How A 'Laid-Back' Property Investor Gets Up To $1,200 A Week Cashflow In Capital Cities

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1 How A 'Laid-Back' Property Investor Gets Up To $1,200 A Week Cashflow In Capital Cities

2 Disclaimer This information in this report has been prepared without taking account of your objectives, financial situation or needs. Before you act on this information you should consider the appropriateness of it in regard to your personal situation. You should get qualified independent financial advice before making any investment decisions. The information we provide ( the information ) is presented for illustrative and educational purposes only. It is not presented nor should it be treated as real estate advice, legal advice, investment advice, or tax advice. All investments involves risk and potential loss of money. Cashflow Research Group Pty Ltd trading as Hot Property News.com.au and their associated companies, researchers, authorised distributors and licensees, employees and speakers do not guarantee your past, present or future investment results whether based on this information or otherwise. Positive Cashflow Research Group trading as hot property news.com.au, and their affiliated companies disclaim all liability for your purchase decisions. You should do your own independent due diligence and seek the advice of qualified advisors before making any investment decision.

3 Who is James Dawson? James Dawson has been a professional property investor for over 35 years. He has been financially independent for more than two decades and has featured in Australian Financial Review. James currently lives in Byron Bay where he enjoys a consistent stream of passive income from his various properties. James's Home In Byron Bay For example, he is currently getting over $50,000 a year net positive cash flow from an investment in an inner suburb of Sydney. Even more amazing, James regularly 'tops up' his retirement nest egg using unique strategies that accelerate the capital growth of his properties significantly. For example, he is soon going to add up to $920,000 equity profit to a property he owns. This would be a retirement deal for many people. However, it is just one of James many investments. He will describe several of these investments as case studies in this report. 3

4 The tale of two farmers Imagine there are two farmers. They both have exactly the same amount of land. They live across the road from each other. They have the same soil and rainfall conditions. Yet, at the end of the year, when both farmers go to the market, one of them has twice as much produce as the other. That means he makes twice the money. This allows him to live a better life, treat his family, and still invest money into growing his farm even more. In this report, you will discover how to become the farmer with twice the yield. You will discover how to invest in the same suburb as another investor and get up to twice, even three times the cash flow yield. You do not have to worry about hot spots, and competition from other investors. You will discover how to create consistent stable cash flow in your neighbourhood, in your city, or even large towns across Australia while sleeping soundly at night. In fact, these properties can be as little as 10 minutes from where you live. You will discover how to invest in these properties for less than the price of a unit in many capital cities. That means it is low-money down. Sounds impossible, doesn t it? That is why I am going to prove everything with real life case studies. For example, I will tell you about a client who gets $359 a week net cash flow by investing in a city suburb that most property gurus would say to avoid. I will tell you about another student who started his cash flow system with just $35,000. I am even going to show you how to find investments like this in your neighbourhood too by the time you finish reading the report. 4

5 This report is perfect for you if you have equity or assets that you want to turn into income. You may have $200,000, $300,000 even a $1 million in equity, but you do not have any income coming in. It is also perfect for people who are sick of negative gearing and the lifestyle impacts of that approach. And it is fantastic for people who just want a set-and-forget way of property investing without the tenant hassles. A wise old man's amazing passive income secret My name is James Dawson. In 1982, I was a young real estate salesperson in Newcastle. I was doing pretty well. I became the youngest partner in an established respected real estate firm in 100 years. I was earning good money. I also had a few properties under my belt. I thought I had it made! Every morning, when I walked into the office bright and early, one of the old retiring partners was looking over a big leather bound ledger. One day I asked him what was in his ledger. He said, These are all my properties. I ve bought all these properties over the years and I m going to retire on this. He had 40 of them, 20 commercial and 20 houses and flats. 5

6 I said, What s the secret. I ve got these properties that I m paying for? He said, The secret is simple. All you have to do is buy a property that supports itself 100%, pays for everything, pays for the mortgage, and then pays you. Otherwise I just don t buy them. I thought Wow, why didn t I think of that? Life went on for a while, until one day I had a turning point. The employees in the firm were all older. I was busy and I asked one of the girls in the office if she would kindly get me a salad roll for lunch. She said, No, you re younger than me, you can go and get it yourself. It was one of those silly things, but it was a turning point. It really made it clear to me in an office environment you do not get to choose who you work with. You do not have freedom. You have to conform to the way that your boss insists. This incident made me realise that I would prefer to spend my days doing what I want. Within about six months, I decided to get out of that business and focus on property investing full time. 6

