my not so great investment experience: Cheapie strategy

If it were me I would be tempted to sell the lot, anything that brings cash back on the table and then start looking at strategies where you can add value and cash flow. It could be as simple as buying a property in Broady and building at the rear. I would not recommend renovations unless playing in the high end stuff and then its too much work regardless.

 

Thats an interesting strategy.
I agree with the not doing small renos unles its high end stuff
As whats the point earning 40k on renos but losing 20k on fees stamp duty and tax etc.

The other point is that hypotheticslly if property doubled in 10 yrs. Assuming i control 3 or 4 or 5 or 6 mill of current assets

That means 300k to 600k of growth per year.
Not many jobs are paying that much.

I could hypothetically sit on my butt and do nothing and it would be a strategy

That being said im not so confident that my regionals that havent grown to double in 10 years.
But it might be me being pessimistic.

 

Another consideratiok i currently have is if i sell a majority or all of my portfolio . What am i goiing to do with the cash
I might procraxtinate and do nothing with it which will be a lostopportunty cost .

Iwill be kicking myself if the sold properties boomed just after i had sold

(Hope im making sense)

 

Hi TMNT,

I am conservative in my approach but 3M in assest in metro quality stock (e.g. not cheapies) I would say grow on average 6% (depending on city/location but I talk about Syd/Melb/Bris). This means that 3M of assets would return $180k in GC and likely a further 4% in yield or 120k - which typically you lose 25% due to cost (PM, Rates, Insurance etc) leaving 90k for mortgage repayments.

Having 3M at 80LVR (highly doubt) is 2.4M debt which at 6% I/O is 144k or negative 54k p.a... This is why I highly doubt it as most people cannot service this sort of shortfall. 3M at 60LVR is 1.8M debt and 6% is 108k or negative 18k p.a. (this is more doable)... BTW queue the NG comments..

If you are unable to service the loans you cannot access the GC but paying 18k out of pocket to get 180k in GC is easily doable and would love to have that issue. However that 180k p.a. isn't accessible all the time (as it relies on bank values) and further having 500k as a buffer doesn't help with serviceability (besides the reduction of debt) as the bank wont say that 500k can pay 27 years of the shortfall or 5 years without receiving any rent (108k). Reason being you can quite simply go and spend it on a new car or gamble it away at the casino... leaving you with no buffer and having the issues.

 

My parents bought a house in Brisbane (Mansfield) for 125k and after 7 years it was still worth 125k (maybe 130/135k) but in theory hasn't moved. Dad couldn't understand why and was told to sell but 20 years later this house is now worth 600k (a house in the street sold for 680k but it had a pool and parents had just renovated it 2 or 3 years ago full reno include things down to door handles).

Everything is easier in hindsight but you need to look at what you feel is correct and what the market is doing. I think I read earlier that one of the properties is in Ipswich, yes it is less than desirable but it will have the flow on effect from Brisbane's gain but it also starts the decline before Brisbane. However if you haven't seen much gain in the last 7 years from Ipswich I would be surprised in another 7 years it is still worth the same (very surprised).

 

Not wanting to be negative .....But you are kicking yourself today that is the issue????

Property does double sometimes in 2-3 years....but it also goes sideways, backwards . But who wants to be holding property, paying debt when there is little no growth, not me I would rather just stick it in the bank, less stess.

 

I do, you are stuck, no point stressing, plenty of opinions but they may not suit and you need to be ready to move forward either way

MTR

 

very good point, however in todays property clock, I dont think as a whole, 6% growth continuously might be a bit optimistc or not realistic,
what do you think?

 

agree, however if I was confident or sure that the cheapies i have that have not grown were going to be next, id simply accept the current issues and wait for the good times to come,

but to be honest, the fundamentals for me dont seem to be very positive, along with other peoples opinion

 

to be honest, my ipshiwhc has done fine, or is doing fine, im not too concerend about taht one

hmmm intereting, you say that an ipswich will decline before brisbane??

in my understanding the regionals start going up when the metros start becomign unaffordable or too poor yield, so the regionals should go down after teh metros...

i would have thought in a struggling or falling economy, people look for higher yields, and/or the metro purchased people start to sell first, so the regionals should be after the metro.....

well thats my understanding

 

I think if interest rates are high, people will look to regionals as they have a better yield. But since interest rates are so low, people can afford to buy lower yielding properties in urban areas that dont give so much of a cashflow return, but instead give CG. I commented much earlier to say I'd sell Ashmont and Cessnock of you portfolio, and I would still do that. They are just not good Socioeconomic areas.

 

My thoughts and just using rough numbers;

Brisbane house 400k
Ipswich - 300k

If Brisbane house goes up to 600k, Ipswich gets the flow on effect/ripple effect and increases their price to 450k.

However if Brisbane then goes back to 550k it will also effect Ipswich and their price goes down to 400k. Reason being Brisbane is more demanding than Ipswich (generally speaking), people buy Ipswich for the cheaper price but if Brisbane is more appealing they will instead go to Brisbane.

Unless Ipswich becomes more popular than Brisbane (I cannot see why) it would be in less demand so when consumer confidence has dropped it becomes more of a buyers market the buyers are going to want to buy in Brisbane over Ipswich.

