Do any of these terms mean anything to you?
Negative gearing.
Cross-securitisation.
Owning everything in your own name.
If you said yes, then we’re willing to bet that you’re already an experienced investor. You probably already have a bunch of assets and you’ve used these techniques to secure them.
And that means you need to learn more about proper investing. If you don’t, you could end up losing it all if something goes wrong.
That’s almost what happened to Neil before he discovered I Love Real Estate (ILRE).
Neil had a pretty impressive asset base long before he ever learned of ILRE. To the outside world, it seemed like there wasn’t anything more that he could learn about investing.
He already knew it all and he had the assets to prove it.
Neil started investing in property so that he could build a nest egg for his retirement. But along the way, he’d gotten sucked into the negative gearing trap. While he had a lot of assets, very few of them produced an income, even at his later stage of the property game.
And worse yet, he owned many of them in his own name.
If something went wrong with his strategy, such as his cash flow drying up, he stood to lose it all.
In Neil’s case, it was a lawsuit that made him realise the errors of his ways.
In 2008, Neil had a property that he rented out to four ladies, all of whom had disabilities that meant they required a carer.
One day, the carer came to the property to find one of the residents sat on the back steps.
The problem was that the tenant was completely naked at the time!
Naturally, the carer went over to convince her to come inside and get dressed. But as she did this, one of the other tenants saw what was going on. Worried that her fellow tenant would get in trouble, she came over to help. Unfortunately, she knocked the carer off the steps in the process, causing her to hurt herself.
The carer went to a solicitor and started looking into Neil’s properties. She saw that he had a lot of assets in his name…
A lawsuit related to the incident soon followed. And because Neil owned all of his assets in his own name, every one of them was at risk.
They called Neil into a meeting and asked how much he’d settle the claim for. Neil knew that he wasn’t at fault. The stairs were fine and the injury didn’t come as a result of anything wrong with the property.
So, he said zero…
And that led to Neil getting left out of the negotiations.
He had to sit in the room while he watched solicitors go back and forth.
They eventually settled on $300,000. Luckily, Neil didn’t have to contribute any of his own money to the settlement. However, he still had to pay $10,000 in legal fees. Plus, he got a harsh wakeup call about just how risky owning assets in your own name can be.
Since then, Neil’s worked with the ILRE team to change his asset structure. He has a blueprint in place to make sure that he never ends up in a similar situation again.
And now, he’s working on several deals with our help.
The biggest of those involved a development on a large block of land. That cost Neil $800,000 to acquire. However, once he’s finished the work, he anticipates that it will generate an $800,000 profit.
With another deal, he’s generated a $25,000 passive rental income. And further deals have resulted in him turning his previously negative cash flow into a positive one. In fact, he’s gone from a negative $20,000 cash flow to a positive $45,000 one.
Most importantly, he’s built asset protection strategies into his investing.
Neil’s story has plenty of lessons to teach us. We’ve picked out three of the most valuable.
We’re going to keep harping on this because it’s so important.
When you buy in your name, you place your assets at risk. That means that the courts can come after your assets if you start struggling with money.
Or in Neil’s case, solicitors can come after them if you end up in a tricky legal situation.
You need to have an asset protection plan in place before you buy any property.
Neil may be one of the most experienced investors that ILRE works with. However, his story shows you that experience isn’t everything.
There’s still so much you can learn, even if you’ve spent years building up an asset base.
The key lesson here is to take every opportunity that comes along to learn new things. You won’t need everything that you learn, of course. But you may just learn something that can help you to solidify your current position as an investor.
Neil will tell you that he tried to go it alone with his investment strategy for a long time. That means he tried to control every aspect of what he did.
But it’s that line of thinking that may have led to him missing the advice that could protect his asset base.
There are always people who can help you to make more money from your investments. However, you have to let go of some control to take full advantage of their expertise.
Neil isn’t the typical IRLE success story.
His work with us has focused as much on protecting his assets as it has on new deals. However, his newfound knowledge means that he’s now safe to pursue any deal that takes his fancy.
As a new investor, you can learn from his mistakes to ensure you get it right the first time. Always invest for positive cash flow and never buy in your own name. If you do either of these things, you’re building more risk into your portfolio.
