Did you miss out on your place at our recent Renovations and Development Workshop or is it something you would be interested in hearing more about in the future?
2019 is my fifth year of attending and I know I get something new out of it every year.
So, I thought I would take the opportunity to let you in on some of the secrets that wealthy use to grow their asset base faster, by adding value through renovations and developments.
If you were coming along to leave your day job in a weeks’ time to make millions from flipping or developing, you would have left disappointed.
There were no false promises or prophecies here, just real-world advice.
Here are some of my observations from the weekend.
The best take home message here, relates to mindset and creating wealth vs cash flow.
Unfortunately, this is usually far from the truth.
I often talk to people who want to turn to renovating and flipping property to create cash flow so they can quit their job.
Even if they do manage a tidy profit, they often underestimate additional costs that come after all the hard work is finished;
- Selling Costs
- Sales Agent Commission
- Capital Gains Taxes
That profit can go from a lot to a little very quickly.
But there is a better way…
BRRR – No that is not the chilly Melbourne Weather, as Michael Yardney explains;
BUY – RENOVATE – RENT OUT – REFINANCE – REPEAT
Rather than selling, you should rent the property out, refinance to avoid the additional costs, take the additional equity and repeat the process, building wealth not cash flow.
2. Ownership Structure
Arguably one of the most important sessions and so critical you get this right to start with.
Before moving forward, take a step back to speak to a professional about what it is you are trying to achieve and what name you should be buying in to achieve this outcome.
It could be too late once you find the perfect property and any contract or entity changes may result in additional fees or even paying additional Stamp Duty.
Additionally, even more important when considering a Development and / or a joint venture with a partner
Ken Raiss explains some of the basics;
3. Property Development
If I had a dollar for every time someone told me they wanted to become a Property Developer, I would be a rich man.
While profit and return are a very important piece of the puzzle, when you are looking to build wealth, there are a number of other important considerations.
By selling the properties at the end you may turn a tidy profit, but by the time you remove Capital Gains Taxes and Agents’ commissions, you are not left with anywhere near what you could have.
Then you must pay commissions and stamp duty all over again when you decide to re-enter the market.
This is the reason many attempt but fail at being a full time property developer.
As Michael explains below, the wealthy do things differently.
Post development, the wealthy hold onto their assets.
They now how what is known as an ideal investment – a high growth, high yielding property with a huge amount of depreciation and tax benefits.
Then, rather than selling and losing valuable dollars, they simply refinance and repeat the process again.
Michael states several times that this workshop is a Real-World workshop, not a get rich quick scheme as many others promote.
You will not be able to quit your job tomorrow to flip houses or become a full-time property developer… today.
But it is practical and realistic advice that will help you create and generate wealth faster so that you can… tomorrow.
Before you take the plunge, ensure you have the right entity and that the name or trust you are buying in will suit what you are trying to achieve.
At the end, rather than selling and losing large amounts of money to commissions and taxes, consider renting out, refinancing and repeating the process.
That is what the wealthy do and that is the message I take home every year.
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