How To Eliminate Your Mortgage And Buy 10 Positive Cash Flow Properties In Ten Years Or Less

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1 Positive Property Investments 1

2 Copyright 2012 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 or otherwise, without the prior written permission of the publisher. No responsibility can be accepted by the author or publisher of this book for any action taken by any person or organisation relating to any material contained herein. Property investment is a complex and changing field and all readers should seek independent, detailed and professional advice as to the relevance of any part of this material to their own specific circumstances. Disclaimer Positive Property Investments are not accountants, real estate agents, financial advisors or solicitors. The information is not intended to be a vehicle for the provision of investment and related advice to you. Positive Property Investments is not giving you legal, accounting, investment, real estate, valuation or financial advice. The information contained in this booklet will not be effective unless you obtain appropriate independent professional advice and do the necessary research and due diligence in respect to your own personal financial position and lifestyle. You must be cautious about making investments where your decisions are not based on sound research and independent professional advice as it is not only risky but can be disastrous. Positive Property Investments are no way liable for any loss, damage or misunderstanding caused by mis-management of any information. Ultimately you will need to make the final decision yourself based on your situation, lifestyle and independent professional advice. Positive Property Investments 2

3 Introduction If you re looking for ways to get rich quick, you ve come to the wrong place. Positive Property Investments are not about get-rich-quick schemes and don t claim to have the latest no-lose, risk-free, no-money-down strategy that will transform your bank balance from zero to hero in no time. There s a very good reason for this: it simply doesn t exist! There is no way to build real wealth in a way that is safe, practical and achievable, without investing your own time and effort and yes, a little bit of money too into the process. But if you are genuinely committed to changing your life by slashing years off your home mortgage, building a quality property portfolio that will grow your wealth position and give you financial freedom, then Positive Property Investments have great news for you! Positive Property Investments are here to show you that it is possible for the average, every-day Australian to become wealthy through real estate. The Positive Property Formula will let you in on the secrets to success through rapid mortgage reduction and positive cash flow real estate so you can learn how to grow your asset base and improve your wealth for the long-term. We ll provide you with a methodical and logical process to help you secure your financial future in a systemised way so you can avoid making huge financial mistakes. And we ll reveal the risk-mitigations strategies that take the fear out of investing. For far too many people, fear is the only thing holding them back from taking the plunge and buying their first investment property but once you know the tricks of the trade, fear will never hold you back again! Positive Property Investments 3

4 Tired of the Get Rich Quick Schemes?... If you are tired of all of the get rich quick schemes and the snake oil promises flashed around in property investing, then you re on the right track. The Positive Property Formula is a realistic method and when used correctly can dramatically drive down your home mortgage, amass a property portfolio worth in excess of $8m and generate a five-figure rental income that will more than cover your lifestyle expenses. It won t make you rich overnight, but it will provide you with a safe, consistent pathway towards creating real wealth through real estate. Until next time...happy investing! The Team Positive Property Investments Positive Property Investments 4

5 Hitting the financial brick wall Picture this. You re all geared up and ready to purchase your next investment property, when the bank call with unexpected news. I m sorry, they say, but we can t lend you any more money. You re too highly leveraged and it s too much of a risk for us to finance another property purchase. You re stunned Even though you can afford to make the repayments on more loans, they simply aren t willing to extend any further funds your way. This is the typical thing we hear when people try to build wealth through property investment without the fundamental pieces of the puzzle. The Finance game Do not be deterred, you re about to learn more about the risks and how the banks really operate. As a result, you will discover a fine-tuned approach in the following few chapters. As we discuss rapid mortgage reduction strategies when used in conjunction with positive cash flow property the light bulb will switch on, one of those ah ha moments. You will discover that positive cash flow investing is the key to growing your portfolio. Rather than costing you money as negatively geared properties do, the banks will suddenly change their tune. Instead of saying no more, they will now be asking: Positive Property Investments 5

