Property Investing: Secrets to Real Estate Investing Success with Rick Otton

Uploaded by rickottontraining on 08.03.2012

bjbjs Join us for our smoking street smart secrets to real estate wealth Even if you
have never purchased a property before. This is the creative real estate show with Rick
Otton and Ben Chislett Ben: Benny Chislett, how is it going buddy? Rick: Welcome to Creative
Real Estate. Ben: I tell you what. We have something really creative today. Rick: Well
we are not in your bedroom like usual. That s a start. Everyone just heard the laughter
so they can sense there is an audience here today. Ben: I can. This is a fantastic day
on live radio. Rick: I will tell you what is good about live radio. We have all of these
people one, two, three, four, five, six, seven that we are going to interview today and if
the listeners could see just how good looking they are. Ben: Well that s true, but these
are people that have been out there in the trenches, applying some of these creative
strategies and actually making some really good money out of it Rick. Rick: Well you
know what we should do? Why don t we find out like where they started because a lot
of people have really interesting backgrounds. We might start right here with this really
highly intelligent gentleman called Greg. Greg, how are you? Greg: Great Rick, how are
you doing? Rick: Okay, do me a favor, just for the benefit of all of the people who have
their ears pressed up against the car radio. Tell us about where you started and how you
got into this bizarre road of buying and selling houses to make money. Greg: Well Rick, I started
into properties like the normal person would be doing, or what I thought was normal. It
didn t work for me. I had probably for about 10 or 15 years, different properties and it
just wasn getting me towards the goals that I wanted to achieve. I started looking around
for a while and I saw yourself and your strategies and that really struck a chord with me in
how I could actually achieve win, win situations and ultimately make something out of it along
the way. I was working pretty long hours. I wasn t seeing my family as much as I wanted
to and my goal was actually to create some time freedom and some financial freedom for
myself so I could spend the time with my family, so I got into this business. Rick: Let me
stop you right there. I tell you what begs an interesting question. Do you know how you
said that you are doing the negative gearing for about 15 years? During that time, did
you make some growth or did the properties double and triple in value? Did you make a
whole lot of money doing that? Greg: No, any money I did make got eaten up with capital
gains taxes and other things along the way. They would just sit there for a long time.
I would end up pouring a lot of money into them. At the end of it, I really didn t make
much money out of it at all. Rick: It is funny. I have so many people that have these negatively
geared properties. They will say, What happened to the capital growth? I need that to pay
for the negative gearing. Ben: They burn the wick at both ends. Here is the thing Greg,
when you actually got the properties to start with, you would have invested in them having
a goal in mind. Obviously a wealth goal of some sort. Did you buy them for capital growth?
Is that the reason? Rick: Yeah, that is really what it was Ben. It was for capital growth.
However, the capital growth that I achieved was not what I had envisioned or been told
was possible. They said seven percent a year and I didn t actually experience that. I actually
only experienced probably three or four a year in that time. Even now, it is a lot slower
than it was then. Ben: Rick inflation is about 4.8 percent? It has actually gone backwards.
Rick: When you started putting this together, and you said you know what, I am going to
go and get this financial literacy to put it all together, but knowing that is back
10 or 15 years ago. Where did you go then to get the information on how to build this
empire? Greg: When I was going the negative gearing? Rick: Yeah. Ben: I went to financial
planners. The financial planners put me into a couple of places that were inflated in price.
