The dumbest quote I've heard in a long time

[orion]

Not sure if anyone has seen Mary Holms' free little book titled 'The Real Story' (if you haven't I wouldn't bother reading it anyway - or anything written by her for that matter). There is a quote in it by a guy called Frank Pearson which goes "Buying rental property is okay if you can do your own plumbing!!" That has got be be one of the most incredibly stupid statements I have ever heard. The mentality and small-mindedness of this guy is unreal. It is like doing your own lawns because you think you are saving money, when in fact you are costing yourself money, and more importantly your time. By doing these odd jobs on your properties, or even around your own home, you are re-enforcing into your sub-conscious - 'my time is worth almost nothing per hour, I had better do this to save me paying someone else to do it'. If, on the other hand you refused to do anything, which you could pay someone else to do for less than say $50 an hour (to start with), your whole mindset will change. If you enjoy mowing lawns for exercise, that's fine, but don't ever do it to because you think you are saving yourself money. You will always think far too small, limit your potential and be costing yourself big bucks.
When you buy properties for below what they're really worth by $10,000 - $20,000 or more, it may take you say 40 hours of your own time and effort to find such a property to purchase (much less than this when you have bought a few). This would make your time actually worth between $250 - $500 an hour. You would also be increasing your knowledge and experience when looking for such properties. The knowledge and time you invest is an investment in yourself. Your time can either be spent, or it can be invested. If you only ever spend it, you will never be rich. If you invest your time, ie reading books, listening to tapes, your team etc, also investing time in your own health by exercising at least 1/2 hour a day, you will be healthy as well as wealthy. You can never get back your time, each day that passes that you do not invest some of it in your health and financial intelligence and your well being, is time that is wasted forever. Most people only ever spend their time, not invest it. People who value their money over time will never be wealthy. People who value their time over money will be wealthy at a rapid speed. When you invest your time ON your investments (not in them), time is worth MORE than money because you retain your knowledge, know how and experience forever.

Graeme Fowler

[Marcus]

Hi Graeme,

Most of the stupid comments I have read regarding property have come from the Saturday financial section of the herald (inside back page for those that are curious) courtesy of Mary Holm financial advisor extraordinaire (cough, cough!!). She has always appeared hostile toward property investment to varying degrees and has had fun shooting down half-wits that write in that only have half their facts right. As the columnist, like a comedian controlling the heckler at a comedy show, she holds the microphone.

My father, who is a big long-term share fan, often would try and quote me pieces from her articles. He found it all good bait for a verbal tussle. Mind you, if you have ever tried arguing someone else’s point (especially if the point was like Swiss cheese) you would have a fair idea that he was pushing $#!T uphill with a tooth pick!
He is old school, and is very much anti debt. In his mind, there is no difference between good and bad debt. It’s all bad.

Back to the topic at hand. Mary has obviously undergone some education in recent years with regard to property as I have noticed a change in attitude toward property. In some instances she even recommends buying property.

Mary is highly respected in her area of expertise. This however is not property. She quite often consults experts when questions are asked that fall outside her knowledge base. Common sense would suggest that she apply this to the property field (but don’t hold your breath).

Regards,
Marcus.

[orion]

Hi Marcus,

Yes, I would have to agree with you on your comments about Mary Holm. I used to also read her editorial/question & answer sections in the paper at times. A couple of times I e-mailed her about the crap she was writing and how she had no idea what she was talking about, but I never got a reply - surprisingly enough. I don't read her columns anymore which I find does help prevent my blood from boiling.
Re shares etc, it is an old argument & there are pros and cons for each. One thing with property though is that it is an INVESMENT if you set it up to be an investment. If you remember Robert Kiyosaki's definition of an investment, it is 'something tangible that you can see & touch that someone else will PAY you to own.' With rental property, as long as you have a P & I loan, someone else is paying you to own it, ie the tenants. If you are on interest only, no one is paying for it, you are just relying on it going up in value which I think is highly risky. With shares, you are buying them, no one else is paying for them, so I do not call them an investment. You can trade options and do naked calls and naked puts where you do not put up any money of your own, but you still need a large account in case you do lose on the trades. Obviously, there is no options trading on the NZ market, only buying and selling shares.
Mary Holm's advice and opinions and others like her, are for people that want to be average, or mediocre, but never wealthy. If you want to be rich, you would not listen to her advice, or other like her such as Martin Hawes. If people have not done it for themselves, always be very wary of anything they say or write.
I used to love going along to property investment seminars with real estate agents / mortgage brokers / bankers or other similar people running them. They, like Mary would usually have very little idea what they were on about. When I couldn't sit there any longer without saying anything, I would say to the presenter - 'can you please tell me how many properties YOU own?' The answer was usually none, or I used to have some, but have sold them. Or I would ask 'can you please tell me where you derive the majority of your income - is it from your property investments, or is it from selling houses / mortgages / loans etc?

Graeme Fowler

[wada]

Orion,

If people have not done it for themselves, always be very wary of anything they say or write

This comment is so true, we have learnt the importance of this. When we started (5 yrs ago) we were green as Kermit the frog and tended to listen to people who weren't the most appropriate.

