Dino Livanidis and Brett Fuley discuss investing in Thailand - Pattaya

Bret Fuley- When is it the right time to invest Dino?

Dino Livanidis - I guess people are always trying to figure out when the right time to invest, but they over look some of the main reasons why you do invest.

Bret- What do you mean by that?

Dino Livanidis - Everyones position changes all the time and you really must consider what will best suit your personal cashflow and look at your long term goals. There is no reason trying to get into an investment if your cashflow doesnt allow you to do it.

Bret- So what your saying is people should look at their cashflow first and see how much is left over?

Dino Livanidis - Yes that is right. I have always had my clients sit with a financier first before looking at investing, because the financier will be able to determine what they can and cannot do.

Bret - But there are many finaciers that get people into property that they cannot afford.

Dino Livanidis - Good point Bret, and I know many people being in a position like that and at the end losing everything they had. I have met many financiers who tell me that they can do that and this and I know straight away they their not the type of financiers I would recommend to my clients. It's great to be creative in finance but only to help the client and not for the financiers sake.

Bret- Youre actualy telling me that financiers do it for their sake and not the clients.

Dino Livanidis - Well some clients are non-educated in the finance area and on the surface it looks like they can afford a investment property but they have left no room for interest rate increase or what happens if they dont have a tenant how do they cover the mortgage payments.

Bret- So what exactly do you recommend clients to do?

Dino Livanidis- Firstly you need to see a financier that will work to your advantage and work with you. Generally you can find them if you ask a friend or even ask us we will be able to put you on a few financiers that will help you.

I have sat with clients and sadly had to tell them that investing in property is not for them at the moment.

Bret - How do you determine that?

Dino Livanidis - Their cashflow and just talking to clients and reviewing their position it doesnt take long to work it out. They may have the best intentions but sometimes you need to work on the foundation before taking that next step.

Bret - What about people getting personal loans for a deposit, do you recommend that?

Dino Livanidis - Bret, it all comes back to what these people can afford, if there on a great income as sometimes that get a promotion to a higher paying job but dont have the deposit, yes they can do it, but for a person who is living day by day on what he brings in, they do need to be carful.

Bret - In simple terms Dino, what do you think the greatest advantage is when investing?

Dino Livanidis - Greatest Advantage......There are a few but the best one that I can come up with is creating an on going income for the rest of your life. People are actually creating a business that will give them a income for the rest of their lives.

Bret - But it's not really an income straight away is it, because you have to cover the shortfall.

Dino Livanidis - Yes you are right but you are starting to create an income and the other huge advantage is... Leverage, people are using the banks money and when the property increases in valve who makes the profit the bank or you?

Bret - You do.

Dino Livanidis - Thats right.... You see property investment is not a get rich quick scheme and I know many that have made a huge amount of money through investing in property but property investment is a long term investment.

Bret - How long?

Dino Livanidis - I guess it all depend where you invest Bret, if you invested in a low growth area well you know it will take longer to create the income I am talking about.

Bret - Then how does it all work?

Dino Livanidis - Ok, Lets say you invested in a good steady capital growth area.

Bret - Ok.

Dino Livanidis - Now property has doubled every 7-10 years depending on where you invest. I know properties that have trippled in 10 years and I also know properties that havnt doubled.

Bret - That understandable.

Dino Livanidis - Right, so lets say we invest just for capital growth.

Bret - How do you guys select these areas.

Dino Livanidis - Well I have property specialists and ever day of the week looking for these areas and they know what is happening in the areas between Brisbane and the Gold Coast and can show my clients why and how the growth will come from.

Bret - Ok, please continue

Dino Livanidis - So lets say 10 years ago you invested in a property around the $300k mark, going by our example it should be worth today $600k right.

Bret - Right.

Dino Livanidis - And lets say you purchased your second investment 2 years after your 1st investment for $350k and another one 3 years later for $400.

Bret - yes.

Dino Livanidis - Well lets say they were all worth $600k each.

Bret - Thats 1.8 mil

Dino Livanidis - Exactly, but now lets say you wanted to retire and just live on the rental income.

Bret - Yeh, but you still owe money to the bank that needs to be paid.

Dino Livanidis - Ok so let look at 2 senarios. 1- Holding them and 2 selling enough to pay back the mortgage.

Bret - Sound interesting, please go on.

Dino Livanidis- So if you help onto the properties, your mortgage would be around $1.1 mil dollars and lets say an interest rate of only 7.5%, that would mean your yearly interest would be approx -$82,500 and weekly approx $1,586.

Bret - But what would your rental be?

Dino Livanidis - Well lets say we were getting 5% rental which is the average rental return in Australia.

Bret - Thats fair.

Dino Livanidis- So, your rental return on the 3 properties would be $55,000 leaving you a shortfall of $27,500 approx $528 per week.

Bret - You couldnt do it.

Dino Livanidis- You see if your were employed you would get half of it back on taxation meaning your out of pocket would be $260 per week approx.

Bret - Thats better.

Dino Livanidis - Well we havnt taken into consideration your running expenses, but lets not go there as yet. So if you were to retire option 2 would be to sell off any investment you had and making sure you sold the one with the least amount of capital gains first.

Bret - Why is that?

Dino Livanidis- Well then you pay the least amount of Capital Gain Tax.

Bret - Smart.

Dino Livanidis - And you sell when?

Bret - I dont know?

Dino Livanidis - When you retire and you dont earn an income from employment.

Bret - This sounds interesting, I like it.

Dino Livanidis - So if you held the 3 properties we said our debt would be $1.1mil, so why dont we sell the 2 last investments, which we can sell for $1.2mil and pay the banks its money, pay our capital gains tax and have 1 investment fully paid for and live off the rent for the rest of your life.

Bret - Interesting, you know I have never looked at property investment like that at all.

Dino Livanidis - Thats if you only invested in 3 properties, imagine you invested in 5-8 investments and held them for a longher period?

Bret - I can imagine.

Part 2 to be continued......