Real Estate Sell Down

Great spot to be in @Piston_Broke Congrats on getting to that position.

Im personally early into my investing career but still believe in RE, I think its just going to be a longer horizon than it used to, it was all ready a long term investment, I think its getting longer. I think it requires being smarter around asset selection, exit strategy, tax etc. to really get the best from it. Real estate for me moving forward will be about leverage and tax as opposed to income or growth per say.

I have a small base now but have decided to direct all my spare capital to the share market as that's where I see the short term opportunity, the time may come where RE presents the best opportunity and il swap back. But will be nice to diversify over the next 2 decades

 

Are you looking at anywhere in particular?

If after 30yrs of investing in RE and building wealth a person is worried about that, they haven't been doing it properly, or they had bad luck( it does happen, though I've had plenty). Or they enjoy the indentured slave lifestyle.
My record is 20% compound over 30yrs. Better than silver spoon born Buffett and fake expert Dalio. I ain't a builder or tradie, it would've been much more if i was.
And plenty people here did much better than me.

A lot of people do it for the kids. LoL and then they squable and squander it.
Don't leave much inheritance, give it to them early so they learn how to manage it and hopefully build more.

 

Thanks.
It's always been long term. And you always have to think long term.
Every ten or so years i heard "it's different now"... it wasn't.
As i said I don't think RE will decline much. There's too much at stake.
Interest rates declining and home ownership are the most important factor IMO.
Declining rates mean smaller returns and could lower prices or just stop growth.
Declining home ownership means "evil landlords" becomes an election issue (it is already!).

RE was always about asset selection and timing the market. To time the market I think you have to be local and know what's happening.
The other option is to add value if you're a tradie. This puts you in a box seat.
I have no idea how tradies and builders can go 20yrs of working and not own at least 4-5 houses.
It's like buying wholesale.

Income and Growth is what is all about.
You gotta find it or make. Otherwise you returns end up being 5% vs 20%+ per year.

What I would do differently is buy shares, yes. But not more than 20% avg and only if the index is 30% or more from it's peak. That meant buying when the ASX200 is under 5000.
That's just my take on it.
I do hope it goes well for you.

 

My next life I'm coming back as Bob the Builder I think. I still want to try my hand at manufacturing growth through rental quality upgrades of outdated ugly ducklings

 

And I forgot to mention:
One of my few regrets is putting money in Super.
Looking back i should not have put a single dollar in super. Not even 50 cents.

 

Hey @Piston_Broke, is that because you could have achieved more outside of super with the funds, ie the opportunity cost? Because of the unavoidable taxes on contributions and earnings in super? Or is my sarcasm detector broken?

 

Or maybe they just want to convert asset into utility, like actually enjoying life. Asset owning is not the goal but merely the means.

 

Sounds like a prudent move all the best. Just becareful with the aussie share market, if you think property yields are low then you are in for a shock. Too much money chasing too few quality companies. You would really need to dig into small caps, high risk retail, reits or negative growth industrials to get any decent yields above 3%. Problem is alot of businesses are being constantly disrupted and economies are not growing so alot of these yields are not reliable and unsustainable. Good to keep some property for yield as people always need a place to live.

On the super front, like some people have alluded to in prior posts - their premixed options are a joke. You really need to diy. Ive been buying international etfs for the past few years and returns have outperformed immensely at a fraction of the fees they charge which is astounding. :/

 

So many great thoughts concepts and ideas in this thread! Would love to reply to all of them But wouldn't want to bore with an essay.

What's clear here though is that each journey is different. Some people select asset classes with different goals or outcomes in mind compared to others. Horses for courses I spose.

As for me I'm also in the process of selling down in AU property a little bit (just one) to clear out a whack of debt and extract my original equity plus a marginal gain on it.

This will take 3 months to complete and I'll then save my income from day job concurrently as the same processes. This will see me hit post-US election and depending on the outcome of that + the forex at the time I'll probably tip all of that cash into another US Property purchase. Goal being:

- owned cash outright no mortgage debt
- low county tax state and low/nil land tax state
- probably do an upfront cosmetic rehab pre renting it at best rate or if already tenanted will enjoy the cash-flow until tenant changeover and rehab then to maximise the return

By my calculations and depending on many variables... If over time you amassed ten of these for a total of AUD $1Million invested all-cash no mortgage; then at an average gross 8-10% yield (netting out after running expenzes and income tax each year) you could almost replace a median single Australian annual income in passive cash flow.

Also, ten of these versus say only 2 or 3 AU properties for the same 1 mill invested diversifies your cash-flow risk further.

I.e. vacancy. If you have only 2 or 3 AU properties then if just one of them goes vacant for a while it's a big hit. If you have 10 cash flowing US or other cost-efficient international market properties and 1 (or even 2..) of them were vacant at the same time, you still have 8 or 9 cash flowing and securing your relatively passive income stream.

Over in AU though, if this were 5 years ago I'd be much more cheery on the AU market cycles. Reason being is, the capital growth was massive over the last decade! That made up for the pitiful cash flow returns on most resi property here. Fast forward to today and flattening values (not much growth) declining rents (not much cash flow) and still having to take on mountains of debt to really expand here; and I'm scratching my head as to the appeal of anyone having an ambition to start a portfolio in 2020.

