Who has followed Jan's advice "to the letter" ?

[Kevmeister]

The more I read these forums, and the more references I see people make to Jan Somer's book (and by definition her investing strategy), the more I feel the need to ask this question:

Who on this forum has invested in property by following Jan's "recipe" to the letter (and how is it working for you)?

What is Jan's recipe. I think the major ingredients are (and anyone feel free to correct me):

1. Tendency towards negatively geared, but perhaps cashflow positive.

2. Bought at market value.

3. Something tenantable and desirable to tenants (location etc).

I guess the reason I'm asking the question is because nearly everyone giving advice will say "read Jan's book" but it is amazing how many people advocate Jan's book but themselves "do it differently".

I'm really not interested in debate about +ve/-ve gearing - more interesting on concentrating on who is following Jan's technique and how it is working for them.

 

[peelsman]

Hi kev
I have 3 rentals that I guess you could say fall into Jan's criteria. As I've had them for a few years they have all done very nicely as far as CG go and as for renting them well they have had about 4 weeks vacancy for the whole lot in the time we've owned them
All are in Stkilda and all are in ripper parts of the suburb but I'm not buying at the minute as everythning now looks very expensive. All are neg geared but that doesnt worry me as I have a reasonable salary and can afford the loss.
I'm happy with the paper profit I've made on these properties.
only one was below market expectations at the time

I guess you could have bought anything 3 yrs ago and made a sh@# load..
HT

 

[Cosmo]

Hi Kev

Amongst the myriad of investment books next to my bed Jans ones were the ones that got me up and motivated. She basically says that one should buy when one can afford it (except as she stated, around the peak of a boom). For us mere mortals that takes a lot of the science out of property investment and got me onto my first one all those years ago (paid too much, negative geared,nice area though).The CG’s been good too.

Today forums like these and more specialized wealth accelerator strategies are more what I try to persue.

 

[Mikhaila]

Hi Kev,

I think, I fit into this category. The interesting point is that I started in 1997, read Jan’s book in 2003 and was relieved to find the strategy that so closely corresponds to what we did and still do. It certainly worked so far for us. We have mainly neutrally or very little neg. geared IPs, only latest purchase is just a bit more heavily neg. geared. The first property actually pos. geared purely due to rent increases over the last 6 years. All IPs are in very decent areas of Melbourne & Brisbane. We paid what we think was a fare(market?) price. Amazingly all properties are complying or very close to Navra “rental reality” (It sounds scientific but this is just common sense approach really).

I think Jan’s recipe has some flavours and spices. I like lazy approach, don’t like renovations nor can I classify myself as big brick & mortar lover. Hence I employ professionals to do PM for me. I reasonably like what I do right now – software engineering. If it gets too boring or tough or industry will be outsourced to India I may think about becoming a renovator .

Hope I answered your question.

 

[Kevin]

have not followed yet, but am just about too. Finance arranged just looking for a property, something in Brisbane area, was hoping to find some thing with +CF or neutral CF. May have to settle with -CF.

 

[Amarantha]

I don't remember reading the part about not buying at the peak of a boom. I remember reading "buy when you can and keep as long as you can", which strategy I hope to follow. But I'm going to be able to start buying in about a year from now, which is still pretty close to the peak of this boom. Should I keep renting and then buy with a higher deposit when the boom dies down, or should I buy when I can and get started ASAP? Does it make a difference if the property in question is a PPOR?

Thanks

 

[bundy1964]

Hi

I havent read Jans books, I do use the software though.

I look for yeild over capital gain.......got that slightly wrong last year CG was 2X the yeild Wont last forever though

I tend to work in the budget end of the market as there seems to be more demand.

We will only know what the peak was after the event...... those who 2 years ago said the prices were going to fall soon and then they would buy have maybe missed the boat. Investment appartments may be another thing altogether. As long as the peaks keep getting higher each cycle and you can hang on during the troughs you should do ok long term.

bundy

 

[MF35]

Without re reading the book, I took Jan's basic message to be along the lines of;

- Do something soon rather than putting it off (as has been said how will you know your at the peak? you might wait another five years and still be waiting for it).

- Her approach was generally to keep it simple and take a fairly hands off approach. Look at the long term. In the long term alot of the little things will even themselves out.

- From memory I think she seemed to lean towards CG as the focus, where you can afford it.