6 Is another million enough? By using the Positive Property Formula you will be able to keep buying and grow your asset base, because the formula you implement can be replicated indefinitely. In other words, as a long as you keep buying one positive cash flow property for every capital growth property then the banks should continue to give you finance. Your property acquisitions won t just help you to get ahead they will completely transform your life. The Positive Property Formula really is all about balance. You ve probably heard other investors and property experts talk about different strategies over the years and most of them have their features, both good and bad. In general, most people buy for capital growth or for positive cash flow but we will come back to this a bit later in the report First and foremost, lets get rid of your home mortgage in the shortest time possible, it s not rocket science and anyone can do it anyone Paying your home loan off in five, six, seven or ten years, paying it off really quickly and buying two, three, five or even ten investment properties along the way Hey, that would be a great concept wouldn t it? The idea of minimising your home loan, which is something we call bad debt, debt that s not tax deductible and exchanging it for investment debt which is tax deductible and creating wealth by paying off your home loan through the use of cash flow positive investment properties does sound good, doesn t it? The strategy has been around for a while but you ve got to put it together or structure it the right way by speaking to the right people to get the desired result. Positive Property Investments 6

7 So what happens here, as you read through have a look at the examples I have added, just so I explain it in a way that is easier to understand. So, we ve got a couple, John and Mary who have a house worth $400,000 and they ve got a loan on the house, a mortgage of $300,000 and they have been chipping away at it month after month. They re paying it the old-fashioned way (principal and interest) at 7% interest. So, that s just over $2,000 a month in interest payments to pay off the house. Now the traditional old-fashioned way of making your life easier by paying your house off is really a defunct concept. The value of our properties is so much more than it used to be back in mum and dad s day. They said the way to get wealthy or get ahead is to go to school, learn and get a good job, work hard for 20, 30, 40 years, buy a house and pay it off and then when you retire you ll be rich. Hey, that s not a concept that works these days. We all know that. When you retire all you ve got is your house paid off and no income. You ve got no other assets and do you want to sell your house to cash up, do you want to move? Most often the answer to that question is no. As a property investors we want to move forward and create wealth for our future, for our retirement, for our kids, whatever it is for you and make sure we pay our home loan off as quickly as possible because, it s bad debt, it s something that s very, very important. We can do that, as property investors and we can get double benefits. We can magnify our results, if we re clever about it. Okay, using this old fashioned way of paying the principal and interest and paying a house off, can take up to 30 years. Does anyone want to wait 30 years? Not me and I m quite sure that you don t want to wait 30 years. What can we do? Positive Property Investments 7

8 All right, here s a very, very simple, very easy to implement strategy, instead of paying principal and interest we pay interest only. Okay? Now your payment to the bank or your financier would go from 2,000 down to about $1700 a month so you would end up with $300 extra in your pocket each month. Now, you say, hey, hang on. Aren t we meant to be paying our house off?" Yes. But this is how it works. Instead of taking that $300,000 and using it for beer and skittles or chocolate and popcorn or whatever you might go and do, indulgences, this is what happens. You make sure you speak to a good quality finance broker and you set up the right structure. This might be called an offset account. It might be called a redraw. There are a number of words used for it. But you set up the correct loan structure, which allows you to put extra money against your home loan, but you re able to access that money at any time. When you talk to a good quality finance broker, they ll explain this. It s either redraw or an offset account. So you always pay your $2,000 into your home loan but that $1700 goes in to pay for the interest and you ve got an extra $300 sitting there in your offset account and now that will continue to offset or save you interest in the future. Now that compounding effect over a period of time is massive. What did Einstein say; the eighth wonder of the world is compounding interest. And the compounding effect of this sort of stuff is the magic thing that we want to have working for us. How can we speed this up? There s a couple of extra ways we can speed this up. We can put more money into our offset account. So if you get paid a wage in your monthly or weekly salary, you go and put 100% of that wage into your offset account. Because our interest is Positive Property Investments 8

