Making the Transition.....

[duncan_m]

Originally posted by Splinter Wood
Firstly, money and being wealthy will not make you happy - in fact probably the opposite is more common.

Maybe its just me, but why do have a constant barrage of people who feel the need to step on the soapbox and sprout forth the above advice as though they have some deep and profound insight into life and money..

I see no value in your response Splinter.. what have YOU done and what is YOUR plan.. thats what the original thread was seeking; specific advice about how other people have gone about doing it.. Coming in late in a discussion and seeking to second guess peoples lack of goals and questioning their maturity about wealth offers no value and borders on being offensive in my humble opinion.

Duncan.

 

[Peter Parker]

You've all heard the expression 'from shirtsleeves to shirtsleeves in three generations'.

My theory is that (assuming you are or are becoming wealthy) about the the most important thing to do for your kids is to ensure that they continue this so that they can also live well in the future. This requires them to have a set of values conducive to success.

I doubt that this can be taught by lectures about 'the starving children in India', etc. However it can certainly be learned, mainly through parental example.

As a parent you have a huge control over their early memories (ie when the child is 4-6 years). Every person has a narrative about themselves that starts with their first memory. They consciously and subconsciously repeat it in their mind and it sets the starting point of how they seen themselves and their progress through life.

If the child's memory starting point is at a period when the parents are struggling, this can be a good thing. Especially when the parents are stating their aim to adult visitors and you're within earshot.

In my case I was brought up in a single parent home. I first heard my mum state her aim of owning a house & 7 acres of land when living in a housing commission house in 1982. She quit her secure PT job the next year, moved to where she wanted to live, rented a house for a year and got a new PT job.

One of the worst houses in the area (being the only one that could be afforded) was purchased and paid off within 9 years. This was then sold (with OK cap growth) and used to buy the sought for 7 acres around 1992. The aim of 10 years ago had been realised. And the capital growth on that place has been at least as good as anything in Melbourne over the last few years! Expenditure was tightly controlled, though it included a 6-week overseas trip in 1986.

It was not until I had left home that I realised that though our material living standards were lower than for most other people, the achievements detailed above were considerable (IMHO), and I regard myself as fortunate to have witnessed them.

It's too early for me to regard myself as a success. However if your kids have memories of your achievements akin to the above, I believe that this should help innoculate them against the 'shirtsleeves syndrome'. This is one of the greatest gifts you could give. And the chances are they won't hang around asking you for money as they'd have enough of their own!

Peter

 

[kierank]

Originally posted by duncan_m
Maybe its just me, but why do have a constant barrage of people who feel the need to step on the soapbox and sprout forth the above advice as though they have some deep and profound insight into life and money..

I see no value in your response Splinter.. what have YOU done and what is YOUR plan.. thats what the original thread was seeking; specific advice about how other people have gone about doing it.. Coming in late in a discussion and seeking to second guess peoples lack of goals and questioning their maturity about wealth offers no value and borders on being offensive in my humble opinion.

Duncan.

Please wait while I get of my soapbox ....

I thought Splinter was offering good advice. Reading between the lines, I believe what Splinter was saying is as follows:

1. A lot of people work really hard (either for themselves or others) but they don't become wealthly.

2. Others work really hard (once again, either for themselves or others), become wealthly but they aren't happy.

3. Then there are others who may or may not work hard, may or may not become wealthly BUT they are happy.

If I understood Splinter correctly, I believe he/she is proposing that if one establishes one's core values and sets one life goals, then one will be happy as/when we achieve them

I think this is good advice. For some of us, we will need money to achieve our life goals (not always the case, look at Mother Theresa). For some of us, we will work hard to earn that money (others will try the sharemarket, investment property, the horses, Lotto and some even try robbing banks - not my recommendation).

Finally, as each of us will have different core values and different life goals, one would expect our lives to be different. In my own family of two brothers and two sisters (basically the same upbringing), we are all different - all have different core values, all have different life goals, all have different lives. That is what makes the world so interesting.

Sorry, I am back on my soapbox again!! Bugger!!!

 

[MLC]

Just do it? Sort off.

We've set a date to get out of the race and into investing full time.

THE PLAN

Short Term
Save
Learn

Medium Term
$150K in cash (currently sitting in 100% offset)
50/50 joint venture with another investor (similar savings).
Combined 900K in equity, debt 400k.

Buy residential houses for renovation, sell some and keep some hopefully turn a nice profit.

String in some Developments along the way.

Borrowing Low Doc at 7% on 70% LVR will cover type of property we will be looking at.

