Has the APRA credit tightening changed your buying plans?

Great...do share what the youngsters have been up to.........I find a lot of people are talking it up. No substance......how long have they been doing it and have they been doing it for a while....i.e. have seen plenty go under....

 

NHG your story sounds very successful - and you are under 35!

May I ask if you were holding down a 'day-job' whilst achieving all of the development and other-strategy success you've had? Or, was success so solid in the first couple of big wins that you threw the day job in and focused on these projects full-time? Are you still working in a 9-5 job currently?

 

Sounds is the right word. A lot of the success stories sound great. After selling fees, capital gains tax etc there isn't much left. The profit from buy and hold is from the long term going through multiple cycles.

Thus i say it takes too long. Also my properties are positive geared. However after taking profits to purchase more property, i am no longer heavily cashflow positive and need to wait a new cycle. Also $M in equity does not let me borrow huge amounts more as still capped by income and things like APRA cut your next step into development short.

Cash is king. Equity isn't cash, it is equity and has many restrictions.

I left work after 2 years of investing to start a business so stopped buying and started building granny flats in the meantime as i could no longer buy. Am back to a 9-5 after a few months travelling for stability now that I'm getting married yet looking at business.

 

Massively.

I had mapped out a feasible plan to triple my portfolio size and boost my cashflow. Basically:

• Buy 2 @ 80%
• Reno simultaneously (making cashflow positive and creating deposits for more IPs)
• Val shop and refi at 88% with best valuing lender (taking out more than went in)
• Repeat, repeat, repeat

My borrowing capacity absolutely fell off a cliff with the changes so I had to shift my plan quickly.

With knowledge that changes were coming, I was able to top up two loans to 88% and 85% respectively just before APRA waved its wand and get a conditional approval for a tentative purchase using that equity.

About to settle on said purchase and I'm done for a while. I'll need a big lift in income to continue building the portfolio so that's priority #1 now.

If I have surplus cash at hand before I can top up more loans, I'll renovate my way through some (or all) of my portfolio to build equity ready for release when I'm able to shake it loose.

 

Hi NHG

I'm not wanting to be negative , put down your suggestions and curb your enthusiasm in anyway . From my experience the putting down of buy and hold and suggesting boarding houses as an alternative came across as slightly nieve.

With timing it is possible to make decent money from buy and hold in a rapid period .

I suppose because I'm not looking for a quick replacement of my income with an alternative as a way to an early retirement I'm happy to stick to buy and hold .

In the previous cycle almost every thing we bought doubled in the following 2-3 years . Everything we've bought in Sydney in the last five years has done very nicely .

Even though we have over 20 properties , I don't think what I'm doing is particularly risky of adventurous , even though for the " normal " community it's beyond their expectations . Within the PCHAT community , what I've done makes sense and is logical .

My concern is in the last cycle lots of people explored creative ways to make more money , faster , and very few succeeded . In reality most that I know of ended up in tears and loss of money . One member did buy a high returning boarding house and went off to live there and run . My last recollection about any comments about it was it was being sold , or at least up for sale .

We did DD on one around about the same time and came to the conclusion it was a job ( if you want to make decent money and not employ a manager ) . My observation from knowing people who live in those types of places is that it would be at time a frustrating job and the running costs would probably be more than anticipated .

While this may sound like a negative thing to say and against the ethos of learning from a forum and maybe I'm just plain wrong on this , but my observation is the sort of person who is successful at coming up with these kinds of high return deals , doesn't pick them up from other people , doesn't need justification or inspiration from a forum .

As per the Nike add , they just do it .

Good luck , but , be careful . Unless you really know what you're doing it maybe painful ....

Cliff

 

I "thought" we were at the end of our IP accumulation phase as of the end of 2014.

We bought another property last month out of the blue as it was a bit of an emotional future PPOR purchase idea.

So the recent APRA rule changes have little affect on us as we are not looking too actually buy anything further right now.

