Investor Clubs

Discussion in 'Original Property Investor Forum Archive' started by WebBoard, 15th May, 2002.

  1. WebBoard

    WebBoard Guest

    From: Mike .


    Windsor - Brisbane
    From: Darren
    Date: 6/18/00
    Time: 10:20:48 PM

    Hi all,

    I've been reading the articles on this forum for the last couple of weeks and it is a fantastic source of information - keep up the good work.

    I am new to IP's and would like to hear from anyone that knows the suburb of Windsor in Brisbane - any comments???

    I am looking at purchasing my first IP in Windsor, which is 4.5 kms from Brisbane CBD. It is a brand new 2 bedroom townhouse for $168k with an estimated rent of b/w $210-220 p.w. I have read a lot lately about Brisbane being the next boom area and although I am from Melbourne, thought that it made more sense steering clear of a City that has just gone through a boom. I think that for the price I would be hard pushed to find anything decent that close to Melbourne CBD and the returns probably wouldn't be as good either.

    Any comments, advice or suggestions for a complete novice????

    Thanks, Darren
     
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  2. WebBoard

    WebBoard Guest

    Robert

    Reply: 1
    From: Mike .


    Re: Windsor - Brisbane
    From: Robert
    Date: 6/18/00
    Time: 10:35:46 PM

    Darren

    Windsor is, (I think and Brissie residents too), just outside the inner city fringe suburbs. Some places in Windor have great city veiws. There is a train station with easy access to the city 12-15mins from memory. Also schools etc around the area.

    Not too sure on the price for what you'd be getting as I haven't lived there for a couple of years. But this would be an area I'd investigate for buying another IP if I had the ability too at the moment.

    Regards, Robert
     
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  3. WebBoard

    WebBoard Guest

    Wayne Hay

    Reply: 1.1
    From: Mike .


    Re: Windsor - Brisbane
    From: waynehay@bigpond.com
    Date: 6/27/00
    Time: 10:50:31 AM

    Hi All, Unless your restricted to the $160,000's finance, why wouldn't you purchase a four bedroom house , double garage on a 600m2 block just on the 10km radius of the Brisbane CBD for around$185 to $195,000 renting out for $250 per week.. Tenant queing up to rent these places..

    Remember buildings depreciate.. LAND APPRECAITES.. Someone else said earlier brisbane is the suburb of houses... there's plenty of townhouses and you'll need to identify the 98% of them which are unsuitable for wealth creation..

    Contact me if you want more info, I have five investment properties in Brisbane and love the place.. and the hassle free lifestyle I have with my investments..

    Your right about the BOOM - GROWTH period.. brisbane growth over the last five years has been very ordinary, so that means catchup time.. As Brisbane has historically doubled in value every 7.2 years.. we are now at the end of that cycle so huge growth will occur over the next couple of years.

    Have a sensational week, fear nothing, act like you cannot fail and watch all the exciting opportunities arise.. get out there and conquer..

    Wayne waynehay@bigpond.com
     
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  4. WebBoard

    WebBoard Guest

    Scott

    Reply: 1.1.1
    From: Mike .


    Re: Windsor - Brisbane
    From: Scott
    Date: 6/19/00
    Time: 10:28:12 PM

    Darren

    At $210 pw you are getting a GRR of 6.5%. This rate of return is a tell-tale sign that you are probably being stalked by one of the marketing groups such as The Investor's Club, Property Investor's Group, or Summus Investor's Group.

    If I was you I would be getting an independant valuation on this property. It will only cost you $120-$150 and it will be money well spent.

    I have properties in a suburb not too far away from Windsor and I can tell you that you can do a lot better than $168000 and a Gross Rental Return of only 6.5%.

    If I was you I would look for some of the properties previously sold by these organistions. These are coming back on the market now, at a greatly reduced price to what investors were sucked into paying 2 - 3 years ago.

    Go and talk to some of the agents in areas like Clayfield, Nundah, Northgate, Herston, Stones Corner, Greenslopes and Coorparoo. These are areas where these groups have operated previously. These Agents are the ones that these organisations have managing their properties.

    If you have your heart set on this townhouse (which you should never do!), find out the builders name and approach him directly. You should be able to get the property for at least $12000 below the Marketing Organisation's asking price - that's the commission they receive from the builder!

    I know this wasn't exactly what you asked for, but hopefully it will be of some help.

    Scott
     
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  5. WebBoard

    WebBoard Guest

    Jane P

    Reply: 1.1.1.1
    From: Mike .