- I also thought she acknowledged different approaches would suit different people in different situations and didn't advocate her approach as the only way, or the best way, (not that anyone said this) just a way that was fairly simple and would work well in the long term for the average investor.

I thought alot of the reasoning she gave for the benefits of investing in property was good also. Her fairly simple approach showed me I didn't have to be an expert to understand and implement a successful strategy. While I am only about to purchase my first IP Jan's book was the primary motivator that encouraged me to investigate further. If I had of picked up a different book I might have skipped on by.

But in answer to your question. No, I haven't used it to the letter. And probably wont use it "to the letter". But I dont know that she really meant for people to.

MF.

 

[Reeg]

Howdy Kev,

We are kind of following it.

I think the most important thing is that you think about what you are trying to achieve and where you want to get to and then think about how you can get there. The path that you choose must be one you are comfortable to tread.

I don't think it hurts to take bits from here and there as long as you are consistent in your approach. We are all different with different aims and risk profiles so I don't believe one approach can fit all. Having said that a lot of Jan's approach appeals to me.

As others have said I think Jan's books are great at getting you to think about possibilities. Just don't spend too long thinking

Cheers,

Richard.

 

[Oscar]

Good question Kev.

It all clicked with me after reading one of her books. 5 years later I have almost hit that magic $1MM mark in equity. So, the strategy has worked for me although I must admit to some "excursions".

I definitely buy and hold, only look at very desirable areas that are easily tenantable (probably a 6 to 7 on jan's 1-10 scale). I buy at market value and are't too worried about reno's or other schemes. The portfolio overall is -ve geared but I do not even factor or budget for the tax gain ( I see this as bonus).

It is a very hands off, laid back strategy that suits my lazy nature. The portfolio is only 4 properties which also minimises maintenance..... but I digress.

I plan to buy whenever I can afford to and hold for the long term. The strategy has suited me to date and I plan to do this over the next 10 years or so.

Cheers,

 

[annE]

Hi

I think most people use those parts of Jan's strategy that appeals and suits them the most and then add their own flavours and spices to complete the cake. For me it was buying where you can afford if you can't afford to buy where you lived. I could certainly not afford anything where I grew up (Blakehurst 2221) but found something that I could very much afford in Penrith in 1997 (which I thought was a dump when I was growing up). But things and people change. Penrith was just ideal for me for my first IP, which was opposite a school, near a hospital, within walking distance of the train station, lots of sporting activities. etc. I then wanted to buy near a beach (a dream of mine) but of course Cronulla was pricewise out of the question. However Maroochydore in 1999 was very affordable with a good infrastructure - IP no. 2
I am now working in IP no. 3.
ann

 

[mallee]

'the bible'

Well I am a new investor who was inspired by Jan's book. It was like a revelation and seemed so straight forward. I think I am following her guidelines but there will always be variables according to individual situations.
I started with one IP and I am now negotiating my 3rd IP and I really enjoy the process. I purchased the software also and find that to be a very helpful tool.
I am so glad I picked up Jan's book and not someone elses!

 

[Cosmo]

Hi Amarantha

Quote

“I don't remember reading the part about not buying at the peak of a boom”.

Check out Building Wealth in Changing Times page 158 paragraph 2…………….

 

[Amarantha]

thanks

that'll be why i don't remember it - i read the first book, and also "story by story", but i've only flipped through "changing times"
i shall have to get it from the library and read it properly

that made me think - poor jan
she encourages us to save all our money for buying property, and so she must sell less books that way, since we all find cheaper ways of reading them
how selfless of her
YAY! for Jan

 

[INVESTRON]

saw jan on t.v.
read her book in 1993
built 2 houses in 93
bought 2 houses in 94
and havn't stopped since - though i slowed down a bit since that rush of blood.
i was already an investor before that, but jan inspired me to do more.

re: neg + pos gearing - don't think about it so much, it's just an added benefit, it's not the most important bit, just do it - is the important bit.
i have neg. geared all my i.p.'s - it is better to pay interest than to pay tax - you end up with something.

 

[Jacki Henry]

Jan Somers recipe for success

I thought Jan Somer's 'recipe for success' was as outlined in her books and I quote from P90 of 'Building Wealth in Changing times"
'the recipe they follow is a simple ''fruitcake'' recipe that you can use yourself by varying the ingredients to suit'.

