Property Millionaire

Disclaimer

All the information, techniques, skills and concepts contained within this publication are of the nature of general comment only and are not in any way recommended as individual advice. The intent is to offer a variety of information to provide a wider range of choices now and in the future, recognising that we all have widely diverse circumstances and viewpoints. Should any reader choose to make use of the information contained herein, this is their decision, and the contributors (and their companies), authors and publishers do not assume any responsibilities whatsoever under any condition or circumstances. It is recommended that the reader obtain their own independent advice.

First Edition 2010

Copyright © 2010 by The Global Millionaire Group Pty Ltd

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission from the publisher.

National Library of Australia

Cataloguing-in-Publication entry:

Jones, Fiona 1970

Property Millionaire:

How ordinary Aussies are building millions through property /Fiona Jones and Nhan Nguyen 1st ed.

ISBN 978-0-9808340-0-0 (pbk.)

Jones, Fiona The Millionaire Books series.

Real Estate Investment - Australia

Finance, Personal - Australia.

Other Authors: Nguyen, Nhan 1980

332.63240994

Published by Source Publishing and Production Group

PO Box 119 Mt Macedon, Victoria 3441 Australia

For Further information:

Email: publish@SourcePublishingGroup.com

Phone: +613 5426 3426

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This ebook is licensed for your personal enjoyment only. This ebook may not be re-sold or given away to other people. If you would like to share this book with another person, please purchase an additional copy for each person you share it with. If you're reading this book and did not purchase it, or it was not purchased for your use only, then you should return to Smashwords.com and purchase your own copy. Thank you for respecting the hard work of this author.

Testimonials

‘As a financial planner I am often recommending wealth creation strategies to clients. I believe education in the asset class they are going to be investing in is important. This book is a practical guide to the various property strategies available and it’s written by people who walk their talk, and who are interested in inspiring others to create wealth through property.’

Quang Tran, Managing Partner, Wealth in Life Financial Services

www.wealthinlife.com.au

‘As a property investor and owner of a property management company, I find it inspiring to work with people who are investing in property with the intention of building a portfolio. Creating wealth through property all starts with education and this book is a great place to begin learning and developing skills to take action on your journey. It gives you the opportunity to learn from people who have achieved what you want to achieve.’

Michelle Wilde, Director, Stella Property Group

www.stellaproperty.com.au

‘I am just starting out in property and am looking to build a property portfolio. This book has given me an amazing insight into the multiple strategies that can be used to create money in property and achieve financial freedom. It is great to read of the wins, and some of the mistakes that Australia’s best have made so I can avoid them. Totally inspiring!’

Josh Lee, Law Student

‘This book is the best investment you can make as a ticket into the world of property. The information is priceless and will open your mind to some unique strategies that developers use to make great deals happen. Learn from these mentors and educate yourself. Find what strategy works for you and then take ACTION.’

Jason Darmanin, Seascape. Design. Construction

www.seascapeconstructions.com.au

Dedication

We dedicate this book to those who have

inspired us on our incredible journey and

all of those who had the courage to follow

their dreams and not look back.

We aim to inspire millions to make millions.

Fiona Jones and Nhan Nguyen

Acknowledgements

Although our names appear on the cover, this book has many authors. To the Property Millionaire contributors, you are truly inspiring. This book would not have been possible if you had not followed your dreams. Thank you for sharing your secrets, experience and personal journey. For this we are forever grateful. Your contribution is beyond words. We appreciate the trust you have given to us in sharing your unique success story so that together we can inspire others. Working with each of you has been an absolute privilege and so much fun!

To the brilliant team at Source Publishing and Production Group, thank you for your support of The Millionaire Book Series. Denise you are a diamond.

Fiona and Nhan

To my children, Riley and Abbie, who were sent to teach me, of that I am sure, I write to leave this legacy to you, my angels.

To my husband and best friend, who has been by my side every step of the way for half our lives, thank you for your continued support and unconditional love.

To my sister and best friend Rebecca, I love and admire you. This series is possible because of you. You are the brightest star.

To my amazing business partners Michael and Susan, who inspire me every day, I am so grateful our paths have crossed. Your support and belief in me is something I will treasure forever. You are amazing human beings.