7 How I discovered my high net yield investing system My first high cashflow property in Newcastle A property investor friend of mine went to an auction and bought an old shop that was vacant. The property in question is an old butcher s shop in Carrington in Newcastle. He was flat out with his other properties and he said to me, Would you like to buy it? I gave him $33,000 for the property. I did not know anything about shops, so I spoke to my old partner in the business. He said, Just get a sign on the window. Give it a sweep out and find out what the rent is. I said, How do I do that? He said, Check on the rents in the other shops around the area. I did that, and within five weeks, I had signed a person up who made little fret work timber pieces for houses. He called his business Period Designs. That business was still around 20 years later. A month after that, I decided to get some finance on this property. I rang up the bank and they sent a valuer to meet me there. He said, You re getting the right rent for the area. The value is about $100,000. That was a 300% increase in what I paid for it. 7

8 I said, How is that so? He said, James, the value of these properties is all based on the rent. Sure, you might have bought it a little bit cheap, but essentially, you are getting the right rent and that is how it works out. It s all based on the numbers. I could not believe it. Because I was getting a higher rent, it automatically increased the value of the property. In fact, it multiplied the value by an astonishing 300%! That statement turned a light on for me. That is the moment I realised this was a better style of investing. Why this style of investing is better In Australia, many investors are willing to accept very low yields from property - as little as 4.7%. With my scientific property investing method, you do not have to chase high yields. You can find these properties in any town or city in Australia. Even more amazing, these properties can give you double or triple the returns that many investors lust after - without a lot of the emotional stress and sleepless nights that come from traditional investing strategies. Since buying my first property, I have created a simple checklist that anyone can use to create a passive income from these properties. I call this the Dawson Doorstep Dollars Positive Cash Flow Checklist. The checklist is in three parts. Here is an overview of each part. Part No. 1 - Invest in positive cashflow property When I buy a property, I want it to pay for itself. I want it to pay for its mortgage payments. I want it to pay for the outgoings, rates, and insurance. I want it to pay for maintenance, tax and then I want it to pay money into my bank account as well. 8

9 Many people in Australia make the mistake of focusing solely on capital growth. The truth is that investing success is more about cashflow. I speak to people all the time with 6 or 7 properties. It looks like they are doing well, but when you look at their debt-equity ratios, you realise they do not have a lot of money for all the work they put in to buying these properties. Even worse, often they struggle week to week because without cashflow to lubricate their portfolios property investing generally does not work. When you follow my system, as you increase cash flow, you will automatically get capital growth. I avoid negative gearing for a similar reason. It does not make sense to me to invest in properties where returns are subject to getting money back from the government at the end of the year. Part No. 2 - Invest in safe and predictable property. I got an today about Warren Buffett s tips for investing in property. His second tip says it has to be safe and predictable. I agree! What I have found in the last couple of years is that there is so much noise in the market. There are all these different methods of investing - USA properties, options, mining towns, buy off the plan there are so many different things you could do. Many of these strategies can involve a great deal of risk! I am not saying that any of them are bad things particularly, but I prefer buying cash flow positive property with minimum risk in capital cities and large regional centres. It is often easy to overlook the basics. All the wealthy investors I know just do the basic investing. Part No. 3 - Invest in property with golden-upside potential. When you invest in property, you want cashflow immediately. However, it is also a good idea to find properties where you can create equity quickly. Otherwise, you might have to wait ten or 15 years to see bonus profits. I will show you how to do that in this report. 9

10 Conventional Investing vs High-Net Yield System In a moment, I will show you real life case studies of this checklist in action, but first here is a basic example of how my system compares to conventional investing. Comparison Chart Conventional High Net Yield System Interest payments at 6% $30,000 $30,000 Returns 4% 7-12% Annual Income $20,000 $35,000 - $60,000 Annual Profit/Loss $10,000 LOSS $5,000 - $30,000 PROFIT How a first-time investor created a $1,436 a month passive income Mike is an investor on the Gold Coast. He had only just bought his first house. He had some equity. He was starting a family and he was looking for genuine positive cash flow income. He did not just want $20 a week cashflow. He wanted hundreds of dollars a week. Otherwise, he was not going to bother with the whole process of buying something. After searching for short time, Mike found two strata shops below a high-rise in Coolangatta on the Gold Coast. This property was on the market for about $380,000. Eventually, we negotiated that down to $345,000 using certain tactics I have learned over the years. That price is less than a one-bedroom unit in Sydney is. In fact, less than probably a one-bedroom unit even on the Gold Coast. Mike's Property In The Gold Coast 10