The recipe for success
Step 1 Begin with your first home
Step 2 Buy an investment property
Step 3 Build a Property Portfolio
Step 4 Balance the dept on retirement

We were accidental investors until we read Jan Somer's first book in 1998. That really inspired us and showed us that we could use our equity in our own home and we went and bought 5
properties in the next 12 months and built another one.
We have a total of 11 properties now and at present living off the equity of one of them.
We have varied the ingredients to suit ourselves. We look after our properties ourselves, have a mixture of property types but the majority are 4x2 modern brick homes in the Mandurah area which are appealing to tenants. We are not renovators but if time allows us we do painting, gardening, cleaning. We have always looked on property investing as a business.
Neither of us is currently working and are self funded retirees.
So we are very grateful to Jan and Ian Somers. We know that anyone could have made money in the property market in the last 5 years but many of our contempories were sceptical (and most of them earnt a lot more than we did and do you know what! they are still working!).
So happy property investing to all of you.

 

[ella]

I'm a newbie here - haven't bought an IP yet but am hoping/intending to start this year. I've got Jan's book and have read it twice. I'm racking my brains as to how I heard about her and property investing. Just can't remember - maybe something on ABC local radio one evening - who knows!

But reading her book has definitely inspired me to get started... that and reading the posts on this forum!!

 

[voodoo]

Hi Kev,

I read Jan Somers "more wealth thru residential property" and also purchased the software.
I would scan the property week and net every week and put the figures into the PIA software.
Within 2 months I had purchased -

3 bedroom house on a 700m2 level block and only 500m to the CBD. The building was constructed post 1988 so I arranged a depreciation schedule to be done. The house also has tenants in place (3yrs). A property manager looks after this place for me and I have to remind myself that it is mine..
I took an IO loan fixed for 3yrs.
It is negative geared, costs me about $30 week.

The best part is....I had it valued last month and it has increased by $75,000 and I only purchased 7 months ago....

I still look for more property, I have lots of Equity but cash flow is becoming a problem. I have a young family and we are on one wage.


I must say Jan somers books are great....
I also followed SOME advice of Neil Jenman.."Real estate mistakes" and it did save me thousands $$$

cheers

 

[hwd007]

I have not read any books at all. From what I can see many people seem to rave about +cash flow, but it invariably seems to come at the expense of CG. It really depends on your situation.

If your cash flow is weak, then + cash flow may be right for you. On the other hand if cash flow aint a problem, then high CG -ve geared may be better.


When looking at property from time of purchase, I have not seen many +cash flow properties that return more than a few thousand per year if that offer more than 5% CG.

Yet I have seem plenty of -ve cash flow properties that may cost a few thousand per year but have 10% CG and thus captalising over $20K per year.

For example consider two hypothetical scenarios on property

1. +CF $3000 per year on $100K property with 5% CG being $5,000 thus total combined capitalisation and revenue = $8,000

2 -CF of -$3000 per year on a $100K of investment at 10% CG being $10000 - $3000 = $7000 total combined capitalisation and revenue

But this is without tax effects. If Im on 30% tax than roughly senario 1. would be taxed $1000 on $3000 net income making it $7000 after tax.

Scenario 2, would get and extra $1000 tax refund making it $8000 after tax. So the tables would be turned against +CF property in this simple example.

Admittedly senario 1 will pay less CG tax when sold due to lower capital growth, but well who cares when the net gain still weighs in favour of higher or double CG, you may still be better off. There may be a situation that offers such good cashflow, that it turns this on its head, but I aint seen any.

We could be talking 100K 200K or 300K of investments, its all relative and the same returns would apply.

At the end of the day its a numbers game and the numbers have to work for your situation. I prefer brand new for less hassles and being an interstate investor, and at present cash flow is manageable, but not forever.

In a years time I may have to re-evaluate, but the my -ve cash flow properties will probably be renting for more anyway due to the high CG in the area. Thus the cashflow concerns may be offset by higher rents. I just don't have the time to be chasing up repairs on old properties.


horses for courses.

 

[hwd007]

I have noticed over the last 6 months though that the returns are falling on brand new property. Even in Brisbane CG is surging ahead of rents which is a concern for new investment returns. I bought about 4 months ago $244K and rented for $280 a week.This is just under 6% return. I cant see anything approaching that sort of return now on new property. If you can find it let me know. I'm all ears !