Q&A Call - Module One - 03 04 2014

Now, that would be bad.

Hello, everyone. It is jane slacksmith here. And.

Go on.

Oh, guys, this is. This is pretty embarrassing. This is our first call, Q and A call for the Ultimate Guide to Renovation 2014. And, you know, I am so excited about welcoming all the new members to the Renovated network. And, you know, well over 100 people are going to be listening to this call. The excitement got the better of me, and I forgot to hit record. We've just had a fantastic hour and a half chatting away and talking to.

Everyone, but we're going to make this one even better.

And in theory, I haven't even introduced you yet.

They don't exist yet.

So I am going to rev up the troops. I'm going to go through all this again. So we have a great record. But I have to, with complete transparency, as you'll get from us here, let you know that. Yep, it's late at night on Thursday night, and we're about to start call two, version two with just the two of us here. Great thing is that I've printed out all of your questions. I have them all here, and I'm going to recreate the moment of answering them all. So apologies. Q and a call for 2014 Ultimate Guide to Renovation. My excitement was too much and we have managed to not record it. So here I am. It's Jane Slacksmith. It is so exciting to be here. And this time I am so excited. I have recorded the calls. Now I am going to start right at the top. For those people who are listening to this, clean and fresh and run through everything once again. And literally, this Q and A module one is really important. This entire course, the whole idea about this course is so that. And the way we run it is that you can literally shortcut years off the journey for your property investing strategy. So you can actually learn by my experiences, the experiences of other people in their groups and the mistakes they've made. So. So that you don't have to do that yourself. Seriously, we are shortcutting you to a great road to success, to you achieving your goals. And the goals are all about what module one is about. So what's really important is that you listen with open ears, that you allow yourself to be teachable and to learn from others. And sometimes it's just human nature for us to put up roadblocks, to think of reasons why something does not apply to us. I speak to people all the time and they're always saying to me, my situation is different, because blah, blah, blah. And the reality is, you know what it's not the case. The case is that we're all in the same position and we're all here to learn. And I just really encourage you to don't discredit something that you hear or an approach that you read or see on the videos in the course. Have an open mind, be open to it. Sometimes it's about approaching things differently. They're going to get you a different outcome in the future from what you've had in the past. And of course, everything you learn here is useless unless you take action. And it's not enough just to know how to do something, you have to also then put it into action. And that starts one step at a time with completing the exercises in the course. So there's a lot of work to be done here. And I've never hidden the fact that you need to put in some work to get the results. In fact, I point that out to everyone before they begin the ultimate guide to Renovation program. There is work to be done and you really are the only person that can do that work and it's not possible for me to do that for you. All of the information is here and we honestly believe this is the most highly valuable, effective course in Australia right now. And we've got people who have been through many other courses and have come and done this course and it's finally consolidated everything for them in one place so they can take action. And we're having fantastic results. Just jump on that renovator network and see what some people are doing who've been through the of course in 2013. So the information that you need to succeed is here. You've had to make the decision to use it though, and only you can do that. But I've got to warn you, this is going to be great. The next 12 weeks you'll be learning how to find the right suburb and the right property, how to negotiate effectively to achieve the best deal and then how to finance that deal. You'll learn about cosmetic renovations, structural renovations, the words, phrases and lingos possibly that you've never even heard before, and then the process of doing it again and again and again to build long term wealth. That's why you have lifetime access to this course. So you can come back next year and the year after and just fine tune some of the things that you're doing in your portfolio. So you have all of that to look forward to. And we're going to get straight into your questions. There's a bit of housekeeping that we normally do. You don't need to do that because we're going to jump straight into talking about what is going to make a difference to you. So first of all, let me just quickly fill in the Renovator network. If you have not joined the Facebook group yet, please do make a request jump online, ask us to join the group. You will see under facebook.comgroups thereinovatornetwork. Now, if your logon Facebook ID is Pooh Bear, we don't obviously have a listing for Poohbear. As one of our students, please send me an email to supportourpropertysuccess.com any technical issues you have, we'll fix them up. Supportourpropertiesuccess.com and we'll make sure you get access to the Facebook group, which is the Renovator network. It is extremely valuable. And if you aren't in Facebook, we've got people who religiously refuse to be part of Facebook. Please just get an alias join. Don't let anyone know who you are. Join our group and you never have to venture into the rest of the time consuming thing that Facebook is. So let's talk about module one. Module one week one Q&A call is all about understanding your goals and where you're trying to go. This week we've been through Module one, the foundational module of the Ultimate Guide to the Renovation Course. But also I'd argue that it's also the foundational requirement of successful property investing. Module one was designed to prompt you to establish your long term goals and also give you a close look at the merits of the two main renovation strategies, renovating to sell and renovating to rent, so you can make an informed and intelligent decision on which strategy is right for you. So I really hope at this stage that you've taken the time to fill out the information in Module one workbook around your financial targets. It is really okay if you are undecided on your strategy. You can return to that later. But being clear in black and white about what you are trying to achieve is really important. So what are your goals when you retire or maybe even before? How much money would you like to have available per annum? Is it $30,000? Is it 50,000? Is it 80,000? Is it 100,000? So there's also different things that could affect the strategy that you pursue to achieve those goals. Like do you want to quit your job as soon as possible? Do you want to retire early or just retire comfortably? Because maybe you want to, I don't know, get rich really quickly or maybe you have Lifestyle, desires and needs. Or maybe you just want to have some free time or time available to go and pursue personal and professional development elsewhere. You know, it's all up to you, and this is your chance to actually target where you want to go and what you want to achieve. Once you have that and the clarity around that, it's easy to work out the steps to get there and what you need to do to achieve that goal. You're after now. I also really hope that you'll make use of the tools provided for tracking your spending so you can concentrate on what's really important. Now, I did this way back in 1998 and I still do today every now and then when I think I'm losing control of my spending. But it really, I guess, allowed me to formulate a way to map where I'm spending my money. And it was amazing. I did it over three months and I really got an incredible insight of the money that was going through my fingers each day. You might be someone who drives around to get the cheapest petrol, but that two bucks you save, you don't actually put it in the savings account, you put it in your wallet to spend elsewhere. So don't kid yourself, look where you're spending your money and track your spending and then you can create a budget. And once you know how much money you have and you know where you want to get to, then we can start working out what needs to happen in between. And it reminds me of a great quote from Craig Trethewey, who was one of our beta testers, who said, am I doing this for real or am I just playing? And be honest with yourself. It's a pretty good indicator if you seriously have some time to sit down, have and think about these things that we've discussed. Module one seems a bit eerie and fairy to some people, but I even speak to experienced investors and we have a bit of a chat about where they're going and what they've done. And do their properties fit into their portfolio, that it will allow them to achieve it. And often they've made mistakes and they've got properties that just aren't allowing them to get to where they want to be. Maybe they're consuming their borrowing capacity, but the reality is that you need to sometimes go back and reflect. So even if you're an experienced investor or just starting out, and maybe you don't even have the money to start buying a property, just starting with this module and solidifying your goals and where you want to go is just so important. So I really encourage you to spend the time, download that workbook and get into it. Now we didn't just talk about goals, we talked about some other things. We talked about strategy, we talked about what is your strategy? Renovation to rent or renovation to sell. And at this point we actually pulled a fantastic little poll. Now I'll show you the poll so you can feel that you're part of it. Unfortunately, there's no one on this call now because as I said, we forgot to actually launch it. But have you decided on your renovation strategy? Yes or not yet? There was 38% who said not yet, but. And at that time I said that is just fine because the reality is that we don't expect you to know what your strategy is now. You do not have to have a hard and fast. This is exactly what we need to do. We want to understand completely. Unfortunately we were the zero poll that people giggling in the background here. But you don't have to be definitive about what your goal is. Sorry about what your strategy is now because in the next couple of modules we're going to give you the information to allow you to look at what your risk profile is, what you need to do to achieve your goals. And maybe it is renovate to rent, maybe it is renovate to sell. Maybe when you get into the numbers or you look at the difficulty with some of the strategies, you might choose the alternative strategy. You don't have to be hard and fast and as you grow your portfolio you might change strategy. So just be aware of that. So we talked about the renovation to rent strategy. We talked about the Trident strategy. We talked about the different types of renovations, cosmetic and structural, the five Rs of renovation. We talked about some renovation costs and rules of thumb now you might get to know over the next couple of weeks. I think rules of thumb are a great place to start. The power of this course is you get to create your own rules of thumb. So once you do that, you can actually start building up the real numbers that are relevant to you in your area, with your experience and your networks. I got very carried away before and as I said, we're kind of in catch up mode now. But I'm going to reintroduce those people to someone who's really, really important to the Ultimate Guide to Renovation and likes to fly under the radar a bit. But you're going to get to know him really well over the next couple of weeks and that is John Hubbard, who's my co creator of the course the Ultimate Guide to Renovation. Hello, John.