11 The property was a short drive from Mike s house. That gave him a lot of comfort. He could just get in his car, drive down, and have a look around. I always recommend looking for these properties close to your home. You can get your head around the market very quickly, rather than flying somewhere for a weekend and trying to work out what is going on. Of course, if you cannot find anything close to home, you can literally pick and choose from any populated area in Australia. The numbers on this deal are interesting. The total rent is $72,000. The outgoings for the two strata units are $33,000. His net rent is $39,000. I will explain later what net rent means in detail. Mike borrowed the whole lot, $345,000. He used the equity in his home as a deposit. The interest rate was at 6% so his repayments overall amount were $20,000 in round figures. His positive cash flow is $39,000 minus $20,000 = $19,000 a year. That is about $359 per week cashflow in their pocket. This was enough money to allow Mike's wife to quit her part-time job. You could imagine how much easier their lives were because Mike's wife was able to take care of their young family. This case study highlights several of the advantages of my style of investing. It really is easy to get a passive income in a short space of time. Mike s deal probably took just three months. Later I will show you a couple of my own deals, which have created as much as $70,000 a year positive cash flow. That is with a 100% financing over and above payments and outgoings. It is very easy to get started. My strategy uses very basic concepts. There are no tricky financial concepts. It is a great way to find high net yield properties in your local area. There is no need to fly to outback mining towns in search of passive income properties. These properties are very easy to find. You are probably sitting in some of them having coffees, or you are going to the hairdresser. They may have residential flats above, in which case you can get the best of both worlds. 11

12 Now, let us look at another real life example... The simple mistake that cost me over $10,000 (and how to avoid it) My Second Property This was my second commercial property. It was a three-storey building. It had two apartments above and it had the commercial space on the ground floor. When I bought this property, I made a simple, but costly mistake. I forgot to get a building report! Of course, the first day I went in to check it, I fell straight through the floor to the dirt below. That cost me about $10,000, which was a fair percentage of the purchase price at the time. I also learned another lesson from this property, which has put hundreds of thousands of dollars into my bank account over the years. I will describe this strategy in details later in the report. How to increase rent while keeping your tenants happy Here is a little trick that can quickly increase your property's cashflow and value. I discovered it while dealing with a tenant in my Kings Cross property. 12

13 This property had a café/bar downstairs and residential above. The person running a café said it was very hot. He said to me I d really like to put air conditioning into this building but I can t afford it. I said, Well how much is it going to cost? He said, It s going to cost about $9,000. My third property in Kings Cross I said, Okay well, what would you like me to do? He said, Will you consider paying for that? I went home and thought about it. I did the numbers on the back of an envelope. I was paying about 10% from my money at that time. I thought if I increased the rent by $112 a month, which worked out to be about 15%, that would cover the cost of the air conditioning. I rang my accountant up and he told me I could depreciate that air conditioner. That was great because he was paying for it anyway. There was a double benefit there. The next time I got the property valued the valuer told me, That increase in rent, which totalled $1,344 a year, added $13,440 value to the property because the value of these properties is directly related to the rental income." In the end, my tenant was happy. He did not have to pay cash out. I was happy because I was making more cash flow and the property value had gone up. It was a bit of a win-win because his business increased. He was able to open that restaurant in summer and fill it with people. No one was leaving because it was too hot. The first lesson I learned was to engage with the tenants. I discovered that if I keep them happy, their business would go well, I would do well too. The second lesson I learned is that when you invest in these properties, you are dealing with business-minded people. It makes it a lot easier to get the concepts of money across because they understand you are trying to make money too. 13