The only concern I have personally moving forward is when we want to extend our interest only periods when they are due on our 90% lends.

The first of these is in October 2017 so who knows what the rules will be then.

As I am on the sidelines right now and not actively purchasing it will be interesting to watch it all unfold over the next couple of years.

 

I've got a lot of equity in NZ so am pulling a further loan from there at the moment, also paying off debt there in the hope of possibly borrowing more. Not sure if I've reached my borrowing limit in Australia, think I could buy one more. All but one of my props are positively geared and a few small ones are paid off so that helps.

 

Thought I was done....looks like I have founder another $1m or so under the mattress.

 

No change for me... I had no plans to do any buying this year anyway. I got equity out at the start of the year, and am now developing my dev stock. I am building 4 new houses in next 12 months, all I have been buying the past 12 months is development sites for split and new builds which will be done at 80% anyway.

 

Are you going to be saying the same thing when you've exhausted this $mil?

 

Don't know...a week ago...I had to put 20% deposits for the majors...now I have another source where ..where they will do 88% plus LMI.

But it is a real pain now to get loans...

 

Refinanced when the changes came in, was pretty nervous, but got there eventually.
Had one purchase so close to being over the line... with AMP. Wrong time, wrong lender. What can you do, on to the next one.

 

No change for us.
Have not bought in 5 years, been saving all that time.
Still waiting for the right deal to show up.

 

Business as usual for us although looking at placing additional funds into other avenue streams unless something interesting pops up

 

We weren't planning on buying for a year, maybe 2 at least, so no change in plans at all. Until then we'll be renoing two IP'S, saving as much as possible into offset and researching for a Dev block.

 

This is the house price increase in Cherrybrook in the last 2 years. I missed the boat in buying their 3-4 years ago as my PPOR.

There was a massive 50% jump in Cherrybrook houses in the last 24 months, so alot of the 500K was Buy n Hold or luck rather than from subdivision?

 

I thought hobo-jo was using another alias

 

It was an empty lot. Council was changing the rules. They had 1 month to put in an application to subdivide. Sold it before they split it. So a lot of the profit was actually from the subdivision itself. He kicks himself because he didn't make much if anything from the holding. To note, the profits are erroding as he didn't have a system for finding such deals, he fluked it by hearing about it from a colleague at work. That teaches me the importance of cycling earnings vs letting them sit in a bank, and learning HOW to source such deals.

As per my dicsussion with @See Change , I am not advocating boarding houses, though I do see a huge market in this area going forward, I am advocating there are more profitable options than buy and hold and we need to be aware of it.

I am also pointing out that any idiot with half a brain could have made money in Sydney over the last 3 years. It doesn't neccessarily mean we (relatively new investors) had good strategies, a lot of it could have been luck. So for us investors new to the game. We need to refine our strategies and take advantage of what we gained from this windfall. If I do exactly what I did in Sydney in Brisbane for instance, I'd go broke/get stuck in the forseable future. The fundamentals that caused the Sydney boom are just not there. We need to keep learning, implementing, refining our strategies (in every area of our lives).

In reference to the young and successful investors I mentioned in the previous post, they are young by age, not by experience. That said, it is their mentors that I'm more interested to learn from. They have gone through various cycles and make money it good markets, bad markets and side-ways markets, with various landmark buildings in to their names as proof of their success. My strategy no longer works in the current Sydney market. That in itself tells me it is a flawed strategy as it is too dependant on external factors out of my control. Not good business.

 

Seems to be having an effect:
http://www.news.com.au/finance/real...-home-loans-fall/story-fndbarft-1227474820222

 

Common doc...with all those prescriptions around....and 20 properties...surely you are an adventurous type!..

Hmmm...interesting comment..there is thinh called a cycle...and it affect cities differently in OZ...I guess..I better stop buying in Brissie. Every cycle...I see people doing fancy strategies...the funny thing is the simple strategies seem to make the most money. Just my thoughts...what would I know.....I am just a Specufester!!