How do people buy dozens of house yet on the same wage

[blaster]

Hi Blaster,

This is a very good question. Jan Sommers in her books outlines a simple and realistic plan of accumulating 10 properties (1 PPOR and 9 IP's) over a period of 20 years. Her break down is something along the lines of 5 years to save a deposit, 5 years to pay off the PPOR and 10 years to accumulate a further 9 IP's. In the plan, cash savings play an important role to reduce debt, or to save up for a deposit on another IP.

On the forum, as someone mentioned (can't remember who, but it was a good point) there is often a sense of urgency to turbo charge the wealth building process. Eg, borrowing using very high LVR's, or to dabble in other things along the way. Sometimes it works; and sometimes it doesn't!

I think it is possible to accumulate 9 IP's within a 10 year period on a moderate and steady income. However, cash savings are also an important factor along the way, as are the yields that the IP's are generating.

Sometimes I think the process of paying down loans is over looked or discounted on the forum, but from what I have read, investors who have bought over many decades have significant cash buffers to ride through rough patches.

Sounds like you are doing well Blaster, with 4 IPs.

Regards Jason.

Thanks Jason.
Or should I say it's not quite as good as it sounds because some are just blocks I've also accumulated and working on now but they'll pay one day and there's also some future blocks and units amongst it to come with divisions later that I don't really count.
Real estates a pretty amazing business isn't it .
Anyway I'd like to get my hands on this latest , always the way I spose .

Cheers

 

[blaster]

Thanks again people there's some good stuff in here I need to come back to and ponder properly - after I get my ride on going !

Bloody thing - grass everywhere - 2 snakes and it decides to get a fuel block , at least I think thats what it is. I'm about as mechanical as a house brick .

Cheers

 

[8fold]

Hi Blaster,
Also dont overlook strategies such as the debt recycling that has been discussed at length on these forums. Non deductible debt goes down, deductible debt goes up. It is another option to have in place to make that servicability stretch.

Scott

 

[JamesGG]

It also helps if you get a great deal at some point that gives a cashflow and/or equity bump. This involves the usual suspects buying well, value add reno, boom in your exact spot, massive rent rises, etc...

These things I imagine boost you several years ahead of what your position would be otherwise.

It's pretty cool when the entire portfolio is made up of these sorts of deals. Can get ahead very quickly, then...

 

[josko]

Hi blaster,


Don't forget that someone with 9 or 10 properties may have only bought them for 150k two or three decades ago.

Nine or 10 properties does not necessarily mean 4.5mil in debt on an average income.

In your accumulation phase, you start with what you can afford or rather, what the banks will lend you. This is why property is such a long term investment. You need to wait for equity growth and rental growth. Along with that comes inflation and wage increases.

Regards JO

 

[Nathan]

Buy properties well under market value, and then redraw equity so you can pull your deposit out straight away. Then you get into the deal and your capital out straight away.

Thats best way to conserve the capital, although I have not been a big fan of pulling equity from my properties, I have done to a couple of them.

 

[blaster]

It's pretty cool when the entire portfolio is made up of these sorts of deals. Can get ahead very quickly, then...

Yeah spot on , that's the main key in my strategy and it's going well I'm happy to say even though I only have the coin for cheapy regional stuff.
This next one would catapult things nicely , bank can do but it max's us out and we're still looking for our own place so it's a touch tricky.
Bank says they won't revalue then until 6 mths in bla bla .

 

[blaster]

Don't the gurus all preach this 50 or 100 in a few years stuff , no I definately don't want that many but what's that then just pure working of small amounts of equity into the next and next then and the lender ok'ing it on that or ?

I mean your not gonna have much cash in the kitty are you buying at that rate.

 

[blaster]

We have two, large properties, 11 unit, 5 unit, on Vendor terms
Vendor financing is nothing if not straight forward
Valuation is accepted as whatever you agree it is
The vendor, as any other credit provider has a registered mortgage.
At your peril, as any other contract is at your peril.
Do the homework, read the contracts.
Vendor terms can be more favourable than any finance institution,

there are no payout fees if you want to pay early, payout fees on a couple of $million is a **expletive**.
We get a lower interest rate than a financial institution (win)​

Our vendor just wants a monthly income for his retirement, a lump sum at purchase would have been a huge tax hit,

paid over years, he keeps more of the money
keeps 85% more of the money (win)​

"Regular lenders", consider it a mortgage, and value it equally to any other mortgage, we have bought six more properties subsequently.

Hi Kathryn
Yeah I can appreciate what Kristine is saying but also in your reasoning. I've recently just sold one of mine on V/T , it works out really well for both of us and I get a pile more dollars over time to that would normally just go into the banks pocket .
Buying myself , I haven't figured out as yet but I do believe it has potential here but your lenders do seem to give it much more credit than ours , one hitch.
Wouldn't mind dropping you a PM if you don't mind .

Cheers

 

[kathryn d]

Hi Kathryn
Yeah I can appreciate what Kristine is saying but also in your reasoning. I've recently just sold one of mine on V/T , it works out really well for both of us and I get a pile more dollars over time to that would normally just go into the banks pocket .
Buying myself , I haven't figured out as yet but I do believe it has potential here but your lenders do seem to give it much more credit than ours , one hitch.
Wouldn't mind dropping you a PM if you don't mind .

