My experience with a local "Guru"

[agent007]

Last year (2009), I visited the office of a highly publicised Sydney resi property “guru”. His office offers BA services, mortgage brokerage, renovations, Accounting and Legals. They specialise in purchasing properties at the lower end of the market and in need of reno which they also do for PM fee. After checking their numbers, I found it very costly to get into the properties they were sourcing for their clients (to much overhead). Though, I have no doubts that their business model is very profitable for them. At the end of the day, people can choose to run their business as they like and it is up to the clients to engage their services. What really shocked me was a comment this *guru* made after checking my portfolio. He said: “You should sell these 2 properties because they already did their job” then he said: “You should buy a couple of properties like the ones I source for my clients”.
The properties he wanted me to sell are located in Melbourne metro and as you know they had a good run during 2007. According to him that was the end of those properties. But, was it?. Mate, the growth they had in the pass 8 or 12 months has been nothing less than spectacular. No one of the properties this guru is pushing to his clients had achieved even half of that growth.
This guru had appeared in magazines, he has been on the radio, seminars, etc. He looks very confident and like someone that knows what he is talking about. I just feel sick for the beginner investors that may have follow his advice and as a result lose $.

From memory, these were the numbers for the properties he sourced for clients (early 2009 numbers):

Property $200k - $230k
BA: $8k
Reno: $20k- $35k
PM: $8k

Therefore, for a $200k IP @ 90% LVR you needed:

$20K deposit
$5k stamp duty
$8k BA
$35k reno
$8k PM

Total: $76k of your own funds. After that the IP was supposed to value at approx $250k and rent for approx $280pw.

If I wanted to buy an IP for $250k @ 90 LVR all I need is $25k plus the stamp duty.

The moral of the story: Be careful who you take advice from

 

[sash]

I bet the mob is P4556ty Secrets.....

The only person who will look after your interests is yourself...why would you want to outsource this??

In my opinion...anymore than 3-5K in BA fees for a property less than 300K is extortion. The reno and PM costs for a property less than 300k is way over the top!

I recently bought a property for 263.k in Woy Woy my costs were as follows:

LMI - $5600 (deductible)
Deposit - $13,175
Legals - $950
Stamp Duty - $7,650
Reno - $6800 (painting inside, tiling, polishing floors, fixing gyprock, pressure cleaning outside house, gardening/mowing, new light fittings, new curtains)

So total was $34,175. I could have bought two houses for the price of one this mob charges.

Also my place is now valued at $340k!

From memory, these were the numbers for the properties he sourced for clients (early 2009 numbers):

Property $200k - $230k
BA: $8k
Reno: $20k- $35k
PM: $8k

Therefore, for a $200k IP @ 90% LVR you needed:

$20K deposit
$5k stamp duty
$8k BA
$35k reno
$8k PM

Total: $76k of your own funds. After that the IP was supposed to value at approx $250k and rent for approx $280pw.

If I wanted to buy an IP for $250k @ 90 LVR all I need is $25k plus the stamp duty.

The moral of the story: Be careful who you take advice from

 

[Paul Do]

Two recommedations:

1. Don't put anyone on a pedestal
2. Understand the fundamentals on investing (e.g. I use this framework http://www.ibhb.com.au/resources/SYSTEM_T.htm)

If someone provides advice that contradicts the fundamentals, then run. For example, by selling the properties, you incur capital gains tax and transaction costs, which will reduce your overall returns. Also, buying properties from intermediaries results in increased costs (and perhaps higher buying price), so make sure you look at the costs-benefits and that it is worthwhile.

 

[Rob Williams]

In my opinion...anymore than 3-5K in BA fees for a property less than 300K is extortion.

So what word do you use to describe the US$5,000 buyers agent fee charged by the guys who source US$50,000 US properties for Aussie investors?

 

[skater]

I would hazard a guess that it is the same mob that Sash mentioned. I see them all the time, cause I live nearby. A few years ago they would purchase the property for just under $200k, and get it revalued for $260k, after spending around $40k on a reno. They might have got the reval, but if they wanted to sell it, they would not have received anywhere near the price. In fact I have seen some of them come onto the market, and they are selling for significantly less that this now, even though the prices have risen a bit.