To Nhan, I have enjoyed every bit of co-authoring this book with you. Thank you for sharing the author’s journey.

To my fabulous team at The Millionaire Group, you are all incredible.

Fiona

Acknowledgements

To my wife Olivia and my daughter Mia, you inspire me to be the best I can be to inspire others to be the best they can be. You make life precious.

To my parents, who taught me everything they knew about being hardworking and ambitious, I am where I am today because of your belief in my abilities.

To my many teachers, who believed in me enough to push me to reach for the stars and take calculated risks, you have taught me life is too short – make things happen!

Nhan

Table of Contents

DISCLAIMER

Testimonials

Dedication

Acknowledgements

Acknowledgements

Foreword

Chapter 1

Steve McKnight—Mr Positive Cashflow

Chapter 2

Jo Chivers—Property is Blooming

Chapter 3

Nhan Nguyen—The No Money Down Man

Chapter 4

Libby Lombardo—Leverage Property

Chapter 5

Paul Derry—The Real Estate Alchemist

Chapter 6

Martienne Freeth—Accounting Millions

Chapter 7

Jennie Brown—Patty Cash Millionaire

Chapter 8

Carly Crutchfield—Developing Millions

Chapter 9

Jason Marianoff—Infinite Returns

Chapter 10

Phil Anderson—Lunch Money Millionaire

Chapter 11

Sasha deBretton—Million Dollar Makeovers

Chapter 12

Bob Trask—Building Communities

Chapter 13

Jason Whitton—Positive Real Estate

Chapter 14

Stephen Tolle & Cherie Barber—King and Queen of Renos

Chapter 15

Fiona Herbert—Rock Solid Millionaire

Chapter 16

Peter Spencer—Pay it Forward with Brad Dolahenty & Mark Usher

Bonus Resource

Deb Lindner—Home Staging

Final Word

About the Millionai

Resource Directory

FREE Millionaire Coach

Foreword

By Eynas Brodie

More millionaires create wealth through property than any other means. In fact the number one industry for millionaires and billionaires in Australia is property.

Being the editor of Australian Property Investor magazine puts me in a privileged position to see month after month the success ordinary

Australians are achieving through property. These are the people who take the time to educate themselves by reading the magazine and books, attending seminars and then taking action.

Broadly speaking, there are three main stages investors need to go through on the road to financial freedom. The first one is the ‘accumulation stage’, where we build our portfolio by selecting good investment properties to hold in our portfolio.

Next comes the ‘consolidation stage’, where we allow time to work its magic on increasing our equity while we make a concerted effort to pay down our debts so that our portfolios become less reliant on our income. Then we reach the’ liquidation stage’ where we cash in a part of our portfolio to reduce the loans across the remaining portfolio to produce passive income. There are countless ways aside from this method to achieve financial independence.

This book tells the stories of some amazing entrepreneurs and the various property strategies they use to create wealth. They have shared their secrets to becoming a millionaire through property.

In one book, you have access to some amazing minds, techniques and strategies that have escalated ordinary Aussies to be among a small group of Australians who enjoy wealth from property. This is a brilliant resource for anyone looking to achieve financial freedom through property.

Eynas Brodie

Editor, Australian Property Investor Magazine

www.apimagazine.com.au

"All that we are is the result

of what we have thought.

The mind is everything.

What we think, we become."

Buddha

Chapter 1

Steve McKnight

Born in Melbourne in 1972, Steve is the founder of the investor website PropertyInvesting.com, which boasts more than 70,000 members. Steve is the author of Australia’s number one bestselling property book, From 0 To 130 Properties In 3.5 Years, which has sold over 160,000 copies. An accomplished investor, Steve has purchased hundreds of properties, and is currently involved in property developments totalling more than $12 million.

Steve has appeared on television on numerous occasions, including the Sky Business Channel for Your Money Your Call, and has been positively featured on Today Tonight and A Current Affair. He is an invited international speaker on the topic of property investing, and a passionate philanthropist supporting underprivileged children through his foundation, The Bradley McKnight Foundation.

While impressive, Steve’s achievements do not define his success; rather, they are outcomes of it. He says his crowning achievement is the fruit of financial freedom, which he defines as being empowered to live the lifestyle you want without being told when and how hard you have to work.