I was pretty inexperienced at that time. Obviously the capital gain took a lot longer to get
in those circumstances. I was just pouring money into it, year after year. I was really
not getting anywhere. I ended up selling them out in disillusionment because it just wasn
t achieving after six or eight years at each time, or 10 years at the other one. Rick:
Before you sold them out Greg, how long did you have them for? Greg: One was six or seven
years and the other one was about 10 years. The capital gain was there, however what happens
without giving to much detail is the tax laws in this country, the capital gain on that
was depreciated over those years. What I thought I bought for $300 thousand, was actually de-capitalized
before my capital gain was taken from $200 thousand. The gain I actually got was maybe
about 60 grand, on top of the 300. Rick: Let me stop you there because this is where people
get caught, right? They will get the house for 300 and they think the capital gain is
the difference between the 300 and the new value of 400. Even though they have depreciated
the product, the government says you have depreciated it down to say, 200, now the capital
gain is the difference between 200 and the 400, which is 100, which is the difference
between when you sell it for 300 or 400. Greg: You are exactly right. They get you on the
way in and the way out. That is what I became disillusioned with. I thought there has got
to be a better way. I started looking and this is what I found. Rick: So how long Greg,
from being disillusioned, to finding a better way? What was the time gap in between all
of that? Greg: I had some personal development work to do in my mindset. I set about that
for about two years. That is about the time it took, two years. Rick: Let me ask you,
before we go forward let's just hear from Tim. Tim I think you were actually in a bank
for a while, weren t you? Tim: Yeah, Commonwealth Bank. I finished UNE to be a financial planner.
Not the one that sold you the property. I suppose I quickly realized that financial
planning doesn t seem to be about helping people. It is more about selling people product.
That was not really what I wanted to do, but also working five days a week to earn $43,000,
which was my starting wage, wasn t a lot of fun really. I started doing Rick strategies
just in my part time, just on a Saturday. My first year I made $110 grand from doing
just one day a week, whereas my job I was working five days a week for $43 grand. I
didn t really need my commerce degree to work out which was the better option. Ben: It is
funny that you talk about financial planners. I said to a financial planner I said, What
is your financial plan? He said, To create wealth. I said, How do you do that? He said,
Well, you buy my products. Rick: That s funny. So Tim, how long did it take to actually gain
the confidence? Even though $110 versus $43 thousand is pretty straightforward, but there
is still the security of having a paycheque every Friday coming in. How long did it take
to get the confidence to make that leap to get out of the bank? Tim: Pretty much from
the day I started doing this sort of stuff, it was about 12 months. My last day in the
bank, I did my third deal. That was sort of my send off. Then from there, it was probably
another couple of deals before I really knew exactly knew what I was doing. I had enough
confidence I suppose to quit my job, and say I know if I can do it in one day, without
knowing anything and barely stumble through it and make $110 grand, surely I can. Even
if I just replicate that, I am still doing a lot better than I was. Rick: One thing with
that, I think a lot of people when they go full time in something, when they are out
and about on their own in real estate or something else, they have the little birds in their
head filling their heads with negative things if something goes wrong. Did you ever experience
that kind of thing, when you had to take the leap? Tim: Oh, of course you do. Everyone
always tell you, go to school, get a job, go to UNI and you work at the bank. That is
a secure job. You will never lose it and you are going totally against that. Of course,
you are going to have all of these, you shouldn t do that, Oh my God, how dare you do that,
and there is all of that negative talk. For me, I just saw it as this isn t your traditional
losing money in property didn t make sense. I am making money. If it is making positive
cash flow and I am making money from day one by doing this, how can I go wrong? It is putting
money into my pocket, rather than taking it out. That helped me make that decision to
move forward. Yes, it is a bit of a leap. Rick: Is it fair enough to say that every
transaction you have made starting from the beginning, you have only made money on? Tim:
A 100 percent of them, yes. Rick: So you have never actually been in a losing transaction?
Tim: Never. Rick: It is pretty hard to change back to the old way isn t it? Tim: Yes, I
haven t had the urge to lose money. Rick: It is like people are dying to get on the
Titanic. Okay so Wayne, you were in like IT. Were you doing IT for a long time? Wayne:
I was doing IT for about 10 years. I moved down to Melbourne when I was trying to do
manufacturing to get away from my family, which is in IT. It didn t work. I ended up
in IT. Ben: When you have family reunions, do you all sit around computers? I am just
wondering because I have never been in IT. People that I meet in IT, I always envision
that they are all sitting around with their laptops. Rick: They have a family reunion
every night. They just go on Facebook. Wayne: We have very quiet family reunions, yes. I
traveled around a bit with IT. I was doing consulting. I was doing Melbourne, Sidney,
up to Singapore. I was all over the place. Ben: Did you like it? Wayne: It was good for
the first couple of years. Then it dragged and the hours were getting long. I got married
and they got even longer. I just decided that was it. When I came back to Melbourne, I would
find something else. Rick: Greg had that two-year gap between finding what he wanted to do.