9 calculated daily, you re saving yourself interest with that money in there. And you say, well, hang on, how am I going to live? Well the great part about this strategy is you get a credit card and you make sure that credit card has a 55-day interest free period and you live off the credit card for 55-days, this is where some discipline comes in. We must have some financial discipline as investors. At the end of the 55-day interest free period the money comes back out of the offset account and brings the credit card balance back to zero. If you ve got an extra, let s say, $5,000- $7,000 sitting against your loan for 55-days that then will be saving you again much more interest and you can pay your home loan off sooner. If you look at example provided, you could potentially pay your home loan off in five, seven, eight, ten years. It applies to any loan amount but he timeframe s are going to be a little bit different. If it s smaller you can pay it off quicker, if it s a bit bigger it will take a little bit longer. But, you re still paying it off and fast. How do we turbo charge this, how do you we get a double benefit? Let s say we don t just want to only pay off our home loan but we want to buy some investment properties. We go and buy an investment property using some of the equity over here that we have in our property or from savings. And we take the rent from that property and we tip it in there as well. And we take all the tax benefits we get from the property whether you re paying them back weekly, monthly and fortnightly and we put them back in here as well. Positive Property Investments 9

10 And what happens, your financial benefit or the savings of the interest and the magnification and the speed of the compounding process from the offset account is geared against paying the home loan off sooner, it works very, very quickly and for many of us if we only go ahead and buy two or three properties. So, you can own two or three properties and pay your home loan off within five or six years Hey, the concept is great and it s simple. Pay your home off quicker, own more investment properties for wealth and have financial freedom in the future. mortgage sooner rather than later. I think that s a pretty cool concept. If you re interested in more details about how implement this quickly and easily, book a complimentary one-on-one consultation with one of friendly and experienced team CLICK HERE so you can start slashing years of your Positive Property Investments 10

11 Now let s demystify Positive V s Negative gearing so we know which one works best in certain situations Capital growth properties are those that are located in high-growth areas, where there is constant and increasing demand for accommodation, but where supply is limited. A prime example of this is inner cities, where virtually all of the land has been developed and therefore no more properties can be built, unless you knock down a house and construct a block of apartments. Capital growth properties, by definition, will increase in value at a faster rate than their regional counterparts and buyers will pay a premium to access this growth. Therefore, the cost of owning the property (including mortgage interest, council rates and other expenses) is often more than the rental income that you receive, so you ll have to chip in money from your own pocket each month. This is known as negative gearing, because most of the costs that you incur that are not covered by the rental income, can be claimed as a deduction against your income tax. Example: You buy a house for $350,000 and the weekly cost for mortgage interest, council rates, property management fees and insurance is $525. The rental income is $450. Your shortfall is $75 per week, which can be deducted at tax time against your income tax. Positive cash flow properties are the exact opposite of negatively geared properties. They are most often located in regional towns and they are the types of investments that actually generate more income for you each week than they cost you to maintain. Any additional income that you receive must be declared on your tax return and you ll be required to pay income tax on those earnings. Positive Property Investments 11

12 Example: You buy a house for $280,000 and the weekly cost for mortgage interest, council rates, property management fees and insurance is $340. The rent that you receive is $400. The property generates a positive cash flow to the tune of $60 per week, which you will be required to pay tax on (according to your personal income tax bracket) at end of financial year. As you can see, the type of property that you buy can have a huge impact on your lifestyle. If you buy four negatively geared properties, for instance, you ll be forking out hundreds of dollars per week in order to finance your property portfolio. That s not exactly a stress-free pathway towards creating real wealth! On the other hand, if you buy only positive cash flow properties, you ll enjoy the immediate benefits of the extra income BUT if selected in high growth Hot Spots you are also likely to reap the benefits of capital growth at the same You can have your cake and eat it. what s the point of having cake if you can t eat it? The reality is, you need positive cash flow in your portfolio. You also need capital growth properties. If you have both cash flow positive and high capital growth in the same property you are well ahead of the game. (Ask your Positive Property Investments team where such properties exist, they do!) Together, they work together to balance each other out and create a neutrally geared portfolio. Positive Property Investments 12