It hasn’t all been beer and skittles, though. The distress of being a social misfit at school, and later having an unsettled career as an accountant, pushed Steve to the cusp of an early mid-life crisis. In 1999

Steve walked away from his career in order to avoid an impending breakdown.

In May of that year, Steve attended a Kiyosaki seminar in Sydney, which gave him the inspiration to purchase his first investment property, and he began buying positive cash flow properties in regional areas. Within five years, Steve’s property portfolio was making enough cash that he, and his wife, never had to work again. Steve has since gone on to transact over 260 property purchases.

Today, at age 37, Steve says his three main focuses are his faith (Steve is a born again Christian), his family, and the future of investors who, like Steve, want to use real estate to achieve financial freedom.

Steve lives in Melbourne with his wife and two children.

What beliefs about money did you grow up with?

Dad worked hard. Monday through Friday he left early in the mornings and was home after supper, and he was rostered on every second Saturday morning.

It would be impossible to grow up watching your father work this hard and not appreciate a strong work ethic.

Today, it’s easy to look at our parents and grandparents and wonder why they weren’t more ambitious or bigger risk takers. This comparison is unfair, though, as coming out of the Great Depression, having a secure job was something to be thankful for.

However, seeing how hard Dad worked, and how little money he had at the end of the day, made me want something different.

It was a close thing, though, because the system nearly had me. I had borrowed money to buy a car, and this meant that I needed a job to make the repayments. Then, once I had to work, my job became gradually less enjoyable.

Did you play Monopoly as a child?

I definitely played Monopoly as a child – in fact, I can remember playing at my grandmother’s house as a young boy because her set had wooden pieces and the money was in pounds!

Unlike others, though, I wasn’t super-competitive, possibly because I’m the youngest of three and my older siblings would have been a lot smarter and more cunning.

Funnily enough, I think playing Monopoly well and being a successful property investor have a lot in common, so much so that I have created an investing system called Monopoly Theory. Here’s how it works...

If you play Monopoly according to the rules, then the first time around the board you’re not allowed to buy any property. Rather, it’s a race to see who can collect their $200 and pass GO first.

It is not until the second and subsequent times around the game board that you can buy the unsold properties you land on.

Now, there is always one unlucky sort who lands on the Go to jail square first time around the board, and then she or he is behind for the rest of the game. And that’s just the way life is.

You may even know people (hopefully not you) who are just unlucky, and while they sit in jail they will start getting angry with everyone because they did not get a chance to land on the prized property. Eventually, they will kick the board over and walk off in a huff.

To recap – first time around, it is all about who can get past GO the quickest. In real life, passing the GO square represents earning an income, from which you can pay lifestyle expenses and buy property. If you don’t pass GO, then you will soon run out of money and will not be able to advance your status in the game.

Once you are allowed to buy property on the second trip around the board, do you really care what property square you land on? No. Whatever you land on you buy, because if you don’t someone else will. In Monopoly, each property square is different. So it is in real life. Most investors buy properties they think are good assets, but put little forethought into their investing.

From the third time around the board onwards, players then need to become more focused on what property squares they want to land on. Instead of just landing on anything, you try to land on something specific in order to consolidate your existing property portfolio by buying more properties from the same colour set. Doing so increases the rent and also the development potential of your property.

The equivalent in real life is looking for a specific asset, rather than just anything that you hope will go up in value.

The next major shift in Monopoly occurs once all the properties have been bought, at which time the players must start wheeling and dealing. For instance, I will swap you this property and some cash, if you give me that property.

What players are trying to do is dispose of property that does not hold much future value in return for properties that will improve their chances of winning the game.

The application of this principle to actual investing is accepting that sometimes you need to sell or trade a good property in order to create an even stronger portfolio.

Once someone owns a set of property (that is, all the properties of the same colour), he or she is allowed to develop the properties in order to increase the rental return. This introduces the notion of value-adding using strategies such as renovating, sub-dividing and developing.

In the first instance, this involves buying/building four green houses, and then ultimately bulldozing them down to build one red hotel. That is, you begin owning residential property, but end up owning higher yielding commercial property.

