"Read anything, read this Part 2"

From: Nigel Kibel

The posting "Read anything, read this" made for interesting reading and was an excellent catalyst to have us all seriously consider our strategies and goals before jumping in and investing.

Unfortunately, it also had the affect of scaring newbies into a heightened state of inaction. Doing nothing, waiting for the impending "crash" is far worse than investing wisely now. Procrastination through fear only shows a lack of knowledge - nothing else.

If there is an impending crash (which I believe will not happen, the rate of growth will certainly slow at some stage in the future, but a crash - I don't think so), then rather than do nothing, we only need to consider other strategies.

Firstly, trying to buy at auction against all the other lemmings is totally the wrong way to purchase in a hot market. You must be far more creative in finding the deals - and believe me they are out there.

We source property every day of the week, and have three full-time people researching, sourcing, looking and negotiating. With hard work and creativity, good deals are everywhere, even in this hot market. To give some heart, two recent examples:

Example 1

We sourced and negotiated 2 townhouses in an inner-Melbourne suburb and our clients purchased them $40,000 below sworn valuation, on-sold them within 3 weeks for $50,000 more than they paid for them.

Example 2

We sourced and negotiated 6 townhouses in a middle ring Melbourne suburb, each of which was $ 30,000 below sworn valuation. Some clients have decided to hold them, others have already sold theirs for a handsome profit.

Just two examples of how to make money in a hot market. I do not agree that it's not possible to make money right now, given the market conditions.

What about risk? Consider an alternative strategy. "Lease Options" are a fantastic way to eliminate risk and make excellent money in a hot market. With an option to purchase, you negotiate the right to buy a property at a set price at some date in the future. You have the right, but not the obligation to purchase, but if you decide to purchase, the vendor has to sell.

Pay a low option fee, negotiate an acceptable price, negotiate an acceptable rental, put in a tenant to cover your payments to the vendor, and sit back and wait for capital growth to do it's stuff. If your option period is say, 2 years, you have 2 years of capital growth to make you money - on a very small outlay.

If the market turns, or you don't get the growth - you can simply walk away from the deal at the end of the option period. If you choose to walk away, you didn't need a bank, you didn't need finance, and conducted the whole arrangement with virtually no risk.

Using this type of strategy, with a well negotiated option agreement, it is totally possible to make 2,000% return on your capital invested if the property grows at 10% per annum for the two years.

There are lot's and lot's of other strategies that can be employed to make money now, so please don't let hearsay of an impending crash stop you from investing.

Learn, read books, speak to people who are out there doing this right now, network, go to meetings of like-minded investors and be receptive to alternative strategies. Waiting will get you absolutely nowhere.

Certainly be careful, certainly plan for the worst, totally analyse every possible risk and implement a strategy to minimise each risk, and if you do all this, you greatly increase your chances of success.

So much of being successful is what goes on in your head. I for one don't want to wait before investing, I want to capitalise on a rising market right now. Everyday I see people making money in property, and I admire those immensely that have taken the time to learn and minimise their risk and exposure.

Doom and gloom - not for me. Just an opportunity of fine tuning strategies and going for it.

Nigel Kibel
The Investment Institute
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Reply: 1
From: Robert Longmore

can you explain the Lease option stratagy in a bit more detail please. i find this idea rather appealing. how do you go about initiating the strategy, etc.
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Reply: 2
From: Jim Kouta

Well said Nigel. There are always opportunities to do well in any market, it's just harder to do so. I too am interested in other ways to do things others aren't doing. It just seems at the moment that every bloke and his dog are paying ludicrous amounts of money today because they think their property will double in the next 2-3 years. This is not the case, 2-3 years ago, yes, but the ship has left port. Ie, they are putting all their faith into Capital growth, when the growth has already happened. The end of the cycle is near I believe. Do you honestly believe the market can sustain itself in the next year. When you've been in property for as long as I have, there's an 80% chance of finding a great "bargain" and I mean great when things slow down. So great, that negative gearing, rent, tax advantages, etc. do not matter at all due to the money you save on the property itself. In fact, that is how I have purchased all my 12 properties. In today's residential market, it's nearly impossible to get a bargain and I totally agree there's other ways to invest. Maybe you can further elaborate on your ideas. Newbies, be cautious, invest more time and explore other avenues that will make you money, don't get sucked into what real estate agents tell you. And yes, I am going to sit back and pounce on the bargains in 6-18 months time.
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Reply: 3
From: Phillip Sharp

Nigel, while I agree with your views with regard to the sit around and do nothing approach that was e spoused in your reply I think that you maybe overestimated the advantages of the lease with option method.
There are 2 significant hurdles that first have to be overcome. Firstly, most sellers, would not consider the option of forfeiting a potential bonanza now, with a maybe sale at a later date. Secondly one must remember that any lease payments that are made, are a potential loss should the sale fail to come to fruit ion because of inadequate market growth in the future. While I think that the profit you made was indeed excellent, those kind of figures would not be the norm in most deals. Any investor would be wise to consider medium to long term investment in real estate rather than the short term that you mentioned.
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Reply: 4
From: Kevin Forster


I looked everywhere but couldn't find the glossy brochure link at the end of the message.

Still again the message board does not seem the same without it's weekly dose of spam.

How about some deals you've done personally recently rather than the Investment Institute. Otherwise someone might suspect that you're like a share broker that doesn't own any shares himself.

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"Re: Read anything, read this Part 2"

Reply: 4.1
From: Terry Avery

Another question for Nigel.

If the Investment Institute is only concerned with educating people, as you
stated months ago when you started, then why is the Investment Institute
cold calling people to invite them to a meeting to buy an investment

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Reply: 3.1
From: James Johnson

Lease options sound very interesting but I can't see what advantage it confers to the potential seller unless prices were going down. Which (at the moment), in Sydney at least, they are not.
And wouldn't renting it out to someone after leasing it be somewhat akin to subletting?
I speak from a position of unenlightened ignorance but if anybody has the answers...
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