What is your strategy?

4. Most, MOST importantly develop what I like to call a 'sophisticated mindset' which involves developing the right habits, attitudes, beliefs and view of fear etc in order to achieve massive success. This last condition is so important IMHO. 80% of the battle to financial freedom.
Mind sharing how you developed the mindset? It would help a lot of people.
 
Mtr
Yes, more or less.
The trick to being able to do it in a good time frame is coming up with the deposits quickly via reno, developing, buying under market, etc ie not waiting around for growth.

I think the strategy is common among a lot of people, but results are governed by how hard you want to go at it.


This shouldn't be news to anyone.
 
Hi Leo,

I'd be keen to understand how to get started on the development path. I've just settled on IP#5, and up till now have been following the boring buy and hold strategy. Made some mistakes along the way, e.g. selling my first IP, but I reckon I've got the right mindset now to start looking to try more advanced strategies.

J

Hi dajackal
Don't want to rain on Leo's parade but just thought I would give you an insight.

It will be dependent on your financial situation as it is not only the property that you have to consider when developing but also construction/holding costs.

If you do not have adequate funds now, start with properties that you can land bank for future development. Alternatively, also look at properties where you can hold the front, adequate access to the side so you can build at the rear. This not only adds value but also increases cash flow.

Also, start following investors on SS that actually develop and post their projects one way of learning. Rockstar, Westminster, oc1 come to mind.

Find out some basics, zonings, cost per sqm to build etc.

Its baby steps and about educating yourself but you eventually need to get your hands dirty and this is how you move forward. I have not read a book that cuts it in this area.

I would also just play in your own yard to start with.

Cheers
MTR:)
 
Mtr
Yes, more or less.
The trick to being able to do it in a good time frame is coming up with the deposits quickly via reno, developing, buying under market, etc ie not waiting around for growth.

I think the strategy is common among a lot of people, but results are governed by how hard you want to go at it.


This shouldn't be news to anyone.

I agree, but not everyone wants to get their hands dirty;)

Also, not everyone wants to sell down, I think this is actually probably quicker way to move forward. Once I started trading I realised I could take advantage of the cycles and reduce debt. OK, no one want to pay tax but its better than holding on to property that starts going backwards.

Cheers
MTR:)
 
" Originally Posted by dajackal View Post
Hi Leo,

I'd be keen to understand how to get started on the development path. I've just settled on IP#5, and up till now have been following the boring buy and hold strategy. Made some mistakes along the way, e.g. selling my first IP, but I reckon I've got the right mindset now to start looking to try more advanced strategies"

Hi Dajackal,

I got started by first investing in IP to build up some good equity. Once I had the equity I realised that my strategy was too passive to achieve the goals I set out for myself and I needed to be more aggressive/hand on. I decided development was the way to go and I did a really good development course which set me on the right path ( I definitely think a good development course vs property investing course IS NOT THE SAME. IMHO) Im sure others have done well developing without any course to start - but I wanted a solid foundation right from the basics. Once I finished the course I started to look for development opportunities. I must stress that I was/am obsessed with financial freedom and I did WHATEVER it took to understand the concepts, make the contacts etc.

So really you need to 1. Identify your goals and timeframe, 2. asses your personal situation ie if your earning 40k a year with 2 kids and a home wife you may have to assess if its even viable for you. 3. You need to develop a really rock solid mindset (depending on the level of success/ net worth your after. If your happy to retire on passive income of say 50k a year and are happy to achieve that in 25 years, then obviously an average mindset/focus will achieve that.
 
So I was wondering what your strategy is?

Lauren,

This is a post that describes my chosen Investment Strategy that involves Villas & Townhouses. It maybe of interest to you..

The capital growth averaging (CGA) strategy I employ utilises a regular purchasing cycle similar to what Dollar Cost Averaging is to the sharemarket. The major underlying principle to its success is it relies on your "time in" the market, NOT "timing" the market, and never never sell. So in other words it does not matter whether you buy at the top of a boom or at the bottom, just so long as you purchase good quality, well located property in high density areas ( metro area capital cities), at or below fair market value, on a regular basis.

We've basically been purchasing an IP per year and to date we've built a multi $million property portfolio spread across Australia.

