Coach's function
Encourage personal accountability
Report into coach on a weekly basis re progress – It’s up to me to make the contact
Technical property investing support – If I’m in the middle of a deal, the coach can help analyse the deal,, just book a time with the coach and work through it together.
The coach is NOT responsible for chasing you up. Coaches are not accountants, lawyers or financial advisors, the decision is on me, not on the coach.
If you don’t like the answer, ask a better question. Bad questions are the ones you haven’t put any effort into.
Leon Madigan has experiences in all scales of building. (Profile: 60 yrs of age. He started as tradesman, then draftsman, then engineer- then involved in building 1985, then GM of design, construct of office blocks, mainly upmarket warehouse , commercial office; bought 1st block of land at 19 in Doncaster).
He works 4 half days a week (Normally Tuesday to Friday) and operates by phone, NOT email. Norm coordinates
Norm is not directly involves with RP4. He looks after the 199 people from RP1, 2 & 3.
There will be a graduate program available when RP4 ends.
Coach’s availability
Coaches are accessible 9 to 5, Monday to Friday. They have annual leaves and Xmas office close downs.
The aimed TAT is 1-2 business days for email and same day for phone call. If it’s a deal that I’m going to sign on the weekend, give the facts to the coach before the weekend to discuss.
Result Pattern
Usually after 8 months in Results, people start to feel comfortable to buy. It’s not a race.
Kick start program
4 weeks structured program
http://www.mentor.propertyinvesting.com/
l Templates: most popular are number crunching spreadsheets and budget
l Deal Log
l Forums: forum do and don’ts
Do Participate, ask questions, ask for ideas and share experience
Don’t advertise deals, advertise for money partner or JV partner or advertise for a specific return for a Money Partner
l Webinar archives
l Blog
l Graduate guides (volunteers)
The economic forecast:
Federal budget reveals
l Bad: $14 billion decrease in CGT revenue due to slower property market and less sale, higher unemployment and higher inflation
l Bad: 70% people fear they will be worse off
l
Median house price vs Rent increase in major capital cities:
Median house price | Rent increase % | |
579 k | 19.05% | |
467 k | 18.64% | |
457 k | 6.25% | |
432 k | 22% |
The low vacancy rates are pushing up rents and the housing price facing downward pressure.
We are in the early stage of buyer’s market, it is a better time to buy than sell
The rules of market have changed. It’s not time to do a long-term speculative buy-and-hold. It’s time for short-term get in , get out deals
The new winners and losers in the market are:
Winner | Loser |
Spot Buyer | Forced Seller |
Cash Reserve | Highly leveraged |
Borrowing ability | Unable to borrow |
Quick turn | Renters, House & land buyers |
The Australian housing bubble is greater than US and
The 5 moronic mantras
l Location, location, location: it’s scarcity that drives value, not location
l Never sell: Are you property collector or property investor? Collectors build ego, while investors build profit. Sell when you can profit better elsewhere.
l Use property to save tax: Losing money is a great way to save tax!
l Use depreciation to build cash flow: it ties you to your job and you pay back the tax when you sell
l Equity mate: it’s using debt to fund lifestyle. You should fund life style using income not debt.
What type of investor are you?
Passive investor | Active Investor |
Market driven profit | Created Profit |
Cash gain ( growth) | Cash flow gain |
Traits of a Speculator, as opposed to an Investor:
l Seemed like a good idea at the time
l Buy on emotion
l Hands off property management and forget
l Never sell
Most People | Investor |
Find property | Identify Profit |
Negotiate | Apply strategy |
buy | Find property |
Apply strategy | Negotiate |
Hope for the best | Buy |
Sophisticated Investing:
Let your goal determine your profit, let your profit determine your strategy, let your strategy determine your property, let the property determine your offer.
And apply A-B-M-S to optimize your profit.
The ABMS model
Analysis phase: your profit is determined before you buy. Everything comes back to:
l Planning:
l determine your goals
l identify your available finance
l choose your strategy
l become an area expert, who can drive up and down the street and determine the price with $5000 of the sale price
l define your ideal property
l Due diligence
l Identify prospective deals
l Carry out due diligence on
l the physical property
l the tenants / lease: payment history and what restrictions are there to get them out of the property
l your target market
l your profit expectations
l The numbers!
l Mandatory Research on
l Realistic rent
l Conservative end-sale value: get multiple opinions of on the end sale price
l Comparable purchase price
l All project costs
l Finance options
Enemies of effective analysis
n Danger of opinions
l Opinions of others
l Failing to distil fact from opinion. Opinions are valuable in itself but not in isolation. Get a lot of opinions and draw the FACT out of them, and form own opinion.
l Vested interest of people providing opinion, e.g. REA
l Beware of uninformed or subjective opinions (gut feel)
n Danger of emotions
l Fear and greed
l Emotion under auction and pressure selling. Auctions are designed for creating emotion,
l Pressure from within RESULTS to do a deal for the sake of doing a deal. Doing a bad deal is worse than being patient and feeling frustrated.