Hello, Jane. Hello, everybody. Nice to be here again.

Now, I have to tell you a bit about John. John is an experienced renovator with well over 25 years experience and has been really strong in his technical knowledge that he's brought to the course.

He.

He has knowledge of building, renovating, literally. John, you've probably done every single job there is to be done in a renovation. Is that true?

It's probably close to true, but I was saying earlier that it was kind of necessity to start off with because I couldn't afford to do anything else. And I basically just did every job that I could. Nutted it out bit by bit. I was a tradie, so I had the advantage of that. So I'd be on site and just hassle the guys how to do this and how to do that. And in the end, I kind of ended up doing all the plumbing and I would even run the wires for the electricians. But I won't tell you which house that was. And, yeah, just, you know, even now I'll still. I still quite enjoy it. If we'll get a chippy sometimes and I'll work alongside him. I often do that when we're framing and that kind of thing.

You get to learn what to do. Like a little apprentice.

Yep.

So what trade were you actually in?

I was a solid plasterer. I did an apprenticeship as a solid plaster. And the reason that I've got 25 years experience and I look so young.

You started so early.

I started so early, yeah. No, so I did a solid plastering is a wet trade. So one of the. I did my apprenticeship with two guys. One was a rendering, a wet trade. It just means that you kind of get wet and dirty every single day.

Fantastic mental note. I don't want to be in a wet trade.

No, you don't want a wet.

No.

Don't let your kids be in a wet trade. Or mums and dads.

Electricians, not plumbers.

Yes, electricians is probably the best. We're trades are things like tiling, bricklayers, you know, maybe something like tuck pointing, rendering, concreting, all that kind of stuff. So a lot of the guys, you know, years ago, particularly coming out from. From Europe, would. They'd have a few. They might have a few wet trades under the belt. So they might do rendering and tiling. Often it was case of tiles, could render because, you know, in Europe, solid brick walls and that kind of thing, or. Yeah, concreting as well. So one of the guys that I work with also did concrete. So I Went to concrete. So over the years I picked up, you know, a bunch of skills from different areas. But these these days I try and use that knowledge to direct other people to do the work rather than do it all myself.

Yeah. That whole time versus money kind of equation we get into a bit later.

Yeah.

And I have to reveal that incredible structural renovation that you see. And the box at the back is all John. So you know, people are so excited. Oh my gosh, they're gonna have to wait, what, eight modules to get to the box at the back. But God, it's gonna be worth it. And you know, you've developed that over a few years and really swiped from clever stuff in the commercial trades and done what is really a clever lean to. I mean, I've had people ring up and say that, you know, it's cut hundreds of thousands of dollars off their estimate of doing a structural renovation. So it's pretty special.

It is, yeah. The structural renovations tend to be real money suck because the roof line's the problem if you're tying into the back of the house and you've got, you know, particularly if you've got tile roof tiles and then you got to tile into the roof line and you know, to have galleys and all this kind of stuff. The idea of the box on the back is it just. You basically cut off the eave at the back of the house and you tack on what is essentially a lean to.

It doesn't look like it.

It doesn't look like a lean to. So it's designed and with the new kind of techniques or the building products that you've got now, you can use essentially what are floor trusses, they're called posi struts and which will give you a really big span. And you don't get a. There's no great depth to the beam so you don't lose ceiling height. So yeah, it's just a really quick way. And you know, people don't think about the structure or how what the structure is or, you know, no one looks at it and goes, oh, this is just a lean to. It's kind of got some parapet walls on either side. So it doesn't look like a lean to. But really what you get is a really low cost addition. Yeah. With 70 odd square meters to the back of the house and it's nice and cheap.

Well, don't give it all away.

No, I know.

Make a. So I mean we're going to learn about John's innovative value adding techniques later and I guess particularly through the structural renovation case study. And those in the renovator network probably know him very well already because they utilize your trade skills. And I think you're answering questions in there this week about gaps in laminate bench tops.

There was one on painting this week too about spraying and embossing as well, which all comes up in the future modules as well.

I know, and we'll keep coming up. My experience on the other hand, has been purely cosmetic renovations and holding the properties to build a portfolio. So in terms of complementary skills, you have the benefit of both of us. Our combined knowledge we are going to bring to the table. To answer your questions, John, I should also mention that all of those emails and fantastic comments that I have had over the last few weeks about the amazing quality of the video production, not just in the course, but in the build up to the course and those fantastic videos that we released has just been amazing. And you have been the person behind that.

Yeah, that's kind of the latest. Well, latest. It's been kind of since the year 2000 or something. I gave up being a tradie even though I've continued to renovate and went into video production. So this course has actually been really good chance for me to combine my two kind of passions really, which is making videos and building houses and telling.

Me where to stand, when to smile and what shirt to wear. My gosh, guys, have you seen me rant about my blue linen shirt? I thought I'd turn up in the only shirt I had ironed and had ironed in many a year and my first day of filming. And after we finished filming, John told me that for the next year of filming I had to wear the same blue shirt. So I get as sick of it as you do. When I had to iron regularly so John would ring up and go, where's filming today? Go iron the shirt. I have to go usually find it where I just hidden it.

It means we can update the course for years to come as long as we preserve that shirt.

Oh God, we are so in trouble. Okay. I was going to burn it. Lucky I didn't. So now I know. Well, I guess it's time to start taking questions. The Ultimate Guide to Renovation 2014. Look, normally we do give preference to people who call in, so please make sure you have microphones in future to do that. Yeah.

Which most laptops do or an iPad or anything. Do they?