We've been purchasing new or near new property over older style property for several reasons, the main ones being (in no particular order) -

1/ To maximise my Non-Cash deductions
2/ To minimise my maintenance & repair costs
3/ More modern & Attractive to tenants - thereby minimising potential vacancy rates
4/ Ask a higher rent - thereby Maximising yields

Without getting into the "which is better debate, houses or Units??", I prefer to purchase Townhouses & Villas with courtyards of 30% or greater land area thereby eliminating multi story units / high rise apartments with balcony's, for several reasons. The mains ones being (in no particular order) -

1/ lower maintenance & upkeep for the tenant
2/ lower purchase or entry level into a Higher capital growth suburb area
3/ rapidly growing marketplace (starting both now & into the future) wanting these type properties. This is due the largest group of people to ever be born (being the Baby boomers and Empty nesters) starting to come into their retirement years. They will be wanting to downsize for the following main reasons - lifestyle & economic.
4/ greater tax advantages & effectiveness thus maximises cash flow.
5/ able to hold more individual properties spread across your portfolio - thereby minimising area over exposure risks by not holding all your eggs in only a few baskets, so to speak

I look to buy in areas with a historic Cap growth of 7%pa and/or are under gentrification. I look to where the Govt, Commercial, Retail, private sectors are injecting money. This ultimately beautifies the area and people like the looks so move in creating demand.

I have found this works well if you are looking for short to medium term capital growth so as to leverage against and build your portfolio faster.

Getting back to CGA, as the name suggests it averages out the capital growth achieved on individual properties with your portfolio throughout an entire property cycle, taking into account that property doubles in value every 7 - 10 years. Thats 7%pa compounding.

The easiest way to explain what Im meaning by this is to provide a basic example taking into account that all your portfolio cash flow will be serviced via Wages in the acquisition stage, Rental income, the Tax man, an LOC and/or Cashbond structure, and any other forms of income you have available.

For ease of calculation lets say we buy a property for $250k, so in 10 years its now worth $500k. Now lets say we do that each year for the next 7-10 years. Now you can quit the rat race.

So in year 11 ( 10 years since your 1st Ip) you have 250K equity in IP1 you can draw out (up to 80%) Tax free to fund your lifestyle or invest with. In year 12 you do exactly the same but instead of drawing it from IP1 you draw it from IP2. In year 13 you do the same to IP3, in year 14 to IP4, etc etc etc. You systematically go right through your portfolio year by year until you have redrawn from each property up to year 20.

So what do you do after you get year 20 I hear you say ?? hmmm..well thats where it all falls into a deep hole - You have to go get a JOB - nope only joking!

You simply go back to that first IP you purchased as its been 10 years since you drew upon it first time around and its now doubled in value ($1M) yet again - so you complete the entire cycle once again. In fact chances are you never drew each property up 80% lvr max , so not only have you got entire property cycle of growth to spend you still have what you left in it first time round that compounded big time. Now you wealth is compounding faster than you can spend it! What a problem to have

Getting back to what I said in my opening paragraph about it does not matter where you buy within a property cycle just so long as you do buy, This is because you will not be wanting to draw upon it until 10 years later after its achieved a complete cycle of growth.

Well that?s the Basic Big Picture of CGA. Once set up & structured correctly it?s a self perpetuating source of tax free income indexed for life!

For further information please follow the links to these "We've Done it" and "We've Done it Again" threads I started some time back.

If you require any clarifications just ask.
 
Tyla " Mind sharing how you developed the mindset? It would help a lot of people."

First I did some soul searching to really find out what my life's goals are and whether or not I was willing to pay that price to achieve them. I decided that I wanted to be financially free at a young age so I could enjoy the finer things in life, help family rah rah all the rest

I was reading some stuff by Anthony Robbins and I realised that your "mindset" is really the foundation upon which ALL your property investment knowledge/developing knowledge rests upon. Doesn't matter how much you 'know' if your foundation is weak, your execution will be poor. I know many, many people in 150kplus incomes but they have no or very few assets and will have to work all their life and retire on, lets be nice, not much. Not because they love to work till 70 by the way and retire on not much. So income IS NOT the most important. So I started to be obsessed and bought all les brown books, jim rohn and similar, reading, studying it and most importantly implementing it. You will find that your attitudes, habits, values all will change, and you will become totally different (if your willing to be changed).


Cutting a long story short, it transforms who you are on many levels. The reality is you have to become more, before you can achieve more. Anyway so then I started to read EVERYTHING I could on property investing. I literally bought every book I could find (written by Australian authors). After you read about...15 books, you will start to gain a perspective about the basics which are generally true eg serviced apartments? big NOOOO, buying a unit in an overwhelming house demographic area? NOOO and even worse buying a fully renovated unit in that area? noooo so basically you will start to gain a perspective. Trust me, many, many 'investors' still have no clue to the basics.

