Taking it to the Next Level - How Geoff Avoided the Boa Constrictor.

By Geoff Doidge of the Reno Kings

The Reno Kings have spent years combining their talents and educating investors on the different ways to make money out of property.  Our message has always been simple, "The best way to profit from real estate is to buy well and then add value quickly through renovation".

From years of experience, the Reno Kings have identified over 117 ways of adding value to get equity gain and cashflow using cosmetic renos.  Our workshops have educated thousands of Australians keen to learn the secrets of property success.  The information has helped many implement strategies which has gained them investment wealth.  We have also shared these strategies many times on national tv programs such as A Current Affair, The Today Show, Extra, GMA and many others.  Our ideas were always practical, easy to apply and obviously good value.

The Reno Kings renovation strategies clearly work as my assets are now worth $20+ million. I continue to buy dumps and turn them into dollars. I use the same methods, same colours and achieve the same results. Adding value to a property in a short period of time means more capital gain, more rent means more cash flow and an increase in value which gives you more equity to extract. This in turn allows you the ability to do it all over again. A Winner!

Stepping Up to the Next Level - The Boa.

Land Tax is the dreaded asset related tax that bites at successful investors and was 'a snake in the tool shed' until a solution finally appeared before me.  I liken Land Tax to a 'Boa Constrictor Tax' as every year it grows bigger and it slowly squeezes your cash flow so much that some people even sell up to escape its grip!  Now, there are solutions to Land Tax if you plan early:

1. It is a state tax so if you buy in different states you can minimise the tax at the 'skink' stage or
2. You can get a 'property wise' accountant's advice and buy in different entities such as Trusts to restrict the Land Tax growth to 'skink' level.

I had accumulated a number of blocks with development potential houses on big blocks of land.  Big blocks mean big land tax and one house means one rental income.  This meant 'the Boa was biting and I was hurting!'

Do you know that quote, 'When the student is ready the teacher will appear'? Well, this student was ready and when Paul Eslick suggested I remove the house from a block of land and build units, it hit me like a ton of bricks.  Instead of trying to reduce the tax, I had to earn more income!

All this time I had been trying to reduce Land Tax.  We actually had developed '27 ways to reduce our land value' so as to reduce our land tax!  I, at last realised, that this was obviously not the answer!  The answer is don't fight the tax - just massively increase the rental income.  Not only does this extra income pay the tax, it hugely revalues the property, increases my borrowing capacity and my ability to service my loans.  It is a win, win, win situation.  Therefore, instead of having one house with one rent, I could have six units with six rents.  I was going to have to Build to Rent.

B.T.R. (Build to Rent)

One day I drove up and down the streets in a nearby suburb.  What I saw had me a little worried. If Building to Rent was such a great idea, then why wasn’t anyone doing it! Yes, there were a lot of developments going on… but every development was being 'built to be sold'. I did not want to sell. I had a Land Tax problem and selling would mean creating a CGT (Capital Gains Tax) problem! That’s like escaping from the Boa and being bitten by a Death Adder!

Most of the developments were five or six pack unit blocks. I calculated that while you could make money if you sold at the right price, the rental return on six units was pathetic!  So I asked my Town Planner ... what I was allowed to build on my block? He rattled on about GFA’s (Gross Floor Areas), carparking and setbacks and info regarding distances from main roads and train stations etc. He then came up with 8 units based on accepted criteria.

I was excited - that’s more like it. Sure beats having just one house!! I then did the B.O.E. (Back of the Envelope) feasibility and everything started to look good. I also heard well known researcher Michael Matusik on radio who gave me a key idea to kick up my returns. I went back to my Town Planner and Architect to check it out. Yes, using that idea I could get two more units on that block. Ten units. Ten Tenants.

Ten streams of income instead of one which also would create a 27% equity gain and a rent return of 7.5%. I was excited!

Reno Kings Tip: Don’t ask your advisors, “Can I do this thing?” Ask “What do I have to do to do this thing”.

Geoff's Review
 

What a result!  We have now taken the first step to reach the next level:  The decision to Develop for Profit and cashflow was made. So what now?

The Reno Kings have assembled their team of highly experienced development consultants and investors to bring you Developing for Profit, a two-day 'everything you need to know' workshop on all things property development.  This is a great opportunity to learn from others on how to make development profits, how to avoid costly mistakes and how you can fast track your development education.

For more information on this workshop, click here.