Yeah, yeah. And just, I mean, we want to talk to you. I want to be able to answer your questions better and if I can interrogate A little bit more about what you're after. I can make sure that you get the right answer. And you know that we really, you know, you understand there is no dumb answers. You know, we sometimes we get questions. No dumb answers, occasional dumb answers. There are some dumb answers. Never a dumb question, Never a dumb question. But sometimes you got us on a hop and we have to do some research and come back to you. But we've got people asking about the right what to use. It's just simple things. If there's something that seems simple to you but is a huge insurmountable mountain that you can't get over and move on with, that's what we're here for. That's what these weekly calls are for. And more importantly, that's what the Renovator network is for. So as I said again, get on the Renovator network. If you're having trouble, let us know, we'll send you an email and invite you. But just go there, knock on the door, ask to be invited and we'll let you in. We've got, gosh, we get hundreds of requests of people who aren't in the course, who want to be part of it, have heard about it and you guys have got the ability there to ask the questions throughout the time frame, the next year, 12 months and where he'd answer them. So without further ado, we're going to pick up some of the questions that were asked during the call and do our very best to answer them. The calls usually take an hour to an hour and a half and this is a Thursday night call being the first Q and A call. Future calls will be lunchtime learning, 12:30 Thursdays. So that's Melbourne, Sydney time. Daylight saving changes will reflect changes the.

Event that you can't make it to. You're able to submit questions prior to the call. We'll include them in. We're going to have a voice line where you can leave a recorded message, which would be our first preference if you do that or just write them or you can just email or write them in the Facebook group.

And as we saw tonight, you know, module one is where we're concentrating at the moment. There's so many people jumping ahead and doing other things. They can't jump ahead in content but they can jump ahead with their questions where they're up to personally. And we're pretty much answer all of them. So we're here to answer your question, guys, and make sure you make use of us. We've got, as I said, hundreds of People will be listening to this. The question that's in your mind is probably in a lot of other people's minds too. We saw that on the call tonight, had an incredible amount of people a lot of questions and a lot of people were asking follow up questions from previous questions. So we're going to do the best to answer those. So our first question came from Cindy and Alex and they actually had a really great question about goal setting and they were a little confused. They listened to one of the past Q and A calls and they still weren't sure on how to achieve a $60,000 passive income in the time frame that they set being 10 years with the portfolio that they currently had. So they were talking about how do we know what to do? And they said we get the fact that you get $60,000 and you times by 20 and that means 1.2 million. What's that mean? And the reality is that 1.2 million represents the equity that you own. So you might have a large amount of debt, but that's the equity that you own. So if you sold up your portfolio, paid down your costs and put that 1.2 million in the bank and got a 5% return, then that pre tax is $60,000 income. Now what does that look like in 10 years time? Well, the 1.2 million doesn't look like fully paid off houses. That 1.2 million could be at a 50% loan to value ratio. A property portfolio that's worth $2.5 million for instance. Let's take costs out and just call it $2.4 million. So we've got a $2.4 million property portfolio. You sell the properties and end up with $1.2 million in equity that you can put in the bank and earn $60,000. So the question that Chris, Cindy and Alex had was a little bit confused about how do we then bring that forward to today's dollar and then go go into the future again. And the reality is it is a little difficult. What you do need to do is you need to look at where you want to be in the future and then bring it back to today and be relative. Today I'm going to use the age old 7% capital growth and we all know that some years there's none and capital growth is below that. And some years it's fantastic. I think I had two of my suburbs in Sydney last year, went up by 17% and 21% respectively, which kind of all evens out to let's say 7. So 7% based on the rule of 72, 7% means your property portfolio will double in 10 years time. So if you've got $1.2 million worth of equity and you've got, let's say a 50% loan to value ratio, your property portfolio might be worth 2.4 million. Or if we were taking the cost out, in reality, probably closer to 3 million with capital gains tax and selling. So what's a $3 million portfolio look like in the future in 10 years, if we bring it back to now or in the next year or two. So $3 million divided by two, because property doubles based on that 7% growth, and we're assuming a 7% growth, it would look like a $1.5 million property portfolio. So if Cindy and Alex had a $700,000 in property already, then they might need to have two $400,000 properties within the next two years or so to get to that magic number that they need to get to to have the value of the property portfolio. So $1.5 million, for instance. Now what happens if you don't get 7%? Maybe you're clever enough to get 10% so you can go and work out the figures based on that. What if you only get 5% and you want to be a bit more conservative? You can work out the figures based on that. Now the reality is you are jumping forward into future time and you're coming back again and what you're looking and there's the future cost of dollars of money and all of those things to consider. But the reality is, if you can set yourself a goal of what your Passive income is $60,000 in 10 years time, and you can then look at the portfolio that needs to achieve that 60,000 by 20. Now that 20 is a variable of a 5% return on your money in the bank. And then you look at that as a loan to value ratio. Now, if you've got a 90% loan to value ratio that you're buying your properties with now, in 10 years time, if your property is doubling in value, you might end up with a 60% or 70% value loan to value ratio. So you then divide that. So if it's 70%, so if $1.2 million equals the 30% of equity, 1.2 million divided by the 30% will tell you what the portfolio needs to be worth. That's how you work it out. Then you bring it back to today's dollars and say, what have I got now in the next year or two? How many properties do I need to buy to be able to get me to that point, and here's the absolute critical thing, guys, is that that tried strategy around capital growth, you can see here, that's the key. If you've got a property that is not going to go up in value and your portfolio doesn't move in value and your equity doesn't move, but for instance, you trade that all up for cash flow, then you might get an extra 20, 30, 50 bucks a week in rent. But that's not going to allow you to exit your portfolio in the future. And this is where capital growth is so important. It gives you the exit strategy, it gives you the equity to grow your portfolio, create deposit and costs, buy your next property. But I don't think you should have to trade capital growth off against cash flow, because you do need cash flow to help you maintain the portfolio within the time frame until you reach your end goals. So, so renovation allows you to do that because by renovating you're actually pushing up the rent that you're going to get, which is going to assist you in paying off your loans and your costs. And you also get, instead of a $400,000 property, maybe doubling in value in 10 years time, you spend $40,000, you get $100,000 worth of value and you've got a $500,000 property that is actually going up in value in 10 years time. So 400,000 in 10 years, 800 grand, $500,000 in 10 years. There's a $200,000 difference there. So just realise the effect of your renovation is actually going to affect your cash flow and your growth.

That's good. I think that's better than last time, really.

See, now I know what I'm saying. So Cindy and Alex also had a question about maybe we should have a good calculator. And yes, we should probably have a good calculator. And I'm talking with someone who's developing a good calculator and getting them to put a renovation component in there. When we get a heads up on that, you don't need to spend tens of thousands of dollars on. I know someone who's charging $7,000 to get your portfolio mapped out. You don't need to do that. A couple hundred bucks should get you a really good calculator. And let us get back to you on that. So thank you very much for that question. I think we then moved on to a really good question from Christina about extending her fixed rate. So she had a fixed rate loan. She was saying, oh, I'm lamenting the Fact that I've only got a year of these low rates left on a two year fixed rate. And I really want to grab some of this other cheap stuff that's happening at the moment.

Wasn't she selling? She was trying to get out of it. So different question.

Yeah, we had lots of questions.

There's another fixed rate question.

