The Expert Opinion – Should You Listen?

An expert is someone who knows a lot about the past
– Tom Hopkins

Property investing seems to be in a bit of a sweet spot all over the country right now. You know that property is on the move when you see the mass proliferation of self-styled real estate experts and seminar speakers, all come from seemingly nowhere, many of whom are promising to make sure that you are a millionaire by this time next week, if only you will follow their secret formula. Some of them are in their early twenties, having bought a couple of properties in the latest cycle and are now experts. I have read several email blurbs and advertisements in recent weeks promising me these amazing riches, just like 723 other clients who are on their path to fabulous wealth.

And then you have the media commentators – most of these people are famous for making outrageous claims, analysing statistics, tearing down someone else in the marketplace, or for controversial opinions. They are paid to do this. Few of these people are wealthy investors out there at the coal face, actually doing what they are writing about.

Never listen to someone who has an opinion that isn’t backed by action.

And then you have the naysayers – the prophets of doom who predict the popping of the property bubble and slashing of property prices or the stock market – a drop of 30, 40, 50 or even 60%. There is one particularly (in)famous US economist, who I won’t name because naming him will just sell more of his naysaying books, who has for several decades predicted everything from the Dow Jones stock index dropping by over half to 6000 in 2014, Australia and the US property market to halve. He also predicted that in 2013 the Dow Jones would drop by half. In 2006 he predicted the Dow Jones would reach 40,000 in 2007, before tapering off around 2010 – this man has been so spectacularly wrong so many times, yet the media eats it up when he writes of doom and gloom – bad news sells. And he sells thousands more books.

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The Magic Bank Account

Imagine that you had won the following prize in a contest – a magic bank account. Each morning your generous bank would deposit $86,400 into your personal account, provided you adhere to the following competition rules:

1. Everything that you didn’t spend during each day would be taken from you.
2. You can’t transfer money into another account – you can only spend it.
3. Each day, the magic bank account is refilled with another $86,400 for spending.
4. The bank can revoke the prize and end the game without warning by simply closing the account.
5. If that happens, you can never win another prize – that’s it, game over.

What would you do?

You could buy anything and everything you wanted right? Not only for yourself, but for all the people you love and care for. Even for people you don’t know, because you couldn’t possibly spend it all on yourself….could you?

You would try to spend every dollar, and use it all, because you knew it would be replenished the next morning, right?

Confession time – no bank is ever going to play a game with you like that. But you know, you are in this game right now…..and it is real!

Each of us is already a winner of the prize. We just can’t seem to see it.

That prize….. is time.

1. Each day you receive 86,400 seconds as a life gift.
2. When you go to sleep at night, any remaining time for that day is gone.
3. What you haven’t used up that day is forever lost.
4. Yesterday is forever gone.
5. Each morning the account is refilled, but the your account can be terminated at any time, without any prior warning…..

What will you do with your 86,400 seconds?

Those seconds are worth so much more than the same amount in dollars. Think about it and remember to enjoy every second of your life, because time races by so much quicker than you think. Make every moment count. Start now, don’t wait, not even a minute.

A last thought for you – Seize the day, then relax the grip a little, and enjoy it…..

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Taking Charge Of Your Finances

That is a pretty scary headline for a lot of people, particularly if your money controls you rather than you controlling your money. Last week I shared with you some simple, basic, but essential tips on how to prepare yourself to be able to borrow to invest in property. This week, I offer you a magical money management system that will put you on track to the wealth you want – its easy and you can start right now.

If you would like to learn about this simple system, then please read on. This is the single most important thing you can do in the pursuit of your financial goals. And the really cool thing about this system is that a whole lot of guilt free spending fun is built in to the program!

The idea is to break down your after tax income in to percentages and allocate those towards your spending and saving patterns. First step – work out your after tax monthly income. Let’s say its $50,000 per annum, or say $4,200 per month.

We need to break that down in to sections of your finances. We start with your Long Term Savings – this is your investment fund, never to be touched – ever – except to invest. Allocate 10% to that – so you are paying yourself first. Then you need to allow for your necessary expenses – these include rent/mortgage, food, fuel, insurances, rates & taxes – allow 50-60%. If you look at your current net income, and your necessary expenses are more than 60% of your after tax income – you have two choices – increase your income or cut your expenses, otherwise you have no chance to save to invest and your only choice will be to work to 70 years or more and exist on a pension pittance. So in this example, if you are paying more than $500 per week in rent or your mortgage, you need a cheaper house in which to live. Or a better paying job, or a second job.