14 What is Net Rent? Before we continue, I want to explain why my property investing method is scientific. It is not about emotion. It is about looking at the numbers. This is different from residential investing where an area of style of property can go in and out of favour. You see, I base every decision on numbers with absolute ice water in my veins. The most important of these numbers is the Net Rent and Net Return. Net rent simple means the total income versus the outgoings. Net Rent = Income - Rates - Insurance - Strata Fees - Maintenance - Additional Costs To calculate the Net Return on a property, divide the net rent by the purchase price. Net Return =-Net Rent/Purchase Price The real estate agent will sometimes call the Net Return, the Cap Rate or the Net Yield Here is an example... Imagine you bought a property for $200,000. You are getting $20,000 net rent. That means you are getting a net return of 10%. That means it has a Cap Rate of 10% or a Net Yield of 10% This Net Return figure makes it very easy to find positive cashflow properties. For example, you can filter out the duds that you do not want to look at. If I saw something has a net yield of 6%, it is too low for me. You can away look at a property on a very holistic basic basis and say I am going to pay about 6% for my money. My net returns if I buy that property is 7.4% so that is going to be cash flow positive at 100% financed. Here is another example. This isn't a deal that would appeal to me, but it helps me illustrate my point. 14

15 If you paid the asking price for this property, you would need a loan of $1.5 million. The income based on that return is about $116,000. The repayments would be about $94,000, so that would have a surplus cash flow of $22,000 in the first year. The advantages of my numbers-based property investing system This style of investing offers a number of advantages compared to traditional investing including: It is often more affordable to get started. You need as little as one property to replace your income. There is very little competition. There is potentially less risk. It is based on numbers, not emotions. This type of investing is less complicated. Let us look at each of these advantages in detail... 15

16 This style of investing is often more affordable One of the biggest misconceptions people have about this style of investing is that it is for rich people only. This is simply untrue. Here is proof... Case Study - Cashflow in a capital Campbelltown Property One of my clients had very limited equity. He only had $30,000. After researching the market, we found a property in Campbelltown. They were asking $165,000. We used some of our special negotiating tactics and hammered it down to $145,000. This property was cashflow positive for him from Day 1 after all outgoings. That means it is putting money in his pocket every day. The other advantage of this property is that it is close to where he lives. Here are some more examples of great cashflow positive properties at low prices... Byron Bay CBD Property For $319,000 - Net Return 7.5% Melbourne Property For $125,000 - Net Return 8% 16

17 As you can see, these properties cost less than a unit in Sydney, yet there can potentially generate huge positive cashflow. Of course, there is nothing wrong with investing in units, but the truth is that many people choose units because that is all they think they can afford. If you are really on a budget, another great investment is a car space. It can cost as little as $55,000. It is concrete. You do not have to paint. You do not have to renovate. You do not have to do anything with it. You only need one property to replace your income With this style of property, you do not actually need many to make a living. In fact, I know people that just have one multi-tenanted property that costs about the same amount of money as a luxury unit in Sydney - under a million dollars. They have virtually retired from that property alone, once they pay down the debt. You do not need to have 40 houses. You can secure just one or two properties and live off that cashflow. Obviously, it depends on what sort of lifestyle you would like. That is why you should work backwards to see what income you need before you start investing. 17

18 There is not as much competition If you look at property magazine, you will see that 9 out of 10 people are trying to invest conventionally. They are buying off the plan, they are chasing hot spots, or they may be dabbling in options. That means there is a lot of competition. Personally, I would rather invest in property where there is little to no competition. Over the years, I have met many wealthy people. I have found that so many of these wealthy people seem to have these styles of properties. They always seem to have commercial or commercial mixed residential. However, often you will find they are very quiet about it. They just own these properties and they never say anything about them. They are never complaining. They do not have tenant dramas et cetera. There is less potential risk because you have long-term leases Many investors believe that when you get a higher return it is more risky. However, it does not have to be. You can reduce the risks associated with this type of property dramatically simply by paying close attention to the lease. You see, one of the biggest advantages of this type of investing is the lease agreement. With standard properties, the lease favours the tenant. In fact, I have had a residential tenant refuse to pay rent, and it would take 6 or 8 weeks to resolve the situation. With my style of investing, the lease actually favours the property owner. Everything is clearly set out in the document in an easy to understand way. Tenants will happily sign long-term leases sometimes of 20+ years. In addition, they will often have to maintain the property for you. 18