Well, maybe. Diane wanted to get out of her fix. So Christina was actually trying to extend it and get a bit of extra action. And what I was saying to her was that when you actually change the fixed rate term, the security, any component of that fixed rate contract that you've entered into, you're actually breaking the fixed rate. So you will be up for break fees. So just be aware of that and it might be worth your time in the sense that ring up your lender and ask them what the break fee is. They will do the calculation for you. It's based on the time remaining, it's based on for your fixed rate. It's based on the current rate of today and the rate that you've rated. You're locked into. And if you think about it like this, the bank has pretty much sold to an investor the fact that you're going to be paying them 7% for the next three years. So they might be expecting a $20,000 income in the next three years based on their investment. But the reality is that if you break that investment contract that you have now and they had to put that money back out into the market, then they might only get 4.5% because interest rates are around 5% now. So they're getting less money. So they want compensation for that. So you need to compensate. So any changes to the fixed rate, you need to be really aware of the fact that you're probably up for break fees and you need to. There are some really crazy fixed rates out at the moment. I saw a 434 for a one year at the moment pre June. We've got lenders who are releasing their interest in advance fixed rates. So just be aware that they're available. They're usually 0.1% below what the registered fixed rate is. There's a really good strategy if you do have some high capital gains or you have high income or for whatever reason you might want to prepay in that tax period or tax year, $30,000 in fixed. Sorry, in interest payments. So interest in advance could be something you could do. But Christina, you can't change your fixed rate, but you can get more. So if you've got a variable component of Your own, you might consider fixing that or fixing some of it, depending on how much you've got in your offset account. Or you might look at what most investors are doing at the moment where interest rates are the lowest they've been and their properties have gone up in value. They're looking at getting a new loan or new equity that they can tap into. So you might want to tap into some equity in your property and fix that. So, yeah, thank you for your question, Christina, and just be aware, guys, of your fixed rates. You could be in a bit of trouble if you want to break them. Now, we then had an interesting comment from Adam who wanted to know how considerations of land tax affect your portfolio. And we had a bit of a conversation there about land tax. It is a state based tax at this stage. There has been rumours that it could go national and what that means is if you are diversifying buying in different states, it might give you the ability to be under the threshold of land tax within those different states. So you may not be up for land tax. Now, I know 18 months ago I was pretty keen to look at some of the opportunities in Newcastle and even Dubbo and some of the areas in Sydney to buy again, but I have such an exposure in New South Wales, the land tax is crippling and it would really affect my strategy. So how does land tax atom affect your portfolio? Well, it affects it because it, it's part of the diversification mechanism that empowers you to have a better cash flow if you keep under the threshold. Another thing that you may not know is that as individuals you have land tax threshold and then buying together you have another. So often when I talk to my finance clients, I talk to them about if they haven't bought before, potentially considering buying in individual names. Whilst they had the servicing capacity before as a married couple, they buy in joint names and that could further minimise the land tax exemptions that they have. So, yeah, it's a really good consideration. It is a cost that's often overlooked in your costs of holding your portfolio and something that you can minimise by diversifying in other states. Good stuff.

Good information to know.

Good information to know. Here's a question that we always get asked, John, and one that you've got a bit of experience in and that's should I buy in a trust or not? Russell was, was quite concerned about the fact that half the people we speak to says yes and some say no.

And really, because everyone's arguing about it.

Yeah. And you know, I'm not a Fan just from my personal circumstances. But the reality is that buying in a trust, if you've got a flipping strategy, is something that a lot of renovators do.

Yeah, I use a trust. It's something that you really need to get a good accountant. And we were saying before that not all accountants are equal. There's some might be a good accountant, but when it comes to property and knowing the ins and outs of all the trusts and all the ramifications of buying not only now but down the track in a trust, yeah, it's good to shop around and really get some advice with a good accountant.

Yeah, it's kind of like mortgage brokers. If you think about the transactions that happen with properties, about 70% are, are mums and dads buying a property and selling their home. It's the same with accountants, mums and dad, vanilla kind of stuff. You really need to ask for referrals and ask for people who've done it before and have the experience of buying in trust. I personally fell for the buy in a trust, otherwise someone's going to sue you and lose everything. Back in 2001, I bought a couple of properties in a hybrid discretionary trust with the corporate trustee. There's a lot of trendy trusts and blood trusts and blood trusts and pits and things that are registered in South Australia and I see a lot of them come across my desk. And one of the main things that you really need to know and one of the things that hobbled me actually in increasing some borrowings, is that there were about three lenders that would lend to hybrid discretionary trusts. In mid May, we found that amp pulled out of that. It's just something they don't get. There's an additional expense, usually about $600 in two to three weeks of their legal team looking over the trust and trust documents are quite big, which justified $600, I gather. But lenders don't like it. The two lenders that are left that do it are what I would claim to be is the top of the banking hierarchy. So if you look at the banks, the big four banks and the way that they assess loans and serviceability, they would sit at the top. You get the nice packages and the offset accounts and professional packages, but they do load how they assess your debts. So for instance, instead of assessing your current debts at the current interest rate of interest only over 30 years, of the 5% interest rate you're paying, they will assess you at 2.5% higher than that principal and interest over 25 years. So you can borrow a lot less with them than other lenders that are further down the banking hierarchy and we'll get to that in future modules. But the thing is that there's only two of those guys that do trust lends. And although I have borrowing capacity for many lenders, those ones right at the top that really take all of your current debts and buffer it with these high interest rates at P and I that you're not paying over 25 years makes it hard for a lot of people to do so. Those who do have hybrid discretionary trusts, corporate trustees do find difficulty in refinancing. Then there is the Family and Unit Trust Discretionary trust. These are dime a dozen guys. Banks get them, they don't mind them. Most lenders do them. It's not a big deal. And you really have to understand what the benefits of the trust structure are for you. There might be some income sharing or income disbursements. Be aware of the cons. It might be the fact that negative gearing is held within the trust and you can't pass it on personally. There might be the fact that from a land tax point of view, because it's a company owning the property, there's no threshold that you have to get over. You have to pay land tax from day one. So understand the pros, understand the cons, see what it suits you. From the income sharing point of view, it might suit you just fine. From an asset protection point of view, it may not actually give you the asset protection that you think you might get. So just be aware of the fact that buying within a trust, depending on who you talk to and who's got a stake in what they want you to do, everyone has a different opinion. But the reality is it has to come down to your specific circumstances. Buy. An accountant who understands properly can explain to you why the trust may or may not work for you and the implications of your decision and make the decision for yourself. You know, it's with all things we teach you in this course, it's up to you. Don't take someone else's opinion. So, yeah, I think Russell's question about trust is interesting. It always comes up and people want to know. We are not accountants. We can't give you advice on this kind of stuff. All we can do is share with our experience and what we see implications and pros and cons. Well, good. Now, Vicky, Vicki had an interesting question. She wanted to know how to minimise her capital gains cost. I think we then took that to the fact that it wasn't Minimising capital gains costs. It was about optimising the profit you can make.

So.

She had a property that she was selling. And I guess the thing is, if you are doing a flipping strategy in particular, in particular, you're going to face 100% capital gains within 12 months. If you are flipping within 12 months, or 50% of your capital gain afterwards. Now, it is one of the things you have to take into consideration, arguably, having the trust structure and company, you might be limited to your taxable rate at 30% of the capital gains being the company tax rate, but it's something that you can't minimize. The only way you can minimize it is, obviously have it as your home.

And which is a great strategy. If you can handle kind of, you know, moving after a year or two, then. And it's not that disruptive. It's a good way to just hop up slowly. I know there's, you know, there's a kind of point there where you might be classed as a business by the ATO if you do it too.

And they won't tell you how many times that is it.

But. Yeah, I mean, you could do it quite a few times, probably before you're in danger of that.