A dollar of commercial property is worth more than a dollar of residential property. Why? Because in commercial property:

• The outgoings are paid by the tenant (rather than the landlord)

• The length of the lease is usually three or five years (rather than one year as in residential property)

• There are automatic rent reviews and CPI adjustments; whereas trying to get the rent up in residential property can be problematic

• The quality of the tenant is different because you are not dealing with someone’s home, so there is often less emotion and less hassle.

In summary, playing Monopoly is a lot like real life investing because:

1. You have to be active (i.e. move around the board) to get paid 2. You invest your income into property and hope to earn rent 3. If you own a set, you have scope to add extra income and capital appreciation through value-adding 4. The best form of income for retirement is commercial property.

It may sound simplistic, but when someone asks me what I do, I sometimes tell them I play Monopoly in real life. Astonished, they reply, What?! You get paid to be a professional Monopoly player? No, I say, I invest in property much like in the game of Monopoly!

What is your property business, and what services does it offer?

I’m a huge believer in the power of education, and so, having been able to achieve considerable success from my own investing, I’m passionate about empowering and equipping other investors.

That’s why I’ve been writing a free newsletter for nearly a decade now, and why www.PropertyInvesting.com – a website that I co-founded – is seen as an industry leader for helping investors who want to achieve financial freedom through real estate investing.

Can your clients get involved in property with you?

If you give a man a fish you feed him for a day, but if you teach a man to fish you allow him to independently feed himself for life. I teach how to fish, and so I do not take students as investing partners; I maintain a strict boundary as an educator to keep my objectivity and independence.

What property strategies have you used to build your property portfolio?

Oh golly! I’m not sure there’s something I haven’t done!

In the early years, when David Bradley was my business partner and we had very little capital to invest, we became vendor finance specialists, where we would purchase properties in regional areas for $50,000 and then onsell them for $65,000.

This strategy worked because:

a) We made $15,000 on the purchase to sale price differential b) We acted like a bank to finance the purchaser and so made a profit on the interest rate we charged versus what we paid our financiers.

This got us going, but after a while we moved on to focus on buying and holding positive cash flow properties on a normal buy and hold/ rental basis.

Today, I am involved in a variety of projects, domestically and offshore, both personally and as part of a small private syndicate.

What do you believe was your biggest sacrifice in getting your first property?

Aside from walking away from a career as a chartered accountant in public practice, the hardest sacrifice I made was when I began and had to compromise on my quality of life in order to save as much capital as possible to invest in property.

My wife and I had chosen to rent rather than own a home, and I used to live on a small allowance my wife gave me from her salary, as every cent made in our chartered accounting business was funnelled into buying deals.

A formula that I often teach is: Sacrifice = Cost + Delayed Gratification. This means investors need to know that success is only possible if you make the required sacrifices – and this means paying the cost of spending time and money on your investing, and also choosing to delay gratification until a later time.

I am yet to meet any self-made millionaire who has not had to learn and apply this formula.

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Sweat plus sacrifice equals success.

Charles O. Finley

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What was your first property deal ever?

Having heard about positive cash flow properties (where the cash received was higher than all the cash outgoings), Dave and I made a number of unsuccessful trips to Ballarat looking for a deal where the numbers would work.

Things were again looking grim on another trip as we headed into our final appointment for the day with Michael Golding – a real estate agent who we’d later affectionately call Micky G.

Michael is a smart agent. I’m not sure whether he’d ever admit it, but I’m certain he used a trick right out of the agents’ How To Sell Property manual the first time he met us. The trick is simple: show the purchaser through a few houses which you know are not suitable, and then, like magic, present the most appealing house as the final property on the inspection list.

It was late afternoon when Mick drove us into West Wendouree – the area where the waiter of the cafe that we’d eaten breakfast in on our first trip had warned us to stay away from. It’s a rough suburb, he’d said, and judging by the look of some of the houses and a few of the people walking the streets, that was no exaggeration!

There were several upcoming auctions of Ministry of Housing properties to be held by Michael’s agency, and he had the keys to show us through many of the houses. We began by looking through some properties in Violet Grove, a particularly rough part of West Wendouree that was apparently dubbed Violent Grove – perhaps a fair title judging by the disaster of the first house we inspected.