BUT BUT let me stress all this is dependant on the goals you set our for yourself. The more lofty your goals are, the more crucial all this is. If your goals are more conservative then you don't need to be this focused/obsessed.

Hope this helps.
 
Hi Rixter,

I have never been comfortable with the strategy your talking about. It sounds good in theory, and yes I know people are doing it but increasing your debt over time more and more and more doesn't sit well with me. yes I know as prices rise your lvr really should go down even though your drawing the equity to fund your lifestyle. Just doesn't sit well with me to have all that debt with no plan to reduce at all. Am I the only one not so comfortable with this?

But if it works for you then well done.
 
" Originally Posted by dajackal View Post
Hi Leo,

I'd be keen to understand how to get started on the development path. I've just settled on IP#5, and up till now have been following the boring buy and hold strategy. Made some mistakes along the way, e.g. selling my first IP, but I reckon I've got the right mindset now to start looking to try more advanced strategies"

Hi Dajackal,
I decided development was the way to go and I did a really good development course which set me on the right path


Hi Leo,

Can I ask which development course did you do? Pls PM me if you don't want to put it out there?

Cheers
 
Start a business to generate good cash flow.
Buy multiple properties and develop multiple townhouses on each to hold, business cash flow funds this.
Once accumulation phase over, sell business which funded entire portfolio and erase all property debt, no need to sell any properties.
Live off a very healthy passive income from an appreciating property asset base.
Timeframe from start to finish - 10 years.

I like this strategy.

But the first step, starting a business, where would you even start??

Surely this is extremely high risk? Business could very easily fail and you are totally screwed.
 
Hi Bltn.

I agree with you mate. Those that already have successful business can just use the cashflow.

For others like myself, I used my income from a job as cash flow. I viewed "me going to work" as" I go to the bank at 9am, have a meeting till 5pm and when I leave I have secured more funds for my investments" :D:D


p.s first step is to develop that dam mindset. I know I harp on about it on here, but its truly what makes or breaks someone achieving their goals.
 
Ill PM you Teshy. I'm not sure the rules on this forum about posting courses etc. Last thing I want is someone saying im a spruiker lol
 
Hi Bltn.

I agree with you mate. Those that already have successful business can just use the cashflow.

For others like myself, I used my income from a job as cash flow. I viewed "me going to work" as" I go to the bank at 9am, have a meeting till 5pm and when I leave I have secured more funds for my investments" :D:D

That's a hell of a long day at the bank:p
 
"That's a hell of a long day at the bank"


haha yeah, trust me it was. I would do double shifts, overtime, etc.. some of those 'bank meetings' lasted 18 hours! :eek::eek:

One of the best feelings ever I had in my life was walking into my managers office and saying " Ive made it, time to retire from this" :D
 
hey leot,

can u pm me that development course u did too ?

i'm very interested in development too, but feel its the wrong time to take on that for sydney (where i'm based) at the moment bc of where we are in the cycle. And to take it on interstate is risky given it'd be my first. I presume timing is very important with development, anyone have success developing in a downturn ?
 
" can u pm me that development course u did too ?"

ok.
" I presume timing is very important with development, anyone have success developing in a downturn ? "

Personally, my favourite part of the cycle is the 'stable, boring part', trotting along with modest growth. I find this is 1 of the best times to get sites below market value, your negotiating power is super duper and costs of a lot of consultants and builders tend to be a lot more competitive. Of course, building just before a boom is also ok to me :D

Its important to understand that you should be able to work out at the beginning of the development through your feasibility/sensitivity analysis whether its going to be profitable and acceptable to you or not. You really make your money at the time of acquisition of the site. Then the rest of the development is more a matter of, how much of that profit can you keep lol


Personally, I wouldn't recommend to anyone to get involved with development if you don't have the property investment basics down. Unless your just the money person and someone else develops for you for a massive cut. That's just my opinion.
 
I like this strategy.

But the first step, starting a business, where would you even start??

Surely this is extremely high risk? Business could very easily fail and you are totally screwed.

buisness can be high risk so it all depends on the individuals aptitude and risk profile. i personally love it but it definitely isnt for everyone
 
Sanj
Do you have to put in lots of long hours and deal with lots of employees? Just curious really, could be very stressful
 
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