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**Propoholic** · 23-06-2006, 05:55 PM

Hi Jumpin

Is it really true I should spend a few thou on a 3 day course with a company wanting to sell me props their finders have sourced?

My own view is that you will get the best value for money by joining your local property investors association, immerse yourself in PropertryTalk and invest in as much recommended reading as possible. You need to network with as many experienced investors as you can, you can achieve this through PropertyTalk and the Property Investor Associations. If you are in Auckland, APIA (Auckland Property Investors Assn) runs 7 meetings/month and 4 property investment seminars per year.

**SuperDad** · 23-06-2006, 06:19 PM

Hi Jumpin,

After two days of cappucino, I'd say that you are ready for MASSIVE ACTION!

You asked:

Originally posted by Jumpin

Is it really true I should spend a few thou on a 3 day course with a company wanting to sell me props their finders have sourced? It's not that I want to be too cynical, but I want to cut to the chase, forget the ra-ra, and go and do it myself.

Now, remember that what follows is simply my opinion, and I'm no expert. (I've just gone unconditional on my first IP.)

NO NO NO. Stay clear of those who claim to be able to teach you all about PI in 3 days, all for the princely sum of a few thousand. I have been along to one of these "information" evenings, and it was shameful.

Learn the ropes yourself, so that you are able to understand how to analyse a deal. I'm not against property finding services as such - I don't really know much about them. But one PF service I have looked in to just does not stack up. Luckily I have the time to source my own deals.

You also wrote:

Originally posted by Jumpin

OK, earlier this year I bought 2 properties which are both CF+ after tax. Damn - that's my first 2 mistakes right? Should be before tax.

Firstly, I'd say that you have made a mistake, that mistake is far outweighed by the huge benefit you have gained by putting your learning into action. A big mistake would be to sit back and do nothing. Further, CF+ive after tax is better than CF-ive after tax. Remember, cashflow is only one aspect of a good investment. Did you buy below value? I will happily buy CF+ive after tax if I get a good discount - that will enable me to roll a deposit out of that property for a pre-tax CF+ive purchase. These are difficult to find at the moment. I'm learning ways to turn CF-ive properties into CF+ive properties - e.g., subdividing, building ancilliary dwellings.

Welcome aboard.

Paul.

P.S. I see that propoholic has responded while I was dithering. I second his suggestion that you join your local PIA.

**JohnL** · 23-06-2006, 07:49 PM

A difficult question to answer. I always remember something Robert Kiyaski said in a course I went to.

Most people are looking for the 'how' in their journey to financial freedom. But once their mind set is correct, there are a million 'hows' and these oportunities will become obvious as they present themselves to you.

So I wouldn't spend any money on a course on 'how' to make money in property, if it doesn't contain a significant amount on things that work on your mindset.

As you have already taken action, you have in reality already crossed one of the major hurdles that stops people from taking that first step in investing ie fear of failure. Reading this forum, books etc will give you most of the 'how' information you need.

Just be aware that it is the mind that determines your altimate success and that is the much harder task to get a handle on.

There are cases of people reaching the millionaire status and then losing it all because of some subconscious self sabotage, usually around the concepts of 'money is the root of all evil', 'you have to stand on other people to get rich' or 'I'm not worthy of success' or other variations. Often thoughts that you aren't even aware of having.

There are so many different ways that people make money in property that it is confusing initially. That is why so many successful people on this forum have so many varied opinions. But keep in action and you will find your plan (whatever it is) will evolve as you learn more and more. For example, perhaps initially you don't plan to trade but being active in the market will present you will trading oportunities, so you change you plan.

I personally would never be afraid of spending money on courses which are fronted by millionaires themselves, not some trainer who's living is dependent running the course. Particularly ones that work on my mindset (which can always do with a bit of help). Other benefits include networking with like minded colleagues, ongoing support via that networking, the 'enthusiam' boost you usually receive and of course you do learn some skills at most courses.

Investing is a lonely profession and techniques that keep you accountable and in action can be important to your ultimate success, once you are investing full time.

John

**Jumpin** · 23-06-2006, 08:22 PM

I guess what you're saying is it depends what I want to get from the seminar. -
Yes my properties were bought under RV, but probably not enough - Also they are only marginally CF- before tax,(ie total -1500 pa) so all is not too bad.

Actually I have just joined the Wellington PIA, and hope to do some networking there.

As for MASSIVE ACTION yes I'm going for it.

For a beginner like myself, what is the best first approach - buying a rental on a larger section and subdividing / adding minor dwelling /
-sourcing properties 20%+ under valuation, for onselling (or holding depending on CF)
-sourcing and adding value to a run-down place for onselling or holding
-adding value some other way for either
-other suggestion?

