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Well hello again!

Another month has passed.  The grass is twittering, the birds are green and it’s finally not so freezing.  Hope this months offerings are helpful to you.
Don’t forget if there’s anything you’d like me to cover in the newsletter …EMAIL ME

Using Goals to build Your Strategy.

Last month we talked about our goals.  Hopefully you’ve got them on the wall or above the computer or on the loo door.  Somewhere where you see them daily.  This is actually an important part of giving yourself permission to succeed.  Put them up somewhere where you will see them.  If it’s not too scary put them somewhere where visitors can see them.  Don’t be ashamed of your goals.  You will battle with your own mind about achieveing them, so the more you reinforce the positive by looking at them and having to explain them, the better.

So now that we’ve sorted that out let’s get on with developing our investing strategy.  It’s impossible in a generic newsletter to explain every twist and turn but we can establish the fundamentals.  There are 4 main factors that will significantly influence your initial investing strategy.
Your current financial position.
Our current financial state can sometimes preclude us from certain investing activities.  The chart below shows the “typical” strategies and how our current position limits them.

NO CASH NO INCOME

Property finding
Reassignments
Sandwich lease options

NO CASH BUT CAN GET MORTGAGE OK

Property finding
Reassignments
Sandwich lease options
Property trading with contemporaneous settlement
Some negotiated prior access deals
Some joint ventures with equity partners
Some vendor finance deals

NO CASH BUT STRONG INCOME

Property finding
Reassignments
Sandwich lease options
Property trading with contemporaneous settlement
Negotiated prior access deals
Joint ventures with equity partners
Vendor finance deals
Possible buy and hold if credit is good

DEPOSIT AVAILABLE AND EMPLOYED

Property finding
Reassignments
Sandwich lease options
Property trading with contemporaneous settlement
Negotiated prior access deals
Joint ventures with equity partners
Vendor finance deals
Buy and hold
Lease options
Do ups and renovations

EQUITY RICH AND GOOD INCOME

Property finding
Reassignments
Sandwich lease options
Property trading with contemporaneous settlement
Negotiated prior access deals
Joint ventures with equity partners
Vendor finance deals
Buy and hold
Lease options
Do ups and renovations
Spec building
Subdivisions                    (NOTE: Rocks in head sometimes required
Developments                            for subdivisions and developments)
Commercial

As you can see your options broaden in direct relationship to your financial position.  This is a slightly simplistic view as there are creative ways to do deals without money but that is not the purpose of this article.

1. Your current knowledge base.

As you look at the lists above, do you know what they mean?  You can’t go and do something you don’t know how to do.  So step one of your investing strategy may be to attend a course, get a mentor or do whatever will best equip you to be able to take….. massive action.

Many of the negative comments I hear from “former investors” are people who went out and bought a property without having a clue what they were doing, had a bad experience as a result of that ignorance and spend the rest of their lives telling everybody how terrible property is.

I meet people regularly who tell me of portfolios sold off years ago because of a tax issue or a bad tenant or whatever.  In nearly every case, had they obtained an education first, they would now be wealthy and retired.

When I started I did the Richmastery Academy and just blindly followed the instructions they gave me.  And it worked!!  I had a road map that worked. You need that as well.  If you are already experienced in an area then you may be happy to continue with that one strategy.  That’s OK.  My experience has been however that one is much better equipped to succeed if one has at least 2 or 3 strings to ones bow.  As you invest more you will get better at finding good deals.  As that skill develops you will feel more confident to try different things.  Once you learn how to recognise a great deal you can start to think, “how will I make money out of this particular deal?”.  But you need to get enough education to know what you are doing in at least one area so you can take some action.

DO NOT GET FREE ADVICE FROM POOR PEOPLE.
GET PROFESSIONAL PROPERTY INVESTMENT ADVICE.

In my opinion only current active investors are worth learning from.  Any so called professional who doesn’t have a growing portfolio or who hasn’t bought a property in the last 5 years is not worth paying good money to. You can’t beat the propertytalk forums for info on who is worth seeing for advice and coaching.  Or you can EMAIL me for a list of people I would recommend.
Timeframe

The number of years you have given yourself to achieve your goals has a huge impact on what strategies you use.  Difficult to cover all the bases here but in simple terms you will either need an aggressive short term strategy or a more passive long term strategy.

“I want to retire in say 4 years or less”

If this is you you will have to have a few strings to your bow.
You must have built a reasonable portfolio in that time to be able to retire and to achieve that you will almost inevitably have to create some wealth outside of waiting for capital growth.  This means that you will need to include property finding or trading as part of your strategy to be able to generate the cashflow you need to retire.

As I say it’s tricky to explain all this generically but I trust you get the idea.  Just buying Investing Properties and keeping them won’t generate sufficient cashflow without making money out of properties elsewhere to be able to get your mortgages down so that you increase your cashflow.