How long was it for you? Wayne: It wasn t very long. Through my years in IT, I had been
trying to cultivate that mental attitude. Once I got involved with some of the strategies,
it took me probably six to eight months to put it together. That really worked for me.
I was out there straight away, trying to call buyers and talk to people. Ben: That is interesting.
That eight months would have been a grueling eight months in the sense of oh my God, does
this work or does this work. How did you keep yourself in a motivated state to keep going?
They do say that the average person will try maybe three times, if they t make it work,
and if it is too hard, they give it away. What kept you going for the eight months?
Wayne: What kept me going was seeing people that had done it. I listened to you, Ben,
and others like that who had actually been out there, done this and made a success. I
knew it could be a success and I just decided that if they can do it, I can do it. Rick:
See I told you Benny, if we made some stuff up, people would believe it. So what happens,
you are out in the game, you are doing a few of these transactions, is it fair enough to
say that the longer you have been going, the more profitable your transactions have gotten?
Wayne: Yes, definitely. Rick: Why do you think that is? Wayne: It is skill. It is knowing
who you are talking to and knowing what you are talking about and it is confidence. Before
I was a little afraid to ask for too much. Now I am much more confident. My time is valuable.
Rick: It is kind of like it is your way or the highway. Would you do real estate any
other way? Wayne: No. Rick: Okay. Ben: It is interesting isn t Rick. So far, everybody
has said that they wouldn go back to the old way. Rick: I don t know any business that
say, you know what, I have been making money in this business from day one. I think I need
to get a new business that loses money from day one. You can t go that way can you. Wayne:
Well you know what I have found that is very interesting is, if you go and see an accountant
or a financial planner, they will say you have a high income so you better be negatively
gaining. I don t know why they stick you in a property, when they could actually probably
stick you into a business and get a lot more deductions. Rick: Thank you. I get a lot of
that. If they stick you in a business, the paper deductions and the losses aren t real
losses. You get much better paper losses than you do on property. I always wondered why
they t do that. When I was in the states years ago, I had to try to explain to Americans
because American property guys would say, hang on, so you are getting this piece of
property and then you lose money for at least 15 years and that is profitable, right? I
used to say if you want losses, why don t you just do it in businesses. Businesses always
have funny losses. It is hard to explain actually. Wayne: They can have manufactured losses,
Rick. Rick: Well that s it. In property, they are real losses. They are hard to explain.
Wayne: And then you have to work twice as hard to find the tax deduction that you were
trying to avoid paying more tax. Rick: It is an interesting concept, yes. [unintelligible
- 00:12:44] you were in property before you got into these strategies. You were actually
in property for a while haven t you? Male: I went to every seminar, whether it be paid
or free. Every so called expert wanted to get a room full of people and tell us about
their best way to do it. I don t think any of them was a waste of time. I got a little
bit out of every single one. I was lucky enough to go to a seminar that you presented and
it chimed with me at the time. I thought I could accelerate my portfolio. Rick: Okay,
when you were doing properties before, were you doing like property developments or renovations
or buy and hold? Male: It was buy, renovate and hold. Rick: So this was just adding another
set of toolsets? Male: Yeah, now we still do a little bit of that. Now when we acquire
the property, we acquire them using strategies that we have learned from you. Even what might
from the outside look like a standard transaction would still save tens of thousands of dollars.
Rick: Just from how you put it together. Male: You are kind of picking things up for nothing
now and adding some value to them. Male: Even when we use the bank, the bank generally pays
us to buy property these days. Some we hold on to ourselves and some we sell off. Rick:
Fantastic. The banks actually pay you money to buy properties? Male: Yeah Rick: That is
pretty cool. The Greek banks were doing that for a while. Male: When I first started, I
got very busy very quickly because we were offered the chance to go to New York. We hit
it really hard and bought a lot. The bank was on board and helped us with a few of them.
