July 06 ~ Newsletter Goal Setting
By support
Read me online or download me HERE
G’day. Yes it’s me again with some news and views from Massive action land.
Firstly I want to thank so many of you for your effusive comments regarding my inaugural newsletter. I am honoured and humbled that so many of you found it useful. I will endeavour to not disappoint you in the future.
This month I thought I would start a series on the steps to successful investing from a standing start. What do you do first? How do you get from zero to hero? For many of you this will be kindergarten stuff but I meet investors almost daily who have forgotten some of the basics and started taking risks and making decisions that they spend years regretting. We will never get so experienced that we won’t benefit from reminding ourselves how to stay safe, focused and moving forward.
Goals
There is no path to success in property without having clear, defined, WRITTEN and TIMEFRAMED goals. So here we go. The start of living the life of your dreams begins here.
- Specific. You MUST decide exactly what you want out of your investing. I am talking specifically about property investing in this newsletter but these rules apply to all areas of your life. Want a better marriage, job, friends? What exactly do you want?In terms of investing saying “I want to be rich” is not a goal, well not a useful one anyway. Everybody wants to be rich. It doesn’t actually mean anything. It’s a vague dream, not a real goal. A goal is “I want to have $800 a week in passive income”. Or “I want to have 3 million dollars worth of equity”. These are useful goals. Saying “I want to help the poor” or “I want to save the whales” is inadequate. You must have SPECIFIC goals for them to be useful. So get a pen, or open Word and put your initial thoughts down “on paper”. No don’t keep reading, do it now!! The 2 main goals I want to achieve in my life are…..
- Measurable. How will you if you are moving towards or away from your above goals? Your goals must have some ability to be measured or they are not goals. How will you measure whether you are achieving or not. I’ll say it again, any goal that you cannot measure is NOT a goal. Any goal that you do not measure will always fail. That’s why “I want to be rich” doesn’t cut it.You need to not only have a measurable goal but actually put the processes in place to measure it. If your goal involves cashflow then you have to do your accounts every week so you know if your cashflow is increasing or decreasing. If your goal is to lose weight you have to weigh yourself regularly or measure your waist to know if you’ve eaten too many donuts. If you don’t measure your results you are setting yourself up to fail because you’re aiming at nothing. You must have a benchmark or starting point and be able to measure against it.
In property this is theoretically simple but sometimes difficult in practise. Simple because we are dealing with cashflow and net worth. Both are “hard” numbers based goals so can be easily quantified and progress measured. The difficult part is that if you don’t have separate bank accounts for personal and investing and keep your accounts up to date then you won’t know how you are doing. Dropping off a shoebox full of receipts and 12 months worth of bank statements to your accountant and waiting anxiously for them to tell you whether you are going broke or not does not qualify as measurement of goals.
Am I closer to or further away from my goals than I was last month? If you cannot answer this question with an absolute answer you have a problem. If athletes trained and never recorded their times, ever….. I think you get the point.
- Achievable. Now this is really important. At the risk of going off on a brief tangent here you need to understand that what is achievable is limited by what you BELIEVE. You have to be honest with yourself and decide what you believe is achievable. If you want to retire in 2 years are you willing to believe that you can?If you get your head around this it will change your life. Your ability to achieve what you want is entirely imprisoned inside your mind.
I believed I could make property work well enough to retire in 2 years so I could work with the poor in Fiji. I believed I could do it. I backed myself. It took less than a year. My wife also retired in under 2 years. So you need to take this seriously. What do you want, how badly do you want it and are you willing to believe in yourself to achieve it.
I often tell my students that if you set a goal to retire in 2 years, then as part of cementing that goal they should write their letter of resignation, date it 2 years ahead, and give it to a friend with the instruction to post it to their employer on the date on the letter. That’s backing yourself, that’s making a goal achievable.
I learnt an amazing lesson in this area myself after attending Kurek Ashleys seminar. He talked about “grand dream goals”. His theory was that it’s better to have BIG goals and aim for those so that if you fall short you have still got a massive result. I felt really challenged by that as I had always set goals that were relatively “do-able” for me. So I drew up a list of 10 grand dream goals that I look at daily. My first one was quite a significant financial goal that my wife laughed at when I put it up on the wall as it was specific, measurable and (un) achievable in her opinion. I am way over half way to completing that goal 2 months after writing it down, and I have till Xmas to get it done. My success with this goal has so inspired me that I now regularly choose to allow my mind to “think big” so I can achieve bigger goals.