Then you have Short term savings – you need to put money aside to replace a car or take a holiday. If you don’t do it regularly, your only choice to enjoy a new car or go overseas will be to borrow to do so at interest rates of 12 to 21%. That does not make much financial sense. Allow 5-10% here.

Most of us have credit card or cards – let’s dump these as they have interest rates over around 20%. Use them each month for convenience but pay them off each month. If you have existing debt, let’s kill it. Take 5-10% of your income and attack one card, paying everything you can from your 5-10% debt killer account, off that one card until you have paid it off. Then cut it up. Proceed to the next card paying off everything from that one debt killer account on the second card, until it too is paid out. Repeat until you are credit card debt free. Then you can apply that 5-10% to making larger long term savings in your investment account.

Everyone should put aside 5-10% of their income to invest in to education – it could be your children’s or it could be your own. Every year I do a new course and read new books, seeking to increase my knowledge, learn new skills and gain more confidence.

Lastly, it is beholden on each of us who are financially blessed compared to many others in the world to put aside 5-10% of our incomes to give to those who need it more than we do. Choose a charity or cause that fits with your beliefs. Giving also tells your mind that you have enough money to give some of it away to others less fortunate than you and that more is on the way. If you can’t afford 5-10%, start with 1 or 2% and build it up as you can. You will make a big difference in the world and to your own feelings about money.

Lastly, the fun bit. Ever walked past the shoe shop or that new restaurant you wanted to try, gazed longingly through the window and then clunked back to reality, remembering there was nothing in your bank account and your credit cards were maxed? What if you had money in a separate Fun Fund – that you just had to spend each month – on whatever you wanted? Like that idea? I bet you do. All you need to do is allocate 5-10% of your net income to your Fun Fund, in exactly the same way as you do your long term saving account. This is your fun reward for all of your fiscal discipline and a great reminder for your mind that you can be firm with your finances and have fun at the same time.

So to summarise:

  • 10% – Long Term Savings for Investment
  • 50-60% – Necessary Living
  • 5-10% – Short Term Savings
  • 5-10% – Debt Killer
  • 5-10% – Giving
  • 5-10% – Fun Fund

Work out the ratio that totals up to 100%, that best suits you and adjust it each twelve months as your financial situation improves.

The best way to run this management system is to have a separate online bank account for each of your money accounts. You do need to find a bank though that will offer you this without all those annoying and expensive account fees, which can be $10-$20 per month – per account! If you leave all your money in one account, without separating it, I guarantee you will not be successful managing your Money system – it is just too easy to take money out of savings or out of debt killer to pay for that ticket to the concert you just had to have when your Fun Fund ran low.

I guarantee you this will work – but you just need to start – and then be disciplined. Think about the lifestyle you want – taking charge of your finances is the first step on the journey.

Now you have money to invest. And you can have fun doing it!

 

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If Money Makes The World Go Around, How Can You Get Some?

Last week I shared with you the truth about what really moves property prices – and that’s money. If you have it, that’s great, you are in the game. If you don’t – then you need to get some.

It’s a good thing there are very profitable businesses out there that cater for that exact need – they are called banks. To accelerate your chance to gain wealth through real estate you simply must be able to borrow money, at least until the point you can sell down what property you have to pay off the debt and still have plenty of income for your lifestyle from the property you still own.

To give yourself the best chance of getting some of that cash, there are six important steps you need to take before applying for a loan – and all of these need to be done well before you get out in to the market place looking for property. Some of these are self-evident, but nevertheless important.

1. Have a steady job – the banks like it better the longer you are in your job. If they see job-hopping on your application, they assume you are not stable in your work and therefore your income is at risk, therefore you are not a good person to lend to. If you are running your own business, you need a minimum of two solid years of profitable, up to date tax returns to submit as evidence of your income. Minimising your profit (legally) through a business might save you some tax, but it won’t help your borrowing capacity.

2. Savings – Your friendly lender will want at least 5% of your purchase price in savings over a 6 month period. They prefer 10%, but really start to warm up to you if you can put down 20% as a deposit – if you can do that, you can avoid the real gods of money – the mortgage insurers. Every loan that has less than 20% deposit must have insurance to cover the bank if there is a loss, and of course you have the pleasure of paying for that insurance. If you aren’t saving yet, start now. I’ll talk a bit more about how to take charge of your finances next week.