Yeah, I mean, it's one of those things that you need to work through, but. And if you can live with plaster dust forever in your life, suits your.

Lifestyle and how old your kids are and all that.

Well, you know, I know just when doing our renovations, when we were starting off and, you know, we didn't want to pay the rent elsewhere and then pay, you know, in addition, you know, we spent many a night sleeping on the kitchen floor, on a mattress or wherever we're living in the renovation to save some money.

You get ahead. You do that a couple of times and then you're right.

Eating mince every night.

Our bathroom was a portaloo on the front yard of the terrace.

Oh, my God. Yep. We've all been down that. Sacrifices and hard work to get where we want to get right now. Scott had an interesting point. He said that if you finalise your capital gains at the beginning of financial year, you might have 15 months to pay that capital gain. So that's something to consider when you're selling the property, when you actually sign the contract. So be aware of that. Then we had a question from Diane, once again about fixed rates, but this time she's selling a property and she wants to get out. We had some sad news for Diane, which was, you're going to break that contract. As we talked about with Christina. And if you're going to break the contract, all bets are off. They're going to come after you for the break fee. However, I do have an innovative strategy and this is something that's pretty advanced and you're probably not going to hear it from others, but it's something that I've kind of been developing over time for some of my slipping clients. From a finance point of view, one of the reasons around that is you're probably aware on 12 March 2014, the Privacy act was changed to become a positive report rather than negative reporting, which means that lenders in the future can look at not just your enquiry to take a loan out, but kind of six months worth of statements of how you've gone and repaying each loan and when you got rid of the loan, etc. As well. Now what does this mean? This means that for Flippers, from a finance point of view, that if you aren't borrowing money to buy a property and then getting rid of the loan and then going back a year later and borrowing more money and getting rid of the loan, etcetera, Then what could happen is that it's hitting your credit file. And we're having numerous lenders that we're talking to and they're coming back and they're deferring decisions and saying, this guy's had 13 hits on his credit file in five years. Which a couple of credit cards, a couple of refinances and purchase of property is not such a big deal for someone with maybe four or five properties in their portfolio. However, the magic number 13 was kind of triggering a bank's decision to fail the loan based on the credit scoring. So just be aware, credit scoring is really important. So this strategy that I developed for Flippers is also relevant potentially to Diane and that is using the portability. So you need to make sure the loan that you have has a portability function. And not many people use this portability. The theory is that you kind of move it to your next house, but some lenders require you to use portability from one property to the next property and settle on the same day. And some lenders, and these are the major four big ones, usually have a portability function that allows you to actually move it to a term deposit. The loan is then secured by a term deposit. So if you have a $500,000 property or $400,000 property and an 80% loan to value ratio, then your property is worth $500,000. If you were moving that $400,000 debt across to a term deposit, then you'd have to have, say, $400,000, securing the term deposit for the loan of $400,000. That's 100% loan to value ratio. So you still have to pay interest, repayments, etc. It's not something you want to be doing ongoing, but it is the ability to actually keep the loan, in this case when it's fixed. So if you're looking at buying another property soon, Diane, and that you rent it with a lender, one of the bigger lenders, then potentially this is the opportunity for you to do that. So ring up your lender tomorrow, ask them to have portability. If you have to sell this property, you don't want to break the break fee. See if you can move it to a term deposit or to the next property. And there you go. Could be an answer for you. Great. Now, Lorraine had a question about cross collateralisation. She's in the process of. She had two questions, really. She said, I've got two mortgage brokers I'm talking to at the moment and I want to uncross my properties. And she wanted to know a bit more about the pain of the cross collateralisation. But she also wanted to know what questions she should ask a mortgage broker about before she decides whom to go with. And what I would say to Lorraine is one of the things that I did when I first started investing or wanting to invest is I downloaded some checklist and I think it's probably from a mortgage broker website that said questions to ask a mortgage broker. And I recently did an article and I think it's in the March Australian Property Investor magazine, and it is on what questions to ask the mortgage broker. And look, I really don't think you need to ask them if they have a property portfolio of their own. It helps, but the reality is that I know when I first started out, I asked my mortgage broker 10 questions and one of them was, do you have a portfolio? And he said, no, I invest in bettering my business and my company and my children and my lifestyle and I understand what my goals are and my financial gains and I've chosen to do that outside of property, but I help other people. And he's like her. He's one of the forum managers on summersoft. He's got incredible experience in giving advice and working with investors, but he doesn't own investment properties. I think that's a silly question. You can ask the question I'd be more interested in asking a mortgage broker about your specific circumstances of cross collateralization so have you worked with other clients in releasing properties that have been cross collateralised? It's an intricate thing to do. It can take up to six months. Lenders love you being cross collateralised because it means it's hard for you to move. So they enact that ability to make it hard for you to move. Just find out if your mortgage broker has done that before. Have they got other clients? Maybe they can refer you to clients. Check out the website for testimonials, Facebook, LinkedIn, Twitter. Let's see if they have a presence at all and see if they're interacting. The other thing I'd be asking them is how many lenders do they use and how many lenders do they use regularly and do they assess against all lenders? I know there's some very large institutions that call themselves mortgage brokers out there that deal with just one lender. And I know that my business development managers that I work with in banks tell me that most mortgage brokers use about three lenders. And you're silly to go and understand the policies on the 30 and do research individually for everybody client because it takes too much time. Or as my opinion is, if you're a mortgage broker, that's your job to do, is go and broker the mortgage that's going to best suit the individual circumstances. So go to your mortgage broker that you're considering. Lorraine, ask them these questions, ask them about their experience with your particular thing that you need to know about and also ask them about the lenders that they have on their panels. Make sure they have the compliance stuff, the MFAA or fbaa, which just means they have a code of ethics. They subscribe to the credit ombudsman. So if they have a problem, you've got a third party you can go to, make sure they have a license or their credit rep. All of those things are just a compliance thing. But what you really want to do is make sure that they can help you with your specific circumstances. Let me just touch on cross collateralisation. What do you think about cross collateralization? You loved it before you heard that.

We really enjoyed talking about it, actually.

What do you love the most about it?

It's one of those things.

Let me tell you about.

You have to know.

I know. Well, look, let's picture this. You have this portfolio. You have a property in Sydney and a property in Perth and they're both worth $500,000. And let's just pretend the Sydney market tanks and that $500,000 property goes down to 400 and Perth oh my gosh.

Boom, boom, boom.