- Relevant. Now usually the “R” in smart goals is defined as realistic but we’ve covered that in achievable. So my definition is your goals need to be relevant. Let me explain. In my case my ultimate goal was to work with the poor in Fiji. So to do that my specific goal needed to involve cashflow. I would never achieve my ultimate goal unless my specific goal was passive income. I could have had a goal to generate income only from property trading for example, but that would mean I could never go to Fiji as I would have to keep trading!! Does that make sense?You need to assess whether your goals will achieve the desired result. If you want to have lots of free time in your life then your goals need to revolve around strategies that don’t involve working 80 hours a week. I find many people don’t actually take a hold of the significance of this. Every step you take will in some way be moving you towards or away from your ultimate goal. So your goals overall must be in harmony with each other.
- Timeframed. Soon, as quickly as possible, I’m in no hurry, when it happens. None of these are timeframes. These are what we refer to as “excuses” enabling one to live in la la land. Whatever you have decided in points 1 to 4, you now need to put firm dates on them. Yes it’s scary, very scary, but if you don’t do this you may well be wasting your time. I have had many emails from people who attended the same Richmastery Academy as myself belittling themselves for not having achieved as much as I have or not achieveing anything at all.Well the only difference between what my wife and I did and those people was we decided we would achieve our goals within 2 years. End of story. No excuses, no vague waffly goals, TWO YEARS!! You need to do the same. It will create perturbation, (told you last month to look it up), it will move you toward your goals. It will force you to achieve something. It will, maybe for the first time in your life, enable you to take MASSIVE ACTION!!
Negativity, NZ’s epidemic
People are all wired differently. Some of us wear rose tinted spectacles, some of us are professional lemon suckers. Most of us live somewhere in between. However in New Zealand, and in NZ property circles, I hear an alarming amount of negativity. It never ceases to amaze me how often someone will tell you why what you’re doing is a bad idea. It’s never hard to find a friend/relative or workmate who is full of reasons why investing is dangerous/dishonest or hopeless. Now these people are usually relatively poor and working their guts out with no hope of early retirement, but they somehow know more than you and I as to how to achieve our lifes goals.
I believe that it’s important to understand that New Zealand is full of negativity, from the government down. It doesn’t matter that our fiscal surplus is into the billions, “things aren’t good enough to consider tax cuts”.
It doesn’t matter how successful our top sports coaches and teams are. As soon as they lose a match the nation wants them sacked.
Anyone who becomes successful and dares to be proud of it is vilified and accused of being ”%&*$%&” or “^#(()&+” or sometimes even “:’{}>><?{)(“. It’s so common here that we are often just waiting for someone to say “you’re a loser. Whenever we get called to the bosses office are we expecting a raise? No!! Even when my wife calls out to me loudly from another room I’m expecting something negative.
Sadly something inside many of us actually takes great delight in tearing to shreds someone else and watching them as they are publicly flogged and humiliated. It is very sad. We don’t necessarily want them totally destroyed, just humiliated enough to be put back in their place, providing that place is lower than our own slot of course.
But this epidemic is much more than sad, I mention it to you because it is toxic and destructive, to you. Now I’m not accusing you of being like this. What I am saying is that this environment will affect you. It will drag you down and discourage you from investing. My wife and I were so “embarassed” about investing when we started that we told virtually nobody. We knew most people would think we were nuts. We knew that the more people we told the more negative comments we would have to combat. Everybody who did find out couldn’t wait to tell us some story of someone who had failed at investing. Family gatherings became potentialy quite difficult.
2 years later most of those same people ask us for advice, want to be on our deals list and think what we are doing is great. One of the many joys of hindsight.
What voices are you listening to?
How discouraged are you when you mention property and get the latest story of uncle Bob’s aunties neighbours dog, brothers, owners friend who had a rental property 20 years ago and it cost them a fortune? Do you realise that these voices create significant negative energy that can sap you unconsciously and paralyse you from taking any action.
Just today I got a phone call from someone saying, “I’ve found this great deal but I’m just not sure whether to do it or not. It was in an area I knew and when I questioned him on the details it was a great deal and he already knew that. But he had enough negative voices in his head to stop him from making 50 to 70 grand on a great deal. I was maybe the only voice that was saying, “Well I’d do it, it sounds great”. I hope my encouragement was enough. But what about you? What are you doing to counter the negative voices? More importantly what are you doing to get some positive voices around you?
