Originally posted by Don't believe the Hype
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Originally posted by eri View Postyou think expensive advice doesn't lead to people
losing tens of thousands of dollars?
3 years ago, I paid about $20k to learn about commercial property from an "expert", unfortunately their service weren't good.
I also have seen plenty of people DIY and got nowhere in the past few years.
One of my current student bought a lemon in Otara before he came on board, that deal he listened to a friend, ended up costing him about $50k.
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Originally posted by GLin View PostAnd giving free cheap piece meal advice that could potentially lead someone to tens of thousands of dollars of mistake is ok?
It is good to see you’ve tempered your advice in light of the Auckland market slowdown but I’d like to see how people who followed your buy Auckland advice 18 months - 2 yrs ago around the time you became a ronovations robot are getting on. At best they’re 10% down, with huge cash flow problems on their first or second property with no hope of buying any more.
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I think Gary is much less arrogant than he used to be.
He took huge risks, which paid off and so he made money. This is the way things are supposed to work, you take risks, and if they pay off, you win.
But of course anyone can look good in a rising market, and one has to be careful that luck and skill are not confused.
I don't know much about Gary's particular kind of education/mentoring, but in the main these mentors aren't that good I reckon. As Gary said himself, paying $20k and not getting much for it.
They are mainly interested in getting your money, and then secondly helping you - but only if they really have to.Squadly dinky do!
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Originally posted by Davo36 View PostI think Gary is much less arrogant than he used to be.
He took huge risks, which paid off and so he made money. This is the way things are supposed to work, you take risks, and if they pay off, you win.
But of course anyone can look good in a rising market, and one has to be careful that luck and skill are not confused.
I don't know much about Gary's particular kind of education/mentoring, but in the main these mentors aren't that good I reckon. As Gary said himself, paying $20k and not getting much for it.
They are mainly interested in getting your money, and then secondly helping you - but only if they really have to.
Taking risks - nothing wrong with taking risks. My issue is that when advising others to do so you need to be balanced and need full disclosure of risks which from what I’ve seen in his online posts didn’t happen.
luck vs. skill - no evidence of skill to this point although the realization he’s come to that cash flow is an important element of building a strong portfolio has him heading into a less risky direction.
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Yes, I have criticized Gary a lot in the past. And for some of the same things you are mentioning now.
But I am trying not to now. Like I say, his strategy was high risk, but turns out (through luck or skill) he was right and so he's made lots of money. To be honest, I'm somewhat jealous I didn't gear myself up to the eyeballs and buy lots of property too.
Having said that, I do remember that Gary had a portfolio in the millions (with slightly less millions owed to the bank) but a positive cashflow of $20k or something. Which is a very precarious position I reckon, and I said so a number of times. But then, again, it worked out right? Turns out going for capital gains was the right thing to do.
And are you SURE it's not the right thing to do now? I'm not. I've always been a positive cashflow investor - I have long wondered why anyone would buy a property that took money out of their pocket.
So let's say his students are borrowing heaps and buying residential properties. Let's further suppose that a crash happens tomorrow. A big one. What I mean is the shit hit's the fan in some way - could be a China property bubble bursting, could be something around Brexit, could be Trump nukes North Korea, you get the point, something fundamentally bad happens and it looks like NZ residential property values will take a large tumble.
What would happen to those students who are in deep debt to the banks? Conventional wisdom would say the banks would revalue their properties lower, they'd ask for more security and if they didn't get it, call the loan in. Which would mean for many, a mortgagee sale.
But that's not what happened in 2008/2009. There were a few who went to the wall, but almost everyone scraped through, and those with big loans often came out the best. Why? Well the RBNZ lowered the cash rate from around 8.75% to 2.5%, so anyone with a mortgage suddenly had their interest costs slashed. They might have had to pay a break fee, but banks allowed them to do so, adding the break fee on to their mortgage.
Also, money piled out of the banks and in to property. No point having it in the bank at 3.5% or so. So savers were punished and borrowers rewarded.
On top of that borrowers were allowed to take mortgage holidays etc. Lost your job Mr Lin? No worries, just take a 3 month holiday, then 4,5,6 etc.
And then of course China and other countries decided to print massive amounts of money and so property prices actually increased quite a bit! Especially commercial. Unprecedented!
So what will happen this time? Will it be like 1987 where the banks foreclosed on every man and his dog? Or will it be like 2009 when the banks (and the government) fell over themselves to help borrowers.
If like 2009:
1) The OCR gets slashed from 1.75% to 0->0.25%. So everyone's mortgage goes down by 1.5%. Which if you have say $1m borrowed, reduces your $15k per annum.
2) People with money in the bank are now getting nothing for having it there. Heck, they might even have to pay. So they go out looking for investments, and money piles into houses and commercial properties.
3) The rest of the world prints money like it's going out of fashion and it rushes around the world looking for a home. Stocks and property go way up in value again, thus bringing heaps of loans back into normal LVR boundaries.
4) For those who lose their jobs etc. the banks are very accommodating and give them heaps of time to sort things out.
