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Another One (or should I say Four) Bites the Dust

Discussion in 'General Property Chat' started by skater, 30th Apr, 2016.

  1. skater

    skater Capitalist Premium Member

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    As most of you know, I've been selling some & deleveraging a bit. Well....I've just sold another FOUR. They are a block of four Strata Units, sold in one line in a decent part of Moree.

    We bought these around 2003, looking for cashflow. We paid $210k for all four of them and they were each renting for $140pw on the private market. We went through a rough patch just a few years in, when the vacancies were a little high, and we found out that the Agent was prioritising local Landlords.

    All four became vacant during that time, & when I rang them up and said I was moving to the area and I needed X (insert the qualities of MY units here), I was not told of my own units. So, they were promptly moved to another Agent who got the WHOLE LOT leased immediately to a local community group on a head lease. They've been rented 100% since then with no issues whatsoever. As they are with the Community Housing, getting rental increases has been hard, & to date they rent for $160pw each, a total of $640pw for all of them.

    If they went back on the private market, & had a small reno, they would easily rent for $190-200pw, which we were going to do, but decided that the time was right for them to be sold, so that's what we did. They settled last week for $380k. Yes, we could have got more, if we sold them one at a time....but doing that would annoy the Community Housing, and would take a heck of a lot longer.

    We assumed that a local would snap them up, due to being Strata Titled. It would be easy for a local to reno them & sell for top (Moree) dollar, but it wasn't. The new owner is in Cambridge Gardens, not far from here.

    So....for all those that say you don't get any CG in Region areas, this shows that yes, indeed you do. OK, not as good as the last one we bought for $186k & sold for $490k, but heck....this is Moree, afterall, and it's reasonably close to double our money.....and the best part is that they've been cf+ since day one.
     
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  2. DaveM

    DaveM Adelaide Buyers Agent & KFC Strategist Business Member

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    Great news! Now u have cash to buy me coffee and toasted banana bread
     
  3. DiligentPM

    DiligentPM Well-Known Member Business Member

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    G
    Well done guys! Indeed there is money to be made in regional areas esp with lower purchase prices for new investors taking step
     
  4. skater

    skater Capitalist Premium Member

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    Yep! Fly back here & we can have a cuppa.:D
     
  5. ashish1137

    ashish1137 Well-Known Member

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    Wowww, thatbwas a good return, especially the rentals were awesome.

    Congratulations.

    Regards
     
  6. DaveM

    DaveM Adelaide Buyers Agent & KFC Strategist Business Member

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    Just landed at mascot, meet you at gloria jeans at 1? :)
     
  7. MTR

    MTR Well-Known Member Premium Member

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    That's great news.

    That took 12 years to almost double in value, however you had the cash flow from day 1.

    I guess the trade off is perhaps a property purchased in metro area Syd 2013 would have doubled in 3 years, dependent on area, however would have been negatively geared. But I think you took a bet each way, metro and regional....

    MTR:)
     
  8. sash

    sash Well-Known Member

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    Good point MTR.

    But is the deal really bad. Knowing a bit about Skaters situation where she "RETIRED"...she has made about 160k (after costs). The CGT liability is reduced to 75k due to the 50% discount.

    Now if she and hubby took 40k each...and lets say they have no other income....they would pay about 10k in tax (5k each)! So they keep about 150k in the hand...not bad. But yes 13 yrs is quite a few years.

    Let say someone bought in Western Sydney for 450k and sold for 900k...on paper it looks good. But people have not considered what happens when things like Land Tax..and other items are added in. The land tax could easily add up to 3-4k every year...
     
  9. DaveM

    DaveM Adelaide Buyers Agent & KFC Strategist Business Member

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    3k per annum land tax to make 450k in 2 years of sydney boom? Not a bad roi and certainly not something to be a major consideration
     
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  10. sash

    sash Well-Known Member

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    Yes fantastic....but the liability is the 450k discounted to say 220k.

    Most people have a day salary...they will pay about 110k in taxes unless you have a trust structure or company structure in place. But swings and roundabouts in NSW with trust structures...they will pay the equivalent of about 7-9k in land tax as threshold starts from $0 of land value.

    So in either case 110k in tax to the govt. So you hold 340k. Better to get a similar return across 3 properties...where you can manage the tax liabilities. In that case you can probably get the liabilities down to 10-20k...per property.

    As with anything swings and roundabouts. Having this issue with some of the stuff I might offload.
     
  11. MTR

    MTR Well-Known Member Premium Member

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    I don't at all want to take from away what Skater has achieved.... the Holy Grail.... financial freedom, her strategy worked.

    There will be a different outcome and too many variables to consider regardless. I was just pointing out the timeframe and perhaps this is something that investors may need to consider when buying in regional areas? I purchase State Housing and I know many investors would frown at this, but I am not about to justify it as its made me money.

    I have not looked at regional properties. However, I understand that Steve McKnight many moons ago made a killing by buying over 100 properties in regional Victoria and then he sold the lot. Once the herd jumped in, it was almost impossible to buy cash flow regional properties in regional Vic.

    You can reduce tax by certain structures and this is just one component and of course playing in different markets that are booming will also change the results/bottom line.

    But if an investor was leveraging in Syds recent booming market, 3-5 properties I think I would be quite happy to pay the taxes and either offload a few or all, so many ways to play it and everything would need to be considered.

    I guess its different strokes for different folks, some investors may not have the adequate deposits, can not service loans so regional suits etc. etc.


    MTR:)
     
  12. skater

    skater Capitalist Premium Member

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    Hehe, sure, give me a call. I might be a bit late though, since it's 1.30 now & I only just saw this. :D
     
  13. skater

    skater Capitalist Premium Member

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    NO CGT on this one. :D

    Firstly, the time it took to almost double is similar to most areas. Yes, you can 'time' areas when you buy, if you know what you are doing. Back then....we were looking for cashflow only, because, although CG is nice, very, very nice, we couldn't afford anything in Sydney AND it HAD to pay it's way. So the important thing, at that time, was yeild.

    Secondly, this property was bought in a Trust. Although it was a cashflow positive purchase, others were not, and there are still losses trapped in the trust. This wipes out more of the losses, so, we get to keep it all.
     
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  14. sash

    sash Well-Known Member

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    So you will need to buy another place and make a profit to unlock the loses? Otherwise it would be a shame!

     
  15. Biz

    Biz Well-Known Member

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    Well done skater!

    Did you buy fruit baskets for the tenants for being so good over the years? :D
     
  16. Tonibell

    Tonibell Well-Known Member

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    Great result - well done.

    The cash flow probably returned whatever of your own funds that were invested - so pretty much just straight profit.

    Does sound good compared to the long suffering for profits via negative gearing.
     
  17. skater

    skater Capitalist Premium Member

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    Unlocking the loses all the time & enjoying the 'no tax' that come with it.

    LOL! Never! My lease was with the Community Housing, not the individual tenants.
     
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  18. RetireRich101

    RetireRich101 Well-Known Member

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    I do not realize I had to pay land tax or CGT after making 450k in 2 years..

    mirror mirror on the wall, I hope my property don't increase in value at all..
     
    Last edited: 30th Apr, 2016
  19. RetireRich101

    RetireRich101 Well-Known Member

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    That's 14% yield

    That's still 10% yield for the new owner.
     
  20. skater

    skater Capitalist Premium Member

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    Yes, it was the yield that was the attractive part, all those years ago. It was listed @ $250k, we negotiated it down to $220k, then got another $10k off due to plumbing issues, that our plumber fixed for around $700.:D
     
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