All Forum Posts by: David Nolan

@James S. Hi James. All property has a value. It all depends on the individual deal you are considering. Some deals however are more valuable than others. Just do your homework and determine what it is that these types of properties can earn for you. If it is viable then buy, if not move on.

Good luck with your investing!

@John Anderson it appears John that you are being given some sound advice here but the bigger question I would ask is why did you not seek professional advice before you bought the property? If you had sought out professional investment advice in regards to the effects of taxation on your investment from a suitably qualified CPA then you would probably not be having this problem.

I hope other investors who read this thread appreciate the complexity the taxation implications can be on an investment and seek independent advice before purchasing/investing. Saving a few dollars by not seeking advice before investing can prove to cost lots more when things are not done correctly.

Good luck with your project and happy investing!

@Simon Baker Hi Simon. I would be happy to talk with you when I get home. I am in the states at present.

Cheers

@Derek Caffe The first question you should be asking is where in the current property cycle is the market that you are considering buying into? Is it falling, stagnant, rising or at the peak? Each of these cycles will throw up different current prices. A rising market, which is what you appear to be describing, is one where prices are rising and as such comps become outdated due to the demand in the market. What sold last month will be lower priced than what is selling today. In a falling market the opposite will occur. What sold last month will have sold for more than what is selling today. This will also make the comps ineffective because you may think you are buying below market when in fact the market is falling.

Making buying decisions should not be done on cash flow alone. You would do well to invest where values are clearly about to or have started to rise. Rising values equates to rising rental returns and increased equity, at least on paper. This then translates into even more benefits of reduced risk and potential cash out to invest in even more property.

My experience is that investing in evolving markets is a good way to go no matter what level of investment you plan to make, so take the time to understand the market you are investing in. Pure cash flow plays in flat or falling markets is one sure way to increase your risk and to lose the real opportunity of having your money work for you. Which after all is the key point to remember. Is my money doing the best job it can do to add to my wealth?

To answer your question more simply. If prices are rising you have no choice but to pay over comps. The real questions are. Is it going to be worth the risk and is it the best use of your money and resources?

There is also one more point I would like to cover. Using comps in any market that are too old is very dangerous. Markets move all the time and the reason valuers use comps within the last 6 months is, that is as far back as they believe relevant to the current market, and even that can be too old.

Good luck on your investment journey!

Is there a better place on earth?

Some of the neighbours...

@Joe Tran Hi Joe

One of the most active sites in China, that actually is hosted in Hong Kong is called Juwai.

https://list.juwai.com/?gclid=CJ-xsOnqwMgCFYySvQod...

Here you can post ads and have them translated and even have the responses translated for you if needed.

I have a number of Chinese investor friends and one thing I would suggest to anyone wanting to deal with Chinese investors is to make an effort to understand the cultural differences in how they do business. It is not like selling to an American or an Australian. 

They may have lots of money to invest but relationships and trust are paramount. I made three individual visits to China before I got my first deal across the line. Trust building takes time.

Juwai also host trade fares on a  regular basis where you can go and introduce yourself to local agents and investors. Could be worth the effort if you are confident in your deals.

Good luck with your endeavours and happy investing!

@Adam Bartomeo Hi Adam

Your experience with Real Estate Agents and car sales people is viewed through your individual and unique perspective on life. From your life experiences, knowledge and beliefs. Your unique set of highest life priorities. Likewise, the sales people you encounter act based on their unique set of highest life priorities and experiences. Every person on the planet lives this way irrespective of religious beliefs or doctrines. The challenge in life is to accept that everyone has a different set of highest life priorities, of individual values based on their life. What we don't know when we deal with people, especially for the first time, is what their priorities and needs are.

We should not judge the actions of others by our set of values. Why? Because every person on the planet lives by their own set of values and will do whatever is right for them at the time. Me included! It is not a question of ethics and morals, these are merely constructs created by one form of society that will be different in another form of society. The key is to understand that WE ALL live by our own set of highest life priorities and simply accepting that makes my life easier.

When people make decisions in life they do so based on their current situation and the likely consequences as they affect their highest life priorities. If my highest life priority is my family and they are starving would I become a thief to feed them? If my income was threatened and it meant I could not keep my most valuable assets would I lie to protect them? If my health was my highest life priority and I was diagnosed with a serious illness would I take drugs? If my religious beliefs were my highest life priority and they were challenged would I go to war to protect them? Would I do any or all of these things? Absolutely. Why? Not because I am unethical or untrustworthy, or immoral. Because I am a human being and we ALL live by our own unique set of highest life priorities, ALL of the time.

Are 99.9% of all real estate agents and cars sales people unethical or dishonest? I doubt it, but they are all human, of that I am positive.

@Nicholas B. Hi Nicholas

I appreciate you may have got the answer you were looking for which is great. In regards to why people take negative cash flow properties and hold for the long term. In many cases the investor would be looking for some form of increase in value over time that is greater than the increase in the cost of living. However, there is one other very important fact to consider and one that might help you find a happy medium of how many properties to buy with your resources and that is the proposed investment's Internal Rate of Return (IRR).

Assume you have three possible scenarios and you want to know which is the best one to invest in. By calculating the Internal Rate of Return (IRR) on each investment you will see the different IRR's that the series of cash flows produce. Investors would normally invest in the investment that produces the greatest IRR. Your accountant should be able to help you produce an IRR for each scenario you are considering if you give them the cash flows and assumptions that you are working on. For example what do you think the rate of inflation or cost of living is likely to be, what will your annual rental increases be, what do you think the capital expenditures will be and when do you think you might make them? You also need to let the accountant know how much equity you are investing.

By doing these types of calculations you will be able to identify if paying off the mortgage sooner rather than later on any individual investment makes the most sense. It is not a guessing game, it is more of making educated assumptions and adjusting your strategy to suit the prevailing market conditions.

There is more to this property investing business than meets the eye at first and obtaining a good understanding of investment fundamentals first, before investing in anything, is of vital importance. So, I would suggest most humbly to seek professional advice before acting. Your accountant should be able to help you make sense of this. If not, then seek out a local accountant who understands property investing to help you make these important decisions.

In property investing you make money when you buy and that means having a clear understanding of how your property is going to increase your wealth, not decrease it.

Good luck on your journey and happy investing!

@John Horner It may have come from his credit department. The individual small bank you mention may be over exposed to too many highly geared SFH's in your area and the credit department are nervous and looking to spread their credit risk across multiple types of investment property.

Perhaps you could ask your banker why he thinks this way. Is it his personal view or those of his credit managers?

@Brendan Reilly Hi and welcome to BP. It appears to me that you would be well advised to learn more about property investing before making any decisions. In fact I would suggest learning more about wealth creation and money management in general. The very experienced Mr @Account Closed said ..."Bigger down payments leave less for investing and reserves." which is a fundamental piece of good advice. Your apparent lack of this understanding suggests more learning would be your best course of action before investing. Your post here is a good start. Perhaps look to invest with others in a JV first and learn the ropes, so to speak.

Creating wealth is not just about choosing which property, or properties to buy. So become a student of wealth creation first. It will only be of benefit.

Good luck with your investing and enjoy the journey!