We are still learning and I find it interesting people's opinions of other 'experts'.

Wada

[donna]

Thanks Graeme. Marcus, Wada for your interesting comments. I have a small but growing IP portfolio and with the interest rates moving upwards have been wondering if I should be investing (or spending as you put it Graeme) $$ on shares.

My experience to date in shares is not a great story - over here in Aus. gave a fin. investor group $100K, left it with them for 2.5 years and got $107K back! Now this was before I knew anything about IP. Needless to say I am doing a lot better in IP. Still I wonder if I should be putting my eggs in different baskets though not too sure what baskets!

I too have read Mary Holm's 'The REAL Story' and agree with all that you three have said. It's a load of Bo**ocks!

Cheers,

Donna

[orion]

Sounds like you are doing well Donna. Interest rates are an awkward one here in NZ and OZ because they can only be fixed for a certain time frame. In the United States, many are fixed for 30 years which makes it far safer in that respect. If you are concerned, may be best for you to fix the rates for as long a term as you can get, which I believe in Australia is between 7 - 10 years. In NZ, it is 5 - 7 yrs depending on the lender. You can also do your calculations when buying, using scenarios of what would happen to your mortgage payments if they lifted 2 - 3 % p.a.

Re shares / property - remember this Donna; it is all the same game - only the players are different. In property - most people lose long term, in shares - most people lose long term, in business - most people lose long term. It is the old 80/20 Pareto rule. Also remember that only 5% of people are financially independant at age 65 - most people lose money when they invest long term. It is not the property, the shares or the businesses that make them lose, it is their own thoughts, beliefs, rules, self talk and psychology that determines whether they make it or not.
If you think of the hotel business - you get 1 star hotels, 2 star hotels right up to 5 star hotels. Most people live their life as if they were a 2 star hotel and are happy playing there. If you want to be one of the 5%, you need to operate as if you life was a 5 star hotel. Another way of saying it is this - imagine you as an individual are a company. What would you do differently if you had your accountant, your lawyer, your network advisors, your shareholders all watching what you do each day. Would they be impressed, or would they fire you as the chief CEO? Live and act as if you were in charge of your own large company with all these people watching what you do and the financial decisions you make.

Regards
Graeme Fowler

[muppet]

Hi Guys.

If people have not done it for themselves, always be very wary of anything they say or write

Ask a Real estate Agent if he owns any IP when he is saying a particular property would make a good investment property?

Regards

[Marcus]

Hahaha,

or ask "what in particular makes you think this is such a great investment property?"

[LeanneS]

I have done this and the answers are stunning.

"People will rent it."
"It is nice."
<paraphrased> "Because it is for sale"/"Because it is a flat not a house"

My favourite comment from an estate agent:
"Oh yes, if you spent $5K doing it up you'd definitely get $5K value out of it." - why would I do that?

In the UK, many selling agents know nothing about rental assessments (different department) and if you ask them how much a property will rent for they will take the asking price and give a 5% yield. Hope NZ is better ?

Leanne

[inzvestor]

Hi Leanne

I agree about the UK agents.

Agents in NZ are generally a bit more helpful and knowledgeable of rental prices and valuation methods than their UK counterparts.

It's the same with companies - each person has a set job role in the UK and will very rarely stray from it.
Scary as it may seem but some people are employed to fold and seal envelopes and will not want to learn how to stamp them as it's not in their job description.

The UK is very backwards in a lot of thigs and Property is just the tip of the iceberg.

[The_Dog]

Back to the lead post of this thread, I think the belief that mowing lawns (or plumbing) is 'incredibly stupid' and 'small minded' is similar to the belief that finding new properties is the b-all and end-all of property investing. After all, what is the point of looking for new properties if your existing purchases are performing cr*p and you have no capital growth or cash-flow to support your next purchase? In the same way that fatherhood doesn't end with conception, property investment doesn’t end with signing the contract.

So, an investor spends 3 hours on a property, mowing the lawns, trimming the edges, washing the house exterior and cleaning the guttering. The tenant is thrilled, the property is looking good. And what's more, the landlord themselves has taken the time and effort to personally look after his asset, but also their tenant. Because of 10 minutes time (chatting) and a smile, the tenant decides to stay on in the house longer, and is satisfied (put a price on that!). Later that week, the house is re-valued, and because it's looking smart, the price comes back $5K more than expected.

So, $5,000 divided by 3 hours... let me think... $1666 per hour!! My word, that's over 3 times what someone could earn sitting at home looking through the classifieds.

My point is, yes, value your time over money. But also, never forget to keep in touch with the reality of property investment. And if that means mowing lawns, get on with it!!

Education without actions is nerd.

Woof

[orion]

Hello Mr Dog,

If you read the post at the top again, you will hopefully note that I did not say mowing lawns and pluming was incredibly stupid. What I was referring to is Frank Pearson's quote stating "that property investment is okay if you can do your own plumbing." In other words, he is referring that it is not okay if you have to get somebody else to do it.
If you have one or two rental properties and you like the idea of doing your own maintenance, gardening and mowing lawns - good for you, but it is not a strategy to use if you are going to build a large portfolio of properties. You will hopefully soon realise that you time is better spent on higher dollar per hour activities. You are also helping the tradespeople in your area in their own businesses. If you are just starting out and enjoy these activities, who am I to stop you?

