Born To Be Financially Free - Melbourne 2014 (c) - - PDF document
Born To Be Financially Free - Melbourne 2014 (c) PropertyInvesting.com Pty Ltd 1 Born To Be Financially Free - Melbourne 2014 Mr. Earl Nightingale From: The Strangest Secret To Start With Is now a good time to be investing? Some
From: The Strangest Secret
tomorrow, today
best decision, here and now
decision you can
you have at your disposal
knowing what to do:
– People do nothing; or – They rely on others
company auditor
About You
creation journey?
How old are you now (in years)?
By what age (in years) do you want to have achieved your primary wealth goal?
How many years do you have left to achieve your goal?
How many hours per week do you presently work?
How many hours per week do you presently sleep?
How many hours per week do you presently rest?
How many hours per week are left?
Of those remaining hours, how many would you say are currently ‘idle time’?
$ How much do you earn per annum? (pre tax)
$ How much do you think you would need to earn per annum (pre-tax) to be financially free?
Using one word, how would you describe your financial situation?
Using one word, how would you feel being financially independent
for money?
Who has had the biggest influence on the way you think
In one word, describe his / her / their financial situation?
In ten words or less, describe your primary wealth goal?
In one word, why are you here today?
Steve’s Top Six ‘Mission Critical’ Investing Truths
investing lesson
for maximum success
As long as people live in houses you can make money from property investing
– Population growth – Low unemployment – Proximity to Asia – Stable democratic government
DWELLING APP Δ POPULATION STATE 30,969 83,737 QLD 26,744 76,346 WA 26,409 110,537 VIC 44,639 108,067 NSW
PERIOD: OCT 2012 TO SEPT 2013 | SOURCE: ABS 3101 & ABS 8731
Forecast Housing Gap Study 76,000 2013 Revision 284,000 2001 Forecast
Source: The National Housing Supply Council data
– Larger households – Lower migration – Kids staying home longer
Our job is to:
buyer / tenant demand
we must evolve too
The Pathway To Maximum Profit
Source: The National Housing Supply Council data
By what margin does the upside benefit
usually sold on the best case scenario
and quantify the risks
Types Of Aggravation
Types Of Aggravation
$119,058 $109,103 $17,686 Potential Profit $260,826 Build 3 x townhouses Cash Needed $142,906 2 Lot Subdivision $249,386 Build 2 x townhouses
MOST QUICKEST LEAST LOWEST
INPUT = OUTPUT
How are your constraints limiting your wealth potential?
How are you trying to reap a full time outcome but only contributing a part time effort?
Buy Problems & Sell Solutions
If there is no manufactured profit to be made, the only way you can make money is via generic market gains.
Potential Skill Based Profit Solution Level Of Investor Skill Problem
Problems
Solutions Problems
And to supersize profits… Massive profits can be made when you position yourself in front of a favourable trend
they carry you one way or another
maintain position or even stay in the boat!
$667,500
($23.18 psf)
Purchase Price Rams Plaza: Key Details Details
5 shops + 3 warehouses + separate building + land
Date Acquired 9 September 2013 Size
Land (sq ft)
108,473
Building (sq ft)
28,794
– Now fully occupied
– Cost $69,500
52,581 sq ft 108,473 sq ft
5/14 9/13 8 Months Owned
Rams $
Post Reno Price $737,000 Revaluation $1,150,000 Equity Gain $413,000 % Increase 56%
Let The Why & When Determine The What & How
– Buy ‘good assets’ – The outcome you achieve is dependent on the assets’ performance
– The outcome you desire shapes the assets you acquire
Properties aren’t all the same… some are better for growth, some are better for income, some are just bad.
Benjamin Graham, The Intelligent Investor
do you want from your investing?
– Provides the context for your investing – Gives you the motivation to keep going – Gives the money meaning
do you want from your investing?
Annual Income Goal: $
to have achieved that annual income goal? Deadline:
product is most relevant?
– Type – Location / Condition – Cost – Area knowledge – Savings for deposits – Borrowing ability
strategy is most relevant?
– Most money – Quickest time – Least risk – Lowest aggravation – Time – Passivity – Skill – Risk tolerance
For the property you are thinking about buying
There Are Riches In The Niches
more cost effectively than anyone else
where the trend is your friend
– Regional property – Sub-letting – Vendor finance – Lease options
– Student accommodation – Rooming houses – Period homes
– Strata titling multiplexes – Renovating 1950’s dual living homes – Property options / flipping property
– Commercial property – Overseas Investing – Air rights – Mixed use
A Summary Until Now
than skill and strategy
buy, hold, hope, hatch
How much control do you have over your investment outcome?
growth a bonus
Joel Bauer
persuasion techniques Joel Bauer
2 × tickets free
From 0 To Financial Freedom
Investing Margin
mar·gin [mahr-jin] noun
the printed or written matter on a page.
mar·gin [mahr-jin] noun
what is actually necessary: to allow a margin for error.
mar·gin [mahr-jin] noun
etc., beyond or below which something ceases to exist, be desirable, or be possible.
brings financial freedom!
and the margin provides confidence
provides a sense
One in four Australians survives on social security payments
Source: Courier Mail, 9 August 2013
What percentage of Australian couples aged over 65 rely
assistance as their major source of income?
