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Hi all! Newbie here.

Discussion in 'Introductions' started by herenow, 16th Aug, 2015.

  1. herenow

    herenow Well-Known Member

    Joined:
    16th Aug, 2015
    Posts:
    55
    Location:
    SA
    Came across this forum recently, have been lurking for a while and thought I'd jump on in!

    Living in Adelaide, have a couple IPs locally, largely acquired through circumstances rather than a defined strategy, now looking to invest again and putting a put of a plan in place.

    Met recently with a local mortgage broker to get an idea of borrowing capacity which was a waste of time as they weren't (or didn't seem to be) familiar with investment strategies and loan structures. Lesson there for us though to better screen the people we talk to.

    Looking forward to being part of the community.

    Cheers
     
  2. Brian84

    Brian84 Well-Known Member

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    Sydney
    Welcome aboard. Good luck with your journey
     
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  3. Azazel

    Azazel Well-Known Member

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    Hey @herenow , good to see you.
    Where abouts are you looking to buy your next IP?
     
  4. Rixter

    Rixter Well-Known Member

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    Portfolio Perth Brisbane Sydney Melbourne
    What and where to buy is dependent upon your chosen investment strategy.

    You see property is merely the vehicle. The strategy is how you intend driving that vehicle.

    Unfortunately the mistake I see newbies and sometimes not so newbies is that they are property focused instead of strategy focused which is like putting the cart before the horse.

    Property investing is not about property rather about the strategy and the way you intend to use the vehicle to get to where you are wanting to go. No good buying a small shopping car if you intend driving interstate on a family holiday.

    What strategy/s are best for you is determined by where you are wanting to go, the time frame you want to get there in and how hands on along the way you want to be - all based around your personal risk profile.

    I hope this provides some food for thought.

    What is your chosen investment strategy?

     
  5. herenow

    herenow Well-Known Member

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    Hi @Azazel, thanks for the welcome! :)

    Not completely sure where to buy next. Still working that out. Things are pretty flat in Adelaide, and as we've already got a few here, considering Melbourne or Brisbane to get some variety in the portfolio. Ideally looking for CG in the next few purchases.

    Do you have an area/state of interest or fairly flexible?
     
  6. herenow

    herenow Well-Known Member

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    Location:
    SA
    Hi @Rixter,

    Thanks for the reply, you've raised a number of good points, some of which I'm currently considering.

    I've been reading a number of books on investing in real estate and considering the different approaches, from positive geared only, to blue chip only etc.

    Not sure at this stage what we'll do. Probably a combination of both approaches. The properties we currently have are positively geared, so thinking that perhaps looking for something in Melb or Brisbane with CG prospects might be the way to go. Not interested in apartments, and all advice says to avoid those, so probably will be looking to invest in houses next. We'll probably stick to investing in capital cities at this stage as that seems like a fairly secure approach.

    What was your strategy?

    Cheers
     
  7. Rixter

    Rixter Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    572
    Location:
    Portfolio Perth Brisbane Sydney Melbourne
    @herenow I started actively investing in 2000 and hit it pretty full on, basically purchasing a property per year over the course of the following decade. Some years purchasing none and other years purchasing two depending upon financial circumstances and existing portfolio performance at time of each IP purchase.

    To date we have built a substantial size multi-million dollar residential property portfolio spread around Australia, which has afforded me the opportunity to fully exit the rat race last year.

    The capital growth averaging (CGA) strategy I deployed utilises a regular purchasing cycle similar to what dollar cost averaging is to the share market. The major underlying principle to its success relies upon your "time in" the market, not "timing" the market and revolves around the purchase of townhouses and villa’s.

    As such the idea is to purchase good quality, well located property in high density areas (metro area capital cities), at or below fair market value, as fast as we could reasonably afford and then hold them long term in order to realise the compounding CG across the portfolio.

    We chose to purchasing near new property over older style for the following reasons, in no particular order:

    • To maximise non-cash depreciation deductions
    • To minimise maintenance & repair costs
    • More modern & attractive to tenants, thereby minimising potential vacancy rate
    • Attract higher rent, thereby maximising yields
    Without getting into the "which is better debate, houses or Units", our preference is for townhouses & villas with a 30%(of lot) land area courtyard thereby eliminating high rise apartments that only have balcony's, for several reasons in no particular order:

    • lower maintenance & upkeep for the tenant
    • lower purchase and entry level into a higher CG suburb
    • rapid growing market demand for these type properties - one of the largest groups being the Baby boomers coming into their retirement years and having to downsize for financial & lifestyle reasons.
    • greater cash and non-cash tax deductions in relation to IP purchase price, therefore maximising portfolio cash flow.
    • able to hold more IP’s across our portfolio - thereby minimising suburb over exposure risks and maximising portfolio compounding CG exposure across increased multiple markets.
    Early on in our journey we looked to purchase in metropolitan suburbs with a 7% historic CG that were approved for and/or were about to undergo gentrification...and that allowed us exposure to short-middle term CG to leverage against faster. I looked to where the government, commercial, retail and private sectors were injecting money, which ultimately beautified and uplifted the overall feel of the area.

    This in turn attracted people wanting to purchase, thereby creating demand and putting upward pressure on prices. It also increased our rental yields due to the demand of people wanting to rent in these areas as well.

    Later purchases we targeted metropolitan satellite cbd’s. We found these is be very good consistent CG areas with main arterial roads in/out of the suburb, public transport hubs, major shopping precincts, with high employment, good educational, medical & recreational facilities.. All the things people want to be located close by to and/or within easy commute.

    During the portfolio acquisition stage all portfolio cash flow we serviced via wages, rental income, the tax man, equity via LOC’s and/or Cashbond structure, and any other form of disposable income we had available.

    Prior to rat race exit we refinanced and topped up all our LOC’s to a sufficient level to maintain an available balance of 10 times our annual lifestyle expenses, plus the capitalisation of interest costs to fund lifestyle over that decade period.

     
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  8. Azazel

    Azazel Well-Known Member

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    Yeah, not familiar with Melbourne but heard it's pretty hot there in general.
    More familiar with Canberra, QLD cities, South Coast NSW myself, there are plenty of places to choose from - it can seem like too many at times ;)
     
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  9. herenow

    herenow Well-Known Member

    Joined:
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    Location:
    SA
    Wow, thanks for the response @Rixter, got a lot for me think about there!

    Yes, I'm looking to get out of the 'rat race' too - figure I could probably put up with about 10 more years working (if I have to!) if there is light at the end of the tunnel and things happening to work towards that goal. Of course, the less time in the work force the better, but it is a means to an end. Particularly at this point in time.

    You have made a number of good points about houses v's other (non-apartments), will have to consider that a bit more.

    Thanks again!

    Cheers