The other thing is that they do a cookie cutter reno. They all get paint, carpet, kitchen etc, even if they don't need it. The cost of the reno is quite expensive for what they do.

I believe most of their clients are high income earners living closer to the city. The properties look like bargains to them, because the purchase price appears so low. The thing is, I have witnessed the BA just bid on the properties that he has targeted. I have seen him overpay (what I would pay anyway) and have learnt that if he is bidding on something that I think is suitable, then there really is no point in bidding, because he will buy it reguardless of price.

You can get good deals out this way, but sometimes using a BA is over-rated. There are some that will add value for you, and some that only add value for themselves.

 

[Piston Broke]

This guru had appeared in magazines, he has been on the radio, seminars, etc. He looks very confident and like someone that knows what he is talking about. I just feel sick for the beginner investors that may have follow his advice and as a result lose $.

This has been my rant for years.
Just because they hold seminars, write books and appear in the mags & TV does'nt mean they know much about investing.
Many don't even "Talk a good game".

So what word do you use to describe the US$5,000 buyers agent fee charged by the guys who source US$50,000 US properties for Aussie investors?

****ed just as most of the (same type )properties they were pushing a few years ago were.
Anyone who followed them years ago would've lost their a$$, which tells me they have no idea what they are talking about.
There's plenty shitty properties here too for those that way inclined.

 

[redwing]

I spoke to them when they were in PERTH, the grand plan was to buy-reno-replace and get bulk discounts when doing so through the whole process

• Buyers Agent
• Mentoring
• Renovating
• Mortgage Broking
• Insurance
• Organising Property Managers

They were doing it all in NSW, VIC & TAS

How are they going Skater, any regentrification happening in the area yet?

$8K mentioned must be on the cheaper end of the timeline (i.e. pre their WA attendance), they were talking about $11k at the seminar, 50% for Buying the property (BA) and the other 50% for managing the renovation

They seem to have dropped out of the media of late

 

[sash]

I'd call them the him piped piper.....

On a serious note.....it is hard enough dealing with BAs in OZ....to do it another country requires a "special" person"!

I am amazed how people are not willing to invest in some simple knowledge. Just attending a few seminars, networking with a few people, and doing a bot of research ...often you can do better than a buyers agent.

I am not saying that all buyers agents are bad....but finding ethical ones is hard.

So what word do you use to describe the US$5,000 buyers agent fee charged by the guys who source US$50,000 US properties for Aussie investors?

 

[Rob Williams]

I am amazed how people are not willing to invest in some simple knowledge. Just attending a few seminars, networking with a few people, and doing a bot of research ...often you can do better than a buyers agent.

Therein lay the problem. A lot of these so called "seminars" are the feeding ground for the sharks. Like shooting fish in a barrel. Sad.

 

[skater]

How are they going Skater, any regentrification happening in the area yet?

$8K mentioned must be on the cheaper end of the timeline (i.e. pre their WA attendance), they were talking about $11k at the seminar, 50% for Buying the property (BA) and the other 50% for managing the renovation

I think you will find the $8k is is for the purchase of the property and ANOTHER $8k for project managing.

As for regentrification, well a little, but I wouldn't credit it to PS. Yes, their homes are a little more tidy than before the reno's, but they are quite bland and don't really add much character. White house with grey trim. Ho-hum! Often the homes start to look a little daggy again after a little time. Not sure if that is because some of the new owners have bad PMs or what it is. If one of mine starts to look cruddy, I get over there and fix it, so maybe it is because the owners are absentee that it doesn't get done.

There are a few new homes sprouting up here & there. Not much, but some. The burnt out homes get demolished (unless Nathan buys them) and a new one is built in it's place. There have also been a few knock down rebuilds that I have noticed too. I think this is because it is cheaper to buy an old place & rebuild than to enter Ropes Crossing, and you get the larger block.

 

[Paul Do]

... does'nt mean they know much about investing.

This is the problem for most new investors. They think they have to do something about their investment to increase returns, when they should be focusing on minimizing their costs. With a few exceptions, most of the returns from real estate come from time, and timing the market (buy in troughs of price cycles), and that's it folks.

