Assets, Duds & Liabilities.. Where to go from here?

Sounds ideal as an investment location.

 

Overwhelmed by everyone’s honest & open opinions, thank you! Really trying to absorb it all, will take some time but I’ll get through the options in front of me into the new year. Surprised as I was initially expecting a lot of messages yes go for development in Sydney, improve equity & rental return, but none were of that nature so I’m thinking twice about that idea now.
The majority of my loans I was in the 50k salary range which shows acquiring property on a low income is possible, the big drawback however was always having loan approvals around the 300k mark and definitely restricted my options. Explains why I have all properties in the outer fringes. I was always motivated by the experts saying if you have 2 properties you’re in the top blabla % of property investors, if you have 3 blabla %.. and so on.. so I guess thinking I was moving ahead of the game by purchasing as soon as I could. Very clear in hindsight and a lesson for some that saving for a bigger deposit, waiting for great equity base, then acquiring a greater loan and buy a much better located property would have been a wiser decision.
@DoAndroidsDream your figures on Pakenham are super positive regarding the vacancy rate, DOM, CG above 5%. If this was the slow way to growth I’d hold, & considering the property is new hopefully less maintenance issues for a while. But if it seems if using funds toward a better acquired property I’ll have to consider selling.

I agree @highlighter dumping apartments; they seem to be nothing more than money pits! I agree also with the majority, clear out the outer fringe underperformers and end up with quality.

@dabbler appreciate your comments, yes Sydney is an IP, likely will hold this one for the long term as it’s the only development potential one I’ve got so may keep this up my sleeve. With Gladstone I’m trying to use a crystal ball to think if it will give me any recovery over the next 3 years otherwise I’ll be forced to cut a massive loss.

@2FAST4U definitely screwed by 1 BA, lesson don’t use a BA buying in another state to there they are based! Morningside time will tell on that one.
Cheers @MTR nothing more I’d love to do than reduce stress! It stresses me out that I get stressed! Selling the lot is scary knowing I’ve put all my hard earned time & energy this past decade thinking I was getting ahead & setting myself up for an early road to retirement. Dream plan was 50… but I’ve accepted that I need to go back to the drawing board and rewrite the pathway forward. Might adjust that to 80 now haha!
Ok back to the plans ahead, first challenge is working out the order & timeframe of clearing out the dead weight. I’ll definitely be needing some good tax advice along the way.
I’m going to have my mortgage broker request updated market values to see where the portfolio is currently at, question if do this:
· If the banks values Gladstone & realizes the value is no where near the loan amount will this cause major issues or will this happen only upon selling?
· The Lynbrook property which I may offload, the 7 year PPOR exemption recently expired and is crossed to 2 other property’s, one of those is crossed to another. Seems like my broker caused a criss cross mess! Should I uncross all loans prior to any sales or this best done when I go through a sale?
Super thanks & have a great rest of the week!

 

Hopefully your broker did not cross collaterise Gladstone!!!

Do some reading on cross collaterisation on this forum and Somersoft. That's probably one of the greatest finance lessons I learnt from this forum- avoid it at all costs. Most banks (instructed to do so as it gives them more control of your assets) and brokers (quicker for them) will automatically cross collaterise you unless you specifically instruct them not to do so.

 

nasty one, you are not the only one, made same mistake when I started

 

keep working it. Accountant is very important

may be worth contacting re agents in Gladstone, my fear is even if you want to sell there may not be any buyers. A couple of forum members in same scenario, if the property is old may difficult?

 

You sure? I'm in Darwin....its carnage up here and it's all playing out pretty much as @highlighter has described.

 

Here meant Sydney & I would say Melbourne too.

I know zip about Darwin property really, it may as well be on another planet. Are they bulldozing new estates, is there new estates abandoned ? The prices, like in Perth, seem high, so why would people invest there ? does it suffer from relying on mining ?

Anyway your not going to be seeing new estates that are empty here, people do want to live in them, they cannot build enough it seems & any drop would probably be a welcome relief.

There are lot of places to live in Australia, clearly they can't all be as popular as each other, and each area has it's own thing going on, on that note I know little about Ireland too, but he was talking of a major city.

 

I agree. I can't imagine the day would come where the government would bulldoze a new housing estate (after it was built) in Sydney or Melbourne like they did in Ireland. And yet I was hounded for saying Australia is not Ireland... hmm...

 

There is a reason so many Irish are coming to live in Australia and few if any aussies are migrating to Ireland . hmmmm..i wonder why that is

 

I'm not sure this government would bulldoze new estates if a large correction occurs. They'll probably do the opposite, and let them rot, or sacrifice the wider public finances to attempt to prop up their developers if the economy crumbles. Inaction and placing is this government's thing.

Bulldozing estates helped the recovery. Many became derelict and many developers went bust when estates were half finished, which is often unsightly and can lower values in an area. Property is a bit like a game of musical chairs. If you want the game to start again after some numpty added way too many chairs, you need to take some away. Bulldozing and taxing abandoned developments was a way to clear the oversupply.

 

There can't be too many houses in Sydney, they can't keep up.

Also for govt to knock down, they would need to buy, don't think they would do that. Apartments however, well in places there is probably too many, in Sydney, maybe briefly, but can't see a bank allowing anyone to touch them.