5) The media initially say everything is darker than black, making money on the doom and gloom clickbait, but then as soon as things start to look rosy (which is like within a year) they are back on the "property is going up this year!" bandwagon.
6) The government during this whole saga lies to the people of NZ, saying the banks are fine, whilst a) Taking funds from the Fed in the US and b) Lying awake at night in a sweat worrying that it will all go tits-up and they'll be out of a job.
And if like 1987?
1) The whole financial system collapses. So this will never happen.
What do you reckon?Squadly dinky do!
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Davo, my net cashflow is more like $80k now thanks.
Re-1987 vs 2009, now adays the economic situation is unprecedented:
1) central banks around the world will print and still are printing (besides the Federal Reserve) out of their way of trouble
2) Euro zone is printing money and increasing their balance sheet
3) 20% of Swiss bank are in the equity market, ie they own lots of shares in Dow Jones and other stockmarkets
4) 40% of Nikkei Japanese sharemarket is owned by Bank of Japan
5) 98% of ETFs bonds market in Japan is bought by Bank of Japan
The economic world is definitely evolved in the last decade...
Yes if like 2009, OCR will be slashed to near zero, depositor's interest rate will be zero if not negative. Banks will be laughing as they are collecting interest income from BOTH the borrower AND the depositor.
Mortgage interest rates, assuming all central banks will print money just like they did in 2009, will be halved to say 2%. My net cashflow goes up $50k for every 1% interest rate drop, so bring it on!!!
Pretty much you are bang on mate.
Savers will be losers.
Single income households will struggle and will get worse.
Immigration and population growth in main cities, combined with low interest rates, will make property prices even higher...
Normal loan terms will extend to 35 or even 40 years (google them, they are available in US right now)...
Interest only periods will be extended to keep the gravy train going...
Two income households will struggle too if they don't have high income or have family to help with deposit to get onto the property ladder.
Retirees especially baby boomers will be huge losers...
If CGT and inheritance tax comes in? Retirees and baby boomers will lose 33-50% of their savings...
Those who don't know how to leverage money and good debt will have their wealth destroyed by the system and inflation.
Those who do, will be richer and well off.
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That’s a very comprehensive post that deserves a well thought out response.
What you’re saying is that he applied one high risk strategy and it paid off. I’d agree the outcome was the right one for him so far. But taking a punt and winning doesn’t mean they’re someone you should take advice from. Kinda like not taking advice on picking powerball numbers for next week from a guy who won last week.
There are many people out there even many on here who have made same or even more money over the time frame Gary has been investing who could offer more varied or better advice but are more humble about their achievements and are here to learn and contribute equally vs. pontificating and always looking for personal gain as priority no. 1, 2 and 3.
My ongoing challenge over time for Gary have never been personal, I don’t know him all I know of him to judge him is what he puts out in the public domain which has often been poorly thought out, regurgitated quotes or parts of other strategies and a fair bit of self promotion. My challenge has always been to debate things he’s suggested are good ideas or sound strategy or to provide some balance to the bullish and risky attitude/behavior, a behavior which I don’t care if he does himself harm but don’t want it influencing others without them weighing up the risks. If however he turned up in Wellington and wanted to catch up for a beer I’d go.
You’re right in that we don’t know what’s comings but being prepared for downside risk is prudent. Even if this means the upside isn’t as great. There are countless examples of high flyers who don’t survive too long.
Personally I don’t wish I’d bought more than I did over the past decade and while I bought for cash flow the unexpected paper gains that have come in the past 3 odd years are a a nice side benefit.
In the last 15+ years we’ve honed our strategy at each stage of our plan whilst keeping to our long term action plan and tracking our progress. We’ve exceeded all our our goals and deadlines except one and we’re revised up our targets and as the market has changed we’ve developed profitable strategies in each stage of the market.
The final point is we’ve reduced our risk as we go along.Last edited by Don't believe the Hype; 30-01-2019, 10:15 PM.
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What you’re saying is that he applied one high risk strategy and it paid off. I’d agree the outcome was the right one for him so far. But taking a punt and winning doesn’t mean they’re someone you should take advice from. Kinda like not taking advice on picking powerball numbers for next week from a guy who won last week.
My challenge has always been to debate things he’s suggested are good ideas or sound strategy or to provide some balance to the bullish and risky attitude/behavior, a behavior which I don’t care if he does himself harm but don’t want it influencing others without them weighing up the risks.
Yes I think Gary can be a bit skity. Probably less now than in the past.
I trap many people (including myself) can tend to fall into.
Nice that you've exceeded your goals.Squadly dinky do!
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I joined up with Ron Hoy Fong's Ronovationz group (Gary's mentor) approximately 3.5 years ago.
I was a 26 year old single income earner, had a 65k salary and a 140k deposit from splitting from my previous partner. I paid 12k to join the group and was advised to find a one or two bedroom property in central Auckland and covert it into two or three bedrooms by moving the kitchen and lounge around.
