Experienced Investors

With most people struggling to find a balance between their hectic professional and family lives, it’s no wonder that only a small fraction of the Australian population end up investing in residential property.

The latest figures from the Australian Taxation Office (ATO) show that out of those who do invest, 72.8 per cent end up with only one investment property. This is where Investors Prime Real Estate Property can help. Historical evidence proves that Australia’s $5.4 trillion dollar residential property market has outperformed all other asset classes over the last 100 years, based on average annual compounded growth. Yet despite the extraordinary performance of the Australian residential property market, very few Australians have managed to grow substantial property portfolios.

The latest figures from the Australian Taxation Office (ATO) show that 72.8 per cent of Australian property investors own just 1 investment property, 18% of Australian property investors own exactly 2 investment properties, and less than 1 per cent of property investors in Australia own 6 investment properties or more…. So only 1 per cent of the entire pool of property investors own more than 6 investment properties… It seems crazy? Doesn’t it?

Many sophisticated investors and experts believe the missing ingredient that separates the 1 per cent from the rest is financial literacy. The problem is that no one is really teaching the topic of financial literacy specifically when it comes to residential property investing, and more specifically, no one is teaching the specific methods that are used by sophisticated property investors to build and structure their multi-million dollar property portfolios… Until now… So let me ask you something…

THE PROPERTY WEALTH FORMULA

When it comes to building large property portfolios and attaining financial independence, the following is a powerful formula that when understood and implemented, has the potential to drastically transform an individual’s prosperity to unimaginable heights.

[Investor Psychology (80%) + Specialized Knowledge (20%)] = Mastermind Group

Let’s examine the first component of the formula, Investor Psychology, which is perhaps the most important component of the Wealth Formula. The term Investor Psychology will mean different things to different people, especially when it comes to the world of property investing, given that there are so many approaches and strategies that exist in this realm of investing.

For example, there are buy and hold investors buying growth properties, investors interested in cash flow positive properties, investors who renovate properties and manufacture capital growth, investors who secure properties via option contracts and on-sell them, and investors who buy property for the purpose of re-development, subdivisions, re-zoning…the list is endless.

Ultimately, there are some commonalities linking all these investors, and their approach to property investing, and it has more to do with what belief systems they adhere to and how they operate. As Wallace D Wattles put it in his famous book ‘The Science of Getting Rich’, the rich get rich by;

“Doing things in a certain way” not by doing “certain things”.

In other words, it’s not what you do, it’s the way that you do it, and that’s what gets results. That is, these individuals understand a few basic principles about successful investing.

Primarily, they understand that in order to become wealthy, they must be comfortable with acquiring debt. Specifically, they focus all their efforts on accumulating growth assets, using good debts, or tax deductible debts, while avoiding taking on bad debts or consumer credit, which has no tax advantages to secure assets that devalue over time.

Furthermore, investors with the right Investor Psychology tend to use other people’s money, or OPM. For example, they use the maximum Loan to Value Ratio, say 95% and are comfortable paying Lenders Mortgage Insurance (LMI) as they know that the most important aspect of investing is in assessing the Return on Equity (ROE) not Return on Asset (ROA).

They also do not own any assets in their own name, that is, they use Trusts and Corporate Trustees to Control Assets rather than to Own Assets. This is a huge distinction that is incongruent with what the average Australian is conditioned to believe about property acquisition. Finally, investors with the right Investor Psychology invest in their own personal development and network with like-minded individuals, who support their investing endeavors.

They understand that the only risk in investing is them, not the market, and that the market, whether it’s the property market or stock market, is simply a vehicle that transfers wealth from the uneducated to the educated. And it is by being educated that they gain Specialized Knowledge about investing that is the second component of the Wealth Formula.

They also understand that time is the most precious commodity, and they know that investing in property is simply buying time in a market that has a proven history of growth with certain properties.

The Specialized Knowledge section of the Wealth Formula refers to the actual strategies which will allow one to secure properties, or build wealth through property. More specifically, it refers to the investor’s financial literacy and depth of knowledge of their chosen area of property investing. Whether it’s property options, property development, subdivisions, buy and hold, flipping or renovations, the ultimate success will lie in the investor’s grasp of the technical aspects of their strategy, together with their due-diligence or feasibility studies leading up to the deal. 

Specialized knowledge takes into consideration such things as cash-flow analysis, what kind of loan to choose (full doc, low doc), which lenders to approach, who the purchasing entity of the asset is, what kind of trust to use (discretionary, fixed unit, hybrid), depreciation schedules, negative/positive gearing etc. It is of great import that the investor becomes aware with the language and function of all of the aspects of their investment strategy.

An example of using Specialized Knowledge is that most informed investors tend to use an Optimized Loan Structure, which is one that allows the property investor to have maximum flexibility and control over every single property that they control or own, either via direct ownership or via a trust/company structure.

So, each property is set up as a Stand Alone facility, that is, only one loan is taken against one property, and hence none of the properties are cross collateralized, all consisting of a variable true Line of Credit, with no mandatory repayments, and a self-capitalizing component built in with the loan, preferably with separate lenders. To add to this structure, the Line of Credit facility (LOC) will have an offset facility attached to it, allowing the investor, and their partner to directly credit their salaries and rental incomes into their LOC, which in turn offsets the amount of interest that they pay on their Primary Place of Residence (PPR) if they have one.

