my not so great investment experience: Cheapie strategy

I dislike steve mcknight with a passion

But i totally agree. Never live in the past

Never consider what ifs

The only what ifs i would conisder if i miselsed out ona ridiciluous jackpot. Eg decling the offer to manage the Beatles (true story)

 

Ouch thats terrible.

So here i am doing regionals while you are doing metros and still having the same problem.
In my experience self management sux.
A lot of the tenants know that they can get away with more so more likely to get a bad tenant

I remebwr your southbank apratment renos and magazine article too and waa ultra impressed!

 

Yeah, spreadsheet suggestion was only that, I am sure you can work it out

FWIW one that I get the most calls about has also risen, so all good.

 

It is interesting that one thinking will be low rates and yields in capitals should mean looking to regionals, and the other in that low rates mean people can wear low yields as it costs less.

The question really is, how many think logically.

The market is also not just investor driven, and the word investor is pretty loose to me, some seem to want to throw away cash so they pay less tax ! but there is also up-graders, down-graders and new home owners and developers, so all that needs to be taken into account.

Low rates should be encouraging all groups, so if an area stays dead, and vacancy rates stay the same and no significant dev going on, then it is probably not going to do much, you can only make an educated guess and not worry if wrong.

 

thanks - yeah had to evolve and move out of the apartment game to different property types.

For those apartments, it was easy, many of the folks that rented had some serious cash but once moving to pt cook etc (it was a different ball game)

Breakins etc it happens everywhere I suppose - not sure if you heard of the apex gang or violent crime in Melbourne. apartment block had some guy walk into the garage to steal a merc and when questioned by the security, didn't let him out (called the police) the guy decided he didn't want to get busted and just slammed into the whole apartment garage door, taking it down with the 150K merc. Next morning, everyone saw the whole garage door lying on the street. We're talking south Melbourne albert park prime area not dandenong with 7pm-7am security guard CCTV and even that happened, so yeah don't feel bad about regional - it happens everywhere

 

agree, investors and OO dont think logically or in sequence is my guess,
however , behavioural patterns should be similar and should follow a pattern,

eg oo like bigger blocks and backyards for their family, however if it becomes way out of their price bracket, they will either move furhter out or go for a town house,
this type of behaviour is natural and not planned or calculated

 

What is centrepay ? I just had my tenant ask me to add the name of his two sons to the lease so they can get rental assistance from centrelink (afghan family - melb western suburb - 3 months into tenancy - they seem like good ppl, family oriented - just new migrants trying to get ahead)

 

It's pretty much Centrelink paying the rent from the benefits the tenant receives. It doesn't guarantee you the rent though as they can ring them up and cancel it at any time. Also from memory you get charged a $1 per fortnightly payment.

 

Update

Well to be honest the next two years will be a test to whether my strategy has worked or not.
I'm simply comparing it to had I purchased in the 500k price range as opposed to the 50 to 200k price range.
I will be considering the headaches dealing with crappier tenants
And the boom that I've essentially missed due to not being metro.
Cycle and timing wise the regionals should be Strat to boom or rise.

So my strategy of for example 10x 200k vs 4x500k will be put to the test.

If the net equity gained from both strategies is similar. I will consider it a success

If the net equity is merely the average state growth. Then it would have been no a failure. But not a very good one.. And the rule of blue chips will always rise will be the winner for me

 

maybe with these cheap areas then self managing might be better with an iron stick approach but friendly and helpful? I would like to know more about this subject myself. Ideally you would have a bunch in the same suburb and live nearby as well so you can keep a close eye on things.

 

to be honest last year I was in a similar position, with similar budgets - I went to Brisbane looking for cheapies in logan vs buying in Melbourne. could have gotten great super cash flows in Brisbane but I decided against it after visiting the areas.