19 For example, I have a property tenanted by a dental surgery, which has been there for about 27 years. I have owned my Bondi building since 1998 and it has never had a vacancy. These properties can pay you an income for life. They are like the goose that laid the golden egg. They can pay your school fees, your car. Consistent cashflow - My dental surgery has zero vacancies for 27 years They are trouble free. In fact, I do not even think about half of them. Sometimes the property manager will ring me up about something, but it is so rare it is almost non-existent. Even more important, the tenant's livelihood is directly tied to your property. This slashes your risk of vacancies. A good example of this is cafes. On the news recently, they mentioned how well cafes are going because people are eating out more often in cafes rather than expensive restaurants. Café tenants often do beautiful fit outs for their cafes and spend a fortune. They are usually on a long-lease. Often, their whole income and livelihood for their family depends on these buildings. Commercial Property Tenants Are Often Deeply Invested In The Maintenance Of Your Property 19

20 That means they have a huge incentive to pay the rent on time and stay in that property. They cannot simply grab all that fit-out and take it down the road and start somewhere else. This type of investing is scientific Another huge advantage of this type of investing is that there is no emotion involved. It is very scientific investing. Which Property is Worth More? For example: Look at the two buildings above. You would think that the building on the left would be worth more. After all, it is a beautiful building. However, unbelievably, the building on the right brings in just as much cashflow and is about the same value. That is because with this type of investing the only thing that counts is whether the numbers add up. It is all based on the lease. The secret to winning with this type of investing is to buy the right property in the right area and double-check your numbers. The property does not have to be pretty to generate a great income. With the standard way of investing, one home unit could be getting $800 a week, and the identical one the next day could be getting $500 a week. To me, that is stressful. If my property is getting $300 a week more, it is because that property is worth the extra money to the tenant. 20

21 As a side note, I do not believe in over charging rents by the way. It is very easy to charge a fair rent because you know what it should be in the local area very quickly. It has to be a fair rent because you do not want your tenant going broke. The more your tenant's business prospers, the better it is for you. Moreover, you can create huge capital growth in a short space of time. Later, I will show you real life examples of how easy it is to increase the cash flow, and increase the value of the property. I recently created about $920,000 in equity with a very simple process. This type of investing is less complicated it s simple One of the strangest things about this sort of investing is that, despite what people think, it is not complicated. In fact, it is much less complicated than conventional investing. This type of investing is very straightforward. You can sign the lease and then forget about it for five years. If there is some little issue, you refer to the lease and that is it. How to increase the value of a property by up to $925,000 and boost the cashflow by up to $44,000 For the next case study, I want to tell you about my Bondi property. This particular goose has been laying golden eggs since The building has a café and an apartment above. The café is one of those grungy ones, not really to my style, but they are great tenants. Bondi property When I bought this property back in 1998, the apartment above was only getting $200 a week. I renovated it and increased the rent to about $800 a week. 21

22 Hot Tip: Always review your properties every year even if you have a granny flat out in the back yard. Property is a big investment, so why not look after it. Back in 2004, the council, through my architect, said that was all I could do. I did not have enough room to do anything else. There were all these rules. A couple of years ago, I reviewed that property. Anyway, there is an old car park at the back of my Bondi Building. A year ago, I was talking to my architect mate, and he said to me, I think you could probably do something else there. I think they changed the rules. I spent about $8,000 getting some plans done. We went back to council. Lo and behold, I got a three-storey apartment approved over the car park in the back yard. That immediately gave me an equity increase of about $650,000 -$700,000. Since then I have been playing around with that plan. I discovered that once you get one thing approved, you could go and get other things approved. Now we have modified that plan to three apartments, one on top of each other. They are onebedroom apartments, which suits the market in the area. The other day, I got some figures from an agent. The end value increase according to this agent was about $1.6 million. The cost to build those three apartments will be about $700,000. That gives me a net equity increase of about $925,000, which is fantastic. If I just want to build those apartments and rent them, I will be getting a total rent of about $86,000 a year. Of course, I am going to borrow the whole lot - $700,000 so I have to make payments on that. The positive cash flow would be $86,000 less the $42,000 repayments. That is $44,000 per annum extra cash flow. 22