Micky G. simply opened the door and said, I’ll let you boys wander through this one by yourself – just watch out for holes in the floorboards.

Most ex-commission properties have a similar layout. Built after the end of World War II, they are constructed offsite and trucked in as two rectangular halves, and then joined together. There’s not a lot of architectural finesse, but they’re solid homes that are built to last.

Anyway, the ex-commission house that we looked through made the unit with the spray painted homicide body on the floor (see anecdote below) look like a palace. There was thick, black graffiti on the walls, the entire kitchen was burnt out, and where the stove once stood there were blackened walls and small clumps of charcoal – evidence of a small fire close to where the gas pipe came up to service the stove. As Dave and I walked around the house, we noted that many floorboards were missing and any chattels of worth had been either vandalised or ripped out. Most of the walls had several holes where someone had punched into them, and there was the pungent smell of stale urine emanating from the half-intact carpet.

In all respects, this house was a disgrace, but Micky G. was optimistically cheerful, winking at me while he told Dave that the property was a renovator’s delight if ever he’d seen one.

Our prospects were looking doubtful as the sun started to set on another day in Ballarat. We had been through three more houses, and there was only one more property that Michael had us down to inspect– another ex-commission house in Ballarat West. Our prospects weren’t looking good if the hovels we’d inspected were any indication of what was to come.

As we drove to our final inspection Mick said, This one’s different to the others we’ve just been through. It’s been privately owned for several years and is in good condition.

In the fading light, Micky G., Dave and I walked up and knocked on the front door. Despite the generally positive appearance, I left my clipboard and evaluation form in the car, having long since abandoned the idea of buying a property in this area.

If the exterior of the property was well kept, then the interior was immaculate, with a real homely feel about it. While I raced back to the car to get my clipboard, Dave started to quiz Mick about the house.

It turned out the owners, who were watching television as we completed our inspection, were a retired couple who needed to sell due to poor health. Interestingly, the property had been previously sold twice before (for $54,000 and $52,000), however both times the sale had fallen over because the purchasers couldn’t secure finance. With the owners now becoming more determined to sell, they had dropped the asking price to offers above $50,000.

As I completed my due diligence template, it was clear that the property didn’t need any money spent on it to make it appealing to a future tenant. Dave asked Michael to estimate how much it would rent for, and he replied, At least $110 per week.

Doing some quick calculations in our heads, Dave and I knew that, finally, we’d found the sort of property we were looking for. We thanked the owners for allowing us to trounce through their home, before walking out the door and through the front gate with Micky G. in step behind us.

Well boys, Mick said, What do you think? Is this the sort of thing you’re after?

As the last rays of afternoon sun touched the nature strip, Dave and I requested a few minutes to talk it over in private. We both quickly agreed that this property was exactly the sort of property we wanted, but how much should we offer? Without any science or method, we just pulled a number out of the air. Returning to Mick, who had walked a dozen or so paces further down the nature strip, I said, We’d like to submit an offer of $40,000.

Michael smiled as he replied that he’d submit the offer immediately, although he wasn’t sure whether or not it would be accepted since it was a little on the low side. My heart was thump-thump-thumping as Dave and I waited by the car while Micky G. disappeared inside to put our offer to the owners.

Dave and I used the time while Mick was inside to chat about what we’d do if our offer was rejected. We concluded that we were happy to go a few thousand higher, but we agreed to wait and see what the agent came back with before upping our offer.

Micky G. returned a few minutes later. They won’t go below $48k guys, he countered with a concerned look on his face. We were now at the final stages of negotiating. Dave and I again moved away for a few moments to confirm our next step. When we rejoined Mick on the nature strip, this time Dave (bad cop) spoke. All right. Last offer: We’ll meet you half way at $44,000.

Although this was less than the figure that Mick had said was the minimum the vendors would accept, he went back inside with a hopeful look upon his face. After what seemed an eternity, but was in fact about five minutes, Mick came back outside and said, It’s a deal.

Even if you struggle with numbers, it would be wise to spend a minute or two becoming familiar with Table X and Table Y. I’ve included the extra detail so you can see the sorts of additional costs you’ll pay, as well as how I crunch the numbers to calculate the return.

