Published: Wednesday, 01 April 2015 12:09
Written by Sean Summerville
When researching a property there are steps you must take before investing
1. Does it stack up
2. Legal Team - no shortcuts
3. Will it be positively geared
In one of our emails, a deal was shared, a reply came in about the deal and said it was a very negative upsidedown investment.
Here is more details about how the deal comes about and how and why it is not negatively geared.
We do not educate to invest in negatively geared property. Positive Cash Flow is King!
Firstly it was suggested that there is a Interest vs Income cost factor not discussed.
This is not mentioned because it does not exist in this instance.
I have never mentioned interest vs income, it is not something I mention as the interest rates vary per person. Some people may be getting it at 4.5% or 12.5% interest rate.
Some people are actually paying cash for the property as they have cash money sitting in the bank and if they are paying cash for the property and they are making $220 a week (based on the deal discussed) positive cash flow on an investment of $50,000 their ROI is infinite, in that situation there is no interest vs income example. I don’t use them as every single person is different.
There are many programs you can use that have x, y,z formulas that will allow depreciation,
They take into consideration:
There are many programs that will allow you to do that to make sure it is a positively geared investment or do your research the old fashionedway by contacting the council to find out how much these things are going to be.
#1. Does it stack up?
There is no mention of insurance, council rates, land tax, maintenance and so on. In saying that, the way we educate is that there is normally a standardised figure that will be allowed to cover most of those expenses, and if you come to my seminar I break down the details of the deals, I show you the expenses.
If your income is $250/week and your expenditures/outgoings (including rates,insurance, land tax, maintenance “and so on”) is only going to be $70/week.
Then you are going to be vastly positively geared, you need to take into consideration all these things.
#2. No Shortcuts!
I have been saying this for a long time that there are no short cuts and there is no way to bypass the legal system or to try and beat the tax man or any type of govt body in this.
You do it correctly and you do it properly,
however you must do your research correctly.
#3 Will it be Positively Geared?
‘if all this were not taken into account you would seriously have an upsidedown investment’ (Key word here is IF)
– it was then said “I sold many many negatively geared properties and retained the cash positively only ones”
Those many many negatively geared properties are properties that I personally do not invest in.
I only invest in positively geared properties, I do my best not to make the mistake of buying 100 negatively properties to end up with 3 positively geared properties.
I did my research before I bought the properties,
I took in account the fact that there is going to be expenses.
All these deals, every single one of these deals, and I don’t know how to say this more than, in every single deal that I do,
every single one, no exception, I take into consideration,
Renovation costs. How much is tap washers is going to cost, carpets to replace, walls needing repair?
All of these sundries are looked at before, not after, before you do the deal.
None of these deals are done
unless the property stacks up as a positively geared investment from day 1.
Please take note, this is urgent and important…
Some people think that there are tricky ways to bypass all these sorts of things, the answer is there is not. If you are buying something where you have to use a tricky strategy chances are that you are doing it the wrong way, you have buy good quality property at the right price in the right area.
If you are going to buy a property that is going to make you a a lot of money, that is going to be a positively geared property in a good area, and what you need to do is do the research.
If you can’t do the research yourself, then you need a team to do it.
The people you need in your team are Mortgage brokers, Accountants, Financial Planners, Solicitors (per state - yes the rules are different), Property experts, Experts in research who research properties for you.
In our experience, you cannot rely on the standard data that exists on the web, what other people have done (to sell you this property) or a statistics report has been given to you from a Real Estate - as by the time you get the report they are out of date, you must do the research yourself in the area or have a team that does it for you.
We (the Team) look at up to 4000 properties a day to come up with 1-3 possibly good ones, the average person can’t do this and you are quite correct to say you can’t do it, however what we have now is a team.
The Property King Team has been created to find the right people to make it all work… 20+ years of experience to build the qualified team that delivers results.
So what you do is tap into someone else’s system who has the team already setup, so you can get the benefits of not having to spend the time, effort and energy in trying to build this stuff up.
Investing in property is not a casual hobby,
When it comes to dealing with property you are going to have to growup,
It is a serious investment game,
Don’t take the short cuts.
Do it properly…
You want this to work.