So I bought a 630k property, spent around 40k doing it all up, got some tenants in and was on my way to becoming rich. Central Auckland just booms non stop I was told. So many Chinese buying up and immigrants always move into Auckland. South Auckland purchasing with higher yields you were criticized in the group for being so foolish and Ron said many times investing outside of Auckland was the stupidest thing you could possibly do. I was asked by many other people in the group when I was going to buy my next property. I must have made huge capital gains doing my renovation right? Not quite. Buying at a lowish 4% yield and not having a 100k+ salary or endless cash burning a hole in my pocket I was completely boxed into a hole. I brought up in our weeknight "mastermind" sessions for a couple of weeks in a row and talked to my "mentor" on the phone about the precarious position I found myself in and wondered why the loan servicing was never explained to me at all by my mentor. I left the group after 6 months and have never been allowed back after I started questioning the investment strategy rather than simply following the capital gains trumps all advice that was given.
So my 630k property in Ellerslie (two bedroom converted to three) is valued around 750k now. I've put in 670k for the purchase price and reonvations (including holding costs during that time) and I've had to top it up around 11-12k each year x 3.5 years = $40.5k. Note this is at record low interest rates.
My fixed term tenancy comes up in the next several months and I will sell this year. After agents fees I've walked away with putting 180k plus into the property and going to walk away with at best 20k profit. Would have been better to just put it into a term deposit without the hassle.
So in summary, buying for capital gains only really works if you are on a massive salary and can afford shortfalls of several properties, do trading/speculating on the side or have deep pockets and are simply looking for somewhere to just park your money and appreciate over time. Definitely wouldn't go down this route again. Looking to buy into higher yielding properties outside of Auckland when I cash up.
Interesting to see Gary's advice starting to deviate from buying central Auckland. Perhaps many other members are asking the questions I did 3 years ago? And they are listening?
I note Gary's original Mt Wellington purchases were 8-9% yields which likely topped up his more recent 4-5% yield purchases.Last edited by House Hunter; 31-01-2019, 01:19 PM.
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House hunter - appreciate your post. I believe there are a lot in your position. It rather easy to flash the gains card and entice unsuspecting students - your story clearly demonstrates the way scenario.
Gary , is it fair to say there will be a lot of people who will get burned following Ron and your strategy which was to buy in quote "leafy suburbs for capital gain" . Your were quoted many times as "The capital gains investor, investing in good area’s in Auckland – leafy suburbs."
What is your average yield now Gary across your portfolio? 6 %? what if interest rate shoots up to 7%.
Because of your strategy of buying for capital gains, this would have limited your ability to borrow more, with AK prices expected to go side ways if not down, has your strategy changed since then to go outside of Auckland?
Last edited by BlueSky; 31-01-2019, 03:32 PM.
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Originally posted by House Hunter View Post
So my 630k property in Ellerslie (two bedroom converted to three) is valued around 750k now. I've put in 670k for the purchase price and reonvations (including holding costs during that time) and I've had to top it up around 11-12k each year x 3.5 years = $40.5k. Note this is at record low interest rates.
Were the alterations signed off?
How much rent are you receiving?
Are you paying principal and interest?Profiting from Property, not People
Want free help on taking your portfolio to the next level?
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Hi House Hunter
If you joined Ron's coaching 3.5 years ago, and left after 6 months, I'm not sure if I would remember you. At the time I was just a student in 2015.
If I were to go back to 2015 I would have bought different properties and not 4% gross yield myself (I bought 3 in 2015, 2016), especially with Auckland Unitary Plan just came through. 20/20 hindsight is always a great thing, but at that time I won't have the knowledge that I have now to buy development potential properties (one of them can be further developed).
Even though I'm not part of that group, and now coaching on my own, I won't be successful today without Ron's help and inspiration.
Your 630k purchase in 2015, I would say you perhaps bought it a bit expensive tbh, especially given your income situation.
My first student Leo in 2013, I helped him bought a few units, first one a 2 bedroom unit in Sandringham for $300k, and another one in Peek Street for $325k. So 2015 two years later to buy an unit in Ellerslie for $630k wow...
Buying around $370-400k for a 2 beddy Mt Wellington unit and convert into 3 bedroom would have been my pick in 2015.
I don't remember there was any weeknight mastermind sessions though, they only had meetings every saturday and two weekly Thursdays.
I would still buy in Auckland. After helping out a client based in Hamilton and buying a 6% in Hamilton, I would say there are more cashflow opportunities in Auckland, especially for those who have $200-300k cash/revolving to do small development to get 7%+.
Central Auckland unfortunately in today's market, where capital gains will be flat or none existent in the next 2-3 years, just doesn't work, with the low yield.
However, caution must be applied to buying in west or south auckland, or out of town, as the next recession will bring prices down, so buy now you must buy very very well and make minimum 30% equity as well as cashflow positive at 100% lending.
Yes my original purchases were 9% yield at the start, and gradually decreased as the markets went up, and also my wife and I started buying better properties in better suburbs.Last edited by GLin; 31-01-2019, 04:01 PM.
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