Cheers

Certainly you can PM me, or AlmostBob

 

[Kristine..]

G'day

Kathryn, you are working with Canadian tax law, are you not?

Also, in Australia the vendor of the property is not lending the money to the purchaser and in most cases there is no mortgage protecting either parties interests.

In Australia, blaster will be required to pay tax on the capital gain in the year the contract is signed.

The interest on the contract is the 'rent' on the contract and will be treated and taxed as ordinary income.

Blaster, what are you going to do when your purchaser sends you a formal request - as they can legally do - to allow them to register as Proprietors and to provide them with a mortgage back on the same terms and conditions as the Terms Contract agreement?

Do you have the funds to clear your mortgage to provide them with clear title?

Terms Contracts are not trifling matters. They impose serious legal and taxation obligations on both parties.

It's easy to write up these agreements, but the Sale of Land Act bestows significant rights and privileges on the purchaser which the vendor may not even realise, and cannot deny to the purchaser should they wish to exercise their rights.

The agreement may be all very well, but just try and get finance to settle one of these contracts and you will see in what regard they are held by the residential funders.

Zilch.

Cheers
Kristine

 

[blaster]

G'day Kristine.

First , a bloody good scotch, then I'd sue the accountant and solicitor that did the paperwork- kiddin. No I probably would actually because I asked them about those angles. I don't have a mortgage on that one , maybe that and my situations got allot to do with it but no these two do wraps themselves and know it inside out. They did explain the setup, it's suppose to be covered, might cross my fingers !

I wonder how other wrappers like Mcknight or everyday ones work it, there's allot around you could be damn sure they aren't forking out the bucks.
I did buy a place once myself on V/T, actually two come to think of it . I'm not sure how his end worked but to refinance, I'd put a deposit on it so that was in there and I'd reno'd it also , it went through no probs.
But I do remember the V/T setup itself carried zero credit with them but what did was the reno , new valuation and deposit I had in it.
I remember they did treat it as better than no contract in it at all and the time and investment factor I'd put into it with some respect though. As far as actual weight that carried , not much.

Cheers

 

[heathgt350]

Buy properties well under market value, and then redraw equity so you can pull your deposit out straight away. Then you get into the deal and your capital out straight away.

Thats best way to conserve the capital, although I have not been a big fan of pulling equity from my properties, I have done to a couple of them.

How do you purchase properties well below the market value?

Is it through aggressive negotiations, unconditional settlements and deposit cheques attached to the offer?

 

[RumpledElf]

You buy the ugly duckling properties with potential that noone wants, or have been sitting around for a while unsold. There's plenty out there.

Then you lowball the owners

 

[Aaron Sice]

you lowball a rundown property that's been on the market for 3 months.

spend $10k, get it back to just under median and make a bluddy packet.

 

[heathgt350]

Hehe thanks RE and Blue Card!

I'm looking forward to buying my first IP and trying out some of these negotiation techniques =)

 

[RumpledElf]

On this forum, Nathan is the master of cheap pos geared properties.

Keep an eye on his new website

 

[blaster]

These properties are everywhere that's for sure but some areas are harder to find than others aren't they.
I missed a ripper 2 mths ago , basically just labor needed , very little cash plus old sheds full of everything you would need anyway and also chocked full of quality timbers you'd sell off and all sorts of other goodies.
70k , this was a 250k house , 15mins from home .

That one really hurt , it's rare in my area so close to home .

 

[kathryn d]

G'day

Kathryn, you are working with Canadian tax law, are you not?

Also, in Australia the vendor of the property is not lending the money to the purchaser and in most cases there is no mortgage protecting either parties interests.

In Australia, blaster will be required to pay tax on the capital gain in the year the contract is signed.

The interest on the contract is the 'rent' on the contract and will be treated and taxed as ordinary income.

Blaster, what are you going to do when your purchaser sends you a formal request - as they can legally do - to allow them to register as Proprietors and to provide them with a mortgage back on the same terms and conditions as the Terms Contract agreement?

Do you have the funds to clear your mortgage to provide them with clear title?

Terms Contracts are not trifling matters. They impose serious legal and taxation obligations on both parties.

It's easy to write up these agreements, but the Sale of Land Act bestows significant rights and privileges on the purchaser which the vendor may not even realise, and cannot deny to the purchaser should they wish to exercise their rights.

The agreement may be all very well, but just try and get finance to settle one of these contracts and you will see in what regard they are held by the residential funders.

Zilch.

Cheers
Kristine

Yes Kristine, Canadian tax laws.
The 2 properties we are purchasing on VT is very beneficial to us.We are paying a bit more in interest, but we can pay it off at any time without penalty. We never have to worry about the interest rate going up, as it is set for the term of the mortgage.

 

[heathgt350]

These properties are everywhere that's for sure but some areas are harder to find than others aren't they.
I missed a ripper 2 mths ago , basically just labor needed , very little cash plus old sheds full of everything you would need anyway and also chocked full of quality timbers you'd sell off and all sorts of other goodies.
70k , this was a 250k house , 15mins from home .

That one really hurt , it's rare in my area so close to home .

How do you hear about those sorts of houses?

Are you mates with a few real estate agents in the area who pass them to you?

Or do you find them on re.dom or domain?