3. Get your debts under control – the first step to dealing with those evil pieces of plastic in your wallet is to cut all but two of them up and limit your use of the remaining two. Do what you can to pay them off each month. Start a debt reduction plan, focusing on one card at a time. If you have many credit cards, the bank will assume that you could go out and do cash advances on all of them at once. They will reduce the amount you can borrow for your investment property because of that.

4. Check your credit report – your credit report will contain any loans you have applied for or been approved for and any outstanding debts, even over a number of years. This is more important than ever as recent law changes mean that even for the most trivial of debts or late bill payments, creditors like electric companies for example, can report your debts after just 30 days late – so make sure you pay your bills on time. There are a number of agencies that offer a free initial credit report, which takes ten days or so, or you can pay for an instant report. Some will charge you for ongoing services or to help you clear your report if there is a problem or if you need other financial advice. Without making a recommendation, some of these are – www.creditrepairaustralia.com; www.checkmyfile.com.au; www.fixbaddebt.com.au. Getting a copy of your report can alert you to any issues you may not be aware of.

5. Determine Your Credit Score – the friendly banks also have a way of rating you to determine how credit worthy you are – they look at your age, postcode, length of job, banking type, how long at your address, whether or not you own or rent and so on. The average score out of a scale of 1000 is 750. Find out what yours is and do what you can to increase it. Don’t do anything to decrease it – for example, moving house can drop your score by 80 points, changing banks by 30, and getting divorced drops your score by 100! Some of the websites above can help you determine your score for free – though www.checkmyfile.com.au works well.

6. Set up a meeting with a competent finance broker – a finance broker has access to many different lenders and they can assess your situation and guide you towards the best solutions for the kind of loan/s that you need. A really good finance broker will do the best he/she can to ensure that the loan you get will be a springboard for your next property. A fantastic broker will sit with you and help you work out your long term plan for the number of properties that you want. If you don’t have one of these people on your investment team, I can proudly recommend my friend Margot Whittington, who has a strong financial counselling background and is a gun finance broker – you can reach her at Margot@wamoney.com.au.

And a last thought from Earl Wilson – Today, there are three kinds of people: the have’s, the have-not’s, and the have-not-paid-for-what-they-have’s.

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Give a Little, Get a Little – Contribution

It has been said that the best way to help poor people is to not be one of them. Another way to look at that is, if you don’t have money, how can you financially help others who don’t have money?

There are so many reasons to want to build wealth, but I am here to tell you, that if you are only building wealth so you can make your own life better, your wealth creation will likely be limited to not much more than you can spend on yourself. I think that those of us who can help others, should do so. And don’t wait until you reach your financial goal before starting to give. A little given regularly by many can add up to a world of change.

Some of the richest people in the world, like Bill Gates and Warren Buffett have committed to give up half or more of their wealth to causes they feel passionate about. That reads kind of easily though for men who can give up half their wealth and still have a net worth approaching that of a small country. I am not suggesting this for you, but I am saying that it is your responsibility to share your wealth in order to make the world a better place. And to do so now, so you can start making a bigger difference.

So go ahead, and choose a cause you are passionate about. For me, it comes down to affordable housing for all. You see, I believe that the basis of wealth creation for the average person is to own their own home. Anything I can do to promote that, falls right in to line with my belief that anyone who wants to own a home should be able to do so. For that reason, I support Habitat for Humanity (www.habitat.org) – they are a global not-for-profit organisation creating home ownership through a hand up, not a hand out. I spent a week last November in Cambodia building houses with people from all over the world – hot dusty, sweaty and tiring work, but oh so rewarding.

My wife Michelle is a passionate entrepreneur, so it makes a lot of sense for her to choose to support Kiva (www.kiva.org) which is a micro-financing company that supports people wanting to start their own business. She (& I) believe that the solution to world poverty is not giving out rice, but in helping people create and fend for themselves. People who can start and run a successful business can feed themselves and their family forever – no need for welfare. And the cool thing with Kiva is that you can start off with just a $25 loan, which will get repaid to you in small pieces – and then you can re-loan that money out to people you want to support. Michelle has helped a chicken farmer and a shoemaker and a taxi-driver among lots of micro-businesses.

One of my best mates, Keith Daddow is a fascinating character. A brilliant real estate rep and investor in his early 40’s, he contracted prostate cancer, which to say the least changed his life and that of his family. Not one for lying down, Keith beat the cancer and now chooses to support the Prostate Cancer Foundation. He is doing this by climbing Mount Kilimanjaro with six other cancer survivors. You may not be aware of this, but prostate cancer kills more men each year than breast cancer kills women.