Cash flow/budgets forecast conservatively for next 2 years for the JV team.

Use $100K for backup/living costs, wife no kids low living costs, backup money should last for 3 years worst case with no profits from ventures.

Current IP's interest prepaid until July 05.

Long term goals......

Still undefined

JV Team skills Consist off:
Experience in building
Experience in Planning/buildings
Arms & legs
Great Attitudes
4 Drivers Licenses

JV Team needs:
More knowledge on Trusts (just bought "Trust Magic")
Financial structure setup (still to seek professional advice)

Fall back position 2 (or maybe 4) members of the JV go back to work to provide cash flow.

Deadline Dec 2003 then we'll "Just Do It".

Cheers

MLC

 

[duncan_m]

Originally posted by MLC
Just do it? Sort off.

Fall back position 2 (or maybe 4) members of the JV go back to work to provide cash flow.

MLC

MLC, thanks for that, nice detailed information, lots of value.. How did you manage to find 4 buddies that are that trusting, close and compatible to pull that plan together? Hate to be one of the Joint Venturers that ends up back at work!

Duncan.

 

[Jakk]

G'day all,

The term "Just Do It" has earned some notoriety in recent years. Seems to be used quite often.

Does it mean throw caution to the wind and just get on with it or I would think more like, get off your arse and have a go at something that you have a strong belief that you can succeed at.

This is, believe it or not, a Property Investors Forum, just look at the top of the page, The Golden Rule that almost everybody agrees on is the neccessity to do your Due Diligence prior to making a decision.

Another Rule that often is mentioned here is the one where, If your decision will cause you many sleepless nights, then that decision is not right for you.

So if we put these 2 rules together, we would be going against all the good advice that we come in here for, ...if we Just Did It.
To leave our jobs and put our family in an unstable situation WITHOUT first determining that there was good reasons to believe strongly and I do mean strongly, that we would better ours and our families position by doing so.

I am all for chasing and living your passion, whatever that may be, but we also have to be responsible and this responsibility should not be taken lightly.

So where does one find the answer, The answer my friends is within yourself, only you will know if the time is right, no one else can determine that for you.
How strong is your passion, do you have the burning desire required to fulfill it to the max......then go forth and prosper.
Do you have doubts?........if so, ascertain the worst that can happen and have a plan B. (going back to work for the man aint that bad, just the pride hurts a lot).

We only have one life, and I believe life is a game, not a gamble, a game. Don't gamble with your life, but do learn to play the game........and have a heap of fun doing so.

stepping off the soapbox..............NEXT...

regards

 

[Brenda Irwin]

Well said Jakk,

You know half the fun of having ips & a job is the claims for the expenses & depreciation on the ips against the tax paid from wages. It's like xmas when the big fat cheque comes from the ATO for my husbands tax return.

Unfortunately, I don't have a paid job & my tax agent says I have to pay tax to claim a tax loss. No sense of humour, my tax agent.

Cheers Brenda

 

[always_learning]

There are 168 hours in a week, most people "work at work" between 40 and 60 of them, leaving you with around 110 hours every week to do other stuff. The good news is that you can choose what you do with your 110 free hours, waste it watching TV, getting pissed etc or use it profitably. My question is "Are you doing all you can do with the time you have?". In many ways I think you can move into another area in a serious way and keep the day job, its not easy but what progress comes easy?

After you have made it a success then you can think about quiting the day job.

Dont ask me to rate how I am going with the above!

 

[bkw319]

I like your post Jakk.

 

[Mikhaila]

Always_learning, I couldn’t agree more with you. Good and very wise words indeed.

Talking about practical advice, we have a general plan and guiding principals:
1. Calculate how much is required to cover your today’s needs and reasonable wishes per year. This is a net amount you need to get from investments annualy to stop working. This figure is 2.4mil for us.
2. Once the first step is done the rest is really easy. This is just a matter of accumulation of income earning assets till you reach your target. In gross terms we are more than half the way to the target. In net terms only quarter of the way.
3. Have more than 12 months living expenses sitting somewhere (offset/similar account preferably if you have mortgage on PPOR). We keep between 12 to 18 months reserve. The magic 12 is purely due to our believe that it is enough time to sort whatever needs to be sorted and continue with the journey. Also really bad economic times unlikely to be around for more than 12 months or so.
4. One step at a time. Concentrate on your next deal whatever it is. Put all your resources, power and skills. No distractions or excuses. Once a deal closed, have a rest, take your time to relax.