I only really started to get really good at it, once the banks started not being on board.
Ben: People say, "What makes you go forward?"I always say, when you t go back. When your
back is up against the wall. Male: I once had a guy give me $200 thousand bucks and
said, Can you go put this into houses and do stuff? It sat there for nine months because
I didn t know how to put it into something because I started with no job. I couldn t
borrow any money so every deal was done. I couldn t work at how to use money on a property
deal. I had to give it back. I didn t want to risk losing it because I had never actually
invested money into property deals to make it work. It is funny what Nathan said, as
soon as the wick dried up, he had to get creative. You have to find another way. Rick: So do
you still sort of do a little bit of everything? Male: Yeah, I do. As you know, we have other
businesses and stuff. We try and mix it all up to maximize our profits and the best return
we can for the dollar. Rick: Okay, James what were you doing before you got into this way
of buying and selling houses? Before you got into this way of buying and selling houses,
had you every bought or sold property before? James: I had bought one house. Rick: Bought
one house? James: Yep Rick: All right. James: I actually bought that and got a pretty good
discount on that one. I renovated it, refinanced and got all my deposit and the renovation
funds back and put eight grand in my pocket. I thought this was pretty good. Rick: And
that was the very first house you had ever done? James: Yep. Rick: All right. How did
you build the portfolio that you have got now? What was the journey to doing that? James:
Basically I just used the strategies that you teach. I just looked at finding people
that wanted to sell their properties, try, help them out, and help other people in. That
is sort of how I got what I got now. Rick: When you started my strategies, you were married.
Did you have one child or two? James: I had two. Rick: Let me ask you something. How does
that work? You came home one day to go, listen I have this new idea. They say, "How does
this work?" I say, sweetheart no money comes in the front door for a while as you practice
this new idea. Usually you haven t got family. How did that work with your wife just getting
that thing started? James: I was actually working and doing this for about nine months.
She backed me and said yes. Rick: What sort of work were you doing? James: I was working
at Woolworths. I was driving the forklift there. Rick: You were driving a forklift?
James: Yeah. I was pretty good at that. Rick: Really? Do you need a special license for
that? James: I have got one, yes. Ben: Do you ever run over anyone on the forklift?
James: No, there are a few accidents here and there. Rick: Can I just tell you, many
years ago when I was 21, I had a job as a customs agent, they actually taught you this.
What happened was Ben: You were a customs agent? Rick: I was for a very short period
of time. It took at least four months to sack me. What happened was, we were down at the
Wharfs down here and we were actually waiting for this Volvo to come out of this container.
This guy bought it from Sweden. He was really particular about it. They were showing me
how to drive the forklift. I was racing around, just down here between the containers with
the forklift, right. Just as I came around the corner, they were just taking the Volvo
out of the container, and straight through the driver s door. Very strong cars, Volvo
s. You would be surprised. I just had to mention that to you because I had just a great time
on the forklift. Anyway, back to houses. James: What I was actually doing was, my wife was
actually working at Holden, so I was doing night shift there and working two or three
days Woolworths , until Holden s had a package for the redundancy. I decided to take that.
I had some money, put that in my pocket, walked straight back into Woolworths full time, and
thought I have some money and I need to learn a way of being able to improve that. Ben:
I am going to ask you this because you have gone from knowing nothing of these strategies
and working full time job. When did you have time to absorb this or practice this craft?
James: What I did for about probably the first year and a half without fail was Rick s CDs
were in the car. Every time I rode in the car, I was listening to Rick the whole time.
I didn t want to talk to anyone else about what I was doing. I was just trying to copy
what Rick said. That is the fastest way to success is listening to Rick. That fastest
way is to surround yourself with the subject matter that you want to do and block out.
Rick: I always say, "If you want to do anything and do anything well, live it."Make it a party.