13 The goal of the Positive Property Formula is to create a portfolio that includes a balance of both negative and positive properties. capital growth capital growth capital growth capital growth capital growth The aim of the game is to combine the two strategies into one powerful combination. The income that is generated from your positive cash flow properties serves to cancel out the added expenses that you need to pay for with your negatively geared properties. The end result? A neutrally or positively balanced portfolio, you will eventually replace your income with positive cash flow properties and you ll become wealthy off the capital growth properties. This is how to build a solid property portfolio using the Positive Property Formula to replace your income and retire, financially free The Power of Replication The most powerful aspect of this strategy is that it can be replicated indefinitely. Provided that you continue to build your portfolio in a balanced way, you could continue adding properties until you have 10, 12, 15 or even 20 houses in your portfolio! The Fast Track to Financial Freedom The Positive Property Formula provides a simple formula for success. It s not rocket Positive Property Investments 13

14 science and that s the whole point. Making money from property is quite easy, if you re prepared to put in some time and do the research. Consideration 1: Research The average amount of time that a person spends researching, viewing and evaluating a potential property deals is generally about 20 hours from beginning to end. Let s say that, as a worst-case scenario, you spend 40 hours tracking down your next investment. Can you spare less than 45 minutes per week to dedicate towards creating your own financial independence? It s a no-brainer, right? The trick is to make sure you do the right sort of property research so you make sure you find a high performance property - and don t get stuck with a lemon! Consideration 2: Finance Many people, including seasoned investors, make the mistake of thinking that buying property is all about bricks and mortar. In actual fact, that s an illusion: property investing is all about finance. If you can t convince a bank to lend you money, then you re at a standstill which is why this strategy is so effective. If you actually make a positive return from your portfolio the banks are much more likely to keep you lending you money because they know if your income situation changes you will still be able to meet your mortgage repayments. That s why for each negatively geared property you buy, you also add a positive cash flow property to your portfolio, so that the shortfall from one investment is neutralized by the extra income generated by the other. You can fund the deposit and associated buying costs with a mix of savings, tax returns and equity. (or simply buy high cash flow, high growth properties and achieve far greater results in less time, ask one of the team at Positive Property Investments where these exist and get your Positive Property Formula started today) Positive Property Investments 14

15 Consideration 3: Putting plans into action The Positive Property Formula is all about buying one property per year (as a minimum), every year, for 10 years. For the sake of this example, let s assume that each property that you buy is worth $350,000. For the sake of simplicity, we won t take into account interest rate fluctuations, mortgages, rent, expenses and capital growth let s just focus on the how the strategy works. 10 properties bought over 10 years $350k $350k $350k $350k $350k $350k $350k $350k $350k $350k TOTAL VALUE $3.5m NOTE: If you somehow managed to pay all of these 10 properties off, you would be earning a significant rental income each year. At a yield of 10%, your rental yield would be $350,000 per year. Under a worst-case scenario of 5%, your rental yield would be $175,000 per year. Once you get to year 10, you will have a portfolio worth $3.5m. At this point, you can elect to sell two, three or even four properties from your portfolio, so that you can use the proceeds from these sales to pay off the balances on your remaining Positive Property Investments 15

16 mortgages. Keep in mind that the general rule of thumb with property is that it doubles in value every 7-10 years. Therefore, the properties that you bought early on should be worth double by the time you reach your ninth and tenth property purchase. You may decide to sell some of the properties that you bought earlier in the cycle and use the proceeds from the capital growth to pay off the mortgages of your newly purchased properties. How many properties you sell will depend on the capital growth you re portfolio has experienced and where you ve bought. The ultimate goal is to pay off all of your remaining mortgages, so that you can increase your cash flow and ideally, quit your job and live off the rental income. For anyone who is really motivated and feels that they could buy more than one property per year in a balanced way, it is very doable. You ll end up with a larger portfolio worth $7m and when you sell some properties, you ll have a larger pool of rental income flowing in. Even if you stick to the strategy of buying 10 properties in 10 years, the result will be a multimillion dollar portfolio with potential and very little or no debt and massive cash flow. It s really quite a simple strategy and anyone can do it. Book a complimentry one-on-one consultation with one of our Positive Property Investments team members today to discuss the finer points of the strategy in more detail, the real key to success lies in the properties that you invest in. There is no right or wrong answer as the best types of assets will be strategic choices, in relation to your situation and finances. To make sure you really understand the underlying principals of this formula, let s look at an example: Example: You buy 10 properties over 10 years, with each property costing $350,000. You Positive Property Investments 16

