John Fitzgerald's seminar and investment approach

[Mich]

I went to a John Fitzgerald seminar recently and i must say I got my moneys worth. While his investment philosophy seem sound and logical, I was a bit surprised at some aspects of his approach to building wealth.

1. JF said stay away from high rise apartments. The worst performers are 1bd rm apts. I understand the land content % is very low (compared with houses), but does this mean they are to be ruled out all together? Anyone out there ONLY invest in city apartments and getting good CG/CF? what are to pros and cons?

2. JF said add around ~6% of purchase price for misc fees and charges. Is this overly conservative? I worked out the numbers for my PPOR and it's only 2%. Could it be because I didn't pay stamp duty as I'm in Qld?

3. JF said new homes can be depreciated over 40 yrs. So if i were to buy a 10 yo house, does this mean I can deduct the total cost of building the house (plus improvements) at the 10 year mark? Is it common for property owners to have a copy of the depreciation schedule? Or is it a job for the quantity surveyor everytime a new owner wants to claim deduction?

 

[Propertunity]

1. JF said stay away from high rise apartments. The worst performers are 1bd rm apts. I understand the land content % is very low (compared with houses), but does this mean they are to be ruled out all together?

No - if you want poor CG - knock yourself out. There are exceptions of course - like the Eastern Suburbs of Sydney where Harriet recently discovered the land componet of a tiny 1 brm studio was $92,000.

2. JF said add around ~6% of purchase price for misc fees and charges. Is this overly conservative? I worked out the numbers for my PPOR and it's only 2%. Could it be because I didn't pay stamp duty as I'm in Qld?

5% is generally the 'norm'. If you're not paying stamp duty then less of course. JF may have allowed 1% extra (over the 5%) to cover Buyers Agent fees - God bless him

3. JF said new homes can be depreciated over 40 yrs. So if i were to buy a 10 yo house, does this mean I can deduct the total cost of building the house (plus improvements) at the 10 year mark?

The house will have a 'written down' value at your purchase date. You get the next 30 years of depreciation on the building from that point onwards (if you hold for that long).

Is it common for property owners to have a copy of the depreciation schedule?

Is it common - No. Remember most homes are OO not IPs. Depreciation is not available to an OO on a PPOR. Should you get one as an investor in an IP - Yes most definitely.

Or is it a job for the quantity surveyor everytime a new owner wants to claim deduction?

Everytime an investor buys - yes - and especially if you as an investor get a reno done - more stuff to be updated in the Depreciation Schedule.

 

[Rob Williams]

What JF has said in the past (and I agree) is that you should be looking for a reasonable land to building ratio. So a high rise apartment tower might not meet that criteria, whereas a group of stand alone, single story strata units, on a large parcel of land might meet the criteria.
I've always got change out of my settlements when allowing 5% for transfer costs. So, I'd say that 6% might have a little fat in it. Maybe I'm too cycical, but I think I know whose pocket that extra 1% is going into. (Hint: NOT yours).
You will find JF presenting compelling arguments for buying a particular type of property and no other. You will also find that his company is able to supply properties that fit the bill.
I started in property investing after reading and article about JF in the Virgin in flight magazine. I then read his book and took from it a lot of concepts that have helped me build my portfolio. I've never dealt with his company for various reasons, but some of his ideas and strategies are quite sound.

 

[Minxdamanx]

You will find JF presenting compelling arguments for buying a particular type of property and no other. You will also find that his company is able to supply properties that fit the bill.

LOL - Nicely put Rob. A good salesman is JF, though I too don't disagree with a lot of what he has to say.

 

[fokas]

I'm booked into his Sydney seminar/sales pitch tomorrow evening.
Interesting thread to make sure I remember to keep an open mind while I'm there.

 

[GoAnna!]

It is not the amount of land that is the key (unless your strategy is to add value) but rather the value of the land as a % of the proprty value. This is a good indicator of the amount of price pressure and hence likely capital gain.

 

[willair]

I'm booked into his Sydney seminar/sales pitch tomorrow evening.
Interesting thread to make sure I remember to keep an open mind while I'm there.

Also keep your hands in your pockets as you walk out the door..willair..

 

[craigb]

i went to see jf in canberra and it was all pretty good except for the part where he said their was not much future here ?? i beg to differ , nontheless good basics, BTW he sells houses, that he develops from up qld way thats my understanding of it all.

 

[Rob Williams]

I wasn't going to say anything, but since Craigb started it ...
Anyone who has picked up real estate mag in the last couple of yours would know that the Adelaide market has shown some strong and (I believe) sustainable CG. Few would doubt that.
At a JF seminar last year, we were told that there was no future in the Adelaide market and the best and safest investment options were interstate. Which states? Well the one's where they had bought wholesale chunks of developments from other developers, of course.
They didn't write up any business that night, I can tell you.
Part of the problem, I believe, was that the local market was moving along so well that there was no stock sitting idle in the hands of larger developers, therefore nothing for the JF group to buy up at a good price and onsell with a tasty margin.
There. I've said it. It's out there.

 

[craigb]

trust me to start it??????

 

[Xenia]

I wasn't going to say anything, but since Craigb started it ...
Anyone who has picked up real estate mag in the last couple of yours would know that the Adelaide market has shown some strong and (I believe) sustainable CG. Few would doubt that.
At a JF seminar last year, we were told that there was no future in the Adelaide market and the best and safest investment options were interstate. .

and you believed that????