l Gut feeling: ignorance of numbers, lack of due diligence and wishful thinking
Buy phase:
In a buyer’s market, there are great spot-buying opportunities
Negotiation Tips:
l The one who says the number first loses:
If you ask the agent How much do you think the owner can come down and the agent ask how much you are willing to pay, say “I have no idea. I need to go through some numbers. Without knowing what the Vendor wants, I’m just going to give you some low-ball figures which is pointless….”
l Uncover the vendor’s needs
l Negotiate on price or terms, but not both!
l Know your walk-away price and stick to that!
l Use conditional offers to tie up the property while you complete due diligence
l Use unconditional offers for greater “offer appeal”, but only when you are 100% confident on finance and confident on due diligence.
Management Phase:
l Investing begins the moment after you bought.
l Management separates a sophisticated investor from a property buyer.
l Here your money is made or lost
The focus areas of management are:
l Budget control for time and money, and cash flow
l Time management
l People management
l System of control: there are two systems of control,
i. control for the project on budget, time and people;
ii. system for the goal to apply property after property. E.g., buy 4 sell 3
Selling Phase
Advantage: It releases cash;
It allows debt to recycle into more profitable property
Disadvantage: you forgo future growth
The question is could you get a better return investing elsewhere? Be prepared to sell if you can profit better elsewhere.
It’s time to think about selling if you wouldn’t buy back at the same value today
The best way to grow your portfolio is with realised profits
Tax liability can be minimised through effective structuring.
Don’t sell just for the sake of it.
Don’t hold just for the sake of it.
Be prepared to sell if you can profit better elsewhere.
Power of networking
Real Estate investing is not about brick and mortar but people and relationship.
DIY in property investing is hard work.
- Getting on agents’ hot list is more productive than searching real estate.com.au; Ask the agent about RP data “I’m working on this area. Can you give me the RP data??
- Leverage on other people’s contact: ask questions like what trade people did you use? What is the good and bad about them?
- Leverage on other people’s time
- Leverage on other people’s money
Realistic Goal Setting
Conscious mind: clear and focused
Sub conscious mind: Expectations on self-belief, self-worth, and “do I deserve it” are led by sub-conscious mind..
External Environment: Relationship
Half time goal setting – 1/3 of the targe for every half time
Goals need to be SMART: Specific, Measurable, Achievable, Realistic and with a Time frame.
Goals need to be written down. Write it down!
Goals will evolve. It becomes clearer as you grow.
Common road blocks and Signs to watch out for:
- Impact on relationship
- Frustration and resistance
- Negative criticisms: Response with a “Thanks for sharing” to the negative comments.
- “Life get in the way” – life will always get in the way, manage it!
- Over commitment is a common stopper. Property investment does not squeeze in comfortably with other commitments. Some things have to be given up to prioritise. Over commitment leads to distress and anxiety, which lead to bad decisions.
Sacrifice will be required. Persistence is the key!
The investment triangle of doom
Every investor will encounter one or all of the 3 problems above along the way of investing.
Deal Problem: Can’t find a deal?
Usually it’s due to
- Lack of time allocated to investing. Solutions:
- Prioritise
- Build a team of accountants, solicitors (not conveyancers, when there is a problem, conveyancer won’t be able to help), lenders & brokers, Real Estate Agents and Trades people etc. Don’t be afraid to pay for good advice
- Delegate
- outsource
- Lack of knowledge: Talk to the coach
- Wrong strategy or wrong area
- Insanity is to expect a different result by doing the same thing. Talk to the coach about your strategy
- Change the strategy or area
- Talk to the coach
Finance Problem: Finance maxed out?
Solutions:
Sell
Reduce personal debt
Restructure: Guarantor is treated differently from the Borrower by the banks.
Go to a different banker each time to guarantee different deal,
Joint Venture
Non conforming loans
Get into business finance: business finance are much more flexible than residential finance and it can be used on residential properties.
Cash Problem: need more cash?
Solutions:
Address the spending habit
Find Money partner through networking: For money partners you need a private loan agreement drawn up by a solicitor. Webinar archive #6 or 7 is about MP and JV.
Leverage on existing equity
Selling to move forward
Releases cash
Allows debt to be recycled into more profitable investments
Tips:
Use surveyor’s report to predetermine if it’s possible to subdivide
Subdivion – to find the surveyors used by the town planner, look at the title plan, at the end it shows the name of the surveyor
Tell agent specifically what you do and don’t want
When dealing with councils, be conservative and expect problems, work on the relationship, some councils offer pre-assessment of project
Useful Resources:
http://www.land.vic.gov.au/ useful in looking at the precedents
http://www.maps.google.com.au/
Quote of the day
Success come by doing things differently.
Procrastination is easy. It’s easy to find excuses not to invest. Don’t do the easy stuff, do the profitable stuff!
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