17 therefore have a portfolio worth $3.5m. You make the decision to sell 4 properties. Due to capital growth, the properties that you bought early on are now worth $6-700,000 each, so the proceeds of your sales are enough to pay off ALL of the mortgages on your other 6 properties. You now have no debt remaining on your entire portfolio of 6 properties, which is worth around $2.5m, thanks to capital growth. Best-case scenario: 10% yield = $250,000 income/year. Worst-case scenario: 5% yield = $125,000 income/year. The net result is you can now quit your day job and live off your rental income. There s no magic trick, no quick rich scheme it s simply a safe, measured and practical method of building real wealth through real estate. The Risk-Free Formula for Wealth Creation Most property investors experience fear at some point. Usually, it stems from anxiety over the magnitude of the purchase you re about to make: most of us are not accustomed to dealing with transactions worth hundreds of thousands of dollars, so it can push you right outside of your comfort zone! Also, when you re first starting out, you may be fearful about what you don t know about property investing. One of the main ways you can overcome fear is through education, support and most importantly ACTION. With the right education, mentoring and support you can learn the ins and outs of property investment so that you re no longer flying blind. Therefore, you ll begin making decisions based on sound economic principles, facts and figures not just Positive Property Investments 17

18 your gut feeling that real estate makes a good investment. There are risk mitigation techniques that you can implement to alleviate any stress or anxiety you have to do with property investing. The best way to get rid of your anxiety is to identify the risks and then work out ways to eliminate them. For instance: Risk #1: What if I can t find a tenant? You d be surprised at how common this fear is, despite the fact that millions of Australians rent each year! There are steps you can take to minimise this risk. For instance, you might only buy property in areas that have a strong rental population (this information is freely available from sources such as the Australian Bureau of Statistics). Also, having a qualified, experienced property manager on your team will help you to ensure your property is tenanted year-round. Risk #2: What if my tenants destroy my property? This is where a good Landlords Insurance policy comes into place. For the sake of a few hundred dollars per year, you gain the knowledge that, should your tenant maliciously damage the property, you re covered for repairs and loss of rent while the repairs are being carried out. It s a worthwhile investment as it provides invaluable peace of mind. I don t understand why a property investor would ever consider not getting landlords insurance! Risk #3: What if interest rates go up? Although this is a very real fear, the Reserve Bank and individual lenders decide interest rates movements, so you have no control over it. What you can control, however, is your own situation so if rising interest rates are a concern for you, make sure you develop a cash buffer/reserve to deal with any unexpected expenses. Or, opt for a fixed rate mortgage. Don t forget that you can also increase your rent in line with the market, so while interest rates may go up, your rental income may increase as well. Positive Property Investments 18

19 Retire Financially Free Eliminate Your Mortgage and Buy 10 Cash Flow Positive Properties in 10 Years or Less. Book Your Complimentary On-on-One Step-by-Step Consultation With A PPI Team Member Now.. If you would like one-on-one obligation free consultation to discuss the Positive Property Formula then make sure you book your complimentary consultation today. This step-by-step consultation is, based on the strategies of successful and safe property investment. In the meeting you ll receive expert support in evaluating a solution and starting point to you property career. This makes it easier than ever before to. Eliminate your home loan in 5, 6, 7 or 10 Years Accumulate a portfolio of 10 cash flow positive properties in 10 years or less. Enjoy capital growth and replace your Income with positive cash flow properties. Find undervalued high performance properties Maximise your rental income with low cost and no cost - strategies Save money with new tax savings opportunities Use risk minimisation strategies to grow your property wealth in a confident and secure way Positive Property Investments 19

20 Avoid costly buying mistakes because you ll know how to do due diligence the right way and have the added security of property experts on hand to veto your deals And much more... Book your exclusive one-on-one appointment so you re the first in line to receive Our high cash flow-high growth property alerts to build your portfolio, simply book an appointment by visiting: To your success, The Team Positive Property Investments Positive Property Investments Suite 904, 3 Waverley Street, Bondi Junction NSW 2200 Positive Property Investments 20