SO if your goals are aggressive/short term, you MUST get comfortable with a range of strategies.  I would suggest you will need a mentor initially.  By mentor I mean either a formal coach or someone who is a successful investor willing to take you under their wing.

I would encourage you to understand and consider as part of your strategy:

For creating lump sums of cash

Property finding
Property trading with contemporaneous settlement
Negotiated prior access deals
Do ups and renovations
Spec building

For generating cashflow

Buy and hold
Lease options
Vendor finance deals

“I want to retire in 5 plus years” or
“I want to keep working but ensure my retirement is secure” or
“I want to work but have more free time than I do now”

If you are one of these you are more of a long term wealth builder and you can adopt a simpler strategy.  Because of the fact that time in the market will create wealth for you through capital growth and rental increases you can focus on buy and hold properties predominantly as time will allow you to sell some off later to freehold the balance. The longer you plan on working the more conservative you can be.

You would still benefit from some help along the way to ensure you maximise your situation but you may find a 1/4ly meeting with a property coach or similar is enough to keep you on track.  Your main emphasis is to be clear on what your buying rules are.  But you’ll have to wait till next month before I cover that!!

So for you your main strategies will all be around:

Building Equity

Buy and hold
Possible do ups and renovations that you then keep
Possible spec building where you build regularly and keep every 5th or 6th one as a rental.

You’ll get your cashflow when you sell down in later years and freehold part of your portfolio.

2.  Risk Profile

This is in my opinion THE MOST IMPORTANT THING, and the one we usually don’t consider.  My success in investing nearly cost me my marriage because I didn’t understand how conservative a risk profile my lovely wife had.  Especially if you are married you need to understand each others risk profiles and develop a strategy that you can BOTH handle.

Don’t ignore this if you have a partner.  If one of you is comfortable with debt and the other partner is overly anxious you have to find a way through that together.  I am often asked to come and talk to someones wife or husband to “sort them out” so the other partner can get on with aggressive investing.  Well I tried that with my own wife and it ain’t worth it.  I hope [fname] you will take this warning seriously.  The stress, fights and hurt can destroy your relationship if you aren’t in this together.

Now whether it’s just you or you have a partner you still need to answer some basic questions to help you with your strategy.

Are you comfortable having large amounts of debt?  Providing you knew and understood how that debt was benefiting you, would you be OK with that?  Imagine you’ve just got home and in the mail is your bank statements and recent updated valuations for your portfolio.  You open your bank statements and see that your total mortgages are currently $6,000,000.  You then open your valuations list and see that your portfolio is now worth $9,200,000.  How do you feel?

I, Dean, think “Wow $3,200,000 in equity, that’s fantastic.  I can’t wait to get my mortgages up to $10,000,000″

My gorgeous wife Raewyn goes “SIX MILLION DOLLARS $#^$&#^$ GET ME OUTTA HERE!!!!!”

So honestly are you BOTH OK with debt?  If yes, then great, tick the box. But if no, you either need more information/education to help one of you overcome your fear OR you need to understand that large scale property investing is probably not the best option for you if you want to stay together.

Next question.  You have bought a property that you thought was a good deal.  In doing it up to sell you discover a major problem you had missed.  It costs $40,000 to rectify.  At the end of the renovation you are faced with selling and losing $30,000 or keeping a property you don’t want until the market increases in value, which could be 4 or 5 years.

The question is, if you sold it and lost $30,000 how would you feel?  Could you live with that?  If the thought of losing that money just makes your blood run cold then you need to find a way through that together.

YOU WILL LOSE MONEY SOMETIMES IN PROPERTY.
It comes with the territory.  If you know you couldn’t stand it don’t start investing.

No take this seriously I mean it.  Not everyone is cut out for property.  Better to explore some lower risk options if you know the stress of investing will end your happiness or marriage.

Raewyn and I “lost” over $250,000 due to bad accountants advice when we sold a business and in investing have probably “lost” somewhere between fifty and a hundred grand due to dishonest people, incompetent professionals and just learning mistakes.  Thankfully we’ve made a lot more than that but my point is ARE YOU [fname], ARE YOU OK WITH THAT?

Often knowledge can dispel the fear and someone risk averse can still be very successful in property.  But those people only do what they are comfortable doing and they know, that they know, that they are safe.