I am not saying that if Brisbane went to 600 then back to 550k that Ipswich will go from 300 to 450k then back to 300k it is just having less demand and people buying there more on price as soon as they perceive better pricing in Brisbane it will keep the demand higher in Brisbane and removes demand from Ipswich (hope this makes sense).

 

This is a moronic argument from any bank if they put this up, because anyone who was likely to do this could also decide to stop paying loans and spend the income that way as well.

I do not know exactly where this comes from, they do not come back with reasons like this.

 

Your credit cards are also included the same way, I have never had a late payment fee or paid any interest on the credit cards however with my 6k limit they perceive it as a neg 30k debt IIRC and this due to the nature of credit card debt.

As I have access to these credit cards/funds, I can spend it without any approval or consideration... Someone could just have a midlife crisis.

I agree with you it is stupid that my credit cards are seen as a negative debt or who is going to blow 500k on a new car but the thing is a person can and the bank has to consider their risk.

What I find even more stupid with the banks is that they only consider what your current income is and not your future income. My parents before they retired maxed out the equity from their property as it is actually safer but if they did it once they retired the bank wouldn't allow them as they wouldn't be deemed as responsible lending giving people equity out with no income.

It is the same that someone who works for 20 years a one job and then quits and starts a new job they find it very difficult to get a loan as they cannot show more than 12 months (some 24 months) employment. Even in my role which includes majority of renewals it is difficult for a bank to consider my commission for the first 2 years and very difficult for 1 year even those these sales/renewals are like insurance where you can almost bank on 75% renewing (if not more). Yet my package has been determined to include the commission as a major part of my package.

 

With the low rates, if regionals are not moving now they are never going to boom like Sydney unless they have a resource that becomes in demand again soon.

I wish the word regional would disappear or we had better identification of regions, to separate the areas along coast near Sydney from country towns/cities & those 5hrs away, anything that is close to the city, I would be holding while the rates are low.

Also if a regional has not had decent growth while rates were low, and the place is paid off or paying itself off easily, then it is likely to stay as a good rental. I see in some places lot's of renters are buying a home.

It seems fairly straight forward to me to put all the info in a spread sheet or however you want to do it, also look at areas historic data, and even in a short time frame of 1-2 years you can see what is working and what is not.

Or another way is how much cash is coming in from each place or lack of it if in negative, and look at the CG even if you can't draw it, it still is a good indicator. I think you want to keep them all

 

interesting thread @TMNT - I remember reading your stuff back in sommersoft days

I had some similar situation like yours but as severe. I was always renting out properties in upper end rental market ( renos of apartments in the south Melbourne, port Melbourne, CBD and southbank). This was back before the days of airbnb and apartment market was pretty hot back then in Melbourne. Majority for self managed - as it was relatively simple. I had a person (local Taiwanese) visit one of my apartments and then offered a 1 year lease payment with no question asked. Only later did I find out she was mates with gai waterhouse etc. Also had many pay me 3-6 months in advance.

Ventured out to pt cook (back 3 years ago) it probably still evolving - had some tenants seem like they're alright. half way through the lease, the couple broke up, domestic violence issues punches through wall etc. I saw even the my floorboards were ripped out at one stage. They did a runner while leaving all their stuff behind - had to go to VCAT to officially get them out, insurance claim etc etc. It takes time to organize all of this when I used to go to VCAT it was in Melbourne CBD, could attend 2 a day which was easy and it was a now a trip to Werribee Courts (which is a drive away) - so half a day gone. my mindset and style of management really had to change due to this.

Now I bought in another up coming suburb - it got burglared even before it settled (like a full copper run - strip out of oven, vanity etc). So it getting quotes etc, running around I feel you as it is hassles and it does take time to sort it out. I think I can manage a property pretty well probably better than an agent due to legal background and ability to negotiate but when you're just tied up it takes time and that is really the killer.

 

They are the lord of their domain and we will never change that, I have often wondered why a lender has not popped up just to cater to investors who are not average, prob not enough money in it.

 

It would make a lot of peoples days a lot easier, I think it has to do with the amount of money in it and further the amount of red tape.

 

Spot on!!!

There is 2 reasons for my current dilemma.
Usually regionals follow the metro (yes past performance is not an indicator of futre). But its cyclic. However the regionals im referring to have not yet moved. To me if they havent moved as of 13th sep 2016 then they arent going to move.
The above is my opinion.

So i shouldnt keep them even if they are neutral since something might go wrong one day and cause me headaches.

That being said the problems in having now are actuallly half the better properties.

Note: i dont need a spreadsheet to observe my props. They seem to be half ridden the recent waves and half doing nothing..

Eg my bendigo and ballart ones seem to have not chnaged much over 3 years.
In fact one place i did a subtansial reno was value at 280kish about a year ago. An agent has apraised at 250k. Which kind of sux

 

Many years ago now I went to one of Steve McKnights seminar, and I learnt a lesson, never regret selling and taking money off the table and its still working well for me today.

This is the story he quoted that evening (shorter version of course)

The Story of a Greedy Monkey » Story Planets