The US may not be all rosy when it comes to social cohesion and raft of other issues there at present. But as investors we must not conflate wider issues of markets with what our spreadsheet feasibility number crunching we all do; is telling us. I'm trying to look at numbers objectively in my spreadsheets and there's just nothing adding up for me that indicates a 'buy' worthiness anywhere in AU at present.

If the bargain basement low socio economic favourites of AU all somehow reduce in price by half (whilst maintaining rents) then at that point even with the hard work of low socio rough tentants; the numbers *may* indicate return is worthy of the effort. Folks I'm talking the usual foothold suspects of QLD's Logan-esque postcodes, SA's Elizabeth-an enclaves, WA's Rockingham-my hoods etc. etc.

Otherwise, providing the proverbial doesn't hit the fan post-US election, I will continue to pursue cash flowing single family homes (houses) there with that view to replacing a median-salary as fast as possible.

 

This is the rub. I started investing some of my gains into the Sharemarket.....better returns, dividends paying more than rents, etc......but I'm glad I didn't go all in. There's a modest amount there, all sitting in the red, and red is not my favourite colour in this instance. While that doesn't bother me too much, it's the reduction of dividends that I'm not comfortable with. Still plenty to live off of, thanks to the remaining properties, the lower interest rates, and offset accounts.

 

Irrespective of how good my returns are I'd rather have a go myself.
Not sure if it was purposely but compulsory is now probably the biggest industry in this country.
The big fatcat super corps/managers/reps have made billions out of. It's fantastic, for them.
Purposely or not imo it's the biggest scam going.

What started as tax free saving scheme is now the biggest cash cow for gov and the finance industry.
Has there ever been a year with added restrictions on super?

 

Dont speculate, NEVER risk your money as a TRADE. Every-one knows the name of the greatest share investor in the world .. Can any body name a share trader in the rich list, Trader's are usually spruicking to get by. Markets are forward looking polls show Biden winning so that is factored in. You should stay away from companies that are affected by change of government and regulatory changes such as utilities that governments can change margins on anyway. Irrespective of government 5G is comming every 1% increase in speed translates to a 1% increase in profitabiilty for some companies. Cloud computing isnt going away, e-commerce isnt going to go away, luxury brands and essentials will still be bought. There will still be something after the election for an excuse not to invest, may be it all that money sitting on the sidelines flowing in.. You should invest for the long term in sound, well ran business's, the important part is to invest in companies with strong balance sheets if you want some protection from down turns and a fast strong bounce back, instead of "trading the market"

 

Not a share trader. I was talking to Wylie and will do similar to her. Have a look back at the post trail

 

^^^^ THIS has been my perpetual fear and frustration when it comes to superannuation. The rules can be changed at ANY time yet gov expects us all to make sound, long-term-viewed decisioning in regards to how we build grow and retain our super. But with the best of intentions in doing so.. what good is that; if gov can come along and change the rules any time they like?? I have little trust and faith in the security of super, for this reason. I treat it as the cherry on (hopefully) a big size cake I can enjoy in my retirement, made from my own investment efforts outside super.

 

Exactly what I said earlier in a post in a forum on Super. My fears too. Fortunately, I will soon be at an age to access it. I'm sick of the taxes and complicated rules there

 

I understand, it's full of uncertainties. Thanks for clarifying. I remember years ago a relative had his super in a retail fund paying 2.2% pa plus the admin fee, plus a significant fee to his advisor. Crazy.

 

The plan for the next step is one of the craziest thing I've ever done.
I plan to trade forex for cash flow.
Most thinking "why not just go to the casino".
The answer to that is they no longer have blackjack with only a couple of decks, and i don't really like the place.
So the plan is 500k earning around 2% per month, which 10k.
On the opposite side there's though who think "2%!! that easy blah blah".
Yeah, sure is easy with a $100 or even $1k account. 50% drawdown, who cares. 250k drawdown and you've just lost half a house.
I will be expecting times with 20-30% DD during trades, and trades will be 1-2 lots max each.

I will keep an eye on the ASX as well, though I don't see many opportunities there at this time.

Locally there's David Hains.
Most traders may not be on the rich list but it's well know that good performing bank traders get bonuses worth tens of millions each year.
Trading has diminishing returns when you get in the high numbers, but I know of a few with tracked records of 1M+ profits per year for many years.

It's the spruked hedge funds that make average returns and still get paid billions.
Some hedge fund managers get paid millions to lose money.

 

Forex is crazy to me.

I’d pick a handful of spec stocks on the Asx with good long term fundamentals under market caps of $300m. Like Junior gold explorers for example. Research & Watch for a month, Then buy the bad days and sell on the 5-10% rebound that same week. A 5% swing almost happens daily

You’d only need to do 1 a month and you could do a couple per week the way the ASX is going; and that’s without needing to be good with charts/TA

I done it with ADN today. All though a much smaller $ amount