 

@Clayton - be good to hear a follow up. How are the values of your Melbourne (Pakenham and Lynbrook) and Sydney properties looking these days?

 

Don't be too hung up on CG (and don't be disappointed)...if it happens it happens ...it it does not then focus on the net profit (eventually it will happen ...most likely)

Purchase properties as if there is zero CG

The net profit is the most important (after capital expenses {capX} needed to maintain income)

I find my depreciation is not much different from my CapX so net profit is after depreciation

Any net profit, use it to reduce debt ...

Property investment is a long term investment

 

Things are nowhere near as bleak as you think. Property is a long term investment, & you've only had most of them for a few years. Be patient! Let them mature!

The only real downer is the Gladstone property. If it's not causing too many problems, I'd hold onto it. It will only cause a capital loss if you sold it.....so I'd ride it out & get out as soon as things improve.

I would suggest seeking a good broker, and get your loans un-crossed. I would also monitor the rents and put them up whenever possible. Even a modest $5pw, turns into $25pw if you can increase all 5 of them. Do that twice a year & you've got an additional $50pw. This whole game is slow & steady.

As for the St Mary's house, well I don't think I'd jump into developing that just yet. Developing is costly, and you want to make sure that you end up further ahead than you started. I'm not convinced on the GF option either.....unless you intend to keep it WITH the GF and forego the development option. By thinking about a GF in the short term & development in the long term, you are just throwing away the $$ on the GF build. You'd want to get a pretty good rental return to even contemplate that option. Although, what I would consider is if you could keep the existing house & subdivide to build a second.....but most of the houses are aren't in the ideal position on the block to make this possible in St Mary's.

Basically, what I'm saying is take a good hard look at this property & work out what you want to do with it. If you ARE going to develop it in the future, just milk the rent out of it for the time being....don't entertain improvements, just keep it well maintained for the tenants and keep the rents at market rates. If you haven't kept up to date with the rents, you may be able to increase the rent on this one right now.

 

Hey mate, cheers for asking! I would say your market view on the south east was spot on almost a year ago! Lynbrook maybe 50k higher & Pakenham that plus more. There's no question had I been back in Aus I would have done a splash reno & unloaded these both, but fortunately holding on to save myself paying the full CG on sales saved me. The governments change to stamp duty for 1st home buyers has probably helped boost the area. No doubt happy with your own Pakenham investment?
Interestingly though seeing some nice equity gain but I still lose sleep on the what the Gladstone unit has done to me!

 

Appreciate the comments Skater! Increasing rental in the fringe suburbs has been challenging over the years, once a tenant moves out it needs to reduced back to where i started. I'm onto my broker as we speak as I'm getting screwed with the St George 1% interest rate increase for ex-pats, if there was any way I could re-finance all my loans & uncross I would but now with the tighter lending & servicing for expats the salary would unlikely be possible. Agree at this point to hold onto the Sydney property, it's taking care of itself.. where I just realized I'm getting hit hard right now is a Qld land tax bill just came in of almost 2 thousand for those 2 Qld units!

 

Hey guys.. long time no post, so the time has come & looking to leave Hong Kong in 2018 for a new working life in Aus & want to ensure my plan seems sound before resigning. Thought I'd post some numbers of the portfolio & see if any alarm bells ring out for the number crunchers.
About to lock in fixed IO which will reduce my yearly holding costs over 10k, had thought about P&I however with working conditions changing I need to minimize outlay.

Brisbane townhouse is the most recent purchase & hasn’t moved, Lynbrook the likely first to switch out. Gladstone is bleeding money, looking as though beginning of the recovery cycle but remains as a loss to hold, huge loss to sell.

SHORT TERM PLAN (EARLY 2018)

Security switch one of the properties, likely Lynbrook (VIC) & buy in Gold Coast 500k mark (likely townhouse). Myself & my wife will live in this property 2-3 years. Will then keep as an investment property.

MEDIUM TERM PLAN (3-5 YRS)

Sell or use equity on Pakenham (VIC) & Morningside (QLD), planning to start a family so will need a bigger family home.

LONG TERM PLAN (5-10YRS)

Either sell North St Mary’s (NSW) now or use equity in the longer term to build on the wife’s land (South East Vic).
@sash & @euro thought I'd throw you in this as I was talking about the North St Mary's development, I'm still working out of this is a sell or long term hold.

 

Did you buy many investment properties in Hong Kong or just the apartment you live in?

 

Hey Beano! Biggest regret is not buying here, now its ridiculous. Every year they say it will pull back, every year it goes up! Had a friend spend 13.5m (Aud2.3m) on a tiny 1bd shoebox! Luckily for me accommodation was provided which allowed savings for the above properties, I can imagine the fewer grey hairs I'd have had I bought here instead of Gladstone! If I wasn't leaving I'd be looking at nice rooftop apartment in Mui Wo or Pui O. Where have you bought in HK?

 

This might be a bit "out there" but I like Tung Chung on Lantau Island. Near airport but there's still a good train service to Hong Kong. And the general feeling of the area is that you have more space, more nature. Its got more expats than other parts of HK.

Edit: ok I just googled mapped Mui Wo and Pui O. Great minds...