I guess I'm not necessarily looking for the easiest route, or even the most profitable route, but the route that best suits the current market, and will allow me to move on and do the next thing straight after

I'm looking for a challenge, looking for a learning experience, looking to increase my cashflow and equity, looking for an exciting deal that gets me excited.

Any advice..?

**xris** · 23-06-2006, 08:28 PM

Hello jumpin,

I do not intend playing with the nuances in the meanings of investment and business, but what you need to get clear right now before you go any further is the difference between property investing and property as a business.

Property investing is long term – there is no short cut. It is slow; it is steady; it is rewarding.

Property as a business is all about making money fairly quickly and indulging in all sorts of schemes, and get rich quick ideas, and most of all in your norma, standard business techniques which just happen to be done using property – such as trading, selling books, selling yourself, and many others.

Both have their good and bad points but they are different. What saddens me is that so many people have been conned into thinking that the sort of hype RM and others are involved in is property investing. It is not. You ask if you should spend $3,000 attending one of these seminars. If you want to see how a crowd can be enticed to give away thousands of dollars for nothing in a skilful and practised way, then by all means go along – it will probably be a good example of one form of business strategy, but not much else. If you want to learn about property investment then don’t. Once you have seen how they do it you may want to copy it and jump on the bandwagon to get others to give you thousands of dollars. If you do choose to do this then good luck. RM and others have clearly had some success which I do not in the least begrudge them, although exactly how much nobody really knows.

So, if you want to be in business which is related to property then go to these seminars, buy or better still write books about it, trade property, spend all your time doing up dogs, buy rubbish properties that will cause you endless trouble in the long run but which in the short term will earn you $100 per week more than they cost you (the magic c/f +!). All of this is fine. A lot of people have and do make a lot of money from doing all this. But, it is not investing.

If you want to invest, buy, or borrow from the library, a simple book on the principles of how it works and talk to others. Joining your local PIA is a good idea. This will cost you roughly $180 all up. (Oh, and not forgetting some great posts on this site,
cost-zilch).

To finish off, decide which of the two types you want to be and which suits you best. A mix of the two may also be possible.

I can say with certainty that if you fall into the trap of all the current hype about seminars and mentors and so on, you will probably be throwing away a lot of money without learning very much.

Finally, I am a cynic I know, but I have got some experience in most aspects of property, some more than others. I do not give much credibility to people who say they have made good in property and they know hoe it should be done, but they only got into the business in 2002. Only an idiot could not have made money in that case. I admire SuperDad for concluding that his RM seminar were less than ideal. I was dragged into one once and could not believe the way the dozens of otherwise intelligent people were sitting there in awe of some fellow talking absolute nonsense. At least SD lasted the duration. I pointedly walked out and I can still vividly remember the look on the face of the guy by the door as I left: “How can you possibly be leaving”, I could hear him thinking, “People pay hundreds of dollars to attend these talks and you have had the privilege of getting in for free.”

Oh well, that’s my evening outburst over with. Which path you tread, one thing is for sure: make certain you do not lose your sense of humour. If you lose that then alas, all else is lost too.

xris

PS/ There are some good opinions on this thread. Please try to sort the wheat from the chaff.

**whitt** · 23-06-2006, 08:35 PM

It seems you are on track. You have got your feet wet, joined a PIA and found Propertytalk.
You can only learn so much from books, seminars etc. Networking is where it is all happens. Immersion with other long term successfull investors( not only this property cycle). You will find you never stop learning in this game.

Enjoy the ride.

P.S . There is a seminar article available via my signature below members here helped write. It may answer your 3 day question.

**Jumpin** · 23-06-2006, 08:50 PM

OK Xris, so I started out with the intention of long term investment, but now feel that doing some of the business side of things may be more rewarding in the short to medium term. As you point out, anyone in the market has had success during the last few years, but over the next few years capital gains may be few and far between. My belief is that simply buying and holding will take a long time to yield decent profits for a while and we may need to shake the tree a little harder.

It's refreshing to hear that those hyped events are not all they are cracked up to be. I guess it's to do with personality type.

**SuperDad** · 23-06-2006, 08:56 PM

Hi Jumpin,

I have to disagree with you when you wrote:

Originally posted by Jumpin

It's refreshing to hear that those hyped events are not all they are cracked up to be. I guess it's to do with personality type.

It is nothing to do with personality type. It simply has to do with truth. Consider the following ACTUAL example:

Earlier this week, I received one of my regular “RichMastery Hot Property Deals” email alerts. Included was the following property:

http://www.richmastery.com/nz/property/propertydetailNew.aspx?Id=1192

(You might not be able to view this if you are not a RM customer.)