I did go with Melbourne and not trying to be cocky or anything (after months of research on zoning, auction inspections and late nights reading infrastructure plans from dept of infra, and some luck) I bought a few in Melbourne - within the 500kish. To date and once some have permited the growth (in figures) and not percentages would be close to 7 figures as opposed to if I only bought in logan which would have yielded 1/10 of that unfortunately. That is not to say the areas in Melbourne is blue chip areas as they are equally rough as some of the ips have been burglared etc as the tenants were cannabis planters. But I rode partly the ripple effect growth, rezoning and luck (no investor can say it was all due to their skill or intuition as that would be just a lie).

in btw I self manage all tenants - one of them being the vendor himself who re-rented the property from me at the highest rent in the whole suburb and so far that has be the no.1 performer with nearly 17K per year in QS report in deductions. I really not into having so many properties but I want the ones with the highest potential for growth.

 

But Logan always seemed to be a cash flow area, never going to be 10 or 20% gains. Also seemed to me Logan had moved a lot by the time everyone was talking about it IMO.

The thing with cheaper areas is you need more exposure & you need to pick places that are not basically sitting still for 15 years or so. You get more management & tenants though this way, more maintenance items, need to manage these things closely.

There is no hard and fast rule in regard to Metro and Regional, they often on different cycles, but all places should have had some gains each year anyway recently due to rates, any place that has sat still for 5 years is not likely to move unless something fires it up.

There is some nice large country regionals but some do nothing from what I can see, if you buy really cheap then best to pay down and use the higher cash flow for paying off others - different to relying on large CG, but that can be easier said than done too.

 

It's an interesting one.

I Purchased 2 in Brisbane just under 2 years ago and have had more growth than holding 3 regionals for 13 years, 5 years and 3 years. But the regionals have still made money. I think it's good to have a balance as the cashflow used to allow more purchases.

Although if I was starting out now with APRA I think I'd stick to major cities.

 

thats if you live near them, what if they're all around the country!

Self managing I would never do. Especially in crappier areas. Dealing with the socio economic people of my properties would drive me nuts (yes I'm sounding like a snob)

 

Exxludinf capital gains for a moment

Managemnt fees are a %. Same with leasing fees etc.

However statement fees. Inspection fees are a set fee

A broken fridge will cost the same to fix whether it's a dump or a expensive house.

Council rates a percentage of value as well to a certain extent but not quite.

I've learnt that once my fridge breaks down or there is a rpboblem. A months rent goes down the toilet.

Heavens forbid when a hws goes too.

Next time I will consider this as well.

And it takes 4 times more effort to find 4 tenants as opposed to one tenant

 

Why?
Many of his strategies have made people wealthy

If he did anything for Australian investors it was to teach us different stratagies and the importance of cashflow

 

well initially before actually visiting and doing some DD - the forums sommersoft and PC - many posters were potraying Brisbane like the next Sydney (like it very well maybe etc with various non-plausible arguments). Although some of the arguments made some sense, some weren't and really it is up to the individual to make his own risk assessment and judgements. Shows the dangers for early or first time investors relying on some hype without much substance.

 

Well update

I'm thinking of selling about 50% of my portfolio

These will be pretty much all the sub 200k props especially the ones in the "slums"

Not sure if timing wise it's the worst, since I missed out on the booms of metro aus. And now that property is cold. Cycle wiser regionals are next
However if I see now minus agents fees. I'll pretty much get my deposit back
I don't have any plans to reinvest these funds . So its not an opportunity cost decision.
It's more of a I've exhausted my patience in waiting decision. And although i didn't lose anything, the headaches aren't worth it. .... or it could be a little burn out too....

 

regional market might lift up with inland train project? I am looking at towns where new sections are to be built and budget allocation. Dubbo might be winner?
Btw still headaches with high maintenance tenants too you never know...

 

Isn't there some kind of FHB incentive in regional areas about to drop on July 1? Assuming your properties would be suitable for FHBs, maybe it IS a good time to sell given prices may artificially rise as a result of the incentive. Will be interesting to see what happens then...