January 18, 2018 by Dymphna

WTF? You can only own 2 properties?

This is the key thing that makes me different from all the others

So Australia’s supposedly largest residential property investor was in the Australian Financial Review last week, taking a pot shot at APRA.

Kevin Young reckons 20,000 of his Property Club members can no longer afford their mortgage after the banks shifted them from interest only mortgages over to principal and interest.

“How would you manage if your bank told you you had to pay 45 per cent more per month on your mortgage?” Kevin Young, founder of Queensland’s Property Club (previously called The Investors Club) told The Australian Financial Review…

Mr Young, who claims to own a portfolio of nearly 200 properties making him the country’s “largest individual residential property owner”, said he had been forced to sell some of his own properties due to the lending changes.

Interest-only loans typically cover a fixed period (up to five-years) and are charged at a higher interest rate, before reverting to principle-and-interest repayments for the remaining period…

“APRA has done a lot of damage trying to fix a problem that did not exist,” Mr Young said. He said the changes effectively meant that a typical investor could not own more than two properties and predicted more retirees would have to sell their investments and rely on the age pension.

Well, I think we’re on the same page with APRA. I also reckon they’ve come down overly hard, and overly blunt. If there was a problem (and look, I still need to be convinced) there could have been better ways to deal with it.

But what about this claim that his investors won’t be able to own more than two properties?

Are my investors in the same boat?

The short answer is no.

Because the real problem here isn’t so much what APRA’s up to… it’s Young’s business model.

The Property Club provides members with ‘free’ advice.

Wow. That’s charitable. So how do they survive?

They make their living off “referral fees” from vendors selling to property club members.

Yep. They’re taking a cut.

Now let’s assume the best. Let’s assume that they’re out their sourcing top-quality investment properties at bargain basement prices (and they’re not one of those agencies flogging off any old crap in the name of commission).

The problem here is that your business model still relies on investors who are dependent on your advice. If you’re not empowering them (because your business model doesn’t work with empowered investors sourcing their own deals), then you keep your clients ‘infantilised’, so to speak.

And so what happens when the investing landscape changes? They find they’ve had the rug pulled out from under them and they’re going down.

Apparently, 20,000 at a time.

My approach is different. I’ve never sold a student a property and I never will.

And I pride myself on empowering people in all aspects of their lives, especially when it comes to property.

And so when the landscape changes, my students have skills they can draw on. If a strategy stops working, they might have half a dozen other strategies they can go to.

And with my emphasis on asset protection, even in the worst case scenario where a deal really sours, it can happen with out taking the whole ship down.

And with a focus on cashflow, and with strategies to build cashflow yourself, there’s no way my students are going to get stuck at two properties. (Kind of sounds like he’s still getting them to use negative gearing, doesn’t it?)

So don’t believe the hype. If someone’s telling you you can’t get past two properties, it might have more to do with their strategy and business model than it does with your potential.

As the saying goes, the most expensive advice you ever get in life is free.