And it goes up to 600,000 now. Your portfolio has not changed in value. It's a million bucks. If you cross collateralize, the bank is going to charge you to go out and value those two properties because you're going to say, hey, one's gone up in value. Let me go get some equity out so I can go and buy the third one. And they'll come back and say, no, your portfolio hasn't changed, there's no equity there, you're already maxed out. Whereas your properties were individually secured. So one loan against one security. What would then happen is that you could go and tap into the equity from Perth, leave Sydney until it moves again, because invariably it's Sydney, there's demand, it's going to move again. It might take a few years, but leave Sydney until it takes off and go and tap into Perth. So it's really important that cross collateralization. If you're going to buy one property with your home, it's not really such a big black monster in the corner. You don't have to really worry about it. Banks love it because once they tie you up with more than two products or three products, they know that 80% of the customers stick for life. They want to make you very sticky. But the thing is that it may not allow you to optimize the equity that you have. And I know, I've worked with clients where they've actually got a security that is underpinning and the lender owns the title and it's underpinning the value of another property and it can be released, there's enough equity there to actually release a title so the person can walk away and have a title unencumbered property in their pocket. It's a financing strategy. In theory. You cannot pay mortgage insurance by using it. The reality is if you set up your finance structure properly by maybe tapping into a line of credit against your home and using that for the deposit and costs for the new property and securing the remaining of the loan, maybe 80% or 90% loan to value ratio on the new property, then you can use equity from one to get to the next. So that's cost collateralization. And I think that we had someone then ask about splitting home loans. So Lee then asks. I had mentioned the line of credit against your home and she wanted to know she'd heard that you could split your home loan and then use some of that loan for the next property purchase, or there was the ability to do line of credit and which one was better. So what I try to explain there is the fact that the only way you can, if You've got a $500,000 loan against your home and the only way you can split the loan and make some of that non deductible is if you've got a $200,000 offset account. Maybe what you could do is split the loan into a $300,000 split and a $200,000 split and you could pay down using your funds in your offset account the $200,000 split and then draw those funds out for investment use. And if you're using those for investment use, then in theory the interest against that is deductible. Now you have to go through your account. And this is why it's very important to have an accountant that is a property savvy accountant to determine that. But some lenders, you know, Anz, if you have $1,000 less than $1,000 in your bank account, they close the account. St. George, less than $5,000. So you need to be aware of what your mortgage broker has to be aware of. The different banks individual policies are about this. Now the important thing is you're not going to go and put $200,000 into your loan and then pull it out and go and put in an offset account because you're putting it into a savings account which the ATO would see as personal use that $200,000. If you're going to draw the money out, you need to draw that out and put it straight into the deposit and cost the check for the real estate agent for your next purchase. So let's be clear that the only way you can kind of split your home loan and declare that some is deductible and non deductible is if you've got the funds to really pay that down. The other thing you could do is the line of credit. And I entered, Leigh, I guess in saying that.

Can you explain the basics of what a line of credit is?

Sure. A line of credit doesn't it. There's a number of different types of loans. There's a standard variable loan. There's a standard variable loan with an offset account associated with it. There's basic loans which are usually cheaper without offset or any fees or charges. There's fixed loans. So you take a commitment to fix a loan for one year, three years, five years is the norm. There is, well, there's self managed super fun loans as well now and then there's lines of credit. And lines of credit are an interesting little vehicle that you can use, and it's like a big credit card. So if you had equity in your home and you had the ability to service that with your. Your income and your debt position, then you might take, let's say, a $200,000 or $250,000 line of credit out against your home. Now, if you want to go and buy a $500,000 property with a 20% deposit, then the 20% deposit on a $500,000 property is $100,000. Well, let's make it easier. Let's go $400,000 property. So 20% deposit is $80,000. And then you've got stamp duty of 20, so you need $100,000. So you go to your line of credit of 250,000, you pull out $100,000. And it's not until you pull that money out that you're actually paying interest on it, which is great, because the remaining $150,000 there you're not paying interest on, like your credit card. It's like your limit and your balance of your credit card. Now, these are really handy and great little finance vehicles to have, but they do come at a premium, about 0.15% of an interest rate hike. They're usually 30 years interest only, which is fantastic because you don't have to go back after five years and ask the bank to make it interest only again, not principal and interest. And you get the ability to also use that to your advantage. If you're flipping, for instance, and you had a lot of equity in your home, rather than going and hitting your credit file time and time again, if you're going to buy a $300,000 unit, for instance, and you had a $500,000 line of credit in your home, then you might go and buy the entire property, $300,000 with a $15,000 stamp duty with the funds in your line of credit, do your renovation. When you sell the property, you put the money back into the line of credit. So you're just taking money in and out of the line of credit. You're not applying for loans again. So that's the perfect way to be able to do a flip. Not hitting a credit file, not actually taking a loan against the property. Because one of the things is, if the bank keeps seeing that every year that you're opening a loan and closing it, you're not really an ideal client for them. So it's one of the things that they're looking at. So just be aware that you don't want to keep hitting credit filing and be clever and structured about the way you do it. And we talked a bit earlier about using portability to achieve that. That I think the line of credit is something that if you were going to. If you had a line of credit of only $100,000 and you needed the $100,000 to pay that 20% deposit on a $400,000 property and the $20,000 stamp duty, and you're going to use it all up straight away, and it was a buy and hold strategy and you weren't going to put the money back in the line of credit. Then ask yourself, why are you going to spend the extra 0.15% interest rate when you're going to draw the money out and not be able to replenish it? It might be because your income circumstances are changing in the future, in the next five years, you won't be able to go back and reapply for another interest only period. And it might be worth it, but it may not be. So understand how that can affect you. Then we had a. Lee kind of followed up with a question about buying outside the area. And I said to. I guess the thing is, if you want to maximize your diversification and the land tax minimization and all those kind of things and buy outside in the area and kind of minimise your risk a little, then one of the things that you might want to consider is buying in a different state or a different area, being regional in your own, in Metro, for instance. And we kind of, I think we picked up that also with Anisa, where we talked about buying in the area that she was in, which is Burntree Gully. And you know, it was really, I think it was important that we kind of. Let me just pull up this question here. Let me have a quick little look. Okay. Nope, I haven't got it here. But one of the things that you can do is you need to go through the process of understanding exactly what you're after. So, for instance, the buying criteria that we go through in the next couple of modules is so important because once you have your buying criteria, that is, you know that your purchase price is $300,000, your renovation budget is $35,000. You need, based on your goals, a capital growth of 8% a year. You need a cash flow of 4.5% rental yield. Then if you've got that buying criteria and you know that you're wanting to buy, to hold and renovate, then you specifically have a clarity about what you're after. And as we go through, well, the next module is fantastic. I love the next module. When we go through the next module, which is understanding your areas and getting your sublets down to three to five to concentrate on, what you'll find is that you'll be able to combine that with your buying criteria and do 90% of your work online. Now, you may not be able to jump on a plane every week to go and view the 10% of properties that interest you and that might then be the time to engage a buyer's agent to do that for you. And the reason that that could help you is, is that they're talking to agents all the time, they're seeing what's on the market. But you need to be specific about your buying criteria and where you want to buy, validate with them. They have local knowledge about what you're interested in and where you're looking. But the reality is that you might really want to consider getting them to assist you. And if they are just familiar with a couple of areas and not the areas that you're looking at, go and find an agent that is going to listen to you and what you want. Because I know when I moved to Melbourne in 98, I looked around and thought that Williamstown had huge growth potential and opportunity. And I went down there to rent. I spoke to three real estate agents and they all told me that no one lived in Williamstown and they encouraged me not to live there and look what's happened there now. So don't depend on local knowledge and it's the same. The question kind of came up again when we talked about. One of the ladies was saying that she'd kind of been looking around Fern Tree Gully in Victoria, in Melbourne. Her husband had some trade experience and they wanted to renovate themselves, but from a price point of view, it was probably better to be regional. And her question was, where should you buy? Really? You're going to get the tools to be able to get into that in the future. But the reality is I don't think that the Melbourne market is going backwards. I think probably the union market right in the city is. But the Melbourne market last month, March 2014, was the greatest capital growth for any month in Australia in 18 years. Don't let that worry about pricing bubbles, etc. If you go to propertyobserver.com and check out the article they talk about and just Google 18% growth or 18 years growth. But the thing is that the affordability is the best it's been. The market's just really still responding. They've still got opportunity to grow, etc. So there is still opportunity. But what I would say to you is just be concerned. A lot of people want to invest around the corner because they know the area so well and you're not getting the diversification. We talked about that when we talked about cost of collateralization and being diversified when one market goes up and the other doesn't. But also there's still some real growth aspects. There's some infrastructure changes. We've seen what happened with Frankston and those areas where the roads went in. Melbourne, Sydney and Brisbane have all put out their long term plans of infrastructure and what's going to happen with demographics and population in the future, those kind of things that you want to be looking at. I know when they were putting in the dual highway over the Blue Mountains in Sydney, everyone seemed so surprised when the next town that got the highway went up in value. And the reality is you do the kind of dot map that we're talking about, you kind of look at the ripple effect. It all adds value. And I think sometimes when you're buying into state or you're buying in an area that you don't know, you've got a lot more clarity I think. What do you think, John?

