Getting Started

[WebBoard]

From: Mike .


WHERE TO FROM HERE?
From: ANTHONY
Date: 11/12/99
Time: 9:44:51 PM
Remote Name: 203.14.175.3

Hi! We are fortunate enough to own outright a house in the city returning $300/wk. Adding our "bit" to this income we have arrived at a point whereby we owe only 25K on this home in a coastal country town. First house is "worth" about 300K, second about 250K.

We have arrived at this situation without any real knowledge of property investment, basically hard work and circumstance (redundancy).

Just discovered Jan's book Building Wealth ..... only half way through and we are excited by the possibilities it offers.

We would appreciate any suggestions on how we could best utilize these properties to gain MAXIMUM property investment potential.

Any thoughts you might have will help beginners like us. Thanks.

 

[WebBoard]

Les

Reply: 1
From: Mike .


Re: WHERE TO FROM HERE?
From: Les
Date: 11/15/99
Time: 6:28:38 PM

G'day Anthony,

Crikey - all the tycoons are hitting the forum on the same day. Your situation is similar to PLL - in your case, you have fantastic equity, but on a smaller number of properties. But that's about to change, right?

Thoughts to help you along -

1. Keep reading. I'm sure you are getting the same "charge" out of Jan's book as all of us did. I like the "FMC" part (Future Millionaire's Club).

2. As with PLL, you need to lay this in the lap of a good Financial Adviser. If you've read much of this forum, you will have realized the thoughts offered are all opinions of other people interested in Real Estate. But you can't replace the value of a Financial Adviser who KNOWS your situation and plans with you what your next moves could/should be.

As an example, from your words I couldn't determine just what your situation is currently. You mentioned redundancy (ain't it great - I've been there, too) but are now in a "small coastal town" - is this semi-retirement, so you would likely need a cash flow from the rentals? When you talk about maximizing opportunity, it all depends on "where you are now!" - and discussing this with a FA would give you even more insight to your own situation, AND your investment possibilities.

But keep reading - I think Robert Kiyosaki ("Rich Dad, Poor Dad" and other books) said "In the US it is ILLEGAL for Advisers to sell clients into something they don't understand - THAT'S why Mums and Dads are pointed toward Index Funds, where they aren't likely to lose, and usually gain a little. So bring YOUR knowledge up so that Advisers can bring you into the higher realms of investments with great gains, and very little more risk" ... or words to that effect. I don't know if there is a similar law in Australia, but it's quite likely that Advisers will initially point people to a "Mums and Dads" investment scheme unless you show you are ready for more!!!

So Buy more books, devour them, and enjoy!

You're in a great position - but, like PLL, you need to engage a higher gear. Read my answer to him labelled "Re: Buying more" - most of the suggestions COULD apply to you. But note there COULD be individual differences, so take what fits you, and leave the rest. Good luck.

Les

 

[WebBoard]

Anthony

Reply: 1.1
From: Mike .


Re: WHERE TO FROM HERE?
From: Anthony
Date: 11/20/99
Time: 10:45:50 PM

RE: LES' RESPONSE Thank you, Les for your words of encouragement. I am sure many of us conversing through this forum appreciate the thoughts you offer to many of the issues raised.

Further to my "Where to from Here?" We acknowledge with grateful hearts the position we find ourselves in. However, we are not semi-retired or really even close to it. There is a lot to do and achieve before we can make the break. The reason for looking into property investment is that we see it as probably the best means of providing for our retirement.

Further reading is bringing me to the belief that the ultimate aim of our investments should be that they are positively geared such that we can live off the income(s). i.e. having money work for you, not working for money. This would lead to what I would see as "semi-retirement".

Robert Kiyosaki and John Burley both take the view that true wealth creation is achieved, through your investments in properties,stocks etc., by ensuring that your assets "column" exceeds your "liabilities" column. i.e anything that costs you money is a liability - including the home you own. By being positively geared you can choose to only work part-time if that's what you want.

If, as Jan Somers says, that generally speaking, ALL property investment over the long term is a good investment, it appears to me that the purchase of relatively cheaper properties (say under $100,000) will allow for the possibility of early ownership. This then gives you the chance of positive gearing and really "living off your investments". Negative gearing and property equity are tools that should allow this to happen more quickly.

I am reading whatever I can get my hands on and intend to seek out a FA if I can locate a "good" one. Will keep you posted.

Anthony

 

[WebBoard]

Les

Reply: 1.1.1
From: Mike .


Re: WHERE TO FROM HERE?
From: Les
Date: 11/21/99
Time: 1:21:36 PM

G'day Anthony,

The whole Real Estate investment game is quite complex, isn't it. There are so many options, probably 95% of which I'm not even aware !!!

Yes, indeed - I enjoy the writing style and some of the philosophies of Robert Kiyosaki. And the slant he puts on this whole investment thing - that it is all a "game" and should be enjoyed as such. Certainly I am getting a lot of enjoyment from it.

Your comment re relatively cheaper properties puts me back in "Brisbane" mode. I've not seen any returns in Sydney that even come close to 5% return, where I'm getting 7.5% and 8.5% on my two in Brisbane. And that makes for a positive cash flow, even though negative geared (slightly).

What I've recently learned is that often the higher returns are to offset the LACK of Capital Growth over time. Thus, in some areas of Brisbane (some parts of Logan City) you can buy for $60,000, and rent for $120 per week - and that's 10% return.

So, really, it's a trade-off - if you are wanting a cashflow, then a bunch of these will do it for you, even though Capital Growth won't make you the huge gains that nearer the CBD will. But, they'll tick away for years, throwing off a few dollars a week. In effect, someone else is PAYING YOU to purchase them!!!

At the other end of the scale is the waterfront, or CBD, home/unit in Sydney - where you pay in the millions for it, and there's NO WAY the rent will even come close to paying it off, so you have huge Tax deductible losses. But, in the end, you owe $1m on a property that could be (in years to come) $3 - 4m.

It's horses for courses - where are you now, and what is the better move depending on YOUR current circumstance, and risk profile - THAT's really the question, and that's where FA's come in.

But it all sure is interesting, eh, Anthony?

And I often mention Tax deductions - it may sometimes sound like I'm advocating for the TAX OFFICE to pay us. But, in reality, they are simply giving us back OUR OWN MONEY that we have OVERPAID, thus allowing us to pay for losses in Before Tax dollars. And that is another Kiyosaki "hot button", isn't it? And it's in THIS area that an Accountant or Financial Adviser can really do some good things for us.

Do let us know how you go, and Good Luck,

Regards, Les