Always better to buy above the median

Not 15 years Cliff but at least 10 I think, I value your posts, so I'm not being flippant.

Not everyone likes developing / renovating though which doesn't leave you with a whole lot of options, especially if you don't feel confident buying in a different state.

Look at the young lady recently who mistimed the mining market, now there is a reason to tread with caution especially for the inexperienced.

I'm certainly not a developer trying to flog off stock, my parents have shown me that buying, holding and actually paying them off has put them in a position at retirement age that most people would be extremely envious of.

Sure maybe it's taken longer than some developers / renovators, but only the ones that got it right. And everyone has a different sleep at night factor.

That's not my style though, I have chosen a different path so see how it goes in the long term.

Horses for Courses.

 

I'm already envious of the retirement part

 

2001 - 2016 = 15 years

This post in 2003 marked the end of my initial learning curve . We'd bought in Logan in 2001 along with many other members and there was much discussion re that at the time .

We've done subdivisions *2 , but unlikely to do it again . Our easiest money has been made by buying as a market is about to take off ( or is totally dead eg Sydney post GFC ) and riding it through the boom period. We've completed that cycle in 5 different locations in the last years and currently have bought in three further places in the last 2-3 years

We have been able to fast track our financial situation by timing our buys as have many other long term members , but having only joined mid last year you wouldn't have seen the path that some members have taken over the last 15 years.

I don't know one regular member of the forum who would have advised buying in remote mining towns , especially at the levels / time mentioned . I've always steered clear of them .

I do buy and hold , but for me timing is the one thing that accelerates that process more than anything else .

Our first PPOR went side ways for seven years after we bought it . We haven't made that mistake again .

Cliff

 

No one who understood it properly would bother trying to criticise your approach Cliff, the evidence is far to difficult to fault. You have also executed the theory with discipline, at scale and on a repeat basis. I have nothing but immense respect for that. The OP was asking about over/under median however in any given market. It might be helpful to them (and it would at least be really interesting to me if no one else) if you could comment on the types of market positioning (ie bottom quarter, sub median, over median, premium) you have found worked best (within your macro cycle based approach)?

 

no idea why developing even comes into play, I thought we were discussing timing the market?

Who is criticising Cliffe?
There is no need to justify a strategy if its working for you.

I thought we were here to share views and discuss strategies etc, its not a competition. If people decide to take things personally cant help that one. The forum is much bigger one person

There are plenty of successful members on this forum and we can learn from everyone.

A simple exercise what markets/States provided growth over the last 3 years?? 40%+ (Perth, Melb, Syd)
Would it make sense to jump in during 2012-2015/16, those who did have killed the pig, its that simple. For those who did not jump in, so what, perhaps there is something to learn here, otherwise ignore it. If you are doing things that work for you, then do what works.

Plenty of threads on Adelaide and Brisbane talking up these areas, but they have yet to provide the growth we have seen in the above States. If you are not interested in timing the market then that is fine, don't do it ....



MTR

 

So Cliff if I am understanding your last post correctly, you don't develop or renovate, you pick a state / city and buy just before each is about to take off ?

 

BA

We've bought at several different levels , PPOR's on North Shore , " nice investment properties " and Lower SES .

When a market is about to take off we tend to gear up and buy at the lower end , though not right at the bottom of the market ( in terms of type of houses ) . You tend to get bottom of the end tenants who are problematic , which we found out in Logan in 2001 , though that didn't stop us making nice capital gains . In Rocky , while other members were buying around 60-65 K we bought a couple of steps up and had no tenant issues . Interestly in Goodna recently , there don't seem to be as many really dodgy properties of the nature we could find in logan in the previous cycle , so we probably bought pretty close to the bottom of the market , though the one's we've bought are all neat clean tidy solid little places . There are cheaper places , but they are either renovator specials , flood prone or backing on to transmission lines.

When we think a market is at the bottom ( Mosman 2009 ) or in the early stage of movement ( Manly , Wynnum 2013 ), we tend to look around for good deals / bargains in nicer areas with the aim of keeping these long term .

Cliff

 

MTR

"Buy and hold is the mantra of developers trying to flog off their stock at the wrong time of the market ."
Cliff

No disrespect to Cliff but his method is buy and hold ? in different area's yes but it's still buy and hold.

