My investment journey – a reset and re-drawing of my plan at age 40

Thanks for sharing your story. It is kind of reality check for me.
I would think twice about selling those Gladstone IPs.
I don't know enough but it looks like the mining collapse is over. Anything from here, would be positive or at least not too much negative.
When you sell them, you are going to be left with debt which you need to service using other income. This might be not much difference from keeping them.

 

Suspect those advising you to hold on to Gladestone are not buying there at the moment..

The hardest thing is to get beyond the sunk cost and regrets and make a decision based on where your money should be invested right now.

Value adding yourself is a good cushion in case the market goes against you - as well as accelerating returns from good market conditions.

 

Yes good point Tonibell

If you suggested holding on - would you buy there now yourself?

 

No. I wouldn't buy there.

This is a bit similar to Telstra shares. Would I buy now? No. Would I sell now? No. I would sit tight with the paper loss as long as the cash flow doesn't kill me.

All I'm saying is.. do your numbers properly. See if it is actually going to improve the cash flow. Nobody really knows how the market will turn.

 

Hi @Orion
Thank you for sharing your story and I applaud you for taking actions!

Before doing anything else, have you had the time to really refresh your batteries and time to heal? I know it sounds like such a simple thing to do, but you have experienced many stressful events in life for a prolonged period. For myself, it took me a year to really recover after a relationship breakdown and really needed the time to reflect and heal, but ultimately had no regrets because I went into the relationship to give and gave it my all in the relationship. Could be a good opportunity to travel to some new countries and experience new experiences.

It seems like you have clear goals and objectives to complete and I really like your drive! Hope you also have the chance to put in time to look after your health, as prevention is better than a cure.

I think it's also important to be kind to yourself and you have achieved some excellent results.

 

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A double whammy who advised you on trusts...again too many idiot advisors out there complicating things via unnecessary structures.

Your story is very valuable for people to understand what happens when a market correct...it can happen in Sydney or Melbourne also. So one needs to be careful.

It is the devil and the deep blue sea. You are young may go with getting rid of on and see how you go! I get opportunity cost...as I am selling some of my dogs and recycling debt...for exactly that reason.

Go easy on yourself...it is unlikely you will ever repeat this again. I too have made mistakes...everyone has....no one person who has bought a lot of properties can claim there were no mistakes in their portfolio.....

 

I find this line a bit manipulative whenever I read it or hear someone saying it. Yeah sure, I know they mean well in regards to making good decisions but life just doesn't work like that. Sometimes good things come easily and sometimes they come after and because of going through tough times. Maybe freedom only comes after submersion into the ****** tunnel: please refer Shawshank Redemption. Just seems like another stick to start beating yourself with to me. Whether you hold on or not is up to you but please don't dwell on what you didn't do.

This is fair; perhaps they're right. Hopefully, you will consider these options at the right time for you, not the advisor (?) Hope you don't mind me saying ...
By the way, with all that meditation you're doing, I'm sure things will start to fall into place.

 

If I had reason to buy there e.g. family in the area, work, retirement etc, I'd probably be looking about now. It's not somewhere I'm interested in though.
I guess I'm saying what I'd do if I had bought there. I don't see the point in having a debt with no asset and I definitely see things constantly changing. That's just me; everyone's different.

 

Sorry to hear about your situation. Those personal stuff like health, weight and fiancee I'm sorry to hear

I know how you feel. It's almost like God is kicking you when your down!

You also mention 80% lvr is aggressive and risky
I d consider it perfectly balanced and good lvr to have. Some may say conservative. So don't get too down

 

I agree I find almost condescending. And does nobody any good

It's a what if and hindsight situation No different to someone saying had you bought bitcoin at $1 you'd be a billionaire.
So what ??
We should stop investing now?

I really don't like it

 

Thanks for the kind words.

Yes and no. I hope others can learn this same lesson I did. Just thinking of the LVR is only half the picture, it's what LVR plus what stage you are in your investing life / your risk profile.

For example;

• 22 year old, good saver, good income, just starting investing = 95% LVR may be fine (this is what I did).
• 30 year old, same person, lifestyle expenses have crept up = 85% LVR might be a better level now
• The same person at 40 years old, kids expenses etc, peak spending time in life, probably 70% LVR, and aim for a more balance of cashflow and growth from the portfolio
• 50 maybe 55% LVR
• 60 maybe 40% LVR

You could almost write a formula - 110 minus your age or something like that.

The figures may change (everyone is different) but I hope I explained the concept. Depending on your goals you only really need 4x unencumbered median priced IPs to achieve 1.33x the average income in retirement (assuming these properties return 33% of average income in rent).

I used to revalue every year and re-draw/borrow and buy again the earliest I possibly could. If all my properties performed at least 4-5% I would have done really well, but they didn't, and it's caused me to take several steps back - probably about 12 years lost and missed out on the huge booms in Melb/Syd. I have learned my lesson though and the next 10-15 years should be better, although probably harder to make these gain, not to mention, any kind of GFC 2.0 event.