The Baby Boomers
Your last chance to retire with a simple strategy?
Now please listen carefully. What I am telling you here is my OPINION. It is based on my research of the property market historically and my current research of population trends etc in NZ and overseas. I have friends and professional acquaintances who have undertaken similar research and come up with EXACTLY the same conclusions. However I am not God, I cannot predict the future. But I believe this strategy enough to be pursuing it whole heartedly myself. OK? Here goes.
Rather than reinvent the wheel I have copied some of this article from my fellow investor and friend Ron Hoy Fong who reached the same conclusion as I and already had some of this documented. More info about Ron HERE. (I’d include his picture but the gleaming teeth might frighten small children!)
We have a unique situation coming our way in the next few years. In 2011 we have 2 world cups in NZ which is always good for our economy and puts upward pressure on our housing values. 2010 will have already begun to show signs of a “recovery period” in the property cycle as we move into the next property boom. (Approximately every 7 to 8 years and shortening as we move further into the information age and advanced computerisation, a fairly accurate and repetitive cycle.)
Did you know there will be one million or so Baby Boomers starting to retire at the rate of 100 to 130,000 people per year from 2010 through to 2020. This will significantly reduce the tax intake by government from work related earnings. The reducing numbers of workers paying PAYE to the government to support the increasing number of ageing people for benefit and hospital care will apply even more fiscal pressure. Massive proportional changes to Employed versus Unemployed. Maybe the signs have already started, given that we now have a postwar record of the lowest number of unemployed people under 65 years of age. Earlier records would not have shown any indication of unemployed mums staying home for childcare. Today the majority of mums are also working, and this is reflected in the workforce, equal pays (EEO), large numbers of crèches’ opening up everywhere.
Also this time around and something which we didn’t have in the past is the large numbers of migrants, who are on work permits. Remove these people and you will not have enough workers in the country today.
2010 will be the start of insufficient numbers of workers to fill 50,000 to 100,000 job vacancies annually created by retiring Baby Boomers; this I see will reflect higher pay increases by employers competing to attract workers. As we all know higher pay means higher rents and higher cost of housing.
2010 will also see increasing numbers of the Children of the Baby Boomers who have already started to want their own homes and start their own families away from city apartments. Prior to the 1980′s government supported young families into home ownership with virtually no money down through the capitalisation of the Family Benefit. Now the government has done a complete turn-around and has pushed the current generation into high debt and high tax rates. Not to mention New Zealand’s absolute obsession with high-interest consumer debt. Hardly much of a chance to save for a home in their early years of employment.
Irrespective of what happens the NZ future generation still must have accommodation to live in. Not just the people who live here already, but the huge immigrant workforce that will have to come to solve our chronic work shortage.
Our only solution I believe to pay for the retirement of Baby Boomers and their welfare and healthcare can only be through IMMIGRATION. Like it or not this is a MUST.
In addition this is the only solution for the retiring workforce. It will take no time at all to mop up everybody who wants to work with internal migration. Then what??
Baby Boomers retirement age may be altered to 70 years plus as in the UK to increase affordability. I doubt if this would work for NZ because it would be political suicide to any Government Party and the Kiwis would leave by the plane loads to Australia or alternatively spend 6 months in each country so as to not lose the Retirement Pension.
The population conference of 1997 indicated a gradual increase in numbers of migrants needed through to 2015 was estimated around 200,000 migrants per annum. However from by 2010 I believe the number needed will be 50,000 just to replace the present population plus another 100,000 migrants to replace the retiring Baby Boomers, making a minimum total of 150,000 migrants per annum.
This immigration will result in more people needing more accommodation regardless of whether the Baby Boomers stay where they are, downsize, upgrade, or move into a retirement village or hospital and rest home for that matter.
The last three years 30,000 housing permits signaled a housing boom.
Imagine in 2010 when history repeats itself. This time there will be the usual 30,000 plus an additional 50,000 building permits needed for 100,000 extra migrants assuming that they are couples plus children if any. This means a minimum of a double boom.(“Boom boom” as Basil Brush would say!).
As the biggest workforce is in Auckland, I believe the boom will be biggest there. Both the government and Auckland Council’s are preparing for this. Just look at the current and planned infrastructure growth.
