Advice for a failing portfolio and a poor start

Hi all,

This thread will probably be a great source of embarrassment for me but I'm posting here because my situation is currently desperate. I'm at a bit of a loss as to how to move forward with the property investing and how to overcome hurdles. I feel like I have run into a wall with my ability to find properties and research areas, how to negotiate with real estate people in general and how to structure finances.

I started this journey back in 2014 after a year of anxiety and procrastination in 2013 in deciding the 'best' approach. I realised that the best approach for me would be to buy houses with neutral cashflow and in the sub 350k range to maximise usage of leverage with lower deposits. So I went on realestate.com after reading the Logan threads expecting to find 7%+ deals "easy" to come by. Instead what I found was deals around the 6.3% mark and stupidly bought them anyway. I was naive and stupid at the time and thought that was the best available, with no consideration to future development potential etc.

My current portfolio is therefore a bit of a mess:

- OTP Unit inherited (2009) Western Sydney 650K @ 80% renting 560pw
- Logan area house 245k @ 88% renting 300pw
- Logan area house 271k @ 95% renting 340pw
- Beenleigh area house 245k @ 80% renting 300pw
- North Brisbane house 320k @ 88% renting 360pw

It seems like the portfolio is at all different price points, different LVRs and generally poor yields. I haven't done any valuations for the properties except for the Sydney property which is the only one that is making money (although I loathe to pull out too much due to going into negative cashflow). Why I even bought the north Brisbane house is even beyond me now, "diversity" probably I have been told now that it will be hard for me to get further loans due to changes in servicing as my earlier brokers all recommended Macquarie bank and now I know that was not the right choice at the time and I stupidly did not question that.

Just to clarify I am also a bit of a social ******, I find it quite difficult to build rapport with most selling agents. I have learnt a list of things to enquire about when talking to them for example: any other offers on this property, why is the owner selling, what favourable things to include in the offer to make it suitable for the vendor etc. It seems like a lot of them do not return phone calls even calling them several times. Some of them do not even respond to submitting offer documents by post, call them back and they tell you that they've accepted another offer already. In addition, some real estate agents use the "silent auction" type of technique, and others use the "submit your best offer once". I'm at a loss for how to deal with them.

I feel like this is my last opportunity. Probably the only things going for me at this moment are that I have managed to pull out some equity sum from the Sydney property and am also afforded the luxury of living at home which means I can save about 95% of my employment income. I really don't want to repeat the same mistakes again. One thing that I have realised is that people on this forum have funding their purchases through their properties increasing in value, but I have not been able to do this yet (except for the inherited one). I have been looking at Adelaide recently, but thought I might post this before buying.

 

Um, ok, so what is the question?

You started in 2014 with now 5 IPs that are supposedly not performing and you think that you are failing?
Hi, I start in early 2013 and have 2 IP, most have not grown much. And by most, I mean 2 of them It's a long term game, so I personally think you have a great start. While there are others who have done better, expecting that everything you buy a year ago will all go up in value is very optimistic no?

 

ummm.... You call that a failing portfolio?.......... I'll be happy with that portfolio with a strong cashflow.
I'll be happy to take 1 or 2 off from you hahah!

 

5 IP's, 6.3% yield....terrible.

This should be in the first world probs thread.

 

I cannot see the pain you are going through. So, I, heavy heartedly, propose to buy all your Brisbane properties. Poor you

 

@hotmail

Are these figures Inc stamp duty and closing cost?

Don't beat yourself as yet, you haven't done bad...

You bought entry level price...profit won't be fantastic.. But there will be profit

Brissy properties give or take $1m @ 10% growth = $100k
@20% = 200k

If you work out your total outaly of deposit, you have done better then some blue chip stock on market.

 

Stop beating your self....!

 

gotta be a gee up.

 

And pick up api magazine June edition.. Read @MsAli interview....that will cheer you up!

 

You need more than 6-12 months in the game to make money. Dont give up, thats the mindset that makes most "mum and dad" investors chuck it in after a year or two

 

It's good that you wrote this all down in thread form.... In 6 -12 months you can have a good laugh!
nothing wrong with it and off to a great start.

Ps, is this a joke??

 

Fellow introvert here, so I understand you somewhat. I don't enjoy talking to agents, property managers or tenants, I'm not fantastic at building rapport with agents and none of it is part of investing that I'll ever love. But I do it as it's part of the big picture and I know that I can't do step B without having done step A first.

As to your portfolio, nothing much wrong with it. It sounds like you should have gotten educated before investing, but you haven't gotten yourself into any really bad properties, so it worked out for you.

You're looking at it the wrong way around! If you get a second mortgage on the Sydney IP, you allocate this in your financials against the property that you're buying, not the Sydney one. That way, the return from the Sydney one stays unaffected and you have to do your calculations on the new property that you're purchasing at an LVR of 105% (assuming you might borrow 25% of the purchase price against your Sydney property and 80% against the new property).
If it doesn't pay back at 105%, you'll be weakening your cashflow, if it does, you'll be strengthening it.

If you feel the pain of paying for the properties now, maybe look whether your financing is right. What interest rates are you paying currently? If it's more than 4.4%, it's probably too much.

 

I agree with all the other replies. You've had a great start - just be patient!!! Your Brisbane properties will see a fair bit of growth in next 3 years.

 

So, whats failing about it? You have 5 IP's dude. Some patience and they will shine. Are you losing money at the moment? Cash flow looks pretty good on your buys so far. You've done more than a lot of people on this forum. I think you've kicked ass taking action as you have, most people just talk and read for years without doing anything.

 

It's not as if you are sitting on a pile of dynamite,well done..

 

As the other posters have said I'm not sure what the problem is? Your yields are fine, I'm not sure what IR you are paying and are your loans IO?
For long periods of time investing can be boring, slow going and requires patience.
The capital growth fairy only comes along every so often and sometimes unexpectedly.
Just because people post about huge gains in xxxx years doesn't mean it's guaranteed over the short term, if it was everyone would be in the game. I'm not sure you fully understand the rules of the game yet and you have made quite a few purchases in a short time frame.
Unless you buy properties with a really high yield some of your funds may be required for a time until rents grow sufficiently.
If you want quick gains the share market might be the place.
Your Portfolio looks fine to me, and I share your feelings regarding dealing with agents.

 

If I had your portfolio I'd be as happy as Larry!

If you think your net yields aren't what you expect, perhaps you might want to look at your expenses? Review insurances, PM fees, etc. Are your rents at market rate?

 

Offer documents by post? Don't you email your offer if its not verbal?

 

I agree with everyone here. I don't see the problem. The income looks fine. You only started last year and have 5 IPs. LVRs look fine. You have the luxury of living with the oldies. This gives you a MASSIVE advantage when the IR turns around. Not all investors and sociable (though it can help). Your difficulties with agents is common especially in a moving market. Relax and keep learning. You have come to the right place to improve and be a better investor. We'll done for getting this far.

 

Fix yo mind ...not your portfolio....the issue you have is instant gratficiation.

You would have bought this at near bottom of the cycle....let the growth in Brissie over the next few years run it cycle.

Youl be delighted in about another 2-3 years. By the way ...it looks like your portfolio is self funding (mostly) congratulations.

Now go to the naughty corner!