 

[Bill.L]

Hi all,

I know I'm late jumping into this topic now, but just have to have my 2.2c worth.

I'm in the just do it camp. I may take a lot of time and study and false starts, but eventually if I believe in something, I'll "just do it". Will it mean losses?

Yep-sure I've had many of those but I pick myself up and continue, often having Jakks plan B to fall back on.

A snippet of information from one of Jack Schwagers "Market Wizards" has always meant a lot to me. This person used to volunteer at an aged care nursing home and talked to many people near the end of long lives. He found that the only regret that any of them had was in NOT doing something that they had always thought of trying. None of them seemed to regret the mistakes of things that they had done.

bye

 

[Ned]

Likewise, I'm coming in late - apologies...

I was interested in your post always_learning - my view is that while we may spend 40 - 60 hours at work, we actually waste a lot of it, for a variety of reasons - getting a coffee, talking (socially) to others, procrastinating, not have DETAILED plans and SPECIFIC goals.

I've been guilty of this and have found that in times when I'm under a lot of time pressure, I get more done in a short space of time that I have in the past week. This is the 80/20 rule at work - 80% of our achievements come from 20% of our effort, 80% of our problems come from 20% of the causes etc etc.

My point is that we all have the same amount of time, it's just that some of us use it well, and some less so (I'd consider myself in the "less so" camp a lot of the time).

For example, how is it that Brenda bought 20 houses, kept a job, raised a family, presumably had a good time etc, while others (me included) had the same time, probably worked as hard, but achieved a lot less? The same can be said for any high achiever... it's use of time.

I think most people need to undergo 'time revolution' as opposed to 'time management' - theres no point doing the same things "more efficiently" - In my case i've realised that 80% of my results have come from just a fraction of my effort (not even 20% of my effort).

So, based on the above, my plan is now to focus on exactly what I want to achieve, and make specific plans to do it, and not get led off the path along the way. This includes being disciplined in eliminating 'time wasting' things which i find easy or enjoy, but which don't help me reach my desired outcomes.

It has taken 6 months of lurking on this forum, while at the same time re-evaluating my long term goals, working out exactly what I want in life, talking to my wife, and interviewing/talking with a lot of people who I think are successful in their area. You may say that this has been 'wasted time' - in fact the opposite is true. I now have a plan for the next (hopefully) 60 years, and its taken a (ralatively) small investment of my time and focussed effort.

So now I don't undertake anything that doesn't meet these requirements. This has been very difficult personally for me to do, as I'm the type who wants to help everyone and be everyone's friend. However as a result, I now feel in control and I'm enjoying a sense of directing my life - I've still got a long way to go, but I'm on the road.

So my philosophy/guiding light now is look at what you are doing (before you look at how you are doing it), and ask.... is this the BEST use of my time, given what I want to achieve.

sorry for the legth of this, and thanks for the opportunity

Ned

 

[kierank]

Originally posted by Ned

So my philosophy/guiding light now is look at what you are doing (before you look at how you are doing it), and ask.... is this the BEST use of my time, given what I want to achieve.

Ned,

Welcome aboard. I thought your post was great.

As well as looking at WHAT you are doing before you look at HOW you are doing it, I believe the first and most important question is WHY you are doing it (that is, what is the purpose, the outcome, the impact of what you are doing).

Just my 2 cents worth.

 

[Ned]

thanks keirank, couldn't agree more, appreciate your reply
Ned

 

[sbe]

Thanks for all the input guys.

Splinter - I did have a plan - set in early 2000, just after getting IP#2.

From memory (its at home) it was (in 2000 dollars)
Rental income of around $20,000
Managed Funds $100k @ 10%
StockMarket $100k @ 6%

Total income $36,000 before expenses, and no debt. Timeframe to complete was by age 40 (currently 35)

I've passed the income part for the property (did that with IP#2).

I've since adjusted the plan - more money (KIDS!) and time- More IP's, the managed funds I had are now the same as when I bought them 2 years ago and I don't have the time to properly learn and monitor the stockmarket - yet.

I agree with several of you that its all what you do with your time though. In the last 12 months we've fixed up one IP from bad tenants, renovated & landscaped another, done work on another, worked on family home, and about to settle on one more for good luck, which will need work. No wonder my house isn't finshed yet!

In terms of making the transition - I probably know the answer already - but didn't want to put too much detail up front as they may limit peoples idea's. Plus, I was seeing if there was anything revolutionary I hadn't thought of.