 

[Nathan]

The funny thing is you can buy this guru's clients properties for $230k if you scratch around hard enough. So while they are tauting the fact you can pay $220k for a property, $40k for reno and all the fees, if he had his clients interests at heart they would just buy their own stock back for another investor.

Crazy! :S

 

[Rob Williams]

This is the problem for most new investors. They think they have to do something about their investment to increase returns, when they should be focusing on minimizing their costs. With a few exceptions, most of the returns from real estate come from time, and timing the market (buy in troughs of price cycles), and that's it folks.

Very true.
It seems the less I do, the more I make. Got to love that!

 

[Deltaberry]

Let's see. My father paid around $30k for some private wealth managers at a reputable global investment bank (think Goldman Sachs, JP Morgan, Bank of America, Citigroup level) to help him invest in stocks.

My friend's portfolio of BHP and Rio Tinto outperformed my father's stocks and my friend spent $40 on brokerage.

Remember, if it's so good he wouldn't be telling you, he would've retired already?!?!

 

[skater]

I remember several years ago, maybe around 2002-2003 reading in API about a certain "guru". He wasn,t a guru at this time. I took special interest because many of the properties involved were around my stomping ground. There was the usual blurb, the prices paid and any reno's etc. The portfolio was a little larger than my own, but I recall there was a PPOR that was quite expensive and had equity, making the starting position much healthier than my own, having a failed business and nearly going down the path of bankruptcy.

What I noticed more than anything, was that the prices paid weren't particularly good. In fact I had secured much better buys on all of mine. Of course, this pleased me no end and I shook my head thinking "where on earth do they find these people to uphold in these investing magazines".

Since then I have met this person at their home. Hubby met him through some work colleagues at the time. He was talking about setting up a Buyers Agency and doing reno's etc, and discussing the massive profits that he would make. It all sounded good (for him) and I couldn't help but think "How would he find enough people gulible enough to pay for such a service, especially when the prices he is willing to pay is not such a good deal".

Fast forward and there are oodles of people willing to pay top dollar for an overpriced home and like Nathan said, those that sell them don't receive anything like the valuation they were sold on receiving. I don't understand it! I would feel guilty doing that myself.

 

[wobbycarly]

What I noticed more than anything, was that the prices paid weren't particularly good. In fact I had secured much better buys on all of mine. Of course, this pleased me no end and I shook my head thinking "where on earth do they find these people to uphold in these investing magazines".

Have you been featured? Serious questio0n, coz I know a few on here have. And I like reading the profile and then seeing how those same people interact here, whether it be freely sharing knowledge and their own experiences, or even admitting they've sometimes made mistakes!

And I'm a strong believer in attempting to learn from other's mistakes.

 

[skater]

No, Rob, I haven't been featured. There was one woman at one stage that was chasing me for one of the magazines, but I'm not really that interested. The last thing I want is everyone in my business thinking I'm "rich". You never know who is going to pick up a magazine and recognise you.

I did get a small spot on ACA or Today/Tonight (can't remember which) a few years back when Depreciator was explaining about depreciation. They filmed one of my IP's and they showed me pointing out some stuff. That was it! Very basic. You had to look quick to catch me, and they didn't mention my name, which I liked.

 

[wobbycarly]

No, Rob, I haven't been featured. There was one woman at one stage that was chasing me for one of the magazines, but I'm not really that interested. The last thing I want is everyone in my business thinking I'm "rich". You never know who is going to pick up a magazine and recognise you.

I did get a small spot on ACA or Today/Tonight (can't remember which) a few years back when Depreciator was explaining about depreciation. They filmed one of my IP's and they showed me pointing out some stuff. That was it! Very basic. You had to look quick to catch me, and they didn't mention my name, which I liked.

Good point. I guess your interview is as much detail as we'll get?

 

[skater]

Good point. I guess your interview is as much detail as we'll get?

LOL! There's enough in that, isn't there? How much more do you want?

 

[wobbycarly]

Bring it on, I say! OK, so I'm a sucker for punishment!