23 Inside the Bondi property As an exit strategy, I could strata the building up into five different pieces and sell three of them to pay off the debt. Then I have two positive cashflow buildings debt-free. This is like a supercharged retirement fund. How to get positive cashflow from Day 1 Gold Coast Property - $26,107 Positive Cashflow From Day 1 The next case study is a client who bought on the Gold Coast. This client received positive cash flow from day one. The property is the Fishermen s Cove restaurant and it is a strata title investment. 23

24 It is under a multi storey building with 100 plus units. It is in a strong location. The asking price was $790,000. The property had been on the market for a little while because it was a little bit expensive. We took quite a time to negotiate the price. We got it down to $717,000. With the purchase costs, the total cost ended up being $747,000. The property was cashflow positive by $26,107 in the first year. The $300,000 lesson I learned from my second property $300,000 backyard? Recently, I was looking at my first commercial property in Carrington, Newcastle on Google Earth. That was the butcher's shop. I noticed it still has the same vacant back yard. It is still sitting there empty. I thought, Wow, look at that. I missed that opportunity all those years ago. I wonder whether that person has even realised that he has this back yard. He probably bought it free in fact, because he would have bought that shop at the front just based on the rental income. That is a great opportunity to add value. That yard could be worth $300,000 if he develops it. There are golden opportunities like this everywhere, but people overlook them. Always be aware that when you are buying a building, there may be hidden upsides like a free back yard in an inner city suburb. 24

25 How to retire comfortably from one investment my $71,000 a year cashflow investment If you want a simple cashflow investment without the extra strategies, then this next example will interest you. I invested in a building in Mackay, Queensland. This building is very beautiful, but when I bought it, it only had one tenant. I still had to lease the two remaining spaces. As soon as I exchanged the contract, I was on the phone to the agents. I said, I want you to approach some national tenants. It is a prominent building. I want to get some national tenants on the ground floor. Within a month, they were able to secure a café chain called Jamaica Blue. I put them into the front ground floor section. The business that went in the upstairs area of the building was a consultancy, and finally Kevin s restaurant was the existing property. Looking at how this building has performed since will you a direct example of why I invest in these properties. 25

26 I bought that property in 2005 for $825,000. Back in 2005, $825,000 would have bought a nice two or three bedroom unit in Potts Points in Sydney. Of course, the unit certainly would not be getting the return that I was going to get from this Mackay building. Including purchase costs, the total cost was $915,000. The rent back in 2005 was $110,000. The outgoings then were about $20,000, which means the net rent I was getting was $90,000. That was showing a healthy return at about 9.8%. This was about average for the area so I was reasonably happy. Once again, I borrowed the whole amount - $915,000, and I had equity in other property. I was paying 9% on my money at the time so my repayments were about $82,000. Of course, I get the net rent of $90,000, so it was about $7,000 - $8,000 positive cash flow in the first year. It is not a huge amount of money but I was confident the rents would nibble up. 26

27 Eventually, the café business sold and I was then able to renegotiate the rent slightly higher. Then the restaurant business sold and the same thing I was able to renegotiate. The interest rates had also come down by then. They would come down to about 6.5%, which meant my repayments had gone down to $59, Fast-forward to 2012, my rent had gone up to $158,000. My outgoings had also gone up a little, to $28,000. My net rent was now $130,000 and after my payments of $59,000, I was getting a healthy $71,000 positive cash flow per annum. Even if you are still paying 9% on your money of $82,000, you can see that you are still in a healthy positive cash flow position on that property. That just goes to show how you can set and forget if you were not interested in pursuing any sort of upsides etc. These properties can be hands free. I do not manage my properties. I have agents to manage them. That means I just have to monitor the statements that come in. 27

28 Your Next Best Step As you can see... This strategy is for you if you re committed to creating a sizeable income, and you are prepared to take action. This strategy is you if you want less emotion involved in your investing. I am 56 years old and I as I have gone through my investment life I have realised that I do not want all the hustle and bustle and the ups and downs. I just want to see the rent cheques come in. I love property, and obviously love talking about property. I like doing deals, but I want to be able to analyse them without chasing hotspots. I just want to base it on the numbers. Warren Buffett once said, Never invest with emotion. I follow Warren Buffett s little homespun strategies quite a bit, and I think they are a great way to invest. Finally, it is for someone that has a goal to do it. If you have read this far, then you want to discover more about this amazing strategy. The longer you wait to get positive cash flow the less money you are going to earn. In fact, you are actually burning money by not doing it, particularly with low interest rates today. When I started investing in property, I was paying 17%. Today, I have just locked in some loans at 4.99%. 28

