Continuing education is very important in the information age where it is said that on average, our skills have a half-life of 4.5 years.  We become obsolete very quickly if we stop learning in this fast paced world.

In today’s market, It is even more important than even, for businesspeople, entrepreneurs and investors, to expand mindset, realities, and knowledge.  And that’s why it was such as pleasure for us to be able to attend the Richmastery Property College in Palmerston North in the past weekend.

There are many things we were able to picked from the event.  We’ve met very interesting adn inspiring people.  We’ve listened to one of the most up-to-date market commentary from Kieran Trass (refer to another blog, “Window of Opportunity is Finally Opened“).  We also listened to some of the things we may have heard before but it was a bit of an information overload when we heared them for the first time.  So, it was nice to be able to understand more on some of the more advanced topics this time around.

For instance, we have heard of the rent by room strategy before from the Academy in May.  We tried to apply the knowledge to one of the deal that we thought is just perfect for this strategy.  It was a 2 storey house in central location of Palmerston North.  We were able to buy at an OK price, but the property had great potentials to become a “rent by the room” property.  It has 2 bedroom and a bathroom on each floor, with a very spacious lounge area that could easily accomodatea another bedroom.  It also has an attached huge garage that can also turn into another bedroom.  Plus, it has another smaller garage at the back that can be turned into a self-contained sleep out.  Our plan was to add 2-3 more bedrooms and add another bathroom and rent it out by the room.  The property could be rented for $250 a week as it was, but would be able to attrach a much higher rent after completion.  And although we were not able to buy a such a huge discount (30%+) we would still be able to increase the value of the property greatly even at a modest 12% cap rate (remember the lower the cap rate, the higher the price).

BUT, it did not work out because we did not know two of the most important tricks.  One is that we should not have TOLD our valuer that we are turning this into a rent by room because valuer in our area was not used to the valuation of this type of property, and therefore have a tendency to refer to their “comparable sale” valuation method, which is fine for a normal residential property but not so appropriate for this type of investment property (income capitalisation is better choice).  Another mistake was that, we should have completely eliminated our risks and created our own certainty (refer back to my previous blog) by putting our plans on papers and have them verify by the appropriate professionals.  This way, they are obliged to give us the facts (numbers) in their areas of expertise and not their opinions on things outside of their knowledge.

In short, we did not know what did not know and that’s why we could not take advantage of the opportunity that was right in front of us.