The Investors Club article

[redwing]

The Investors club according to the West article..

The Investors club will soon celebrate its 10th Birthday , with 60’000 member families in Australia and New Zealand.

Membership is free and no fees are charged for services including help locating the right property, organising finance and ongoing support from fellow investors, monthly meetings and newsletters.

The club does this because it charges a fee of 6.6% to the vendor after settlement, so it comes out of their profit.

Vendors benefit because the club has a waiting list of up too 2000 finance qualified investors waiting to buy so they sell quickly, with reduced costs.

Property selection is critical and the club provides researchers, who focus on WA, QLD Sydney and Darwin IP’s that give good returns and CG. Near new IP’s: to take advantage of depreciation and tax relief.

They have Computer programs that estimate each member’s cash flow from day one. And they never, never sell.. Building equity and buying more.

The founder Kevin YOUNG retired at 27 with 22 IP’s and came out of retirement to teach his methods throughout the club.

There are meetings in WA in Willetton, Dianella and Kalgoorlie

REDWING

 

[Aceyducey]

Ouch! 6.6%

Cheers,

Aceyducey

 

[Sim]

6.6% ... that's a helluva lot of money ... as a vendor you'd want to be pretty desperate to give away that much of your profit - especially in anything other than a dead market.

 

[Peter_Tersteeg]

6.6% ... that's a helluva lot of money ... as a vendor you'd want to be pretty desperate to give away that much of your profit - especially in anything other than a dead market.

The vendor would either be really desprate, or the price would be hugly inflated.

 

[kissfan]

Hi all. Hmmm, I just wonder if the 6.6% charged to the vendor is built in to the sale price. Also, does anyone have any idea how investor club members access their equity once they have their properties in place. Do they draw it down from a line of credit?

Regards
Marty

 

[geoffw]

I'd be guessing that's not a 6.6% cut from the developer's profit, that would be an add on to the end price.

(Though normal R/E commission would be included in that margin, which would cut it down a little).

 

[beachside]

Hi all

My experience with Investors Club (IC):

I was at a money expo a couple of years ago and ran into someone I knew (and thought highly of) who was looking after the IC stand. She filled me in on what the IC did so I cautiously decided to check it out. She seemed up-front, meetings seemed OK, could not see anything obviously dodgy. She was a support member (sales agent). I was aware through news letter of the club that some people were criticising/investigating Kevin Young In QLD. Properties were supposedly sold at discount prices because cost of advertising was avoided and stock was quickly placed.

I was going to QLD a few weeks later so took a copy of the current list of properties for sale to do my own research into their pricing. Members could inspect properties before buying and be reimbursed for travel expenses - but were shown through by a support member.

Some new developments were in places I did not consider desirable - next to motorway etc.

Some developments were renovated flats. (I was later told Kevin had bought these to do up and sell off)

One townhouse development was near a rail line and in a hollow. A local RE agent also had these advertised in their window - I think at the same price. I went in on the pretext of enquiring about some other properties and then mentioned the townhouses as I was leaving. She said they were overpriced by about $20,000 (advertised $180K from memory) and were being sold to southern investors who did not know any better.

I looked at a nice unit development in good location which was being advertised by a local agent (LJH?) also. The asking price was above the IC price. I was talking to the salesperson and slid Kevin Young into the conversation - easily done in QLD as he is well known and not liked by agents. It turned out that she used to work for IC. She said that she would source a good deal sometimes but Kevin did not want it - claims one of the companies he was selling on behalf of was actually his own company. She also told me what commission the support member got on sale of a property -this was double what I was told when I had asked the support member what was in it for her.

No doubt all those properties which were sold 2 years ago are all worth a lot more than the sale price now - even if overpriced then. But what about properties being sold at other times of the property cycle?

At one of the meetings one of the older members spoke about how well he had done over the years, but I later heard him talking to another member about his first IP he bought through the club which had performed very badly.

The bottom line is that from my research some values seemed reasonable/discounted on normal asking price, but others overpriced. Some properties were desirable, others questionable. I can't be sure that what the ex employee/RE agent told me was accurate or just sour grapes. Kevin is not liked by RE agents in QLD - but is this jealousy or concern for innocent investors?

I had sufficient doubts to give the IC a miss, but I think if you do you own research, arrange your own finance, conveyancing and property manager, you may be able to take advantage of some reasonable deals and be in full control. Don't know how things have changed over last couple of years.

 

[Jerry Maguire]

I went to one of their meeting long time ago in Sydney
back then they were trying to sell NZ properties at 100K which they consider a bargain when they are trying to compare it to Sydney property prices

I don't know NZ market enough to go in and buy

 

[straight]

i too signed up to check out some of the properties, indeed i looked at the indooropilly train-side town-house, and i agree it was indeed overpriced by at least $20k. i also looked at properties in areas i know well and allot of the critical information on the detailed property profiles was inaccurate, like distances to public transport, schools etc.

i figure its just another avenue of possible properties which come to me with detailed profiles. don’t buy off the profiles, check them out in detail.

somehow im always suspect of organisations which are not transparent in relation to profit margins and who pays.... and there didn’t seem to be a coherent philosophy on picking a property [some units i liked in small developments with low bodycorp fees, others were in huge high-rises in inner brisbane or 10m from the rail]....and that ***** about the young successful investor returning to help others out.... please.

 

[beachside]

Hi straight

It looks like we came to a similar opinion. The property I was referring to next to the train line was not in such a good location as Indooroopilly. I checked out about 20 properties on offer when I was in Brisbane /Gold Coast at that time.