Raewyn and I feel so strongly about all of the above that we will be inviting you to spend the day with us on September 23rd so we can try and help you deal with these issues and show you what a day in the life of a full time investing couple is REALLY LIKE!!
Keep an eye out in your inbox over the next week for your invitation to
“Behind Closed Doors with Dean & Raewyn”

LOW OR NO RISK STRATEGIES

Property finding
Reassignments
Lease options
Sandwich lease options
Property trading with contemporaneous settlement
Buy and hold

MEDIUM RISK STRATEGIES

Sometimes Negotiated prior access deals
Sometimes Joint ventures with equity partners
Sometimes Vendor finance deals
Do ups and renovations
Spec building

HIGH RISK STRATEGIES
Student accommodation
Boarding Houses
Subdivisions            (NOTE: Rocks in head sometimes required
Developments                    for subdivisions and developments)
Commercial
(NOTE: Commercial is not necessarily high risk but is VERY RISKY for a new investor)

NEXT MONTH: SETTING OUR BUYING RULES

Empowering yourself and others

Some principles are universal.  Whether or not you “believe” in gravity, you are affected by it.  So it is with a law called sowing and reaping.  In simple terms, what you give out, you will get back in some form or another.  My world view is filtered through my Christian faith so I am perhaps more committed than many people to encouraging others and seeing them built up.  However I have never ever seen any benefit in being negative or critical towards another person or  situation.

Empowering or sowing into others is the pathway to our reaping our own freedom and success.
As a Christian I would say it is in giving to others that I receive from God.  Buddhists talk of a “middle way” meaning the highest point of a triangle.
Even physiologically it takes less energy to smile than frown.  Laughter actually releases health into your body.  Anger and bitterness can contribute to arthritis, cancer and a host of other so called psychosomatic illnesses.

So what am I really on about??
Simply this.  If you find yourself constantly critical of others, needing others to feel bad so you can feel good, then something is wrong internally in your world.

You cannot focus on positive outcomes in your own life if you are being sidetracked by negativity inside your head.  Various success guru’s give it different names: abundance mentality ~ living above the line ~ obeying the golden rule ~ forgive and forget etc. etc.  They are all touching on the same truths.
Successful people focus on the things they can control.  No point getting angry over a red light for example.  Expend energy on things you can control.  If you find yourself tossing your toys out your cot over relatively petty things you have an internal wiring problem that needs fixing.  You can’t control other people, cats or the weather!!

Successful people always look for the good in a person, situation or deal. They will be aware of the bad but never allow that to control the situation.

I have friendships with many people who have done things to me that I didn’t like.  I have decided that whilst their actions were unfortunate their motivation was not bad.  They are imperfect people who have hurt me or let me down.  Do I write them off for not being perfect??  No.  I will undoubtedly do the same thing to them at some point as I am not perfect either!!

I choose to pursue the friendship until such time it becomes evident that they are wanting to hurt me, deliberately.  If you think of your past, are there people you used to be close to who are gone for no good reason?  People who you walked away from over an issue but you still miss their friendship 1, 5 or 10 years later?

I don’t find many people out to deliberately hurt others.  I find lonely, hurting, abused people who often have defences up to protect themselves. I find people who have never developed good social skills who don’t know how to give or receive friendship.  But underneath those issues they are wonderful people, who can become life long friends.  Look for the good.  It’s nearly always there.

Successful people are able to choose HOW TO RESPOND in any situation. Sometimes anger is appropriate, sometimes gentleness.  Free people can look at a situation and CHOOSE THEIR RESPONSES.  This is the Number 1 sign of a whole person.  The freedom to decide, “in this situation I think I will do ????”  because you have been able to analyse the facts, the impact on you and respond with dignity and integrity.

Only whole people can do this.  People who don’t have this sorted in their lives can appear successful, but are rarely, if ever happy or fulfilled.  This topic always reminds me of when I watched the behind the scenes documentary on Elton John.  Here is a man the world would say is successful.  Rich beyond imagination, talented and celebrated world wide.  5 minutes of watching the real Elton John uncovers a spoilt, selfish child who behaves in a totally unacceptable manner and should be vilified for his treatment of friends, family and especially his staff.  Rich? yes.  Famous? yes.  Successful? no!  Happy? no!

Steven Covey had a great example of this in his book.  He was sitting in a railway station when a man appeared with several unruly children.  The kids were really out of hand and the adult, presumed dad, was doing nothing. People were looking and pointing and getting very angry with the kids. Steven sat next to the man, introduced himself and simply commented on the kids activity in a non judgmental way to try and get more information about the situation.  The man replied. “Yeah they’re noisy all right. We just came from the hospital where their mum died an hour ago.  Like me they just don’t know what to do with their grief”.  Steven was free to choose his response to a terribly sad situation because he didn’t need to react to the apparent situation. Are you??

Partly because of the above, successful people decide to treat others with dignity and respect irrespective of the behaviour of the other party.  We all want mercy for ourselves and justice for everyone else.  That is not a success mindset.

Treat others well anyway.  You never know the dividends that might pay.  One of my friends has really been through the mill and abandoned by many/most of his former friends.  I have remained a friend and as a result we have been able do some lucrative property deals together because I stayed on his team.  I’ve been able to help him start to rebuild his life while others stand around talking about him behind his back.  Which would you rather be doing??  I’m interested in him as a human being, not what he may or may not have done.

