Bill Zhengs passive income strategy (May 2012) - Buy 3, sell 2 to pay down debt
- Thread starter DavidMc
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The bit in bold is what I think the issue is with this strategy. Which is assuming 6-8% growth per year and selling 2 properties in year 4. Sure, you can achieve 6% growth per year but that is over long term, you have to look at entire property cycle 7-10years.
I could buy a property today which does nothing for 5 years and then jumps 15% and again another 16% the following year giving an effective 6% growth over 6 year period.
Also, I don't believe you can outperform buy and hold by buying and selling constantly and paying transactions costs unless you put in significant effort on your part thereby effectively trading your time for the extra money.
Cheers,
Oracle.
you also need to fight depreciation which is another flaw inhis strategy. It is quite depressing sometimes when you assess your brand new property after it has been leased for a year++
even though the plan is not for me I think it could work if instead of buying the crap he is selling you bought in hotspots that have high and quick growth and sell close to the peak, obviously hard to get it right every-time but i 100% believe it would be possible to get it right enough to make the plan work.
what you may do is the properties you intend to keep you buy in more blue chip established areas and the one's u intend to sell you buy in hotspot areas like gladstone, darwin, port hedland or wherever u think the best opportunities are at the time of purchase
what you may do is the properties you intend to keep you buy in more blue chip established areas and the one's u intend to sell you buy in hotspot areas like gladstone, darwin, port hedland or wherever u think the best opportunities are at the time of purchase
I am confused.
Why would someone sell a property performing average 6 to 8% growth and buy again another property to expect a similar performance, average 6 to 8% growth? Simply just to realise profit? but dont forget the buying and selling cost.
If this strategy is to make a profit when you are buying (bulk buying with negotiated better price on land and construction costs), aren't this is what a developer doing?
If one can sell a property at their desired price and time, most strategies work!
Why would someone sell a property performing average 6 to 8% growth and buy again another property to expect a similar performance, average 6 to 8% growth? Simply just to realise profit? but dont forget the buying and selling cost.
If this strategy is to make a profit when you are buying (bulk buying with negotiated better price on land and construction costs), aren't this is what a developer doing?
If one can sell a property at their desired price and time, most strategies work!
RE agents would Love, Love, Love this strategy. Every sale a new commission.
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I agree with Bigtone that this strategy will work if buying in Hotspot area at the start the cycle and sell near the peak. But I doubt it will work buying H&L package that Bill Zhend is recommending. One of the areas that he was recommending was Epping in VIC.
I have been to few of Bill's seminar. 3 years ago, he was presenting this strategy of buying few, keeping one and selling some to pay down PPOR debt and other debts. It looks good on paper but it's different in practice. I did a quick calculation in my head and I thought this is not for me because property doesn't grow 7-10% every year. What happens when the market is flat during 3-5 years.
I've also been to another of his seminar when he was recommending another strategy of capitalising the interest cost. I even had an one on one meeting with him about that strategy and thought it was too risky for me. This was 6-7 years ago.
It seems that he changes strategy according to his business model which is making money without considering your personal situation. I think he said that he gets paid by refering clients to the developer and he will disclose the amount when you sign the purchase contract. I may be wrong since this was few years back.
YLC
Investors Direct
Yes interesting strategy, that requires some mind set change especially if like myself you favour the tried and true blue chip suburbs. I attended one of Bills seminars and paid for financial plan and am looking at implementing the "freedom model".
The cynic in me however makes me think that it is just a way of ID selling fringe properties in a tough market....they are pushing Craigieburn at the minute.They have all basis covered. You get financial plan, finance thru ID, buy property thru ID, rent it out thru ID and now they also have an insurance advisor!. In addition you keep getting phone calls to request to meet to see you are on track. I am undecided yet but will need to bite the bullet at some stage .
Yes interesting strategy, that requires some mind set change especially if like myself you favour the tried and true blue chip suburbs. I attended one of Bills seminars and paid for financial plan and am looking at implementing the "freedom model".
The cynic in me however makes me think that it is just a way of ID selling fringe properties in a tough market....they are pushing Craigieburn at the minute.They have all basis covered. You get financial plan, finance thru ID, buy property thru ID, rent it out thru ID and now they also have an insurance advisor!. In addition you keep getting phone calls to request to meet to see you are on track. I am undecided yet but will need to bite the bullet at some stage .
Yes, my thoughts exactly. That's what I am doing. Bought a house with a large block of land zoned high density in a growth area, building 2 townhouses at the back, total cost around $580k, end value of each new townhouse is $590k. Get a townhouse for free, with no requirement for capital growth.
Beats these other ideas hands down.
How much did you buy the block for? What is the building cost?
Yes, my thoughts exactly. That's what I am doing. Bought a house with a large block of land zoned high density in a growth area, building 2 townhouses at the back, total cost around $580k, end value of each new townhouse is $590k. Get a townhouse for free, with no requirement for capital growth.
Good effort and great margins there. When structured properly developments are hard to beat. Rinse and repeat.
Yes - I am thinking along similar lines. Might have to go new builds still though if the entry costs screw the model.
And so do mortgage brokers...
Ryder picked Epping as a hotspot in one of his Vic reports (maybe 2 years ago?). I'd say that area is good. I was looking at blocks up there back then, but the only estates available at the time had huge power lines going through them and I bought elsewhere. It was a madhouse at the time, many migrant families snapping up blocks left right and centre.
One would assume you would wait it out. The cashflow requirements are quite low (in theory). You'd be better in this flat scenario than established properties.
Yes - I did this myself. Didn't work out well
Yes, my thoughts exactly. That's what I am doing. Bought a house with a large block of land zoned high density in a growth area, building 2 townhouses at the back, total cost around $580k, end value of each new townhouse is $590k. Get a townhouse for free, with no requirement for capital growth.
Absolutely... if you have the massive amount of equity required and can live with it tied up for 12-18 months
That's all that has stopped me from doing this.
Neither Bill or Terry have NFI what they are talking about.
How many did Bill buy?
With commissions money?
Was he given freebies or promotional comps?
Did Terry buy Commercial property in Sydney when he was spouting it as being good value on API?
Where did he buy?
Did he buy in his "hotspots"?
How much $$$ does he put where his mouth is?
How many did Bill buy?
With commissions money?
Was he given freebies or promotional comps?
Did Terry buy Commercial property in Sydney when he was spouting it as being good value on API?
Where did he buy?
Did he buy in his "hotspots"?
How much $$$ does he put where his mouth is?
why would u need to gp new builds.
i have found in most hotspots the lower priced properties had the quickest and highest growth
certainly happened in gladstone,darwin, tassie and many other spots
My preference is the same - I think they are better value with more upside of short term gains. In my mind, something near new is the best deal in a medium priced hotspot e.g. Bowen, QLD right now, some good stuff for $300k that is CF neutral.
I'm saying the model may need new builds due to the frequent transacting (in Vic you only pay stamp duty on the land, which is basically nothing in comparison to buying established).
Stamp Duty might be $20k (established) vs $1k (new build) on a ~$400k property (very rough figures), makes a big difference if you are buying and selling lots.
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