29 Here Is The Exciting News As you can see, this is a great system for creating passive income through property, and creating set and forget cashflow with safety You have seen in this report: How this system allows me to create up to $1,000 net income a week from properties in capital suburbs $920,000 equity profit on development projects And, how this system helps my students like Mike create $359 a week and more from the one deal. So as red-blooded investor, you re probably thinking you d love to see how you could apply this system to your situation. Here is the good news I ve allocated a limited number of strategy sessions for readers of this report. One of my team of commercial property coaches will personally show you how to apply this strategy to your situation. They will look at dangers and threats to your current financial - and how to eliminate or reduce them. They will look at current opportunities where are the golden cashflow opportunities to take advantage of in terms of creating your passive retirement income They will analyse your strengths what existing strengths do you have that we can capitalise on to create your passive income retirement income. 29

30 Who is This Strategy Session For? This session is for you if you want to retire soon and you need to turn your existing savings/equity etc. into a consistent income stream that supports your lifestyle, very comfortably. It is also for you if you have a negatively geared portfolio and you want more cashflow coming in, to ease the financial pressures. In addition, it is for you if would love a set and forget passive income to support you lifestyle, and enjoy more holidays etc. In your strategy session, our team member will analyse your current cashflow situation and together you ll discuss ways to turn that into a monthly passive income of $3,000 $5,000 even $10,000 a month and more over the next 1-5 years. Obviously, how quickly it will be will depend on where you are starting from. And it s really not for everyone. The sort of people that we can help fit these 4 criteria 1. You or your partner has a regular income stream i.e. pay as you go job, or small business with 2 years of tax returns, or strong investment income. If you do not have these things, it s hard to get loans to get started. 2. At least $200,000 in investable cash/equity super etc. Obviously, the more you have the cashflow you can create however that is the minimum starting point. 3. An eagerness to get moving in creating positive cashflow over the next 6 months. 4. You also need to be able to make investment choices - if a partner or husband or wife hamstrings your investing then this is not for you either. If you fit, these four criteria, then we can help you get you creating consistent cashflow surprisingly quickly. 30

31 No this is not about selling you property. You will not be able to buy any commercial property from me because I don t sell commercial property! However, we can help you get started in selecting safe, predictable cashflow investments. And, as an added bonus, if my coach speaks to you and finds that you re suitably qualified, they might recommend you for my application-only program, where I ll personally mentor you. Now, a warning though. We have distributed this report to hundreds of people. That means if you do NOT act quickly, you may miss this rare opportunity. Claim Your Free Commercial Cashflow Consult Yes, I want to discover how to create an income of $115,000+ a year through set-and-forget commercial property, over the next 5 years. Yes, I want to discover how to turn my existing asset base into regular monthly set and forget cashflow. Yes, I want to discover how to identify the type of properties and areas I should target for maximum cashflow yields and capital growth potential. I also understand that these consults are in high demand, and you may refuse my application for this FREE consult if you have already filled all the available slots. Claim your FREE Strategy Session here hotpropertynews.com.au/complimentarypassiveincome 31

32 FAQ How do you buffer for longer vacancies on commercial property? I have never had significant issues with vacancies because I have put a lot of research into selecting the right properties. For example, think of your own area. Sure, there are probably vacant properties, but there are also places that you have never seen vacant. Bustling cafes, packed restaurants or busy service stations. It comes down to choosing the right property in the first place. If you choose the right property, you should not have any trouble in re-leasing that property. It is very important to choose the right area. For example, I would not be buying something if it were in a street that was already full of vacant properties. You need to choose the places that are bustling and have not been vacant for the last 10 years. They are likely not going to be vacant for the next 10 years as well. How good is the capital growth on commercial? If you are focusing on the cash flow, if you are buying a property at a 10% net return and that rent creeps up every year with inflation, you are going to get capital growth naturally. That is because with commercial investing the price is indexed to the rent. However, if you are engaging one of my super charged strategies, you will be getting massive capital growth faster. Why do investors sell these properties when they have a good tenant with great positive cash flow? It is really up to the individual. I have always been a bit of a trader. I have bought and sold probably 100 properties, and it just depends what you are doing. 32

