Early 50s noob investors

Signs of booming market, the thing with small markets is lack of inertia and how quickly things can change hence my comment about higher risk.

Land supply restrictions in regional areas are temporary at best and will and can catch-up fairly quickly.

Hobart has population of 200k+, smallish compared to capital cities. Yes it did have a boom and yes people made money but timing is all that much more important for small markets.

@euro73 I understand that you are developing/selling stock in Orange. This is not a direct critic of your product (which I know nothing about) but rather more about Orange and the price points and how things may go sideways quickly.

 

I'd still be pretty pleased even if it went sideways. ZERO capital growth and ZERO rental growth still gets the OP mortgage free with a better than 30K income in 11 years and 5 months. And that's what he asked for - a 30K income stream from his 180K available cash.

I've only used 130K of the 180K and demonstrated how it can be achieved in 11 years and 5 months - even with zero growth.

Property need not be about growth alone. You can use cash cows and debt reduction to build very handy income streams as well.... a fascination with growth turns things into speculative investing. That does a disservice in this credit environment. I'm not interested in trying to speculate in a credit environment deliberately engineered to hurt speculators and reward debt reduction. Or look at another way- I am interested in investing for a credit environment that rewards debt reduction and punishes speculators

I also don't believe its very likely that 130K cash deployed into any other asset class can provide a 600K asset and 35K+ income stream in 11 years and 5 months - somtheing I have demonstrated will work even in a situation where zero growth occurs .... the OP can keep putting away 18.5K per annum and in 11 years may have accumulated somewhere @ 390-400K.... thats still not anywhere near 600K. And that 390-400K would need to be generating over 9% returns to match what Ive outlined above ... if my dual occ's do better than ZERO it will require much more than 9% to get close...

There's no alternative out there today that delivers those numbers without massive risk to your capital. And there wont be while the world stays at record low interest rates.

PS "big " markets are doing a pretty handy job of lacking interia right now, just quietly ... These arguments are all based on pre APRA biases. They don't stand up in a post APRA credit environment . They are redundant for the new credit era. The evidence is all around. It is overwhelming. Yet the denials still persists...

I'll stick with simple and safe and suitable for the times ie buy stuff that can pay itself off P&I - thereby removing all risk of of holding costs undoing me, and removing all reliance on growth to produce a lump sum outcome. Welcome the growth if it comes, but sleep soundly knowing I will generate a handsome income stream even if it doesnt. Thats post APRA investing for income.

 

Hey Sash,

Thanks for responding back with an open and transparent response.

Apologies for the delay.

Amen

At his age I had several properties in Sydney, and the year was 2012.
I also note he is starting a business. Interesting.

I do have a lot less than I could have. That was by choice.
3 years off work.
Traveled to over 45 countries (in comfort), over 2-3 holidays/year.
Started and closed 2 unsuccessful businesses.
Cancelled a nice fully paid for, self-funded wedding.
Diamond rings. Terrible 'investments'.

It comes down to personal goals, and satisfaction.
Honestly, I was significantly more content when i was making a small 6-figure salary, than I am now.

7 builds. That is a running leap over the fine line, and well into the 'business of real-estate' territory.

Our incomes are by no means 'average'.

I have never seen someone passively get a quality result from property investing.
Not with a low income. I believe anyone can succeed in this business, however I believe it requires them to do what it takes. Step 1. Drastically increase income.

Windfalls are the best. Doesn't detract from the hard work you put in to leverage it into an awesome portfolio.
Would love to hear more about your journey.

Awesome strategy amigo. Clearly you have put a lot of thought and work into creating your current standing position. Grateful for the share.

My figures are a little skewed. I used equity from the Sydney boom to build granny flat on the back of my dads place, extension on family home, and we purchased a property in the USA which increased in value an additional $100k (this is being used to support family there, we don't keep the income).

Under my name.
Portfolio is $2M @73% LVR.
Valuations are 3 weeks old.

Including other investments funded by portfolio equity, not under my name (excluding home extension on family PPOR),
$2.9M @45% LVR.

Rental income about $2,725/week.

Took 7 years.
Mostly luck. I did not know Sydney was going to do what it did. I was playing for cash-flow at the time.
I don't think any of us that started around that time really had much of a clue to what was going on.

Failed. I prefer, learning curve.
Business currently makes 6-figures with vacancies. I am still learning.
Every dollar is being re-invested to grow the business.
With current deals I'm about to sign off on, should hit $4k/week by May at full occupancy (which is never the case).

Also growing my knowledge. I have started targeting larger deals. Last night, I visited a property up for rent at $7,500/week. Income at full tenancy is $10,500/week. Minus GST, outgoings. I will try to negotiate for $6,800/week. Something different, never done larger deals like this before. This is not included in my $4k by May figure.

I am also still working in a 6-figure PayG.
So combined, I earn multiples of 6-figures, I'm also in a DINK relationship.