In fact truly successful people will not tolerate gossip or negative comments because it sows seeds of negativity.  In addition, if I listen to negative stuff about someone else from you, what are you saying about me to others?  I find this hard because there’s something in me that loves gossip.  So I have to choose to never go there.  Sometimes I fail but I am committed to doing it.  Those of you who know me in propertytalk will know how passionately I defend anyone being attacked.  It only destroys people.
Lastly, (for now), successful people wake up looking forward to the day knowing life is an adventure and they have no skeletons or dodgy actions to be concerned about.  No integrity always equals no peace.  If you wake up in the morning and have to talk yourself into getting out of bed then something is not right.  If you need pumping up every morning [fname] you need to find out where you are leaking!!

So if any of this has touched you let me say this.  You can be set free from negativity and depression.  You can become successful in the way you think and act.  I have found God to be a source of healing and change and I am happy to share what has worked for me with any of you, anytime.

If that is a bit too spiritual for you then start by reading, “The seven habits of highly effective People”.  It will help.  Find someone you can trust and start being honest with someone about how you really feel.  There can be great healing in being “known” by another person.  A Christian Psychiatrist once said, “You are only as sick as your secret”.

If I can help please write to me

NEXT MONTH: LEARNING TO LIKE YOURSELF

How to finance your portfolio with no money

OK we’ll split this into 2 parts. This month I’ll give you some no money down strategies and next month we’ll go into more detail regarding advanced finance strategies.

There are 3 simple no money down strategies that you should all know about and be using.  Simply by wording your S&P agreements correctly you can get into property without a deposit.
Vendor Finance.  Ask for it all the time.  This simply means you are asking the vendor to leave in 20% of the purchase price as a second mortgage. Often vendors will agree and why use your own money??  This is a good way to trade off a slightly higher price for the vendor, with your terms.

Trust me it works.

There is really nothing else to say about it except put the clause in your agreements.  I use it often whether I want it or not, because if they say yes, then I can use the deposit on another property.  This is a great “101″ strategy to fund your portfolio with no money.

If you don’t have it download the clause from the web site.

Long term settlement.  Now this strategy is great when you find a deal under valuation OR you can negotiate prior access to improve the property.

The way it works is this: There are lenders who will lend against a current VALUATION on a property you haven’t yet settled on PROVIDING there has been an unconditional agreement in place for 6 months or more.  12 months is even better.  Alternatively if you have negotiated prior access and gone in and done a property up before settling on it, you can show the bank the receipts of the work done to justify the valuation and they will also lend against CURRENT valuation.

So anytime you can buy 20% below OR add 20% value above purchase price, this becomes a no money down strategy.

If you don’t have it download the clause from the web site

Lenders are looking for security. So another simple strategy that will work for some of you is to find a way to access equity in a property to allow the bank to lend you 100% on a rental.

For example.  If your parents/ brother/aunty/ housekeeper/dentist/old school friend has a property with untapped equity in it, you can ask them to allow you to secure a second mortgage against their property.  They are only exposed to the tune of the deposit and if you have bought well you will be able to recycle that money out quickly and cancel their security.

Next month this will be the feature article and we’ll look in depth at how to build a multi million dollar portfolio even when you think you can’t.

If you are in this situation or have anything specific you’d like discussed please email me your info and I’ll use it as a case study

Final words

My 2 latest purchases, both this week, are a reminder of the importance of honesty and treating people with respect.  I mention it here to encourage you.  If you pursue integrity in your life, success will follow.

Last year I saw a valuers vehicle outside a house next door to one of my rentals.  I waited for them to leave and knocked on the door, explaining that I was an investor and neighbour, I had seen the valuer and if they were selling I was always buying.  It turned out mum had just died and they didn’t know what they were doing.  I apologised for bothering them and left my card.  9 months later the phone goes.  They had kept my card and were impressed that I had left them alone.  They “liked” me as a result of me being courteous so rung me to see if I wanted the property.

Valuation with a bit of a tidy up at least 350K. I paid their asking price of 280K.

I have an agent who has contacted me only 3 times ever with deals and I have bought them all.  She says, “I don’t deal with investors at all but I LIKE you because you never muck me round and you do what you say you will”.   She contacted me with a deceased estate, vendors wanted simple fast deal.  Valuation as is 260K.  Purchased off a drive-by, before getting to market for 210K.

So being honest and likable made me $110,000 in one week. Nobody has been ripped off, nobody is upset with me.  In fact both vendors would love to deal with me again.  Do you get it??  Do you see why integrity is worth pursuing.

Once again, “Safe investing” and I look forward to hearing from you.  Please forward this to anyone you think would be interested and tell them to SUBSCRIBE.
Dean.
Did you know that behind every great man is a totally amazed woman?  Thanks again babe!!