quote:Originally posted by Halebop

WNS an average is the basic building block of benchmarking. Benchmarking is a basic building block of performance excellence. This is why I often comment on market "average" performance benchmarks like share indices. Knowing an average score is a key criteria for recognising, determining and emulating out performance. Something as simple as a control chart using a single standard deviation above average can help identify the out-performers.
Halebop, I agree with everything you've said here, and I use comparisons to the average all the time in my share-market investing.

What I was trying to say with what prompted your comment is that discounting a whole asset class (eg. residential property) as an investment option, because of its historic, inflation adjusted, maintenance adjusted AVERAGE returns isn't very empowering or profitable.

Looking at specific properties, specific market situations etc is what's profitable. There's always profitable bargains to be found.


quote:Originally posted by Halebop
Because with wraps you are taking operational and leverage risks, I'm not certain that knowing you might earn 40% is actually an acceptable risk / reward trade. What is the benchmark? For me it could be my own returns during this bull market phase. They have "averaged" above 40%pa without any leverage.

Posted by JoeKing...

Here is a real life example. He was 64, she was 56. and desperate to own their own home. Both worked, had good incomes but not enough savings history to satisfy the banks. I bought a modest 3 br house for $95k Rotorua,(used 100% bank finance (will explain how if anyone interested) fixed 3 yrs 6.8%) sold it to them $135 on a WRAP on $9k deposit (plus $12k gst refund) 9.5% int. 35yr term.
Their repayments $274 pw (the same house is rented today for $300pw) my outgoings $152 (P&I), cash surplus $122 pw. They completely refurbished the house, and resold 2 years later $195k. Added an inheritance to profit bought a couple of rentals as prices were rising Rotorua, used equity to buy nice home, rental incomes from 4 properties to pay for it, and send me a nice Xmas card and bottle single malt each year. Can't all be bad. Remember I had not paid one penny for this property gross profit $52,000 plus satisfaction of helping someone achieve their dream (priceless!) everybody wins.


JoeKing has none of his own money in the deal, therefore his return is infinite. There's a number of ways to structure these type of deals so that you have none or very little of your own money in the deal... or to get your money back very quickly.


In this particular deal, he gets their $9k deposit up front and a cash-flow profit of $122pw (x 52 weeks = $6344), so $15,644 back in the first year. I don't understand the GST part, that's different to what I experienced with the deals I was involved with.

Even if he was to put down a 10% deposit of $9.5k for his $95k purchase, and say $6k to cover closing costs (stamp duty, legals, mortgage insurance), he's gets all his money back in the first year, then $122pw profit until they refinance, at which point he gets his back-end profit which is something like $37k... $135k minus $9.5k deposit minus whatever their reduced the principal by (say few $k) minus $85.5k (his loan). For the particular deal detailed above, this happened within two years, which is fairly typical.

[b]
The average person would only need to have about 6 or 7 of these deals going and they would have their living expenses covered. Shrewd Crude (for example, since he started this topic) could pay