    Re: Windsor - Brisbane - Hi Robert
    From: Jane P
    Date: 6/20/00
    Time: 2:28:49 PM

    Hi Robert and All Thanks for the info on Brissi markets. I'm looking at purchasing IP no. 3 and am considering Brisbane. My other two are in Melbourne. I'm just wondering if anyone has stats in Brisbane ie. occupancy rates, Cap growth, mediam prices, and other demographics ie new roads, etc. If you do, I'd be interested in having a look or if you can refer me to a site with this info, just as good. Cheers Jane P
     
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  6. WebBoard

    WebBoard Guest

    Robert

    Reply: 1.1.1.1.1
    From: Mike .


    Scott, where did you get this info???
    From: Robert
    Date: 6/19/00
    Time: 10:56:30 PM

    Mate this info is great, but how do you know about it?

    I am an old Brisbanite from out Keperra way. I have always thought that this area which Darren is asking about would be rather good area for the current value. Not saying it isn't, but how much of the new stuff in that area (as well as within the 5-10km zone around the CBD) is under control of these groups which will add +$0000's onto the purchase price?

    I'd be grateful for a bit more info as I'll be in Brisbane next month to settle on one property and look for another and this area is somewhere I was intending on looking.

    Regards Robert
     
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  7. WebBoard

    WebBoard Guest

    Darren

    Reply: 1.1.1.1.1.1
    From: Mike .


    Re: Scott, where did you get this info???
    From: Darren
    Date: 6/20/00
    Time: 12:57:50 PM

    Scott,

    You are spot on the money, the property I was referring to is being marketed by the Investors Club and they do (by their own admission) get a $11,500 commision from the builder. I don't know that this is a problem in itself as they are very upfront about this and as long as they are getting the property at a discount to start with, everyone wins???? (so their promotional material says) They also offer a lot of assistance to novice investors like myself, especially if your hundreds of miles away in Melbourne.

    This being said, though, I am trying to maximise my returns and do the best I can. Have you had dealings with the Investors Club before? You sound like someone who has learnt from experience.

    My dilemma is that I am so far from Brisbane (where I'd really like to buy) and am not sure of how I would move forward and find a decent IP on my own. Any advice would be greatly appreciated.

    Thanks, Darren
     
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  8. WebBoard

    WebBoard Guest

    Les

    Reply: 1.1.1.1.1.1.1
    From: Mike .


    Re: Scott, where did you get this info???
    From: Les
    Date: 6/20/00
    Time: 9:58:34 PM

    G'day Darren,

    Send me an Email - I may have a part of a solution for you - lezzo35@hotmail.com

    Regards, Les
     
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  9. WebBoard

    WebBoard Guest

    Scott

    Reply: 1.1.1.1.1.1.1.1
    From: Mike .


    Re: Scott, where did you get this info???
    From: Scott
    Date: 6/20/00
    Time: 7:16:53 PM

    Darren

    At least they are admitting to the amount of commission they take...they never used to! They used to lie and say that they receive the standard REIQ commission...

    We were sucked into buying one of their properties a few years ago. I was so swept up in their 'system' and the potential profits that I became a Support Member. When I discovered how unethical they were and how much 'cream' they were skimming off the top I quit. It kills me to see so many unsuspecting people being sucked in by groups such as this.

    Some of the other things to watch are:

    - Undisclosed Up front and Trailling commissions received from the finance providers.

    - They suggest that they will source the best loan for you...in reality they source he best loan for themelves...the one that pays the greatest commission (normally Westpac or the non-bank lenders, such as Qld State Home Loans)

    - Their 'No Tenant, No Worries' scam is just that - a scam!. There is nothing that guarantees that they will pay your rent if the place is not tenanted. I know of two people who had their payments stopped after a number of months - It nearly bankrupt one of them. This particular Investor was going to persue Lisson Pty Ltd (trading as The Investor's Club) through the courts. I don't know the result of this action.

    - They say that they negotiate a price with the developer by determining the annual rent and then dividing that figure by 6.5% (it used to be 7%, then 6.75%, now 6.5%). What they don't tell you is that their rents are usually exagerated....the properties DO NOT rent well.

    - I currenly rent a property from an Investors Club 'Member'. I found a property that had been on the agent's rental lists for over 6 months and approached the owner (the developer still owned it). He indicated that the property was being marketed through the Investors Club. I offered him $40 less than the $280 that the Investors Club was telling Investors that it would rent for. He agreed. He handed me a cheque for $2080 ($40 x 52 weeks). My lease stated a weekly rent of $280, and I pay $280 per week. The developer insisted on it being done this way so that the Investors Club could market the property to members and state (incorrectly) that the property was rented at $280 per week for 12 months. This is one of their 'tricks'. Unfortuneately they were able to sell this property to a member...I managed to turn away at least 10 of them.