It doesn t matter what it is. Just live it. Just drown yourself in it. It becomes part
of you. James: You find that athletes do the same thing. Athletes that are training for
an even or whatever it is, do nothing else but that. Rick: Let's just keep it back on
the real estate. I don t want to forget what show we are on. When you are doing houses
now, tell me how you might be doing your houses now a little bit differently then how you
were doing them in the earlier days. James: I actually found it quite difficult going
from playing tennis and using my body and being a laborer. I was always using my body
to make money. I made some good money. Rick: My God, I am glad there is a radio here. Imagine
all the imaginations out there. Ben: We might lose sponsors after that. James: It was actually
a very big shift from going from physically doing something to mentally creating something.
I had a really tough time going from making $25.00 an hour to $25 thousand on a house,
just by having some skills. Ben: Can I just say to you. I remember I think for a lot of
people, if they are going from a nine to five job and you know every Wednesday or Thursday,
there is a certain amount of money that is going into the bank account to pay the bills
and now you have gone to nothing. It is an abstract and an idea in your head. You are
hoping like heck that it works, that is a very big shift. James: You learn a lot about
yourself during those times. You learn everything about yourself during those times. Rick: So
James let me ask you, the first time that you got one of these cheques in, your very
first cheque from doing something creatively where you invested no money. Describe the
feeling for everybody. James: It was pretty amazing because it was probably about eight
months worth of normal work. I didn t have the house for that long, so I actually made
more money during that period than if I was working. I guess it was surreal thinking that
I could actually achieve something like that, with the background that I do have with not
many social skills. I didn t really talk to people, then going to helping people the buyer
and the seller, and then making money. Rick: How did you feel when you were looking down?
Did you get a real cheque or was it wired to your account? James: I could have got it
sent to me, but I actually went there and picked it up, photocopied it and then to the
bank. Rick: I reckon if you asked everyone about their first cheque, because we all really
needed the money, I bet everyone went and picked it up. Now Sally, you came from which
country? Sally: From Serbia. Rick: Now you have been doing the house business for how
long? Sally: About five years. With you about five years, but we did something before. Rick:
Okay, give me a couple of years before that so the people listening can get an idea of
who you are, where you are from and what your background is. Sally: Would you like just
the house business before or the whole lot? Rick: I guess the last five years. Sally:
Oh, okay. We worked our normal jobs and we decided that is not enough. We wanted to try
something else, we tried negative gearing, and we also donated some money to a share
market. Rick: Sally, with the money you donated to the share market, was it Joe idea or your
idea? I am not trying to start a war here. Sally: Don t get me started doing that. Rick:
I usually say that females make better share traders than males. Sally: So yes, when we
attended our boot camp in 2006, we were negatively geared up to our necks. Rick: How did you
move yourself from that position? I get it, when you are in it. How do you now move yourself
from that position? Was it a case of putting everything on the market and selling it? Sally:
Well we did sell all of our negative geared properties, but it didn t make any sense after
we heard what you were saying in the boot camp. These days, there is not any other way
to buy property and to deal with the properties, but to do the strategies. Rick: How do you
explain to people, when people say, what is it you do? How do you explain what it is you
do? Sally: I am helping people to solve their problems, and I am helping people to find
a house if they can t get the house right away. Rick: Okay, now have you found that
because you have come from another part of the world, that has either helped you or hindered
you in this direction you have taken? Sally: Well that helped me because my brain wasn
t conditioned the way it has been conditioned for people who live here. I was ready to do
stuff differently. It wasn t that bad for me. Rick: That is interesting isn it. I know
when I went to the United States, I listened to a lot of stuff the Americans used to do,
and I used to do things differently. They would say, Why are you doing it that way?
couldn t get them to understand that having apartment buildings that what they would do
is keep one vacant. I would say who s is this. They would say this is for the girl that collects
the cheques. I am like, that is all she does. They are like yes, she collects the cheques.