Yep. It's all evidence based. You're not basing it on preconceptions of suburbs that, that you don't like or have grown up thinking you're a certain way.

Seeing the poor people live in Newtown and Paddington. I'm not going to live there. Gee. So you know, don't let people talk out of the Williamstowns of the world. You do your numbers and this is the great thing about the next couple modules is you do your numbers and the numbers talk for you.

Yeah.

Which kind of brings us to Aneesa wanted to know about the property clock and where we are and where to buy and what time is it. Yeah. And that was her question about furniture Galley as well. Is Melbourne gone? Should we go somewhere else and look, I really encourage you to go to her and Todd White who are valuers. They've got valuers, thousands of valuers out every month looking at property and they've probably got the most up to date market analysis. I believe they've got a property clock at the back. And to answer the question for who was it who was after commercial property? I think Lee wanted to know about commercial property as well. Not expert in commercial property but there is offices, there's retail, there's warehouses. They do a great analysis on commercial property as well. So Just be aware that advanced investors try to pick the market. I've always, when I had the money available, did the research to find the best opportunity, arguably the trident strategy. Two prongs for the strategies still work. The third in buying below the market is hard in a moving market that's moving up. But there's still opportunities to be had out there. I mean I bought a $425,000 value property for $100,000 less by having a motivated vendor and being in the right place and asking the right questions. So, you know, don't think that it's not possible. And we had a lot of questions around the maps and what size of map you should get. We'll put some of those up on renovator network melbmaps.com mapworks mapworks.com is it works with the Z. Mapworks.com is it, is it okay? It'll be on Renaman Network. Someone's already put it up there.

There's a few maps up there.

I saw on the Facebook page. Someone's already asked Ben from Western Australia where he got his Perth map. You can have a look at Ben and he's the size of his mat. That's kind of.

I've got a big laminated map that I got from the maps. I think that was mapworks actually. And I bought the translucent colored stickers that you can see the suburb names and everything under them and people write different things on the stickers. So you might actually write the capital growth or you might put predictive growth if you combine it with the Residex.

Report or median value.

Yep.

On the median because sometimes you'll find that you might have. Well, we'll see this next week. But you might have some real ripple effects pointing to an area. But the reason that area hasn't gone up is because the median value is 1.2 million or something silly. So yeah, MathWorks, this time last year they had never heard of us.

But loving us now. Yep.

I think we're the only people in the world who teach this technique. And boy, guys, it is so unbelievable. It's going to take you a few weeks to do. So don't give heart, you know, sit down, get in, do it by hand. You can get programs and probably do a Google map. But you, you might use the census map so you've got some information about where the owner occupiers live compared to the renters. You might use a council map for zoning.

Most of the time that's been done a few times and most of the times it's taken someone most of a week to work out how to do it. And I thought, well, you could do a dot map in about an hour.

And a half with a bottle of wine, two hours, a couple of glasses.

Well, yeah, and then you can sit back and look at it.

And yes, I know someone who put it in the back of the toilet.

Yep.

Don't say anything. So, you know, this is get intimate with your map, guys. That's all I'm going to say because it's going to start talking to you after a while. Squint a little if you're not seeing the numbers. But it's going to give you an opportunity to see where there is opportunity so you can target your suburbs. But that's all for next week.

Yep.

Module two, Emily had a really interesting question about strategy. She wanted to know, did one strategy buy, renovate, sell, buy, renovate, rent be better for a single income family? I kind of struggle with this. I don't see the difference. In theory, if you've got one person at home, they could be out researching the properties all the time or managing a renovation. But then again, you've got lower borrowing capacity and from a flipping point of view, you usually have to be. We interviewed John Edwards and he thought 600,000 was where you needed to be. So, you know, it's kind of, I don't think single income family. I would go one strategy over the other. It comes down to borrowing capacity, your time, your effort, your risk profile and what strategy is going to get you to your goals. And that's why module one's so important. Yes. Nodding away.

Yep. No, I was thinking, well, flipping is inherently a higher risk strategy. So I don't know, if you've got one income, does that mean you should be more?

Make sure your insurance is up for income protection, first of all?

Something like that.

Gosh, you know, I've spoken to two, three people in the last while that have fallen off ladders and completely lost their income, which is extraordinary. Two of them had income protection insurance. Amazing opportunity. So we then had Grant's question that kind of followed onto that, which was can you flip in today's market and make money? John?

Well, you had a couple of good examples of people doing units. We were talking about where it's possible. And generally speaking, the higher in the market you are, the more spread of values that you have there between the unrenovated and the renovated properties. So as a rule of thumb, structural renovations higher in the market work better for flipping than, let's say sub $400,000 renovations with a cosmetic strategy. And most of that comes down to what's the unrenovated house in the street worth compared to the renovated house on the street? Because you lose a lot in the transaction when you're flipping. So that takes a chunk out of your profit.

Capital gains. Yep.

And then you've got the. Yeah, the capital gains and we talked a bit about the trust and so on ways around that. So the. But yeah, as a rule you want to be disparity is really the oxygen of flipping because you haven't got the benefit of capital growth that you have with the buyer and Burton hole strategy.

And as I said, you know, I know a lady, I think she's like 11, in an inner suburb of Melbourne and she was buying smaller units. She was doing high end finishes and targeting single females and popping them out a couple a year and doing fantastic. Luckily making 30, 40 grand on each.

And being in that niche all the time, she would know her numbers back.

To front and know her tradies and know where to source the stuff. Having said that, you know, this is a hard luck story. Warning alert. A couple of years ago I was working with a client and it's going to go into a lot of detail here, but I'm going to share it with you anyhow. Working with a client and she did one renovation and it frustrated her. The trades kept taking off to do other jobs and delayed the job. So she reckoned if she could do two at once she could actually keep all the trades busy and have them on the job. And she wanted me to do the mortgage for her and I felt it was too risky with one income and blah blah, blah, blah blah. And I didn't do it. But she went ahead and did it anyhow and the idea was to flip it and she sent me the photos and I gotta tell you, this renovation, high end fixtures and fittings and she spent on a cosmetic renovation. I think she spent 15 to 20% of the value. So a lot higher than what we would normally say in that kind of beginning. Rule of thumb, 10% cosmetic looked fantastic. Couldn't sell them, couldn't hold them, couldn't sell them.

These are units or houses?

Units in Brisbane. Couldn't rent them either.

Really. Couldn't rent them.