What percentage of Australian couples aged over 65 rely
assistance as their major source of income?
What percentage of Australian’s living alone and aged
government assistance as their major source of income?
What percentage of Australian’s living alone and aged
government assistance as their major source of income?
What percentage
Weekly Earnings is the Pension?
What percentage
Weekly Earnings is the Pension?
Financial Freedom Methodology
channelled to property investing
Given property is now so much more expensive, you’ll most likely run out
your financial freedom goal.
Step One: Nominate an annual income goal
$800,000 $600,000 $500,000 $400,000 $300,000 25% $1,000,000 $750,000 $625,000 $500,000 $375,000 20% $1,333,333 $1,000,000 $833,333 $666,667 $500,000 15% $2,000,000 $1,500,000 $1,250,000 $1,000,000 $750,000 10% $2,222,222 $1,666,667 $1,388,889 $1,111,111 $833,333 9% $2,500,000 $1,875,000 $1,562,500 $1,250,000 $937,500 8% $2,857,143 $2,142,857 $1,785,714 $1,428,571 $1,071,429 7% $200,000 $150,000 $125,000 $100,000 $75,000
Step Two: Nominate your desired % return
$800,000 $600,000 $500,000 $400,000 $300,000 25% $1,000,000 $750,000 $625,000 $500,000 $375,000 20% $1,333,333 $1,000,000 $833,333 $666,667 $500,000 15% $2,000,000 $1,500,000 $1,250,000 $1,000,000 $750,000 10% $2,222,222 $1,666,667 $1,388,889 $1,111,111 $833,333 9% $2,500,000 $1,875,000 $1,562,500 $1,250,000 $937,500 8% $2,857,143 $2,142,857 $1,785,714 $1,428,571 $1,071,429 7% $200,000 $150,000 $125,000 $100,000 $75,000
Step Three: Calculate your required investment capital
$800,000 $600,000 $500,000 $400,000 $300,000 25% $1,000,000 $750,000 $625,000 $500,000 $375,000 20% $1,333,333 $1,000,000 $833,333 $666,667 $500,000 15% $2,000,000 $1,500,000 $1,250,000 $1,000,000 $750,000 10% $2,222,222 $1,666,667 $1,388,889 $1,111,111 $833,333 9% $2,500,000 $1,875,000 $1,562,500 $1,250,000 $937,500 8% $2,857,143 $2,142,857 $1,785,714 $1,428,571 $1,071,429 7% $200,000 $150,000 $125,000 $100,000 $75,000
Step Four: Nominate your desired deadline
$800,000 $600,000 $500,000 $400,000 $300,000 25% $1,000,000 $750,000 $625,000 $500,000 $375,000 20% $1,333,333 $1,000,000 $833,333 $666,667 $500,000 15% $2,000,000 $1,500,000 $1,250,000 $1,000,000 $750,000 10% $2,222,222 $1,666,667 $1,388,889 $1,111,111 $833,333 9% $2,500,000 $1,875,000 $1,562,500 $1,250,000 $937,500 8% $2,857,143 $2,142,857 $1,785,714 $1,428,571 $1,071,429 7% $200,000 $150,000 $125,000 $100,000 $75,000
$
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Potential Skill Based Profit Solution Level Of Investor Skill Problem
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Are you doing what’s most profitable, or what’s most fun (or what’s easiest)?
– Traditional – Creative
– JVs – MIS
You won’t source a great property investment until after you’ve started contributing great inputs (time, money, skill, risk).
Input
Input Output
Input Output
My investing approach: Passive Active
My desired profit outcome: Growth Income
Minimum profit of: $____________
Frequency (timing): per __________
Profit will be: Made Generically Manufactured
Using this strategy: Buy & Hold Sub-divisions Vendor Finance Renovations Lease Options Developing VCB
I have cash available of: $____________
I have equity available of: $____________
I can afford to borrow: $____________
I’d like to invest in this suburb / area: ______________
I am a (1) investor. My ideal property is one that will deliver a (2) profit of (3) per (4). This profit will be (5) using the (6) strategy. The specifications I need to work within are available cash of (7), access to (8) equity and an ability to borrow a further (9). The property will be located in the suburb of (10).
to make it happen?
Your I-Deal Property Profile
Why create one?