    - They will tell you that Townhouses and Units are the best investments to buy because of their low maintenance, high depreciation levels, etc. This is not where the money is though...the real money is in buying something that can be turned into townhouses or units....why do you think they are doing it?

    - When the lender (usually their selected lenders) send a valuer out to do the valuation they try to have someone from the Investor's Club there to oversee it. If the valuation comes in below the purchase price (which it often does!) they insist on another valuation. If that one comes in above the contract price they insist on another valuation...and so on, until they get a valuation they like. The poor Member never gets told about these 'revaluations'. I would imagine that if people knew that they were having trouble getting a valuation you would have second thoughts about the investment!

    I think that the Investors Club and other organsiations like them are an easy way to get into IP's, but you don't learn anything...You pay a premium for their services....and many years profits are eaten up....why would you do that?

    If you are not comfortable enough to go out and do the work yourself, then you are not ready for property investment. Go out and learn more....but don't get so caught up in learning that you never actually go out and buy!

    I am not going to bag them anymore...I've got better things to do with my life. But one other piece of advice for you......DON'T BELIEVE ANYTHING THAT THEY, OR ANYONE ELSE (INCLUDING ME), TELLS YOU. USE THE INFORMATION THAT YOU GET AS A STARTING POINT FOR YOUR OWN RESEARCH.

    If you need any more info feel free to email me. selsom@bigpond.com.

    Scott
     
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  10. WebBoard

    WebBoard Guest

    Terry A

    Reply: 1.1.1.1.1.1.1.1.1
    From: Mike .


    Re: Scott, where did you get this info???
    From: Terry A
    Date: 6/21/00
    Time: 9:51:18 AM
    Remote Name: 203.146.66.133


    Comments
    Scott, thankyou for your insights into this type of organisation. I attended their inaugral meeting in Melbourne many years ago and at that time they didn't disclose their commissions. All the same I was never comfortable that someone would fly you around, give rent guarantees and a bunch of other services and they were going to make the builder pay for it!! Like a builder is going to sell at a loss?

    I have tried to research their method though of buying seven properties and then living off the increases in the mortgage in seven years time. I have read in this forum about other groups saying to use ten IPs. I can't quite get around this concept as my reading of the tax act disallows borrowings or redraws and specifically mentions residential property. You therefore still have to pay the interest on the extra drawings and on my calculations after about five years the accumulating interest exceeds the rents, the tax benefits and the amount you can redraw. Do you have any insights as to how this is supposed to work? I was also suspicious that the tax office would allow this to continue hence my research into the tax law, but I am not qualified to do detailed research so I haven't quite completed my thinking processes on this one.
     
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  11. WebBoard

    WebBoard Guest

    Bob

    Reply: 1.1.1.1.1.1.1.1.1.1
    From: Mike .


    Re: Scott, where did you get this info???
    From: Bob
    Date: 6/21/00
    Time: 1:02:29 PM

    The idea as explained (I have my reservations) is not that the redraw is tax deductable, but that it is tax free. The rent (supposedly) keeps up with the interest rates and covers you for that, and the property (supposedly) doubles in value every 7 or so years (ie constant 10% growth - in Brisbane??) so after 7 years you go back to IP#1 and do the whole bit again. High risk? Certainly too much so for this little black duck.
     
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  12. WebBoard

    WebBoard Guest

    Terry A

    Reply: 1.1.1.1.1.1.1.1.1.1.1
    From: Mike .


    Re: Scott, where did you get this info???
    From: Terry A
    Date: 6/22/00
    Time: 1:03:55 AM

    Thanks Bob for your comments as they confirm my understanding. Yes the redraw is tax free but the additional interest liability is not deductible as it appears to be not allowable. The IC recommends drawing down only the average weekly wage so I applied a rate of inflation to the wage and the same rate to rents. If we use Jan's method the rents overtake all expenses and we end up with passive income. If we use the IC approach we start off with tax free cash but are capitalising the interest or using the free cash flow from rents to service the debt. The rate of inflation would have to exceed the interest rate on the loans to get ahead. On my conservative figures in a few years you end up with a massive interest bill, insufficient rent and not enough equity to draw down to pay the interest. I really don't think it is a good idea to use equity to pay interest. It should be used to create more equity. If I haven't worked it out fully I would like to know more detail about how they propose you do it.

    Cheers, Terry
     
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  13. WebBoard

    WebBoard Guest

    Scott

    Reply: 1.1.1.1.1.1.1.1.1.1.1.1
    From: Mike .


    Re: Scott, where did you get this info???
    From: Scott
    Date: 6/21/00
    Time: 7:02:58 PM

    Bob

    You got it in one!

    They assume that the demand for units/townhouses will result in rents increasing at/or above the rate of inflation (not likely when you look at how many units and townhouses are being pushed into their target areas.) As you say they also assume that values will increase at least 10% pa. Maybe they did in the past and maybe they will again in the future - but I wouldn't be investing my $$$ on that assumption.

