Bad investing decisions, expensive learning process

@Hodgo I'm another victim of ego in the Perth market of 2014..

I had just split with my partner and we sold our place, making a tidy 20% in 2 years. I threw my takings at a townhouse as a PPOR. 2 weeks after settlement I had just finished moving in and work gave me 1 week to pack up as they were moving me to Melbourne. I decided to hold and rent as selling straight away would have chewed a big chunk of my equity.

As you mentioned, I'm also now a data hound with lots of lessons learnt. It hurts looking back to see all the key indicators of a market peak in plain sight. Around the time i put my offer in, population growth had peaked and dwelling completions were ramping up hugely. Employment growth had slowed but it was more concerned with the positive press about interest rates falling and "surely sentiment can't turn that fast".

A lot of these same identifiers now ring true of the current Sydney market (although job losses shouldn't be quite as extreme as WA had). I'm eager to see how it plays out, and if my "lessons learnt" have actually taught me something or if I'm just aimlessly speculating on something else now.

 

@JL1 "surely sentiment can't turn that fast" it really did turn fast didn't it? I was at auctions in my area for 4 weeks in a row right at the end. Sentiment turned really fast. It was big sales one week and 2 weeks later everything passed in. The market in my area has not recovered.

 

Hodgo, why don't you flick him an email and then let us know how it all worked out?

 

Bellamy's.

 

Craig, that's certainly been a white knuckle ride hasn't it?

There's probably a number of Blackmores shareholders who feel the same way, assuming they bought around the $220 mark....

 

Interesting article in news.com.au today regarding the state of the property market in mining towns. Also the WSJ news item paints a snap-shot of the situation (a different take of outsiders looking in).
An $800k mortgage on a $200k house: the reality of the mining bust

Anyhow, some of the concerns / questions I have:
1. The article states "95 per cent of our sales are bank repossessions", so presuming an investor had borrowed funds from the bank to purchase a property in a mining town and the bank repossesses the property and it's sold for less than the balance of the loan, what happens to the remaining debt?, are the original investors still liable for that debt?, do they still need to pay the loan?, does the LMI (if there was LMI) pay out the debt to the bank?, does the investor need to pay back the LMI insurer?

2. I wonder how many who bought properties in mining towns during those boom years borrowed from equity (especially increasing equity) from their own PPOR elsewhere?, and how many investors may have been locals or even FIFO workers?

3. I wonder how many investors sold out before the prices started to fall to either make a profit or break-even, or subsequently, how many investors are sitting on terrible losses?

4. I wonder how many property marketeers / spruikers / educators etc also got caught up in mining towns which they recommended? (Does anybody know the update on the Crawford liquidation?).

5. Now that prices are back down to very realistic levels, I wonder how much of the local community (or those who desire to partake in the local community) who previously may have been locked out, have now bought back in to make it their homes, i.e. are those local communities recoverable as communities or on their way to recovering. It then begs the question, would it be worthwhile to invest in those towns again?

Overall, it's not a good situation, and I do hope that people who are in desperate situations, are able to get the support they need through these tough times and those communities are able to rebuild and remain sustainable.

 

Don't know about 1...
2. I'd say quite a few used equity from PPOR. I know Gladstone had quite a few local investors that were burned.

3. Very few sold out. Property only goes up remember? Going by the number of homes for sale in the aftermath, I'd say thousands of speculators are sitting on losses at the moment.

4. Hopefully all of them..

5. Locals are buying back in now that things have stabilised a bit more, BUT while it presents good buying opportunity for PPORs I can't say the same for IPs. Buying in mining towns is as speculative as buying shares in the companies related to those towns, but the leverage makes it even more deadly.

I think you'll find there are a lot of communities relieved that the boom is over. Some places have excellent new infrastructure, and the pain of 'over-crowding' is gone.

 

Back in 2008, when we had our business (sold in 2010) and it was doing really well, we were doing some EOFY tax planning with our accountant.

After some very detailed forecasting, we calculated that we were up for a six figure tax bill. Horrified, I asked our accountant what were our options. He said:

1. Pay the tax.
2. Donate to charity.
3. Buy an agricultural products.

I didn't like Option 1 as I felt they wouldn't make good use of the money.

I seriously thought about Option 2 as we give serious money to charities every year (still do) but never anything of this size.

In the end, we went with Option 3 as it was the only one that gave us a 'chance' of a return on our money and some interest.

We went with a product that was deemed 'conservative', had a long history in the game, had a good reputation in the finance industry, ...