One of the claims made was that this 8-bed property has a projected rental income of $66560 ($1280 per week, or $160 per room per week). This is supported by a rental appraisal – so far, so good. However, a closer look reveals that:

RM’s researcher’s comments suggest that the investor “get a live in manager” or else “use the services of HB management” so that one can “sit back and enjoy the income”. If one gets a live in manager, then presumably that person will get free board in lieu of their services. This will reduce the annual income by some $8320, which RM don’t allow for. Alternatively, getting a rental management agency to manage the property, with fees of 8.5% + GST, will reduce cashflow by some $6365. Again, this is not allowed for in the RM calculations.

RM states that the annual expenses for the property are $3253. This is low for fully furnished accommodation in which power and phone (and possibly Sky), insurance and rates are paid for by the landlord.

As the registered valuation provided by RM notes, the property is zoned “Urban Residential One”. The valuer notes that permitted activities in this zone include “Residential Activity and Homestay limited to not more than five visitors (beyond this number a Resource Consent for Visitor Accommodation use is required)”. Without this consent, RM’s figures are bogus. The cost of getting this consent is not included in RM’s figures. And, as the valuer notes, obtaining a consent “will at least require the provision of adequate vehicle parking and manoeuvring spaces on site, the standard being one parking space for every three residents the boarding house accommodates”. Again, RM does not include the costs of meeting this requirement of the RC in their figures. And even if the parking requirements are met, there is still no guarantee that the accommodation will be granted RC. Again, the smell of cooking books is unmistakeable.

Note that the valuer has described the house as a “boarding house”. If the IRD deems the house a boarding house, the owner will be liable to pay GST on the rental income. This has got to hurt the cashflow, to the tune of $8320 per annum. This is over and above the costs listed above in 1.

So judge for yourself Jumpin. Is it simply a matter of personality type? Don't forget that the purchaser of this property is paying RM $15K for the privilege of being dropped in this huge pile of $h!t.

Paul.

**David_W** · 24-06-2006, 01:04 AM

more advice - "Shake the Tree Harder"

You have had some great advice already from your post {especially from Propoholic in joining your local PIA

}. Consider doing the Fuzo Wealth Wheel strategy where you buy 3 or 4 properties, trading 2 or 3 of them and keeping the last with your loan dramatically paid down by the profits from your trades.

Providing you do your trades in a trading trust (or appropriate structure - see Gilligan Rowe or Garth Melville) this strategy has managable risks. Don't let fear consume you - there are professionals that can help you in your passage to great wealth. You find by wealth wheeling that you will get your wealth much faster than pure property investment holding (too passive for my goals). Why - because you are trading properties now to get your cashflow (as the market doesn't give you that anymore). You keep property still, wanting to lay a great platform for a bull market in a few years time, so pay down the loans to minimise your interest and MAXIMISE your cashflow. Wealth Wheel it!

All the best success for your investing - give it heaps.

**McDuck** · 24-06-2006, 08:46 AM

Originally posted by Jumpin

before I can dump my job. Tim

Hands up anyone who thinks that property investment is an easy job.

It's a job all right...just one with different benefits and drawbacks.

**xris** · 24-06-2006, 09:57 AM

Originally posted by Jumpin

See it seems to me that buying a few props is OK for a retirement income, but 'buying cashflow properties until you are rich' may take forever, and will still leave me reliant on working in my old job for too many years to come.. It's not that I really need to "Get rich quick", but I want to know I can generate my own independent income asap...

Hello jumpin,

Going back to your original post and attempting to address one of the questions you raised, why not try this for an answer.

Yes, your conclusion is quite right. Property investors, with a few exceptions no doubt, do not live off the rental income. But, people who have built up a business which uses property as a vehicle for running that business can and do live off the income from that business.

Investors have to keep two points firmly in their mind.

First, their nett wealth – the value of their properties less the debt outstanding. This is where they make their money and where their wealth comes from.

Second, the combined cash flow. This is not because they want to siphon off and live off the surplus, but because the cash flow has to be used to operate the rentals. It is the oil and petrol of the engine which pulls their nett wealth remorselessly uphill - no positive cash flow, no engine running, no wealth accumulation.

I want to make a few general comments which may help you and others.

If you choose to be an investor rather than a businessman, forget retiring in ten years. You will be rewarded in the knowledge that you have a considerable nett wealth which, when and if the time comes, you can use to your advantage. If you have started young and at age forty you have twenty properties with a nett worth of $7m. then you can sell off one, pocket $300,000 and go on a world cruise for a year or two. The size of your portfolio will not be adversely affected, but you still cannot retire because you cannot continue selling off a property every couple of years. Or you could borrow $300,000 secured against the value of the portfolio, but again you cannot keep doing that because you gearing will start to get too high and you will encounter cash flow problems.

Following from the above, you can see that this person is in quite a good position. If we change some figures, the situation changes. With only three properties, a nett wealth of $100,000, and aged 55, the investor still has options, but they are more limited. Also by being older, his age precludes him from enjoying some aspects of life he could have enjoyed when he was younger. But again, he cannot retire.