Their Specialized Knowledge is key to their ability to choose the most advantageous banking product, thus propelling their success forward. However, beyond having an intimate knowledge of all aspects of their chosen investment strategy and its components, the individual is unable to implement his or her design without assistance from other specialists; this is undertaken by The Mastermind Team.

To the Power of THE MASTERMIND TEAM

Behind every successful property investor or self-made millionaire there is a team of experts that has been that person’s catalyst for success. Put simply, all the psychology, and specialized knowledge in the world will not translate to actual results. Other specialists are needed to bring the investor’s plan to fruition. That is, one needs a solicitor to settle the property, a real estate agent to sell the property, a mortgage broker to submit the loan to the bank…and so on. These specialists form the individual’s Mastermind Team.

Most successful property investors are themselves not experts in every single field of property investing. Rather, they become generalists, relying on their Mastermind Team of Experts,and they leverage from their expertise and knowledge. Such a team, may include, but is not limited to the following individuals:

1. A Property Solicitor,
2. A Mortgage Broker or Banker,
3. A Property Accountant,
4. A Quantity Surveyor,
5. A Property Valuer,
6. A Property Manager,
7. An Insurance Broker or Financial Planner,
8. A Property Mentor.

The key to your success is to develop your level of Specialized Knowledge to such an extent, that you can:

1. Prequalify and shortlist your key Mastermind Team of industry experts;
2. Coordinate them in a manner that will enable them to implement the necessary steps and actions that will eventually lead to your desired outcome.

The difficulty with accurately identifying and pre-qualifying the relevant experts which will ultimately form part of your Mastermind Team lies with the Investor’s level of Specialized Knowledge in that particular field, and their ability to ask the right questions in order to pre-qualify and shortlist them. Specifically, your accountant should be very familiar with setting up various types of trusts, (Hybrid, Unit, Family, etc.) and have firsthand experience with property settlements utilizing those structures, not to mention lending.

Your mortgage broker or banker should also be comfortable with setting up loans via trusts and company trustees, and understand the various credit policy restrictions that apply to buying properties via these.

Your solicitor should specialize in Property Law in your particular state, and be well versed in the latest legislation, sale of land act, etc. Ideally, your Solicitor, Mortgage Broker, and specifically Accountant should all specialize in Property Law and they should be positioned as niche operators in that industry, resulting in the majority of their client base being property focused or working in property related industries.

To illustrate this example, a successful investor would have in his or her team, a Property Accountant, a Solicitor specialized only in Property Law and a Mortgage Broker who only looks after investors. The importance of the Mastermind Team in the Wealth Formula cannot be underestimated; this is literally the key to your success. Sadly, so many Australians are being given very average, to bad, advice by accountants, financial planners and bank managers, and hence have average results, or worse, have lost, or are currently losing, substantial amounts of money both in their super funds and in personal wealth.

The problem, in virtually all cases, is that the client fails to correctly identify and assess their consultant’s credentials and accurately assess their ability to give them the correct advice and guidance. The credentials have nothing to do with the consultant’s formal qualifications; they are a given, based on current legislation in financial planning, mortgage broking and banking. The lacking credentials that are essentially missing in all cases are that the financial planner, accountant, and mortgage brokers are themselves not wealthy individuals, rather, they are selling their time, advice and services, or receiving a commission for the client taking up a recommended product. The most obvious commonality between all successful clients is that their consultants are themselves investors and wealthy individuals in their own right.

The following are two excellent pre-qualifying questions to approach prospective Mastermind Team members with:

‘How many investment properties do you personally own or control?’ And, ‘How much money have you personally made from this recommendation?’

If they don’t have a significant property portfolio themselves, then walk away! The company’s brand, the company’s reputation, time in the industry and letters after your consultant’s name are all virtually irrelevant – all that matters is their bank account and real results. Harsh, but true.

In summary, assembling your Mastermind Team or group of experts will take a long time, due to the scarcity of consultants in the various industries who not only hold the correct formal qualifications, e.g. Advanced Diploma of Financial Services (Financial Planning), or being a Charted Practicing Accountant, but also have a PHD in results.

The key in finding them lies in your ability to access other successful investors, industry networks, and getting referrals from industry leaders. If you do assemble a Mastermind Team of experts who are themselves success stories, your wealth will skyrocket exponentially. Hence, the formula for Wealth is Investor’s Psychology, multiplied by Specialized Knowledge, to the power of (Your) Mastermind Team.

Click HERE To book your complementary 60 minute property strategy session with a Property Strategist at Investors Prime Real Estate (Valued at $297).

Real Estate Investing Fast-Track Weekend (2 Day Live Workshop)

The Live Real Estate Investing Fast-Track Weekend is a 2 Day interactive event that is designed to teach you the ‘Blue-Print’ of how to build and structure a multi-million-dollar property portfolio from scratch that has the potential to replace your income.

This includes a full bus tour, the Due-Diligence and Research Field Trip, putting all your knowledge into real-world action while looking over real life property expert’s shoulder. Consisting of 2 days, over 14 hours of practical ‘How To’ content is delivered by some of Australia’s foremost Real Estate experts and professionals, including Konrad Bobilak and Cameron Fisher just to name a few.

On the 1st Day you’ll discover advanced property investing insights so you’ll have specialised knowledge, and confidence knowing how to quickly grow your property portfolio.

On the 2nd Day, you’ll do what thousands of other investors would only dream! You’ll be 1 of only 40 others on a luxury bus tour, looking over the shoulder of one of Australia’s best Property educators for this exclusive In-the-trenches property due-diligence and research field trip!