That's my 7 year journey thus far.

So can a person on $80k/year, with 2 kids, mortgage, buying $300k properties renting for $300/week, not looking to do anything about increasing income achieve the same size portfolio. I haven't seen it.

They may however achieve their light-fire retirement. I just can't stomach living on a knifes edge income.

Whether I pursue this path to fruition is a different matter entirely.
That would have nothing to do with strategy, but with my shifting value system.

XoXo
NHG

 

Towsnville has a population of 190k, more than 4 times that of Orange. Townsville has a medical school. Does it make a good investment?

The thing with one trick ponies (towns) is that it'll get old and the crowd will move on. Again, not saying money can't be made but timing is very very critical.

A bit of hype, developers and early investors move in and when mum and dad investors start coming in, the early investors sell up and leave.

Very small market size means, market makers don't need large amounts of money to do the trick.

Bottom line: Higher risk and forces that are not just organic are at play.

 

I think first your only saving $350 per week is the Number one issue to address.

 

Gotta remember they are putting quite a bit into Super as well. Combined income of 186K means their 9.5% super contributions are @ $17,670 per annum.... so if they are topping that up to 50K combined ( 25K each) they are tipping in another 32.3K per annum. Sure, they could stop doing that and be saving 51K per annum instead of 18.5K , but I think the OP is doing the right things..

There's more than enough deposit to get into a property outside super and pay it off before retirement, easily reaching his stated goal of adding an additional 30K income stream . I outlined how 130K of his 180K savings will get him and his wife there easily ( better than 30K in fact) in less than 12 years, in an earlier post ... and if there's 50K per annum going into Super, the possibility of an SMSF /property arrangement may also work very well..... again, with that sort of money being injected into the super annually, a high income producing property could potentially be purchased and paid down very quickly... lets say you set aside 8K of that 50K to cover insurances and accounting and auditing , you'd still have 42K ( $3500 per month) available to make extra repayments .

So 1 x dual occ in personal name could be repaid in 11 years and 5 months .

That's income #1 Over 35K per annum even with ZERO growth



And 1 x dual occ in SMSF ( if they decided they wanted to go that way after consulting with a planner) could be repaid in 7 years and 3 months if 42K of extra repayments was made per annum.

That's income # 2 Over 35K per annum even with ZERO growth

And with SMSF #1 paid down so quickly, there's a realistic possibility a 2nd could be added and paid down before retirement- again, if they decided they wanted to go that way after speaking with a planner. There would still be 42K from personal concessional contributions available to make extra repayments, plus an additional 35K from the unencumbered first purchase would now be available as well . That's a total of 77K available to use towards extra repayments . That would pay down the debt on a 2nd 600K purchase in 4.5 years. And I've left 8K out of the equation to cover accounting and insurances etc...

So two properties would be unencumbered within 11 years and 8 months.... just about bang in line with when the full repayment of the dual occ purchased in their personal names was being finalised.

That's income #3 - another 35K per annum even with ZERO growth.

Add them all up and it's over 100K per annum even with ZERO growth, in less than 12 years ....

While most here will continue to faff around chasing growth they aren't assured of getting, hoping they can somehow defy APRA ceilings or "buy below market value" or "flip" or any number of other hit n hope strategies that barely worked during 20 years of ultra easy, ultra generous lending , this approach - outlined step by step above - delivers exactly what people on here often say they want - a 100K income ... It does it in less time , and it does it while easily managing P&I ...and it does it in spite of the much more difficult lending environment ...and it does it even with zero growth or zero rental inflation. It's a pretty tidy outcome I'd say

 

Hey ******....... I am the end of my journey....I'm off the deep end....I am far from the shallow now....

Tell me something, Navid
Aren't you tired tryin' to fill that void?
Or do you need more?
Ain't it hard keeping it so hardcore?

This might help.....



As for me...maybe it is time time to let the ole ways die.... si senor...I am a gaucho at heart.......you are correct ...cowboys eventually ride off into the sunset...

 

The problem with buying into a currently booming market when the newspapers tell us that it has a housing shortage is this:

It has a booming market statistically recorded because it had a housing shortage and all these new estates are springing up in the last two or three years to rectify that housing shortage.

Newbie investors hear about this great cash cow regional centre - think Gladstone, Hobart - and think: It's prices have increased significantly recently - "I'll buy myself the same and I'll make the same $$$$ they did."

Yep, you and 5000 other newbie investors. By the time you all complete your shiny new properties, that shortfall becomes an oversupply. Council will be raking in the Development fees so they aren't going to want to pause the building frenzy.

 

^^^ This. Very easy to get burnt in small markets. All cash flow projections of paying down debt go down the drain because the cashflow assumption will be challenged as soon as there is over supply.

 

When you have been to the dark side, very hard to come back

 

Vader.............