Property Investing Tips in a Changing Market..

Thx Rolf

 

Yeah probably true now....the Royal commission stuffed it for everyone.

However, if its a IP it is easier...but you need to have a strong case. Try the smaller players they will be more flexible than the majors...

 

agree with most of your points @sash, except Points 1. 6. 7. 9

next career move, becoming a broker?

BTW, it seems CBA is closing the door of extending IO term very soon. ( unfortunately ppl can't do it if within 6 month after refi to CBA)

 

Hi Sash,

Thanks. Appreciate you taking the time to share.

Wanted to ask, What's the end game? Sell some before the 5/10/15 year I/O period? Or refinance when there is CG to buy more? But by doing so, wouldn't the P+I repayments be even more when it eventually reverts? Or to wait for the rents to catch up to the increase in repayments?

If we do all in I/O, once we hit the servicing limit, would it be better to convert it to P+I to increase DSR?

Thanks!

 

Have to agree to disagree.

No plan on becoming a broker. ..yet..have enough on my plate at the moment....to take profits and convert profits on builds over the next 18 months...over $1m ...

CBA has closed the door already their emails about 2 weeks was telling...they will no longer do more than 10 years...it also looks like they will assess for serviceability after 5 years.

 

I have full offsets against a lot of of the I/O conversions...2 revert in 2019....then 3-4 in 2022 and the rest from 2026 own wards

I will have payed down about $4m in debt then..and have less than $2m....which will be more than manageable. I want to have very little by 2022....I intend to hang up the cowboy boots by then.

 

Thanks for the reply Sash, would you still hold on to the properties then or cash out?

 

I plan to hold at least 50-60% of the portfolio for another Sydney, Melbourne, Geelong, Brisbane cycle.

I plan to get out of Adelaide, Perth when the time is right.

I will also be buying and selling some stuff in line with the cycle of the market.

 

OK..time for Tip# 2......

Timing of Developments/House and Land

• The timing of when to get into a particular market for development and House & Land is critical. If you get this wrong you could end up with negative equity:

1. Development (i.e. more than 3 houses, villas, T/H) is significantly more risk. Typically you need to get into the cycle quite early and have your plans and approvals in place. Thus you need to have land banked in advance. Trying to get into the tail end of cycle is death.
2. The same applies to House and Land but this is significantly less risks. As before a cycle you find a lot of land available. For example...in early 2017 I noticed there were blocks in Melton for less than 135-150k for 450sqm blocks. These blocks are now worth around the 230-260k mark. The hosues back them if new were selling for low 3s now they are pushing over 500k on some. Unfortunately, I could not take advantage of these and had to pass as I had 2-3 House and Land packages on the go back then.
3. Buying land OTP is great idea ..as it will take about 18-24 months to settle. Buy it when the market is starting to move.
4. Lots of newbies are trying to make millions on developments. Very few people are successful here. I personally feel you can 2-3 well selected House and Land packages and make as much with significantly less risk. Sure it is not as sexy as development. But the end result is to be in the money.
5. Be careful of the numbers on PC...some of them have not completed any developments profitably. There is a lot of gilding the Lily. Having said that some have some excellent experience and knowledge.
6. The gross margin on development has to be minimum of 30% to ensure the development is profitable. The larger the project you may need add more margin as costs will go up and it is not easy to fix costs on developing already existing land. New estates are much easier to build on as you don't need to replace some of the existing plumbing, electricals, etc.
7. People are claiming 400-500k in potential profits on $2.2m developments. This does not make sense as this is under the 30% gross margin. The risk vs reward does not align.
8. Above all if you are going to build or develop ...learn the rope first. Jumping in with both feet could get you burnt....especially now. So learn to crawl before you start running.
9. When building make sure the type of property will suit the market. The duplex market in Qld is finicky. A brick box will not suit ...whereas a replica Queenslander would suit better in most of the Inner market.

Good luck...hope the points are helpful....

 

Hey Eric, thanks for the heads up, is there anyway that I extend it few months before its due to expired? my next one is on the November this year.

 

Hi @icic, maybe call you broker to let him get on to it next week. Or call CBA Monday the first thing to try.

It is a matter of days or weeks for CBA to make the change.

Act quickly.

 

Great tip #2 @sash ! what are your thoughts on land banking on development sites with the eventuality of selling to developers when the market heats up. lots of houses made to news when developers bought a bundled up sites in the likes of Castle hills and paramatta several times its worth back in the good old days. Any such experience you like to share?

 

When do you see Sydney Melbourne recovering from current downturn?

 

Not sure how you guys can seriously believe that property prices will recover after the next 2-3 years? Which fundamentals? wages increases? more immigration? more employed people? high inflation? demand > supply?

 

Great post Sash .

 

Ta

 

Not for another 7-10 years..normal cycle..sure some places will do okay and press up...but no major increases....especially Sydney..

 

Nope no such experiences...that is like winning the Jackpot...just slow and steady.

But in Perth this could work..but you need to cope with serious negative CF.

 

called my account manager today. He said all i need to do was to log on to netbank and change my existing loans to P&I, give it a few days. Once applied, change it back to IO and I will get another 5 years(max of 10 years accumulative). hey @sash, have you got your loans extended yet ?