We also had to contribute a further $713.80 in mortgage application, legal and registration costs, together with another $4,400 as a deposit since we were only borrowing 80% of the purchase price. Our cash- on-cash return was:

How did you get your next property and go on to build a portfolio?

Although we bought this house as a buy and hold, we heard about the concept of vendor financing from a Canadian investor called Chuck, and decided to try the strategy to increase our cash flow returns.

Luckily, we found someone who wanted to buy the property from us and was happy to accept our finance terms since he could not obtain traditional finance from a bank.

The table below provides a summary of how the vendor finance deal worked out. As you can see, in the first year we increased our cash flow from $20.06 per week ($1,043 ÷ 52) to $164.11 per week ($234.92

– $70.81). Our return fell in the second year to $54.38 per week ($125.19 – $70.81), but this was still a lot better than the $20.06 that we received from the property as a rental.

If someone wanted to get started in property today, what is the best advice you could give them?

I believe that value-added strategies such as renovating, subdividing, developing, property options, etc., are the best way to build capital, but that ultimately investors need to convert their capital into cash flow by investing in commercial property.

Given property prices have increased so much over the past ten years, the real difficulty is finding the deposit money. Practically, then, it’s reasonable to expect that you might have to team up with others to pool your money and therefore share your profits.

That’s okay, because it is better to get 50% of something than 100%

of nothing.

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Go confidently in the direction of your dreams! Live the life you’ve imagined.Henry David Thoreau

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How do you find great deals in property?

The best opportunities arise when you can find and exploit market inefficiencies.

Market inefficiencies exist where one party lacks the knowledge, skill, timing or financial resources of the other, and therefore has to accept a reduced price for the sake of completing the transaction.

It may not seem like it, but the property market is becoming more efficient. The way property is advertised for sale is an example that comes to mind.

Before the Internet existed, those looking to buy property turned to the classified ads in newspapers to see what was for sale. This made it hard for interstate and overseas buyers to compete since they couldn’t easily access those newspapers. Even locals had to spend hours searching and sorting through the ads for properties that were relevant.

Today, anyone around the globe with Internet access can quickly and easily find a variety of websites with properties for sale, and can then complete a search that filters the available properties in seconds.

The increased access to information means that there is greater competition and therefore less inefficiency than in years past.

However, while there have been improvements, the property market is still a fundamentally inefficient market, primarily because buying and selling real estate is done by people (rather than machines), and people are irrational and emotional.

Furthermore, unlike the stock market where investors are not in control of the day-to-day activities of the entities they invest in, a property investor can use his or her superior skill to solve a problem in a certain way that allows him or her to access a profit others cannot.

For example, those who are skilled in renovating property can create a profit others can’t by using their superior knowledge of how to complete the project in a cost effective way, and can therefore create a profit independently to what happens to prices in the wider property market.

Mind you, not all properties are inefficient investments. Investors that prefer set and forget or low maintenance options must wait for general market growth, which, like the stock market, is beyond an investor’s ability to influence.

The principle here is that inefficient markets (like the property market in certain situations) provide the best opportunities to earn above average profits, provided investors have the skill to find, exploit and capitalise on those inefficiencies.

This does not mean that you need to shaft someone – far from it. Often a person has superior education, nous or skill that can allow them to solve a problem in a much better way than someone else, but still create a win-win outcome for all parties concerned.

What recommendations would you make to someone else who wants to get into property?

Although you might plan to become a property tycoon, it’s smart to approach your goal with a one-deal-at-a-time mindset.

In fact, this is quite encouraging because you’re only one deal away from financial independence on the basis that once you find your niche deal, you can then do it again, and again, and again.

What is the most important thing you have learnt about successful property deals?

Definitely that success comes from doing things differently. Because the property market evolves, you can’t apply what I did wholis bolis and get started, because real estate prices are so much higher.

However, what remains the same is that there are people and property problems out there to solve, and if you can do it in a cost effective way then you will be handsomely rewarded.

Remember this: As long as people live in houses, there is always the opportunity to make a profit by investing in real estate.

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There are many paths to the top of the mountain, but the view is always the same. Chinese Proverb

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In your opinion, is it better to buy apartments or houses as property investments?

I think if you can afford it, houses