33 For example, I have just sold a couple of properties because of my age. I want to re-buy in my selfmanaged super fund. Things like divorce, death, etc. will cause people to sell. Moreover, with my style of properties, some people say, right, I ve developed that, I m going to sell part of it as strata titled or I m going to sell the whole lot in individual lots and then move on to a small shopping centre investment. Here is another example. John Cornell owned the Beach Hotel in Byron for many years. He just sold it for $65 million. That building was always the golden goose for him. However, he has come to a stage in his life where he wants to move on and do other things. How do I make sure I am not buying a lemon from another investor? Due diligence is so important. My whole philosophy is you just do not want to buy a dud. You need to take your time, and really make sure you know exactly what you are doing before you buy something. That is why I give all my students a checklist to research their deals before they buy anything. Obviously there are risks involved but if you follow my process the risks are minimal. Do you have to pay the higher commercial interest rates for the sorts of properties we have discussed? Yes, traditionally they are a bit higher. On average, if people negotiate hard with the banks the interest rates are around 6.5%. Some people are even getting it at 5.8%. It really is just about doing your homework before you launch into getting a property. I am not a financier, and I suggest everyone just has to shop around and you certainly do that before you go to start negotiating on a property. 33

34 What is a typical Loan-To-Valuation Ratio for commercial property? On average, I find it is about 65-80%. Obviously, you do need a level of equity or cash to buy these properties. Typically, with conventional properties now, I know people can borrow 90%, but the standard really seems to be about 80%. Otherwise, you have mortgage insurance and all these sort of things. However, before we continue, let me make an important point. When you use equity on a residential property to fund a commercial property, you are borrowing money at residential property rates, but getting commercial returns. That means you could be borrowing money for as little as 5% and getting an 8% return. Do you agree that it is not the cash flow that will make you wealthy, but the capital growth? Capital growth is important, and that is why I learnt to focus on those super charged strategies. However, to me, cash flow is king really, when you are investing. That is because in commercial property investing cashflow drives capital growth. If the rent goes up, then the property value increases too. In addition, retiring early would be hard to do with capital growth alone, simply because you would be relying on just taking money out of your equity. It would not be a magic pudding that keeps on renewing itself like cash flow. Where do you reckon the highest yield in commercial properties is located? Traditionally you are going to get high yields in strong regional areas. For example, areas like Tamworth or Inverell show up to 12% net on the asking price. When you go to the bank with these sorts of properties, they do not actually look at your financial position so much. Instead, they look at the lease of the property. They say okay you have a five plus five lease. The leased is to Kentucky Fried Chicken. That is a great, multi-national company. That sounds great! 34

35 Obviously, they want to know what you are doing yourself, but they do look at the lease. I will just say it again... One way to get the great capital growth is to buy multi-strategy properties like the one I was looking at in Inverell. It had shops underneath and flats above. They were rundown flats. They are not applying much value to them. They based the value of the property value on the rental income from the shops down below I figured you could strata them off and sell them, pay the loan down dramatically on the shops. Then you are getting massive cash flow. You can sit there and just wait for those properties to go for years and years. How much of the shop fit-out is the responsibility of the owner? One of the great things with these styles of properties is that absolutely everything is negotiable. Generally, the fit-out is the 100% responsibility of the tenant. That is a good thing. If one of my café owners spends $250,000 on a fit-out. They have a lot of money invested in that fit-out. That means they are invested in this property. Everything is in the lease. It is very clear. It is very business-like, and everyone gets legal advice. It is not something where you just go into a real estate agent, sign a lease, and walk out. I really like that, because it means that you can continue the negotiation right until the last day before signing the lease. Something might come up and you go, well hang on a minute, I forgot about the air conditioning; you have to maintain that, for example. Anything is negotiable in these styles of properties. 35

36 Claim Your Free Commercial Cashflow Consult Yes, I want to discover how to create an income of $115,000+ a year through set-and-forget commercial property, over the next 5 years. Yes, I want to discover how to turn my existing asset base into regular monthly set and forget cashflow. Yes, I want to discover how to identify the type of properties and areas I should target for maximum cashflow yields and capital growth potential. I also understand that these consults are in high demand, and you may refuse my application for this FREE consult if you have already filled all the available slots. Claim your FREE Strategy Session here hotpropertynews.com.au/complimentarypassiveincome