New strategies post APRA

So when I first began thinking about investing 4 years ago I read all the books listened to all the podcasts etc, it all sounded simple and a great way for people on average incomes to get ahead. It seems like all of that information is now out of date considering the changes in lending.

Initially I was going to be a buy and hold investor adding value where I could and extracting equity and going again. Not aiming to get 100 properties but steadily accumulate then either live off equity (seems sillly now) or sell down half and live off rent or buy high dividend paying shares.

However now with the changes I am left a little snookered. I have purchased two properties and have pretty much hit my borrowing capacity, I could possibly get another few hundred grand and buy an apartment or somewhere regional. The properties have performed well so I am still well ahead of where I would be if I hadn’t done anything so no complaints on that front.

However I have been rentvesting with the plan of buying a ppor at a later date. Again this now seems unlikely considering my borrowing constraints.

My personal feeling is now that I will keep saving, reduce debt, eventually sell down one or both properties then look to buy a ppor and have as little non tax deductible debt as possible. Then begin my portfolio again.

Going forward from that I may need to buy one property that is in a booming market, sell down after good growth and then put the profits towards shares that generate an income right away.


What do you say brains trust of property chat, What can newer investors do to replicate some of the successes of previous investors.

 

Steps haven't changed.

1. increase income.
2. reduce debt.
3. save.
4. invest.

The mistake I see people make is they want to do step 4, without willing to budge on step 1 & 2 & 3.

And when they do step 4, they buy crap properties for the sake of 'investing', rather than moving forward. Not intentionally, sometimes it's just the best you know at the time.

Are your current properties worth holding onto ATM? Would there be a better use for your capital elsewhere? What can you do to increase your income / savings, and thus your borrowing capacity? Subdivide / develop, perhaps sell and move funds into a different investment vehicle? Can you get a promotion, start a side business, sell items, reduce expenses?

Lots of things to focus on that keeps feeding the fire.

My strategy has been to consolidate investments, grow business, cut expenses. Building cash to then take advantage when the next buying cycle comes around.

The further down the investment path I go, the more I realise residential real estate is the way to HOLD wealth, not grow wealth. There's a reason that person is selling books on real-estate, runs seminars, become brokers or buyers agents. Those book writing peeps also tend to also be doing commercial and developments. Why is that?

 

Search "apra" posts by "euro73" will give you some insight

 

Dude I am all about steps 1,2&3 we save 50% of our take home and are generally really frugal.

First property I bought has done really well 40% growth in 2 years, has slowed a little now so I am watching and waiting on that one.

Second property purchased in Geelong just under a year ago had it revalued at %15 growth.

Both have good land content so subdivision is possible, just not sure if I will get the finance now

Going back to study to increase job opportunities , however in the short term that is likely to decrease income.

 

I should have said I wanted the easy way haha.

 

That's awesome!
I think my point was missed though.
@Rolf Latham said it better: "Business".

Me:
24 months ago - saving 40% of PayG.
Now - savings 70% of PayG (which is $50k more than before)
AND - saving 100% of BUSINESS income which is = to my PayG and will be 1.5x more by June 2019.

Business. Better than sex.

 

Exactly what I was referring to by my first post.

Not being said with malice. Just observation.

Wana be a heavy-weight champion, need to get punched in the face a few 1000 times. Hard.
Otherwise, enjoy being a spectator (reading books, etc)

 

Yeah I have read them, they are great but hence my concern about having limited ability to go forward without substantial changes to income.

 

Also take a look at what euro73 has written below each and everyone of his posts...

#business.

 

@NHG either you're having lousy sex or your business involves a felt hat and a mink coat...

The steps really haven't changed. As others said, save, pay down debt, invest as much as you can. The problem is restrictions have been imposed and you can't do as much as you used to with the same amount, money management is more important than ever.

You can still build a portfolio of properties and live comfortably, but it's going to take longer. People 'discover' property investing and have an expectation of results within 5 years. It's never been that way. If you speak with people who are successful you'll realise that most of them realised their success over 15-20 years. It's never been a quick and easy process, it takes decades of commitment.

