Who lied in the equity and/or net worth polls ?

[Sim]

C'mon, own up !

 

[always_learning]

I assume you have access to the mysql database logs and can find which person selected which $ range, and I guess you I found some serious descrepancies. Why dont you post this information

Anyway why lie? It's not where you are today, but where you are going in the future that is important. Maybe some people where just selecting where they will be in the future, ie telling the truth in advance!

There are 4 who selected $5M+ equity, I can think of at least 4 who probably are worth that much ( Jan and Ian Somers, Jakk next year , Navra, Michael Croft, of course Sim and many more )

 

[Sim]

I wont be sharing the information... sorry

If people want everyone to know what they are really worth (or what they would like to be worth) then they can tell them themselves.

They don't have a number big enough for what I'm worth !

(Actually, I voted honestly, and it certainly wasn't in the $5m+ range - if I was, I certainly wouldn't be working PAYE still !)

 

[WillG]

Sim,

Do you think the majority of the voters were truthfull ?

What % of forumites actually voted ?. Do the people who voted reflect a representative cross section of people on the forum or is it a bit like American elections where only certain cross sections of the population vote ?

 

[TheBacon]

I havent really set myself goals, its good idea though...

Currently I'm thinking +5mill in 10 years time and +1mill in 5years time (net worth, not total value). Currently nowhere near this.

goals.... time to think hard...

TheBacon

 

[sbe]

I answered truthfully, since the answer isn't published with my name - who cares.

Interesting to see how you compare with others.

Now if we could cross reference that with age, marrital status, # dependants etc, I'd get a real good picture......

or

I could just keep trying to do me best......

 

[pjb89]

Hiya

In addition to the above we could have a number of years 'field' also which could then all be combined into a table which would give a reasonable cross section of the forum membership (so long as everyone contributed honestly of course).

Pedro

 

[Jakk]

Originally posted by always_learning


There are 4 who selected $5M+ equity, I can think of at least 4 who probably are worth that much ( Jan and Ian Somers, Jakk, Navra, Michael Croft, of course Sim and many more )

G'Day Always,

I hate to disappoint you but you better take me off that list, The question as I understood it was NET WORTH..... to me, that means after deducting loans.

Anyway ask me again next year......

regards

 

[always_learning]

Jakk

Question, what sort of financial structure do you use to hold so many properties, it must be different to "consumer" IP finance.

Rgs Glenn

 

[Sim]

Another interesting measure would be what is the total dollar value in loans you control ? Of course some definitions would be required, such as control meaning you are both a director and beneficiary of a trust structure etc.

This is a good measurement of your servicability - coupled with your risk tolerance.

More is not necessarily better !

It would be interesting, but wouldn't really mean terribly much

 

[Jakk]

Originally posted by always_learning
Jakk

Question, what sort of financial structure do you use to hold so many properties, it must be different to "consumer" IP finance.

Rgs Glenn

G'Day Always,

In past postings, I have hinted that I had real funding issues some time back. I know first hand the serviceability problems one has when one is not a mega dollar earning IT Professional.
Couple that with no income other than rental income and one finds it almost impossible to get a loan, ....from traditional sources (banks).
Therefore we look further afield, at the present time, more than ever before (that I know of anyway), there is a multitude of lenders that do LO DOC or as I call them NO DOC loans. These loans however usually have a maximum lend of around 70 -75%.
There are some out there that will lend a bit more. Ask our esteemed Mortgage Brokers on here for further details.

When one has owned a few properties or even one for that matter and capital gains have been tremendous over the period of time of ownership, then a simple refinance to the max amount of lend under one of these No Doc loan arrangements can usually free up lots of moolah.........which is in turn used to finance the equity contribution on more properties as required by these No Doc Lenders. I hope I am making sense here.
Notice I have said nothing of any income requirements till now, thats because I have never been asked to provide them with these lenders to date.
I simply state the truth, that I am self employed and I get an accountants letter informing the No Doc lender that I am in a position to repay the loan.
These loans come at a slightly higher interest than your conventional WeSuck Bank property investment loan, but if this difference in interest rate is going to have such an adverse affect on the property purchase that you are making, then you should maybe consider looking for a better investment property in the first place.
The way I look at it is, if I can borrow the money without the hassles, tis worth paying a higher interest rate.

Now Always, I will take you to the advanced session, this is where we create equity out of thin air.

I buy a block of dirt, say $75K, I pay for this 100% from my moolah that has come from refinance of existing, much capital gained property. I spend say another $10K on plans, surveys etc to build a couple of townhouses there. After a long wait, I get council approval. I contract a builder to build these 2 townhouses for lets say $120K each, total of $240K.
The finished townhouses on this piece of dirt will sell for $250K each, once all the landscaping, driveways, etc is all done.
I now go to my No Doc Lender and ask to borrow 70% of the completed valuation of this project.
$250K x 2 = $500K x 70% = $350K that I can borrow.
Now Always, go back over my figures and see how much of my money is in the deal.
Now lets take it to the next step and this is where I might confuse some.........by the time these 2 townhouses are complete, you owe $350K, the land and permits cost you $85K plus to build them $240K, so far $325K + the stamp duty paid on land purchase, about $2K (Vic.) plus landscaping, fencing etc etc. lets say the whole $350K is gone........but you've got your original moolah back, therefore you have no money in this deal of your own.............now how did that happen.
Next step, you sell one of the townhouses for $250K, so therefore the other is also valued at $250K, the lender will require you to pay down the $350K loan leaving only 70% lend on the other townhouse. So lets see, you've sold own townhouse for $250K and after paying a measly amont of $10K to the selling agent and lets say a couple more in legals ($2K), you are left with $238K of which the lender will want back $175K plus an early payout penalty of, lets be generous and say $3K, so that in effect leaves you with $60K back in your pocket.