I think you guys forget the amount of newbies who read and don't post and this is for them.

Everyone's strategy and time frame is different, mine is to hold 10 houses in Perth then develop and sell in each state as the market changes.

Sure I will have to pay more land tax, but I don't have to pay management fees and I can do maintenance myself, plus I have more control with renting them out etc..

Is the person who buys ten houses in each market as it goes up way better off than the person who builds 10 houses in the one market and waits for that cycle to come around ?

Of course above or below median is another option.

No right or wrong in my opinion, just a different approach.

 

There are also some who have attempted to emulate previously successful members, but are short on demonstrating any real knowledge or details themselves, just a "Do what I did, I'm awesome!" mentality.

 

What can I say, we were all newbies once.

I never stop learning, am relatively new to developing and have made my own mistakes, I take responsibility for this. have to otherwise I am a fool.

MTR

 

And you know I wasn't talking about you of course.
You ARE awesome MTR!

 

BTW , I didn't see anyone as attacking me ...

Unlike some others I don't have a Master plan of what I'm going to do , basically because things change . The markets change , we change , though we have done things in the past we will repeat.

We have subdivided , we have renovated , we've bought at the bottom of markets , in the early recovery phase of markets and when I think markets are about to take off .

My personal observation over the last 15 years is that the easiest and fastest money we've made had been when markets move in a boom so that is one situation I'm always on the look out , and my personal observation is that it is relatively easy to pick those times .

At any particular time , I look for what I think is the best opportunity available.

cliff

 

Which state are you heading to next Chomp?

 

I'm probably another 2yrs away from finishing accumulating. So hopefully the Perth market will start to turn shortly after that. Which would be perfect for another development to sell not hold.

 

Thanks Cliff.

So in many, but not all cases, it appears you have also gravitated to the quarter that sits just below median (ie below median but not the worst houses) and your points further up taken as this factors is not the primary wealth driver, which is for you TIMING, but it would still seem to me quite a good risk reduction option to buy the low risk, good return options underneath your prime strategy of timing the market. Quite an attractive pair I think. As always, horses for courses and there will be exceptions.

 

@Chomp are you holding any sites in Brissy mate?

 

Timing , yes
.
Only time I look at the median price when buying , is in relation to direction of the trend.

Re median price , and where my buys sit in the market it's not something I look at when I'm choosing properties so too be honest , I couldn't say , and if I can't say , neither can you make assumptions about where my properties sit in relation to the median price.

My criteria are , no significant negatives ( busy roads , floods , structural damage etc ) sitting next to an industrial area etc and properties that are likely to be easily rentable , ie fairly typical for the area , neat clean , tidy .

I know in cheaper areas I'm often buying a fair way below the median .for example Median for Goodna was 290 last year ( 2015 ) while we were buying in the 215- 240 bracket which is pretty close to the bottom of the market and not sitting just below median . But all of those properties fitted my criteria .

Cliff

 

Oh, ok, so it isn't even something you consider more those other factors you mentioned. Fair enough. I was trying (perhaps too hard) to extrapolate from Jan's original idea that sub median is often lower risk and going up 1 rung off the bottom avoids the riff raff. Of course it is never quite that simple but just trying to see whether your findings confirm or don't confirm that idea. No sweat if its irrelevant its irrelevant. I know what you mean about Goodna the amount of 7-12 yr old project homes for below replacement price is unusual eh so it behaves a little differently. Glad you found no probs I went up a while back and there are some parts of town where the soil is highly reactive and I could put 2 hands inside cracks in brickwork in some places in some of the cheapies. Mostly its not like that but some areas are. Nothing a good build inspection can't identify.

 

Saw a couple of properties that had issues , but when you've looked at enough houses , you know to bypass those anyway .....

Most of the places we bought were older than that , so any issues with soil would have been well and truly obvious .

There are pockets of areas with reactive soil , but that was something we picked up on from reading posts on the area on the forum . The other well documented issue is the mining subsidence and there is one property on the market at the moment that is in one such area .

The scope of where the floods got to is a bit of an eye opener in some places . You're standing half way up a moderately steep hill , with the bottom of the valley well below and then you find out the property is flood affected .... Saw that in a couple of places in Ipswich .

Cliff