For my personal SANF - I take my responsibility to my family very seriously, so nothing that could be too bad for them. Having said that, it wouldn't hurt the kids to see some hard application either.

I do appreciate all the idea's and feedback. I think it's also helpful for anyone else pondering the same thing.

For me, the hardest thing was having no mentor. This is all flying blind for me, and I've only discovered RDPD, Jan Somers and this forum very late in the peice, so couldn't get advice from here.....I'm also not used to sharing personal information.....

I figure it's a while longer in PAYE, at least until I can change from -ve gearing.

Encouragement for others...
To think, I was told at age 23 from RE Agent that the best I could hope for was a small shack out back of nowhere......

Thanks guys.

Simon

 

[darren b]

After many years dreaming about it, I went full time into real estate full time 15 months ago.

How did you do it? - did about 30 wraps to replace my previous income. Reduced my expenses. Sold all my negative geared properties which were eating me alive. Looking at getting into bigger deals now, such as commercial, but I have very strict rules in that I need at least 12% return.

What did you need set up? - a minimum of 60k per annum in passive income. I dont need a big lump sum sitting in the bank, besides I'd use it anyway to buy more property.

How much $ reserve did you have? - bugger all, but plenty of passive income. Money in the bank is overated. I get wrappees cashing me out regurarly anyway.

How did you eat? - no problems. Have a wife and kid to, so im not on my own.

Particular struggles / hardships? - not really, although a bit more challenging to get finance with property being my sole source of income. This will get better in time.

Advice / warnings? - make sure you replace your job income with passive first. Start of with small deals first and graduate to the bigger deals slowly. I'm in the process now of moving upto bigger deals. Get a mentor/mentors who have been very successful investors.

Strategies... - wraps and true positive cashflow properties only. All my alligator (neg geared properties) were liquidiated, to fund the positive ones.. I have done a few renos, but got bored with dealing with unreliable tradesman.

Anything else to be aware of? - take your time, its not a race. It doesnt happen overnight.

 

[sbe]

Thanks Darren. Informative, reassuring (given you've got family too), and instructive.

I can see your logic on the neg gear stuff, but I'm still loathe to get rid of current property for a few reasons. Costs in selling, loss of further growth. Some are neg geared by choice to free up PPOR a bit.

Plus, I actually like them all. I've even lived in one for a year between houses. I only buy places I'd be willing to live in myself.

I agree it's best (in my mind anyway) to build up passive income to soften the jump.

Finance - low doc's or something alternative?

Cashlfow Positive - If in Vic, rough area? Rural?

Thanks Darren.

 

[darren b]

I can see your logic on the neg gear stuff, but I'm still loathe to get rid of current property for a few reasons. Costs in selling, loss of further growth. Some are neg geared by choice to free up PPOR a bit. - thats ok, whatever suits you. I just didnt see the point of holding a property that was worth 180k, that rents for $170 per week.


Finance - low doc's or something alternative? - you name I've done it all. Low docs were my last resort, did about half a dozen. My financials are ok to get 80LVR from major banks, but definately now have to stay away from mortgage insurers.

Cashlfow Positive - If in Vic, rough area? Rural? - regional, outer melbourne. some rough areas, but those areas have double too. I bought alot before the boom.

Also looking overseas now. Having the time to travel makes you realise rental returns in australia are a joke.

 

[XBenX]

Originally posted by darren b
I can see your logic on the neg gear stuff, but I'm still loathe to get rid of current property for a few reasons. Costs in selling, loss of further growth. Some are neg geared by choice to free up PPOR a bit. - thats ok, whatever suits you. I just didnt see the point of holding a property that was worth 180k, that rents for $170 per week.

i think the idea would be sell it if its not going to grow at a significantly faster rate than your +ve property

but keep it if its is growing at a significantly faster rate than your +ve IP (if you can afford to hold it)

Originally posted by darren b

Cashlfow Positive - If in Vic, rough area? Rural? - regional, outer melbourne. some rough areas, but those areas have double too. I bought alot before the boom. [/B]

thats the way to do it.... but is this a long term play for you ? when will it double again ? sure its grown 50% a year now but what about the previous 20 years ?

From what Ive read and researched the growth rate of these properties is not the same as CG type properties over the long term

if someone can show me where Im going wrong and CF +ve stuff does grow at the same rate as CF -ve CG orientated property over the long term then Im IN... im selling up and going CF +ve (maybe im just leaving something out)

 

[Sim]

One of the best "soap box" type threads I've read in a long time - keep those opinions and suggestions coming.