Keith’s goal is to personally raise $10,000 for the trip – he will pay his own way and all money raised goes straight to the foundation. I will personally donate to this cause and I am asking you to do the same – whatever you can will be fantastic – just click here and give until it hurts!
https://saveamankilimanjarochallenge.everydayhero.com/au/keith-daddow

Keith is a fascinating character truly worth meeting if you get the chance. I am sure he won’t mind if I give you his email – keith@theriverofmoney.com – so you can reach out and talk about anything you want, including his cancer journey – he loves football, poker, his wife & kids and he particularly loves to chat about positive cashflow real estate – that’s the kind that puts money in your pocket every month.

A last thought for you – giving is the start of receiving – the law of karma ensure this.

 

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Are you doing what you have to do, or what you want to do?

I posed this question to the people who attended our Cashflow | REDEFINED event last Wednesday night in Perth. The response from most was predictable and completely understandable.

Most were doing what they had to do and wishing they could do what they wanted to do.

So what was stopping them from doing what they wanted to do? The answer is likely to be the same for them as it is for you. You still need to exchange your time for money.

By that I mean you still need to work every day, either for an employer or in your own business to earn money to pay your bills and meet any financial commitments you have. I am not saying that there is anything wrong with working, not at all. Working in a job you love is an honourable and worthy thing to do.

But for how long? Have you given any thought to how long you want to continue working? How many more years? And what will happen to your income after you stop? Could you afford to live in the same way you do now?

Consider what would happen to your finances if you lost your job or perhaps were injured and could not work. How long would you be able to last before you ran out of money? Research shows for most of us that time is less than 90 days.

To have income that still comes in, enough to pay for the lifestyle you want, whether or not you are working, is the ultimate financial goal. This is where you have the freedom and choice to do what you want to do rather than what you have to do.

Income comes from assets. And the best type of asset to produce a steady income, month in and month out, is real estate. Though not just any type of real estate. The average yield for residential property is somewhere between 4% and 5% and that is before any costs. Net yields could be as low as 3%. And if you have any borrowings, then you may not be able to collect any income at all. That means you would need to rely on capital growth to eke out a return from your investment. The last few years since the GFC have shown us that growth in values is no certainty.

The last few years since the GFC have shown us that growth in values is no certainty.

If you want to use property to create income to replace your work income, you need to find property that has a rental return in excess of 8%, ideally 10% or higher. If you can achieve this, and then reinvest your cash profits while you are still working, so you can own more positive cashflow real estate, could mean that pretty soon you will be able to do what it is you want to do, rather than what you have to do.

For a really good example of positive cashflow real estate, check this out –www.daylesfordplace.com.au – this is a project of mine that I am incredibly proud to tell you about. It is the single best development project I have ever created.

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Top ten things successful people do

Have you ever asked yourself, how can I experience success?

This is not an easy question and I am not sure there is an actual definitive correct answer.

This is because everyone’s definition of what constitutes success will be unique to themselves alone.

For one, “Success Mountain” might be having a net worth of a million dollars.

Perhaps it could be dreaming up and acting on a business idea that not only earned significant profits for you and your family, but provided society with something useful and valuable.

For another it could be, being a parent to a happy, healthy well-adjusted child, the result of a committed, long-term loving relationship.

Someone else may consider that learning to read and write as an adult after a lifetime of illiteracy the pinnacle of achievement.

Yet another may think that just getting through to the end of the week and their next pay-cheque and having all the bills paid and food on the table as significant success.

“Success is doing approximately the right thing at exactly the right time” – Richard Pratt

The truth around “Success” is that it means different things to different people.

The mistake most people make is that they try to compare someone else’s “success” with their own.….That’s a recipe for unhappiness.

If you examine your life, I bet you can find at least one thing, and likely a whole lot more things that you have been or continue to be successful at.

Take a moment and think of one.

Go on…!

The late great Jim Rohn used to say “Success is easy – just find out what failures do, and then don’t do that”.

So here are my observations of the Top Ten things that successful people do….