Adelaide is a great performer and still on the move.
we still have it!!!!

 

[Rob Williams]

and you believed that????

Nobody believed it. The JF people went home with their tail between their legs and I don't think they signed anyone up. They lost all credibility.

 

[Peter Parker]

Nobody believed it. The JF people went home with their tail between their legs and I don't think they signed anyone up. They lost all credibility.

One can easily mount a case against Adelaide using broad demographic stats like migration and population growth; in every year of the last 30 either Brisbane and Perth added more people than Adelaide.

40 years ago Brisbane's population was similar to Adelaides and Perth was much smaller. Now Adelaide is much smaller than both.

Recently SA (and Vic) seem to be shaking off the 'rust belt' label and overall population growth compare much better with the national average, although SA's population is still quite aged and there are few migrants except for '60s poms (which has implications on household formation).

Comparison though is everything in this game. Rust belt states look good largely because NSW has replaced Tasmania and South Australia as Australia's laggard state/s and anything looks better than NSW/Sydney.

So the JF people can create a plausible story about population trends and demographics and the long-term record doesn't flatter Adelaide so salesmanship and facts can go together. But there's heaps of other factors as well and I don't doubt that people have done well out of Adelaide (and other country towns)

I agree with JF about the land value component. But his teachings are more valuable for what to avoid than what to buy. In this his book is better than his recommendations at seminars.

For all JF's preaching about this he has a blind spot, largely because the new properties he markets actually have lower land value ratios than is available to the independent buyer who picks almost any established house in the real estate magazine and pays full asking!

This is where depreciation comes into it as this is used to help offset the higher expense of buying new over established. And conveniently it helps cashflow (although I'd rather this benefit upfront in buying a higher yielding cheaper older property).

Even a small villa unit in a middle suburb or a 1br flat in an <10km suburb could have 30-40% land value component, just like the new houses he markets. But an older house could have a 70-80% land value component, something that weakens his argument (and claims that more things going wrong in an old house have not been my experience).

 

[Bill.L]

Hi all,

Peter,

and claims that more things going wrong in an old house have not been my experience).

Mine either. In fact I have a feeling that the opposite is true (again experiences) In the old days they made things stronger/better, they could put up with the rigors of tenants.

In an old house (californian bungalow) that we renovated, all the problems that needed fixing were the new, then again it may just have been my workmanship (but I didn't make the dishwasher).

I don't doubt that people have done well out of Adelaide (and other country towns)

Now you are asking for trouble

bye

 

[Minxdamanx]

It is not the amount of land that is the key (unless your strategy is to add value) but rather the value of the land as a % of the proprty value. This is a good indicator of the amount of price pressure and hence likely capital gain.

Could you please explain this? One of my IPs the rated value of the land is 81% of the price and the other is 45%. The first is a house on an 800sqm piece of land and the lower is a duplex half on a 450 sqm piece of land.

Sorry if I'm being dense.

 

[Peter Parker]

Quote:
>I don't doubt that people have done well out of Adelaide (and other country towns)

Now you are asking for trouble

Luckily in this I'll be backed by the Federal Government, which counts Adelaide as a country town for immigration purposes!

http://www.studyadelaide.com/work-immigration/migration.aspx

Adelaide is the only mainland Australian capital city that has regional status. This means you have greater chance of eventually gaining permanent residency by studying in South Australia.

The only reason why Adelaide needs to lower the bar like this is because, unlike other capitals which have no trouble attracting migrants, Adelaide has struggled, and attracted maybe half the number of Perth or Brisbane.

 

[Peter Parker]

It is not the amount of land that is the key (unless your strategy is to add value) but rather the value of the land as a % of the proprty value. This is a good indicator of the amount of price pressure and hence likely capital gain.

I'm going to be devil's advocate here:

A cheap old house in Melton or Werribee can have a 70-80% land value component; a not much lower percentage than an expensive house in a salubrious inner suburb. Plus it can be bought for below replacement value.

Will this appreciate faster than (say) an art-deco unit in Hawthorn with a similar or slighly lower percentage? Can't say for sure, but most people would say 'probably not'.

 

[sheehan]

Jlf

Am a novice investor and am looking at JLF investment propositions and after reading the above threads am still wondering how using JLF would benefit me compared to using his tools and his focus areas myself without using his company:
Land Content
Location
Finance
Timing
Cash flow
Tax Deductions

 

[Rob Williams]

Am a novice investor and am looking at JLF investment propositions and after reading the above threads am still wondering how using JLF would benefit me compared to using his tools and his focus areas myself without using his company:
Land Content
Location
Finance
Timing
Cash flow
Tax Deductions

I did that, to some extent. I used some (repeat .. some) of his ideas to get me started.
22 months, 7 properties and $2m later, I feel like I made the right move.
I think you hear what I'm saying without me having to actually say it

 

[firstmillion]

Am a novice investor and am looking at JLF investment propositions and after reading the above threads am still wondering how using JLF would benefit me compared to using his tools and his focus areas myself without using his company:
Land Content
Location
Finance
Timing
Cash flow
Tax Deductions

I have been to one of his seminars and read his books. His input on how to grow the portfolio is remarkable.

All the best