I was like, why don t they put electronic deposits into people s accounts. They would
say, oh no, people won t pay their rent if it is electronic. am like, Why not? Because
no one has ever done it that way, if it worked, they would have done it. They had a second
vacant one, which was the guy that takes all the maintenance requests. It was some funny
stuff. They wanted to change it, and they couldn t get their head around it the whole
change. They had saltwater pearls and freshwater pearls, and I want to make them into saltwater
pearls to cut down on the filtration equipment. It is just getting people to change stuff
when it is different. Ben: I want to ask Sally a question. I want to ask her about when you
sold your last negatively geared property, how did that actually make you feel? Besides
good, what was the Sally: I felt like dancing because that one was really badly negatively
geared. It has been sold to us by a real estate agent that is the one of the plan that you
bought. Rick: Let's talk about the plan opportunity just for a few minutes. Sally: That was our
retirement plan. Rick: Really so you didn t get it with the intent to actually sell
it before you settle on it? Sally: No. Rick: Talk to us about how the purchase came about.
Sally: Well, that was the period when we were looking for the properties to invest and then
they will go up in price within seven years. Rick: Was this a Queensland property by any
chance? Sally: It is. There was one very nice piece of property. I wanted to say piece of
something else, anyway the real estate agent says it is a building to be built. It is going
to be close to the beach and it is phenomenal. Rick: Did you need to get in early so you
capitalize on today s price? Sally: No, it wasn t that story, but we had one of those
as well. Ben: So actually that is an old journey and you are not going back there again. Now
you do everything positively. Jovan, you were in IT? Jovan: Yeah, I was. Rick: Let me ask
you something. Did you work for Wayne? Jovan: No. Rick: So you were doing IT, and was that
one of those things that you enjoyed doing or wanted to move away from? Jovan: I love
it. It was my hobby, my job and I enjoyed it. I was working in IT hours and hours. I
loved it so much that I decided that I wanted to leave my country and fly 20 thousand kilometers
to another country to work even harder and more. Rick: So you seriously bought in to
those pressures didn t you? Jovan: Yeah, apparently it was booming. There was so much more work
to happen, it was the Olympics and everything. Rick: Okay, so then you got here to what you
are doing. When you came here, did you move back into IT in Australia? Jovan: I started
working in IT straight away and it was pretty much what I expected. Working hard and working
harder. A thing, which we have noticed, is here we have only two weeks, four weeks annual
leave and then there are four school holidays. We had two years old and there are four times
two weeks. We simply didn t have anybody. No grandmothers or nobody to look after our
child. I realized it is nice what I am doing, however I don t really have time to spend
with my family. That was a big problem. When I looked at the prospect and everybody told
us to go to school, get a piece of paper, get a good job, climb up the ladder, and become
a manager, a manager s manager. I looked into the corporations where I was working for.
I was looking at my general manager, which was my natural step in five years. I saw him
sitting there day after day, overworked, stressed, with a mortgage, and with marriage problems.
I said, "Do I really want to be there?"What I am currently doing is just moving myself
to be him in five years. I realized I don t want to be there. Ben: Rick that is interesting
what Jovan just said because you find most people come through initially to start a business
like this, thinking they just want the money. The money does give you some choices, but
then when you actually dig a little bit deeper, the real reason is exactly what Jovan has
just said. It is to give you a bit more quality of life. Time with the kids, less stress and
all that kind of stuff. Rick: Yes, it is really interesting. When people get into small business,
they are going to make money. That gives me more time, more choices and blah, blah, blah.
Have you got that because I am going into a business that was meant to do that, that
makes the money? They are making the money, but they are not getting to do the things
that money is all about. I tell you what Bennie, I think we have actually come to about the
end of another. Isn t it funny how quickly time flies? Ben: It just flies. I bet everyone
would like to listen to us for hours Rick, that is another thing. If anyone has liked
what they have heard today and would like to find out a little bit more, they can go
to You know, people are actually sitting there talking about every
word we are saying? Rick: Is that right? Ben: You can download those transcripts. Rick:
We have got the transcripts that they can actually download on the website. Ben: There
is someone sitting there typing it out as we speak. You can download them at www.
If anyone wants to send a quick question in, you can send a question to support at
Until next time Rick, we are going to go back to your bedroom next time. Unless we can rope
another live audience in. Rick: I will see you next week Bennie. Ben: See you later Rick.
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