 

[paulie]

I was semi involved in the Western Australian arm of the IC some 4 years ago but as a supplier of property for them to onsell, instead of being a purchaser. As my father and I where sourcing, managing and selling a few villa and townhouse developments and we where selling alot of these off the plans through the IC. Whilst all those who have bought through the IC have made money in these boom years they did pay more as the IC would add a $9,000 - $16,000 commission payable by the owner, on top of my fathers (a real estate agent's 3 - 3.5% normal comm) on properties selling for $150K to $240,000. FOR EXAMPLE owners price is 135K RE Comm is $6 and IC comm is $11, total sale price to newby investor $152K.

We (my father and I) talked at length at the time about the ethical nature of what they where doing - ie selling properties at "retail" premium prices to every day mum and dad investors, my thoughts was that the IC was ripping them off for the extra $9-$16K. I was angry because it is so easy to not only find new villas to buy well, but it seemed so easy to find these sites and dev projects (I didn't really acknowledge my fathers efforts in educating me in property development at the time). My father's opinion which I now agree with is that these people probably wouldn't have entered the property market without the IC to hold their hand and do all the work for them are better off even though they paid this premium. Investors who wish to do the hard yards, self educate and find the deals themselves can and will save alot of money.

My 2c

Paulie

 

[Rolf Latham]

Hi Paulie

Your dad is 110 % spot on !

Someone pays, but in the medium term if you dont enter the market YOU pay.

ta
rolf

 

[quiggles]

Way back in the old days there was a longish thread about IC. I don't want to search it out as it may now be considered to be either defamatory or at least outdated.

We looked into the IC model. What really alarmed me was the super-borrowing model for 'living tax free forever'. The idea was that you buy 7 IPs and in year 1 you drew down all the available equity in your IP1, lived on that for a year and moved onto IP2. By year 8, IP1 would have doubled in value, so you get it revalued, draw down the equity etc. For some reason the interest was not considered to be a problem. (I have no idea whether they still promote that one, but it disturbed me at the time.)

We got some educational value out of IC, but their deals never seemed to be that good to our analysis. When we realised that our support member couldn't even calculate gross rental yields, or hadn't thought to, we moved on.

BTW, what ASIC got Kevin Young for seemed pretty minor IMHO - things like a prepaid rental gaurantee which he called a no tenant, no risk policy and they objected to the word policy. They amy have had other objectives, but those were the scale of things that he'd actually committed a breach on.

And I'm with Paulie's Dad (and this was part of the earlier consensus) - you might not do professionally well, but it's certainly better than nothing.

 

[agent007]

.

What really alarmed me was the super-borrowing model for 'living tax free forever'.

If I understood it well, the financial structure that Steve Navra suggests in his seminars is also base in what you call "the super-borrowing model" and its also tax free forever. It has some differents in relation to what IC proposes but it's base on the same principle: leaving from the equity of assets that are continuosly growing and producing income (rent). The system would work as long as one doesn't take more that the assets (portfolio) growth.
I personally think it works and it's the true way for "normal mortals" to put their hands on a portfolio of IPs and shares without having to fully paid all of them. Otherwise, the task would be impossible at least for more of us. Hence, control is more important than ownership.

All mega rich people live under the same principle.

e.g.

K. Paker, W. Buffet, Bill Gates just to name a few control their empires but, they don't own them in full. In fact noone does it.

For some reason the interest was not considered to be a problem. (I have no idea whether they still promote that one, but it disturbed me at the time.).

The interest can and must be factored as part of the cost. I guess that the main issue here is that we, the middle class were taught by our parents and teachers to always base our financial thinking on "cash transactions" and having to pay in full for everyting in order to get the sleep well factor.

.We got some educational value out of IC, but their deals never seemed to be that good to our analysis. When we realised that our support member couldn't even calculate gross rental yields, or hadn't thought to, we moved on.

I have the same experience. All support members I meet were simple but good people with no much financial education themselves. They were or are just preaching the KY gospel as they learnt it. What I found of good value was the information about the areas on where IC was selling properties. IMHO, IC were in those areas before their potential was recognised for others.

Regards,
James.

 

[quiggles]

I pretty much agree, James. In fact, it was probably KY who made me so nervous of the phrase reported to me second hand that Steve Navra 'favoured eating your equity'.

So now I'm going to have to talk to him direct to find out what he really said and really meant. Damn your eyes! I was perfectly happy in my cocoon.

But the support members must only be preserved from coming under ASIC's purview by virtue of dealing in real estate. And even then, it's probably a narrow thing.

Another interesting development was a purge of support members that happened about three years ago. Never got the story on that one, but all the Canberra reps simultaneously lost their accreditation and/or formed a new association.

 

[crusader]

Investors Club

Hi All
My first post on this forum. I agree with most comments about the IC.
I have been a "member" for many years. I receive their monthly newsletter which sometimes is quit interesting. On 2 occasions I was interested in doing a deal with IC. One was a serviced apartment in Perth, which I could not get finance for, and the other was buying old houses for reno's in Thornlie. Upon researching the Thornlie market I found that they charged about 6 - 8 % above market value, however they promised to help with the reno, such as referring trades people etc, which was only a verbal comment by the support member. I also discovered that their "no tennant-no problem" policy did not stand up to what it was supposed to be.
So my word to anyone - do your due dilligence.
Caveat emptor
Regards
Crusader

 

[Carimwell]

Investors Club

I too have been a member of IC for a couple of years but not yet bought through them. In the past I looked at their properties in a few areas that I knew reasonably well, and the prices did seem to be inflated. Since the boom we had to have though, they are probably showing nice CGs. But what actually bothered me was that the information provided as to distances from shops, schools, transport etc was severely wrong (ie 500m when it was actually more like 4km). Anyone not familiar with those areas could have been deceived into thinking a property was a much better rental proposition because of its location than it really was. The poor quality of this research put me off at that time.
JIM