After all, what is the point of looking for new properties if your existing purchases are performing cr*p and you have no capital growth or cash-flow to support your next purchase?

If this is above is true for you and I don't know your personal situation, I would be spending the time on looking at why your properties are performing cr*p, or what expectations you originally had about any capitals gain when you purchased them. Also, focus on ways of increasing your income from your work, business etc so that you can make future property purchases. Also most importantly of all, you need to ask yourself better worded questions. The question you ask above is not a question I would be asking my subconscious mind to come up with an answer for, because the answer that will come back to you is not one that will help you in any way. If you ask a better and more intelligent question such as "even though my properties are not performing the way I would like them to, what can I now do make them perform better, and also what can I do to increase my income so that I can put extra money away for future purchases?" Ask a better worded question enough times to yourself and your subconscious will in time work out a way to achieve what you ask of it.

As for increasing the value of your rental property by $5000 by mowing the lawns, washing the house, cleaning the guttering and chatting to the tenant for 10 minutes, that's a new one to me. So, let's say you do that every week for a year, your property has now risen in value by $260,000 in 12 months, do it for another 3 years and you have increased its value by $1 million. Wow, if you can do that, I would be highly impressed. Also, when I was a tenant, I don't think I would have wanted the landlord coming around every week and chatting to me, I may have suspected that they weren't trusting me enough and had to be constanting checking in on me.

If I had to do all the lawns, gardening, washing houses, cleaning gutters, chatting to the tenants for 10 minutes a week, plumbing, painting, electrical work, etc etc on all my properties, there would not be enough hours in a week for me to do this, even if I didn't have any sleep. I pay people to do all these jobs and I highly value what they do. Some of them have their own rental properties and I help them out with info every now and then when they ask me for it. By having people excellent service people do these jobs for me, it frees my time up so that I can also run a business and do the things I enjoy, and still only work 20 hours a week. Your time is your greatest asset. You can spend your money, but earn it again to replace what you've spent. With your time, once you've spent it, you can never get it back again, ever. I would rather do things with my time that I enjoy doing and mowing lawns is definitely not one of them.

Regards
Graeme Fowler

[The_Dog]

Don't worry so much Graeme, I'm not asking you to mow my lawns.

I was suggesting, that a visit to the property in person, once a year just before the valuation, and making some cosmetic improvement to the property, could give the impression the property is well maintained and therefore gain a more favourable valuation.

I know in my work, people on the workshop floor appreciate a visit from 'management', of course if it is done with the right attitude. What impresses them more is if management get their hands dirty and muck in.

Once a week would be too much, I agree. I don't believe I suggested a frequency. Certainly only for valuations, and perhaps change of tenant.

The Dog

[Marcus]

I must admit to doing the odd job around my rentals too when time permits (nothing too major though. 1/2 hr jobs are OK). I find it can be a good opportunity to have a quick squiz around the place without having to do a full-scale inspection.

In saying that, I don't have 50 odd properties to look after either so these occasions are few and far between.

Regards.

[orion]

Hi again The_Dog

Not sure where you got the impression I was worried about anything, or that I said anything about doing your lawns.

Yes, I think inspections are a great idea, and it is something I probably don't do enough of. I do however organise new tenants, but don't have to advertise that often as I would on average get 5 or so calls from current tenants referring others to me to see if I have any properties becoming available for rent. When tenants move out, I get my general maintenance guy to go through the place and make sure all is in order before the new tenants take over. I think many problems are caused by landlords ignoring tenants' requests to fix, repair or maintain things that the tenants have called you about. It is best to get onto anything they are unhappy about immediately and also follow up with the tradespeople to make sure it has been done, as well as with the tenants to make sure they are happy with the job.

once a year just before the valuation, and making some cosmetic improvement to the property, could give the impression the property is well maintained and therefore gain a more favourable valuation.

Now, this one has me completely baffled. Which valuation are you meaning? A registered valuation or a government valuation??
If you mean a Reg Val, I don't know why you would be doing this, unless re-financing - if you are on a floating rate, otherwise you could be paying penalty fees to break a fixed interest loan. But, why would you be doing this each year??
If you mean a Govt Valuation, or RV (rating valuation), I hope you don't think that someone from the council actually drives past every property and looks at the lawns, the guttering and if the house has been washed. And even if they did have the time to do this, and thought your property was now worth $5000 more because of all this being done (without of course seeing the condition inside), all that would happen is your rates would more than likely now increase. The RV is for rating purposes only and has absolutely no bearing on what a property is actually worth. In some areas you can say that on average true values are 10% above RVs etc, but it is only an average. And averages are not something you would use to base very much on. It is like saying because one person dies at age 4 and another dies at age 84, the average age of people is 44.
so, the valuation question has me stumped, what valuation are you referring to??

Regards
Graeme Fowler