  1. Marry the right person – this one decision will likely determine 90% of your happiness or misery.
  2. Only work at something you enjoy – nothing more soul destroying than wasting your “one half of one second of life” doing something that you hate each day.
  3. Be grateful – every day I think of at least five things that I am grateful for, no matter what kind of day I am having. And guess what – after that exercise, I am usually having a great day.
  4. Be generous – ever heard of karma? And what goes around, comes around? It is part of the circle of life. Your giving can change the world.
  5. Take responsibility – if you spend any time blaming others for your ills, then nothing can change, because “it’s someone else fault”. You are in charge of your decisions.
  6. Persistence, persistence – so often we hear stories of those who gave up just before “success” happened. Be persistent.
  7. Commit to continuous improvement – every day I endeavour to learn at least one new thing. In the last 2 years I have done two x 12 month courses – on corporate finance & becoming a key person of influence – both things I felt would contribute to my “success”.
  8. Be Honest – do what you say you will. People will come to know whether you are a person of your word or not.
  9. Become the most positive and enthusiastic person you know – positivity and enthusiasm are infectious. Make sure you surround yourself with these types of people.
  10. Have a success plan – that is, written goals and desires. Know what you want in life financially, personally, physically and in your relationships. From this plan, stems your action.

It’s not so hard really.

Dream Large.

Craig Turnbull

CEO Hillsfar

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Successful people are those that make the best choices

I am assuming if you are reading this that you are someone who knows that there is more to life than the blind existence that most people live – what I call the “rat corridor of life”. Getting up in the morning after being rudely awakened by an annoying alarm, hugging the spouse and yelling at the kids before racing off to work in the car to crawl along the freeway to a job you hate, with people you don’t really like, praying for five o’clock to arrive so you can inch back down the freeway at fifteen kilometres per hour to collapse on the couch in front of the tube, only to wake up in the morning and do it all over.

Maybe you are smiling now at the thought of this, maybe you are feeling a little uncomfortable or maybe you are even horrified, recognising elements of your own life. Well the good news is that you can change any part of your life at any time you choose. You design your life. You set the alarm. You choose your partner. You decide whether or not to have a family. You choose what kind of car you drive – or even whether to get the bus or the train. You accept or reject the job offer and you always retain the power to leave a job you don’t like. You elect what kind of TV to buy and you are also in charge of the remote, so you decide what kind of information gets fed into your brain.

Every day you make choices that will affect your life. Your success will depend on the cumulative effect of all of the decisions you make, meaning that success or failure usually won’t happen overnight. It will be the result of a series of choices you make and actions you take. They will add up over time to give you a result that you either are happy with or not. You can make a living or design a life – your choice. Whatever happens in your life, ultimately the responsibility is yours. You might be tempted to fall back on some of the old reasons or excuses for not achieving financial success like “I don’t earn enough” or “I haven’t got any money” or “my credit is awful” or “the economy is going bad” or “I’ll just wait until the real estate market comes down.” There are so many ways to talk yourself out of a fortune. You only need one reason to succeed – and that is your own.

Your “why?” That is the thing that will get you up early and keep you up late. The goal, the desire, the dream – something that really excites you and gives you something to aim for. Yet, without a sense of urgency, desire loses its value. It is completely possible to desire something though take no action toward it because there is no imperative – or timeline by which you will be, do or have your desire. You know the old saying “one day I’ll………” whatever it is. Though deep down you know that one day never comes and all you are expressing is a wish. And unless you have fairy godmother or keep a leprechaun in your back garden, your wishes are not likely to come true.

Successful people all have well defined goals and dreams. They have a crystal clear view of what their lives will be like and hold this view as if it were already real.

Next week I am going to share with you the top ten things you can do to be successful in your life. It will surprise you how easy it really is. In the meantime, successful people all need a steady incoming cashflow – check details for the special event below.

Dream Large.

Craig Turnbull

CEO, Hillsfar

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What Would You Do With Your Life If You Had a Year To Live?

It’s an interesting question. Most of us haven’t considered it because we don’t really know how much time we have left, and those that do have usually received the news from medical professionals. What makes the question really interesting is that one day, the question will be true – except you may not even know it. So what would you do?

You might remember Crazy John Ilhan, who at age 43, with a reported net worth of $300 million, dropped dead while walking on the beach early one morning. He had recently stopped smoking and taken up exercise. His wife and family were not even aware that John had a health issue until the police showed up at the family home bearing the news. Life is short.

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What will your life be like in 2014…and beyond?

It’s been a while now since I’ve connected with you, mainly because I have been very focused on creating several new really exciting property developments, which I personally have underway.

I’ve also been quietly working on my new book (my 5th!) and preparing to launch my new investment company, Hillsfar

I’ve been watching property markets around the country, with interest – and it seems most of them are heading just one way – up. As you know, over the years, I have done my share of property education, willing to share knowledge with those who wanted it and were willing to act. And after 30 years of successful real estate investing, here is what I am certain of – there are NO secrets in property. Everything you want to know can be found in a book, a course or online.

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