At the end of the day, you have a townhouse worth $250K on which you have a lend of $175K, therefore equity of $75K plus another $60K in cash. On the townhouse you have sold, you have made a profit of approx. $70K,(after incidentals) so you use part of that $60K cash to pay the tax man his cut, and move on to do it again.

So who is it that says this property stuff is hard?
Piece of cake I reckon and so do a lot of others.

anyway in answer to your question Always, I will now ask you, what sort of financial structure do I use?, maybe you can now tell me?

regards

 

[always_learning]

Jakk, thanks for the long post, very interesting.

Do you want to know how they finance in Japan? As you know property prices have been declining for more than 10 years. How can anyone invest in a falling market with no event on the horizon to stop the decline?

I asked this question to a multi-billion dollar a year development company president in japan ( interesting people you meet when you send your kids to expensive schools).

• First they create a holding entity that is related to but not legally connected to the master/parent company. Ie in our terms a trust!
• The parent company lends the holding entity 30% of the project. Banks in Japan will lend the remaining 70% to the big guns, the bank knows the legal limitation and they cannot seek redress if it goes belly up to the master company. ie in our terms loc-doc no-recourse finance.
• The holding entity gets the place built and puts in under the control of a service (building management) company. in out terms lets it out via a full-service real estate agent.
• Yields are good around for A grade office or hotels gross returns can hit 8-10%, after paying the bank 1.7% interest (the bank pays 0.003% from the reserve bank of japan) and other costs the holding entity yeilds 6% profit each year. In our terms they are cash-flow positive.
• 5 years at 6% profit gets the parent back the orginal 30%seed money. Believe it or not thru some accounting trick, they normally have borrowed this seed money from someone else at 3%pa. ie in our term they use a LOC for the 30%
• After 5 years it is all profit, they dont care if the value of the project is 1/2 what it was 5 years ago that's the banks problem!

Creating something from nothing in a protracted falling market!

Its all about mananging cash flow, selecting the right structure, structuring finance and only then finding the deals to meet your goals, which seems to be the easy part....actually then doing it is more a exercise in getting things done thru people management.

The question for me is, if a guy from Drouin can do it, why not a guy from Koo-Wee-Rup? Why not me and why not now? All I have to answer this question is a bunch of excuses, nothing else!

 

[WillG]

Hi Jakk & Always,

Great to read posts with practical examples of doing things out of the norm.

Jakk, there is a lot of land for sale in Canberra at the moment that may be good for medium density development.

http://allhomes.com.au/c/ah?a=sl&s=37

It may be a challenge finding a builder to build dual-occupancies / townhouses.

I hadn't thought of development as an option due to ignorance.

Cheers,
Will

 

[sbe]

Thanks for the post Jakk. Very educational !

 

[Bazza]

Hi Jakk,

Excellent - sounds too easy!

A couple of questions:

1. I guess you would also have to account for the interest on the loan while the townhouses are being built ~$15k

2. If you sell the first unit in less than 1 year I think you will have to pay 50% Capital Gains Tax. But, if you kept it for 1 year then that tax is halved?

The part I like is that you put the mortgage on the townhouses removing it from your PPOR - magic!

Cheers,

Bazza

 

[JoannaK]

Originally posted by always_learning

The question for me is, if a guy from Drouin can do it, why not a guy from Koo-Wee-Rup? Why not me and why not now? All I have to answer this question is a bunch of excuses, nothing else!

Only you can answer that question truthfully AL, but if someone wants something bad enough, they'll find a way to push themselves to do something about it.

My mother once said to me, at a very appropriate time in my life, when I was asking myself the very same question "procrastination is the thief of time".

Jakk, that was an excellent post!

 

[brains]

Someone once said that to me years ago and my typically smart arse (at the time) response was:

So is daylight saving..

Now that am a bit older, i see the sense in what it means.


JoannaK wrote:

"My mother once said to me, at a very appropriate time in my life, when I was asking myself the very same question "procrastination is the thief of time".

 

[wayneh]

Very Much Food For Thought Jakk?

Have spoken recently to a few ex wage earners now doing this & I said to myself, self, this couldnt be to hard.

So am now trying it myself!

Thanx for the further insight!

wayneh

 

[Tibor]

Jakk,

Great story, really smart and inspiring, together with the usual humourus tale telling.

Tibor

 

[paulzag]

Plus a hassle with the poll being Net Worth was my net worth declined for 6 months as I funded deals and the biz, Then it increased for 6 months as I reaped the benefits.

My net worth has never followed a smooth line.

Oh no! I just realised I made a mistake on the answer. My personal net worth is -$66K!

regards

Paulzag
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