Reply: 2.1.1.2.2.1.1.1.1.1
From: Jakk Bass - The SLUM LORD
Peter,
Jakks rule No. 1 - Never buy a property that can't be turned to positive cashflow within a reasonable time i.e. within 6 months. (and by that I dont mean allowing for depreciation, tax advantages etc. I am talking cold hard cash in your pocket.
e.g. rent-(interest+rates+insurance+repairs+any other expenses)=$positive dollars in your pocket
Jakks rule No. 2 - Always put in 20% equity + borrowing costs + stamp duty + legals etc. (by all means revalue at a later date and borrow against equity build up to buy additional property, but never owe more than 80%) my reason for this is if the shit ever really hits the fan, worst case scenario, you sell the property and pay out loan and then walk. or as they say, drive away, no more to pay.
Jakks rule No. 3 - I always buy in my own name, no trusts for me, no company structure.
I have heard our very learned man Dale speak on trusts and I was convinced that this is the only way to go, but I am a control freak and somehow I love getting those rate notices with my name on them.
Last years Land Tax bill from memory was around $9,000 but I am only too happy to pay it (yeah right), I know this could be reduced significantly through the use of trusts, but you cant teach an old dog new tricks.
Jakks rule No. 4 - Invest no further than an hours drive from where you live.
I like to see what I own, I like to drive past my properties regularly, I like to see if adjoining properties are for sale, I want to know it all. If there is a repair to be done, then I want to see it and if I cant do it personally, I'll contact one of my preferred contractors. Put simply I don't believe that anyone cares more for my properties than I do, why should they.
Jakks Rule No 5 - Always look outside the square, always. some of the best properties I have owned or still own are ones that were passed up by other investors, Try to see something that others cant, this is hard to put in words but mastering this aspect alone will put you in a class above others.
I'll give an example here.
I owned a house on a corner, and was looking at building a unit fronting the side street on the same block. While getting plans drawn up, house next door came up for sale, put everything on hold and bought next door house.
Applied to do transfer & consolidation of title (attached to my original block)
put next door house straight back on market, same price as purchased but with reduced backyard and sold no probs just had to wait to get everything through for settlemnt.
New plans drawn up for 3 units on newly created "L" shaped allotment, and pased at council. So basically got 2 unit site for free. Very hard to lose money on development when you dont pay for the land.
By the way financing the construction of these units I achieved 130% finance, no probs as they looked at the value of the completed project. (my equity in total project was still over 20% on paper)
Sold 2 of the units and kept the 3rd and I still own old house on corner.
Accountant said I had to apportion cost over the 3 new units, paid a bit of CGT but basically the 3rd unit owes me nothing.
I figure worth around $155,000 now and returning around $9,000 a year
Now thats what i call positive cashflow:
cost $0 returning $9,000 per annum.
would love to do a few of these a year.
Gone slightly off track here, and kids nagging me to a challenge of Crash Bandicoot on playstation.
better sign off.
Will think of more rules and post later.
Go on folks, pick it to pieces, but has worked for me, and the funny part is it's still working and I aint.
regards
Jakk the Slum Lord
..and the hangovers nearly gone.