– Affordability – Relevance
– Construction – Land size /
– Age / condition – Floor plan
– Purchase price / terms – Profit
– Exit strategy
– Technique – Target market – Time budget – Money budget – Team
You give yourself the best chance at succeeding when you match the right property, with the right price, and adopt the right strategy that’s targeted to the right person.
Four Smart Financing Tips
Property Is A Money Game
– Are you a good risk?
– Can you repay?
– History and security
you can make more money, in quicker time, with less risk and lower aggravation
Money Supply Is More Important Than Interest Rate
interest rate you can, but…
is better than no money!
Cheap Expensive Traditional Conforming ≈ 5.62% Traditional Non Conforming ≈ 7% Private Money Partner ≈ 10% Hard Money ≈ 15% Venture Capital ≈ 25% Credit Cards ≈ 29% Cheap Expensive
$500,000 Purchase Price
$24,000 Interest @ 6% 0.8% % Purchase Price $4,000 Extra Interest $28,000 Interest @ 7% $400,000 Loan @ 80% LVR $500,000 Purchase Price
Be Cash Smart
$3,000 $1,400 After Tax $- $600 Tax ($3,000) $2,000 Interest (Saving) 6% 4% Interest Rate $500,000 $50,000 Amount Loan Owing Savings Account
– After tax and inflation almost zero
After tax and inflation, if you earned 1% interest
would it take to double in value?
After tax and inflation, if you earned 1% interest
would it take to double in value?
– After tax and inflation almost zero
Go Wholesale Where Possible
else thinks is good
and responsibility if it’s not
The Risk Equation
MOST QUICKEST LEAST LOWEST
By what margin does the realistic upside benefit
By what margin does the realistic upside benefit Outweigh the realistic downside risk
“Separating the facts from the opinions.”
Assertions & Assumptions
This would make a great property
You’ll get great capital growth
You could easily raise the rent $50 per week
You could build three townhouses here
The return is ….???
Believing without testing
Benjamin Graham, The Intelligent Investor
The more things you leave to chance the more chance things will go wrong
How To Approach Due Diligence
If you don’t know where you’re going, any road will take you there
Don’t waste time looking at deals you won’t buy!
I. Phase One – Understand the deal
Don’t start Phase One until you have the property under contract
II. Phase Two – Understand the numbers – Identify the risks
III. Phase Three – Call in the experts
– Final review and decision
Property Bought $31,655,125 17
Property Not Bought Property Bought $389,628,699 134 $31,655,125 17
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Strategies For Increasing Rents
less than market rent?
benefits of increasing the rent?
achieving higher rental returns?
– Passive
and you don’t get upset
– Active
Which approach best describes you? Why?
– Low rent is better than no rent – Start low and work your way higher Best approach is a ‘move in special’
– Don’t want to upset the tenant – They might move out! – They might call me names or act aggressively Blame a third party / event or offer incentives
– A bird in the hand is better than two in the bush – It can be expensive to find a new tenant Manage the property well Offer a (re) signing bonus
– Don’t upset the cart – I’m not greedy… I’m happy getting something, even if I could get more This is an investment. Offer charity to people who need it.
– Less rent equals less cash flow – Lower cash flow equals lower value
– Will your bank allow you to pay less interest if you don’t increase the rent? – Lower rent = underpricing risk
– The ‘Ralph Rule’ The longer you leave it, the more aggravation you will receive and the more likely the tenant will leave when you reset to market
if you have to as low rent is better than no rent
and secure tenure through incentives
4% 9% 5% 7% RR % $520 $520 $520 $520 $10 $10 $10 $10 Extra Rent
100 % Return Rent Rent Annual Additional EPV × ⎟ ⎠ ⎞ ⎜ ⎝ ⎛ =
$13,000 $5,777 $10,400 $7,428 Δ Value 4% 9% 5% 7% RR % $520 $520 $520 $520 $10 $10 $10 $10 Extra Rent
100 % Return Rent Rent Annual Additional EPV × ⎟ ⎠ ⎞ ⎜ ⎝ ⎛ =
the more dramatic the cost of charging a less than market rent
How can you make the space:
– More comfortable? – More convenient?
bedroom rather than the house
– Desire – Willingness – Price point
– New lease with conditions written in
suit you better
to pay more without just cause
then find a way to implement it in a win-win way
leaving on the table?
more rent, not less?
to start training your tenant?
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Anti Ordinary
Positioning For Success
“No one plans to make a mess of their life. But a lot of people never plan not to.”
Andy Stanley
If you’d like my help…
Chinese Bamboo Tree
You take a little seed, plant it, water it, and fertilize it for a whole year, and…
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The third year you water it and fertilize it, and…
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The fifth year you water it and fertilize it, and...
The Chinese bamboo tree sprouts and…
The Chinese bamboo tree sprouts and grows ninety feet in six weeks!