    My philosophy (now) is to do the exact opposite to what the crowd is doing (Contrarian Investing). Take a look at how much property the marketing companies are moving....that tells me to stay away from 'their' type of property and find something else that is perhaps going to be in demand in the future...

    Scott
     
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  14. WebBoard

    WebBoard Guest

    Geoff1

    Reply: 1.1.1.1.1.1.1.1.1.1.1.1.1
    From: Mike .


    Re: Scott, where did you get this info???-Right on Scott youve got it!!
    From: Geoff1 - What about an advanced forum?
    Date: 6/21/00
    Time: 11:51:10 PM

    Hi Scott.

    From my 28 years experience in property there are only 2 truly non-profit organisations that I know of in my area of interest:

    The Australian Investors Association and The Property Owners Association

    I am a member of both and they are both fee based and are both kosher.

    I recommend every investor to join these associations if you are truly interested in the truth about investments... they ridicule the scammers when they are exposed.

    To Scott. I can see you have moved to another investor level. It was good to see you out and about at auctions looking for the bargain.

    They do not come to you on a plate from your local marketter. (Why dont THEY buy them all if they are such a deal?)

    I have been waiting for the marketter balloon to burst but it has been a very slow leak.

    Is it only the people like Scott who are aware?

    Scott, you are no longer satisfied with just average/or below average investments.

    You are searching for the truth.

    The truth is... most people on this forum have still to make the mistakes you have made before they understand it.

    What about a forum where people who dont want to buy average properties (eg individual units at 5% - 7% returns) they want 10% - 12% returns and are interested in subdivision, strata titling, re-zoning, & can get specialist discussion.

    Is anyone tired of hearing people buying properties that are average, average, average. eg Is this unit from this marketter better than this unit from that marketter?

    Does anyone have an interest in an advanced forum where we make super profits that could work in conjunction with this one?!!?

    Regards geoff
     
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  15. WebBoard

    WebBoard Guest

    Darren

    Reply: 1.1.1.1.1.1.1.1.1.1.1.1.1.1
    From: Mike .


    Re: Scott, where did you get this info???
    From: Darren
    Date: 6/20/00
    Time: 10:29:46 PM

    Scott,

    Thanks, that has really got me thinking. Anyone else had similar experiences with these "clubs"?

    Darren
     
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  16. WebBoard

    WebBoard Guest

    Geoff1

    Reply: 1.1.1.1.1.1.1.1.1.1.1.1.1.1.1
    From: Mike .


    Re: Scott, where did you get this info???-So thats how the marketters do it to you!!!
    From: Geoff1
    Date: 6/20/00
    Time: 10:10:40 PM

    Scott, Congrats for bringing this practice out in the open. It is now so widespread that the valuer at the AIA (Australian Investors Assoc) property workshop said that 40% of all property deals are done this way. 40%!!!!! Thats a lot of $12500's.(and some charge more)

    The developers in my suburb just love them ...they say "we just go out and build 'cos we know the marketters will find investors to buy them."

    Consequently, the vacancy rate for units is 5% to 6% and the rate for detached Houses with land is about 1% to 2 %. (tight)

    It has killed the chance of rent increases for unit owners as the developers keep on supplying units no matter what the demand is.

    I've seen very average properties in secondary positions on main roads sold by the marketters at very high prices. Say $180k , and 2 blocks away, in better areas, 10 year old similar units are selling for $125k and 20 year old are selling for less than $100k and 25-30 year old selling for $70-$80k.

    Get the picture.

    When you realise that capital allowance is now clawed back upon sale and there is no capital gains indexation for inflation , then the Brisbane unit market looks like a recipe for disaster.

    I wouldnt go there!!

    If this is the type of property that investors are coming to Brisbane to buy then they may as well stay in Melbourne and pay too much down there.

    At least you can drive by it.

    Sad, sad, sad.

    Geoff
     
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  17. WebBoard

    WebBoard Guest

    Nico

    Reply: 1.1.1.1.1.1.1.1.1.1.1.1.1.1.1.1
    From: Mike .


    More on letters from Scott
    From: Nico
    Date: 6/30/00
    Time: 7:15:52 PM

    My first meeting with the investors club was with one of their "research" people. A few carefully worded questions and guess what? The guy had been a farmer all his life, had no formal academic qualifications in property finance or any other related area, but professed to know so much......one wonders about such free services that are on offer. Furthermore, this chap said he did it full time. A paid employee? Or doing it out of the charity of his own heart? The more I watch this discussion group the more that seems to come out about this facinating organisation, or is it a corporation?
     
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