So, we put our money into Gunns Projectlot 2008. In the following year, we had an even bigger 'tax problem'. So we bought into Guuns Projectlot 2009 as well.

This time next week, we are due to get our total payout for both investments from the liquidators. Around $2,600.

Over nearly 8 and 9 years, I managed to turn multiple six figure investments into $2,600.

Looking at things from a positive perspective, I am getting some money back, albeit it very little. So, I was right .

With hindsight, I would feel a lot better today if we donated it all to charity, especially now we know how little we are going to get. They would have made better use of the money.

Some would say, you should have paid the tax. I would have if I knew they were going to use it wisely. IMHO, things have only gotten worse over the last 8/9 years, ...

Lesson learnt.

 

Well, they do say that you pay for your education one way or another. Keep the positive mindset and keep moving forward with what you've learned and now know! Best of luck with it all, dude.

 

Kieran, that's a bitter pill to take.

A shame there's not a "That's ****" button or I would have clicked it.

Royal North Shore Cardiac Unit (Kolling Foundation) could have done with a few bucks instead of the overpaid southern woodchippers, but anyway.... hindsight gives 20 - 20 vision.

 

Yep, always easier in hindsight.

Make a mistake once, put it down to experience.

Make the same mistake more than once, you are an idiot.

 

Thanks, I'll keep that in mind.

No more posting on Q & A and expecting a coherent response....

 

Got too obsessed with the FHB Grant just before it finished, and though I accepted we were buying at a premium figured the government was taking that cost, and we would live in it for two years. The unit (which I actually like, but didn't do enough thinking about) hasn't increased in value (or has only $10k max) in 8 years. Though it was only $300k, the opportunity cost (especially as I was looking in western Sydney and Melbourne end of 2009 at that time).

 

Gawd - too many to list, but Ill give it a go
1) started doing a couple of flips with a mate. We had a terrible structure, an unorganised 'JV' and non-existant paper work. But we made money a couple of times so thought we had hit the big time. We got one of the flips wrong, at about the same time the market crashed. Total loss $150k++ and a friendship. After about 10years we made contact again this year, and had a great chat over a beer. Im glad we could put it behind us.

2) Purchased my 'forever' block. At a time I should have bought an investment giving me a cash return. The block today is worth 50% of what I paid for it. $100k loss (plus holding costs)

3) Jumped in really early to development I couldnt handle. This one very nearly sent me to the wall, and I sat on -ve equity for a long time. I documented this in detail on SS and here. Broke even financially, but had a huge opportunity cost, plus stress!

4) Purchased Macquarie fusion funds. Lost $50k.

Then I turned 30.

Blacky

 

Got myself a girlfriend.

 

Wow what an education to have in your 20s. Thanks for being honest.

 

here is mine in a nutshell

22. started a IT business with a partner, went in completly blind, a drunk person could have made better decisions, put in my life savings of $80k odd, 1 yr later, lost it all, came out with $50k debt
learnt not much, except dont be an idiot

25-28, after paying back those debts and investigating several business, did an imports business for 3 years, did well

27 in another brain fade, bought $20k x 4 of risky mining shares based on hype, and to diversify $65k x 2 in managed share funds thinking I was diversifying,
fast fwd a few years, thoe $20kx4 share are worth less than $1k
the $65k fund, one was closed by the company at $45k,
10 years later the other share fund is sitting on $60k
lesson learnt: past performance is not an indication of future, and shares go in cycles

29. did a hosptiliaty restaurant for a year, made a decent profit but only due to luck,
lesson learnt: results are not indicative of skill or acumen

 

I invested in a company (shares) after a friend pressured me into it. He was relentless, calling me an idiot for not buying, etc. I caved (yes, my own stupid decision), lost $4-5k in my early twenties. He pressured his brother into buying the same shares, his brother lost about $90k which was his life savings and he had a baby on the way.

We bought a property last year, our first IP, we could have bought a lot better. It's in Everton Hills on a good sized block, I just think we could have done better and I should have done more research. We bought another in a different suburb in Brisbane and I'm much happier with the second purchase.

 

Win some, lose some... think by being on here there's more winning than losing. I'm wondering... how old are you now? Just to put everything into perspective.

How can someone do that to someone else....

 

I should say, I don't think Everton Hills is the problem, nice suburb, we just paid too much for it. Hopefully Brisbane will boom to make up for it!

Gockie, he's an arrogant, crappy person. After the shares crashed, he couldn't understand why I was ****** off, but I think he must have felt terrible (more about his brother than me, and even more about the money he lost himself) and was trying to make himself feel better by taking zero responsibility and trying to laugh it off.