Expansion of Motorways northwards to Warkworth, freeways south of the Bombay Hills to Hamilton, spaghetti junction developments, widening of motorways, completion of Auckland’s South Eastern Motorways to connect to the western Motorways, proposed corridors even if it has been cut back due to funds, R8 high density Zoning for housing, widening of the Auckland Harbour Bridges and a possible second crossing between Auckland City and North Shore, Auckland Hospital and other Hospital developments, new shopping centre at Sylvia park, NZ Railway workshop land in west Otahuhu to become an industrial park for 5,000 jobs and not so far away the East Tamaki industrial park to be the largest Industrial park in NZ with a proposal of 15,000 jobs. Albany development has yet to become an even bigger city in the north plus surrounding commercial and residential development, plus the proposals of Takanini, Papakura and Karaka to be designated as the new city centres by 2050 or sooner as some have suggested as early as 2035. Huge housing developments at Botany and Dannemora southwards, and Helensville to become more connected to Auckland’s growth, and what of the inner city growth in apartments, it maybe a bit early now but they will be needed in 2010 plus more, then look at the anticipated Panmure Basin development etc, etc, etc.
I realise this has been a lengthy article, but you need to understand the significance of what I am saying here.
How does this information help you?
Well, the above information is both a license to print money and your ticket to easy retirement by 2015 at the latest. Here’s why.
- Because of the combination of a unique boom on top of a normal property boom, it is in no way optimistic to assume that property values will at least double between now and 2010 to 2012.
- The double boom and enormous immigration housing crisis is going to cause any and all property in main centres, especially Auckland, to increase in value regardless of normal capital growth areas. Even lemons will double in value.
Knowing the above, a simple simple strategy to retirement is……..
Work out how much passive income you would need to retire on. Lets say $75,000 per annum or $1500 per week. Divide that by average rents by 2012 lets say $350 a week. This equals 4.28 freehold rental properties. So lets call it 5 properties. So starting as soon as you possibly can you purchase 10 properties between now and 2010 that are neutrally geared after tax. Once we are well into the boom you sell off the 5 worst performing properties of your portfolio. This will put enough cash in your pocket to pay off the mortgages on the other 5. Remember they would all have doubled in value. The earlier purchases more than that perhaps. So you are now into say 2012-13 with 5 freehold properties worth probably 2.5 to 3 million and you never need to work again!!
There’s so many ways to not hear “no”
My chief assistant and boot polisher Jo did a great job on a deal while I was in Fiji. It’s worth detailing to you here to give you some ideas on getting prices down to realistic levels.
This was a home and income on a very subdivisible site in Auckland. Vendors would not accept less than 480K. Under duress and in the absence of another deal the vendors signed a contract at 460K. We then commissioned a valuation which came in surprisingly low we thought at 470K. Jo goes back to vendor advising them of valuation being disappointingly low and manages to get them down to 440K. We decided that the numbers still didn’t work for us at that so Jo goes back to vendors and to our surprise they dropped another 10K. So now we spend some more money and get a building inspection which highlighted nothing we hadn’t seen already. At this point we are nearly at unconditional date and vendor advises that they have a private offer of 450K. I advised Jo to tell our solicitor to put in writing to their solicitor that we will go unconditional at 420K otherwise we walk. The vendors refused our offer all day till about 4PM when they accepted it. So a “we will not sell for less than 480″ became “sold for 420″.
Never assume “no” is a permanent answer. No at 12 o’clock can be yes by 4PM.
Final words
Whilst in Fiji I read a book that has been life changing. I’ve heard it quoted often over the years and I cannot understand why it is not compulsory reading for any investor or anyone wanting to lead a fulfilled life. It is called, “The seven habits of highly effective people” by Stephen Covey and precedes most of the modern “success literature”. In my opinion it runs rings around anything else and everybody else in the personal development area. Steven is a man of great learning, wisdom and principle who has discovered some amazing keys to personal happiness, wholeness and fulfillment. He has done this through, amongst other things, reading and researching every piece of “success literature” he could source that had been written over the last 200 years!! I will comment on some of his subjects in coming months but do yourself the biggest favour of your life and go and find a copy and read it. My wife and I are going to go through it as a workbook over the next 12 months, that’s how powerful I believe it to be.
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.
PS. Many thanks to my exquisite other half who not only puts up with me every day but also spends much time proofing and correcting this newsletter. Thanks babe!
Downloads