The other big problem was I went for properties that would give good short/medium turn growth, not properties with a 30-40 year mindset. Ideally you go for both.

 

Good post.

Pick ya self up ...get on with it....Perth awaits once you sort Gladstone......

 

The context in which they said it was a helpful one, I wanted to hold onto the Gladstone properties until they bounced back, they were trying to convince me to sell. This was 2 years ago, and they would have been right - I would be $80k cashflow better off, and possibly made the same again in CG in a new IP I could have purchased. No doubt I would be feeling better too.

Hindsight 20/20.

 

Man.... Who has gotten into your head!

That's a terrible formula....

Lvr is dependent on stage of investing, strategy, cash available, income, type of investment,, time frame
And a million other factors

Warren buffet is old and a billionaire and I am sure if he were to buy prooerty he'd finance it

That sort of mindset is really bad my friend. Its only going to hold you back

 

20s - 95%
30s - 85%
40s - 70%
50s - 55%
60s - 40%
Doesn't look like a terrible way to aim for it.

 

@Orion , I would sell the Gladstone properties. You have not bailed at the first hurdle, you have given it a couple of years to recover, which it hasn’t to any worthwhile degree.

You say each is losing you $20K each year - can you see prices rising by that each year? Work out the percentage increase needed. (If present value $200K, you need a 10% per annum price increase to break even. Do you think this likely?)

Mining MAY recover to previous levels - but this is doubtful given the Adani fiasco (companies will be wary to propose new projects given the 10 years and millions of dollars Adani has spent to still be bogged down in appeals and approvals). You also can’t count on existing mines being extended - the Acland extension was knocked back.

But even if it does, the chances of boom times in housing will be even more doubtful given the huge losses some suffered in the last crash. Hopefully a lot of lessons have been learned.
Marg

 

No so simple to sell...because if you sell Mr Banker will want to know that you can cover the loss..please any other costs.

So you need to do your homework....if indeed the 500k property is worth say 280k....the loss id 220k...plus selling/legal costs say another 10k...that is 230k you will need to have in cash.

Addiitonally, he would need to pay CG in Melbourne but can offset against the loss....needs to executing carefully....

I am in the process of selling a regional property I bought for 122k......if I get 185...net of sell costs I walk away with 47k....I will also repurpose the small loan of 148k...for a block of land in Geelong.

 

Thanks for sharing your story.

I can relate. Like you, I made lots of mistakes and feel I’m behind by ten years. Luckily I’ll come out of it ok with a bit of cash in the bank and hopefully I can hold onto my other IP and my small PPOR. What’s important is we pick ourselves up and learn from these mistakes so we don’t make them again! Don’t worry there is plenty of time for you to recover at age forty your still young. 40 is the new 30 as they say. I’m 45 and still have time on my side. We will have the knowledge and experience the next time around, so all is not lost!


Have you thought of selling down everything and just starting again with a clean slate?

Then you could rebuild, save for a few years and then I reckon you could replicate what you did successfully, buy in those areas that did well for you in Melbourne.

Be a bit more conservative, rather than looking to achieve 7 IP’s how about you aim for 3 quality IP’s in great locations blue chip inner ring or middle ring. Suburbs that have a known history of doing very well! I’d steer clear of the US, you might not have the experience and knowledge and it could be another risky type gamble like your Gladstone buys. It could also be stressful too. I believe your better off replicating those two properties that did well for you. Ensure you have enough of a cash buffer too.

If you sold all your IP’s would you be left with any cash or would you be in debt?

I think you have to look at the impact it’s having on your health! Sorry to hear about your weight and your bad health from the stress you’ve been under and your fiancé leaving you. I think it’s important to get yourself back on an even keel. That is the most important thing for you right now! Pay down your debts start afresh, save for a couple of years then look to buy again. Replicate your good purchases. Don’t think too far ahead about what you’ll invest in, in the future. Focus on getting yourself out of this situation your in and take a rest for a while while you save.

That’s my opinion anyhow and is what I’d do in your situation.

All the best. Look after yourself. There is a light at the end of the tunnel. You’ll get through this and will be ok.

 

So a first time 40s investor should go for 70% lvr when they want to aggressively accumulate

 

hi @Orion, thanks for sharing your story. I think try to stick to what works and throwing away what didn't work. what I see is that you did well in Melbourne when you brought it at a low, but took unnecessary risk in investing in a regional mining town of some sort of with a bit of speculation. So try to repeat what you did well but with other capitals cities that are at buyers market stage.

Just stick to what works and avoid taking unknown risks such as invest in a foreign market. Don't try to over complicate things by hot spotting and speculating.

I have two simple rules, #1 buy as close to cbd of capitial cities as I can afford, #2 buy when bottomed out or just started rising(6-8 clock) it has served me well so far so I am going to stick to it.