The person above with twenty properties may well have enough positive cash flow to safely take out some of it each year, but it will not be as much as many people think, and will probably not provide enough to allow you to retire. There was a recent thread on this subject which I suggest you read, if you have not already done so. Although perhaps not enough to retire on, any surplus cash withdrawn from the portfolio ,ay be a welcome monthly bonus – say enough to fund a child’s private education or to pay for that Mercedes sitting in your drive.

If you do want to retire in ten years then that is a wonderful ambition, and there are many ways to do it, nearly always by building up a successful business or two. If you like property then you might choose to use property as the vehicle for creating that business. Why not, plenty do. But, it is not investing, it is running a business, and should be thought of as such. It will take up all your time, you will take on considerable risk, and so on.

Some ‘investors’ will say that that is what has happened to them – they’ve taken on high risk and their investment property takes up all their time. I would simply argue that they have not done it properly – perhaps having fallen for all the hype? “Buy this $50 per week CF+ pile of poo, sit back, relax and pat yourselves on the back while watching your wealth climb inextricably upwards. And in ten years time you can even retire!”

Oops, is that the time? I had better stop here before the morning has gone: places to go; people to meet.

A quick conclusion – property investment will not let you retire in ten years. But it will give you many more options and go a long way to alleviating the daily financial worries most people have.

xris

**JohnL** · 24-06-2006, 10:34 AM

If you ever read or heard Graeme Fowler's suggested strategy, its pretty much the same a xris. You have a business (whether its property or something else) which generates excess cash which you then put into buy and holds.

So, short term you are looking for a business. Keith Cunningham doesn't particularly like property as a business, he tends to buy other sorts of businesses, generally in the service area so you aren't manufacturing goods, needing plant and equipment.

So it really depends on where your passions are. Its hard to be successful doing something you are not passionate about.

One thing you could read up on is Roger Hamiltons material. I haven't done it yet, but many of my colleagues have attended his courses. He has developed a wealth profile which identifies where your natural inclination lies. The theory is that its hard to be truely successful doing activities which aren't your natural inclination. Go to www.wealthdynamics.org to read up about it. You can either attend a weekend course or you can do the test itself on-line (for a fee).

John

**SJL 01** · 24-06-2006, 11:14 AM

Hello

Interesting thread, with a couple of different themes being discussed.
I'm not sure how to Quote, but xris said

"A quick conclusion – property investment will not let you retire in ten years. "

Surely this is only your opinion ?

Personally the passive pre tax income that I have generated in less than 10 years is many times greater than the NZ average income, and many of my collegues and clinets are also reaping similar beneifts. So I would totally disagree with that statement. However if that is your belief then maybe that is true for you.
I was once a "employee" working in a 9-5. Gave that up 3 years ago, now I choose to do something very different with my time. "Retiring" is not all about sitting on a beach...

There are many ways to make property work, and with a well thought out strategy I have seen many many people achieve their goals. Does that mean it is easy - hell no !!! If it was everyone would be doing it !!
Hard work is still required, however the benefits are awesome.

In summary then - each to their own, if it works for you great, if not do something else..

Cheers
Sue

**Josko** · 24-06-2006, 11:20 AM

Hi Tim,

Have been in business a number of times its easy to see why many insist Property Investment is a Business.

The path for many that find the vehicle of Property Investment is much the same as yours and the questions still the same, what do I do with this thing called Property Investment.

Suffice to say I got excited my self when I decided to buy an IP, I then discovered PropertyTalk and things became even more exciting, you learn there is a lot of different strategies and as John said,

There are so many different ways that people make money in property that it is confusing initially. That is why so many successful people on this forum have so many varied opinions. But keep in action and you will find your plan…

That is the key really, find your plan, your plan depends on the goals you set. You seem to want to replace your employment income with income from property investing, @39% taxed that is either quite a few houses, quite a few do-ups, quite a few trades, quite a few assignments or quite a large combination of all. You need to choose how you want use this vehicle to wealth, how you want to run this business.

You have already begun the journey the options available to you are simple (as already stated) find the flashlight, or someone who has one, there are many here on PT that have one, (I don’t but have been taught by a few that have), take MASSIVE ACTION, but don’t forget the important ingredient VELOCITY, velocity is an exponential value. Immerse your self in the business, get a plan and stick with it no matter how hard it gets.

As far as seminars goes I have been in sales all of my career and have attended copious personal development seminars, RM combines the psychology of seminar production with Property Investment information, for many that have not sat through this style of seminar before the USUAL energy that is created by a gathering of people like that is irresistible. No matter the fact you have just paid a small fortune. As Propoholic mentioned you can get all that from PT gatherings, Property Associations and to an extent here at PT.

Just my thoughts…

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