No, it was just a horrible situation and you know, we did what we could to rescue it. But the reality is that flipping is my risk and doing multiples at a time is really, really high risk.

Some of the risk.

So yeah, she saw that. She saw the Risk of not of losing, you know, tradies and not having them being devoted to her. But yeah, risk reward, risk reward. Understand the risks, manage the risks, understand the numbers, you can do it and you can make money out of low.

End properties and you mitigate the risk by doing the research. So if you're not willing to do the legwork, then stay away from it altogether I reckon because you've really got to get in there and one, spend the time to find the right suburb. Once you've found the right suburb or three suburbs, get on the ground and build the relationships with the agents to try and get the off market stuff and yeah, know exactly where in that suburb, what side of the street's going to sell compared to the other side of the street or end of the street. All that kind of stuff that you really, really have to know back to front.

We'll go into a lot of detail with you and I'm sure people will want to interrogate your strategies in the future, John. But I mean you do targeted door drop, not door drops, letterbox drops to people, houses that you actually want, don't you? Yeah, in the suburb that you're targeting. So you know, we're talking down to understanding your number so well, you understand the house and the value of the house in the street that you want?

Yeah, yeah, we know the number basically the numbers and the numbers of the street or the numbers of the houses in certain streets where we know it'll work because we can, you know, know a box wall, whether it's a double story or single story box, work on the back of that house. You know from the Google maps, it.

Doesn'T matter if they don't want to sell. No, no, target and go, hey, we'll buy your house. They think everyone in the street's getting the letter. It's only one house.

Yeah, well the best thing, one of the Things in module 3 is when you come down to the demographics. So I mean that's really important about knowing if you're a flipping strategy, you're after homeowners, you can look at other things about income. We use income maps a lot. So you're looking at trying to find the little pockets of high income birds of a feather stick together, you know. So you're trying to find where because often what you'll find is it might be the same street on either side of a reserve or something like that. And the local little click says oh no, we don't live down that end, we all want to live here kind of thing. And Sometimes that comes out in the income maps.

Well, it just brings up something I want to share my learning for the week and something that's happened and I'll try to bring something new to the table each week. But here's my one for the week had a person buying a property with a 90% loan to value ratio, which means there's mortgage insurance involved with a lender that didn't have delegation, which means they have to go to the mortgage insurer. They didn't have the delegation to be able to approve things in house. Makes a big difference. But anyhow. And this guy finally found a property delighted with this property, Absolutely delighted with this property. And the valuation came back with. And they rate the risks of different things, market environment, you know, all these different things and six different things from one to A five and they marked environmental concerns a three. So the assessor jumped into the valuation and looked at the comments around it and they said 156 metres away there's a large substation for the area and said there is risk if the substation catches on fire. That fire could burn through the reserve to these people's houses. And it's unsightly even though it's over a ridge and you have to drive two kilometres from the house to actually access it via road. And unsightly can affect the resale value in the future. So the bank came back and said we will do this but we will do this. And this is actually the assessor saying we will do this but we will do it at an 80% loan devaluation due to the risk of resale value and the environmental risks involved. So just be aware if you are using mortgage insurance guys and you're getting a pre approval. And I had a client last year and she was a single mother doing it. Tough single income, four kids, one disabled, looking for a specific property in a specific area in a capital city. And we did a pre approval for her and got everything set up and she found this incredible property that had things to suit a disabled child. It was an amazing property. And we went to the lender and we were getting to the final point and they came back and said is 75 meters from high tensile wires. Now one of the mortgage insurers has a policy that says they will not mortgage insurer a property within 100 metres and the other mortgage insurer had 50 metres. And unfortunately we were the one with 100 metres because we didn't anticipate high tensile fire wires. So we're getting into some interesting stuff. Here. But we want to add some value to your decisions when you're looking at this properties down the track as well.

What are high tensile wise like power lines.

Power lines. So we went to another lender that would go within 50 meters and we're all good, got the loan, got the house and everyone's happy. So. Interesting days, John. Interesting days. Well, I think that kind of comes to the end of it. You're going to get a lot of emails from us and we're going to tag them as the ultimate guide to renovation. TK I always like to write TUGTA the ultimate guide to renovation. T U G T R the big T U G T R at the top. So in the subject line so you can kind of file them and use maybe rules in Outlook to put them into it box so you don't.

If you've got Apple mail, it's a smart mail.

Yeah. So we're going to send you some emails. We're going to send you emails next couple of weeks after you address so we can send you that trade card. So after the 30 day money back guarantee trade card will come out. We're sourcing that for you through a third party and they've gone and negotiated with a lot of the national providers around Australia that trade discounts and as long as we keep sending clients to these retail guys, they'll keep giving the discount. So there's some fantastic discounts on the trade. We're really, really proud of that. Yeah, great packages. What else can I tell you? Yes, we will be having this up in the future in the Q section so you'll see it. But for now it's in the bonus section so you'll listen to this later. Q and A section. If you have any further questions, don't hesitate. As John said, there'll be a phone in line that we'll release to you in the next couple of weeks. Get onto that Facebook group, guys. Even if you've got, you know, don't like Facebook, just jump in, get an alias, come join us, don't talk to anyone else and lose your life hanging out in Facebook. There's some amazing conversations going on there. Great value. We've got people who are valuers, we've got people who are serial renovators, we've got tradies, we've got, you name it. So you know, don't be afraid of sharing. You'll see in there the people sharing their numbers, the renovation they're sharing. I'm looking at this property. What's the. Your ideas about floor plans. You know, people even putting up their dot maps and saying these are suburbs I'm looking at their buying criteria could be completely different to yours. So they're not afraid of sharing that. And this is a safe place. You can ask questions. And if you, you know, we're going to have weekly calls for the next seven weeks at 12:30 on Thursdays we're going to have Q and A opportunities for you. Some lunchtime learning calls will be about an hour to an hour and a half. And yeah, don't be shy, ask your questions. If you can't make the call, send a question through. If you're struggling with the dot max, don't fear it does take a of couple, couple of weeks sometimes to get it right. And if you haven't even done module one yet and you're just listening to the call, that's just fine too. You might be not ready to act, but you're going to have access to this, the course going forward. So you're going to have this forever. So look, as I said, if there's anything that we actually disclose on the call that you don't want to disclose, which is kind of convenient tonight because we didn't actually record the calls with people's voices on it. Yeah, we've done a re recording now and repeated everything. So we really know this stuff.

Well.

Let us know because we can actually omit stuff from the recordings. We do want to get the calls up in the bonus sections within 24 hours. That might limit things a little bit. But be aware that we're running this course. The greater good for the entire group. We respect your privacy, so let us know after the webinar if you do have an issue and we'll get right on to are editing out your comments or what you think specifically is a bit of a worry. And as of midnight tonight, module two will be available midnight every Thursday night. So you'll get the next one. Module 2 is fantastic. It gets you down from that helps you narrow the wide list of suburbs down to three to five suburbs. And you know, we're going to take you on a bit of a detective journey to discover the best renovation suburbs that match your specific criteria. So it's a fantastic module. Can't wait to chat to you next week about it. Thank you to everyone who shared the questions and everything. Sorry for the bit of the hiccup in technology. My excitement got better of me and I forgot to hit record.

So we did get to all of them again though.

We got to every question it's only midnight. We can wait now after module two to be released. Okay, guys, all the best. Have a great week.

See ya.