 

it's bad business to use your own product

@Ian87 , also observe the bottom of Rolf Latham and Peter Tersteegs posts.

#TheSecretMillionairesDon'tWantYouToKnow
#YetTheyDo

 

The only thing I can add to your existing strategy is to be patient. It takes time. Apart from that you seem to be doing really well.

 

Ha thanks, I guess it is the patience that is killing me. I didn’t want the original post to come across as a get rich quick post but it seems it may have been construed that way.
More just looking to see how people have changed their plans in line with the cnaging environment.
For me I will probably look to be more active with the possibility of buying and selling more then reinvesting funds.

 

I think you are talking about the very top of the pyramid only - there are plenty of nice areas just near the top as well.

For every successful business there are a multitude of dud businesses.

For every successful business person there are a multitude of high paying employees doing almost just as well.

For every sucessful developer/commercial investor there are a multitude a resi investors doing quite nicely.

No issue with those aiming for the rare air but for most it is not necessary and often it is just bad advice.

Also, a lot of businesses like to portray success as a type of marketing to their customers (and a lot of the businesses here have their customers are on here as well).

For @Ian87 the ideas you have sound pretty good to me.- built income, build equity then build cash flow.

 

True .... and a good percentage of those propertyblog posters start a business as a broker

That was what I was commenting on - the subtle push that a business is the only way to investment success. I'd take you on a journey through my 30 year + corporate career and investing journey - but I'm not looking to write you a loan so there isn't much point.

 

Real-estate requires borrowing, which requires a high income. Yours or not.

Business can be scaleable. Usually teaches financial discipline. A high PayG rarely does.

"A business can buy many properties. A property cannot buy many businesses".
Read Millionaire Next Door.

Strategies I have used since down-turn.

1. Refinanced peak of market where I could. Nut and bolt method, take out as much before prices come down or lending is tough. People trying it now. Too late.

2. Purchased in the USA. Sacramento, 70% growth. US $7k positive geared.

3. Rolled loans back to tier 1 banks P&I. If I can't borrow, no need for higher IO rates.

4. Invested in my education. Spending more time helping mentors with their projects to up-skill. Also, I like spending time with my mentors, they're great people.

5. Lost money trying various strategies. Found one that worked (for me). Created business around it. Learnt to leverage OPM/OPT/OPK.

6. Growing business. Great cash-flow, It's scaleable. Not saleable. Getting RE licence. Opening second business to create rental roll which is saleable. Can borrow 50% of value in cash from banks.

7. Tracked living expenses, slashing, trying to increase my savings rate. Using PayG to pay down loans. Business funds to grow business. Partners funds for PPOR savings.

8. Stopped buying resi in 2012. Focus is on property-business, subdivide/develop/commercial/etc. Particular interest in multi-res, boarding houses/hotels/hostels. I doubt I would go back to resi-investment. Returns are too low.

9. Also hired a cook/cleaner to free up my time (it's affordable). Looking at a manager to do the run-around for the business also. Work on the business, not in the business.

10. Plan is double income in 24 months, grow business, shore cash, take advantage of market I predict will drop close to bottom within 18-24 months.

11. Pray. Life rarely goes as planned.

 

Be interested to hear more about your US investments, perhaps another thread??

 

Hi Marisa,
We've spoken about this a year or so ago.
Nothing fancy. House in Sacramento $117k purchase. Comparables are over $200k now. $1,250/month rent.

 

Have you bought your first ppor as yet? If not you could use an add value strategy for your next play to make some cash. You're looking for easy you said..

Next place buy a ppor that needs a Reno and live in it, nothing stupid crazy, something you can achieve or pay others to do, Painting/landscaping/carport etc.
Make use of the free stamp duty since you're in Melb and tax free when you sell.
Find a market that that isn't falling hard and start learning the area, find a house you can add value too and only if you buy it at a great price. I'm sure you already know one or two areas pretty well that you can see value before it sells. When you do run the numbers and make sure you can get in, spend on the Reno and offload within a few months. Make sure your finances are ready so you can put in lower offers with finance available so it strengthens your offer.
Rinse and repeat.

If you have to sell one of the ones you're holding then offload it, if it means you can move forward and make more cash then do it.