Real Estate Sell Down

I know a lot of people who eventually got burned doing that.
Sure with a few thousand bucks, no big deal but you don't know when when the day you buy a .25 and it drops to .10 comes.

Just as i can setup an EA with $1k that makes 20-30% per month and no idea how long before it busts.
A week, a month, a year...
You have to play it like a ponzi: Use small amounts, hope you get your money back first. then try and ride the wave and extract before the break.

 

It was 2011, first Tuesday of the month, AUD was changing at 1.05 to USD (yes higher than USD). I was waiting the whole day to short AUD as I had a good feeling RBA is going cut interest rate that day. 30 sec before 2 pm announcement, I placed my short but instead of shorting AUD 1,000,000, I shorted 10,000,000. So yeah, AUD jumped almost 1% on the announcement even though RBA cut rates that day. Everyone was selling the news as it has dropped the whole day before the announcement. My IG account got liquidated, loss like 34k in just 1 min or so. My original plan, I was just trying to profit 5k lol.

So yeah, many profits and even more losses after that which made that day shocking trade felt just like a tiny pinch now, it’s getting dangerous as stake is highest ever. I have given up Forex altogether, only in the really know wins. But I have made IG paid for all my Forex and Derivatives losses with way much more gains in Share CFD profits so far. And big chunk of it was just last year (2020) lol, maxed out LVR in March when market was bottom, bang and sold in Nov. Gotta love crisis.

Stick with shares, Au or international. But only short/medium term for me. Long term in my view, most will crash, gone bankrupt. I’d rather stick with RE.

Happy new year and good luck

 

Not a trader but if you're going to trade, why don't you just trade with one of the old LICs? That way, if you bet on the wrong side of the curve, you just hold it?

 

Im essentially doing that with a stock I plan to hold long term anyway. If I’m on the wrong side of it, no big deal I’ll just hold it longer. I have 90% un-touched for long term, but use 10% to trade in and out during times of consolidation or pull back, which tends to happen after each big run. (One stock just ran 100%+ and has pulled back 30%)

it’s happened before and I just had to stay with it for a couple of extra weeks before it rebounded.

 

Thanks, and you too.

In 2011 I started buying USD at 95 cents. My FX account was USD as well.
By the time it got to 1.05 I had a 20k at 1:50 short the AUD.
Than it sank, but it took a while for me to close at around 85 cents.
I then started shorting again over 90cents and closed mid 80s again.
Interest rates was the reason for the untenable rise, even though banks were predicting 1.25 in their research. And another reason not to believe "experts".
I have screen shots somewhere and I was commenting as it happened on the now dead Oanda forum.
Years ago I also real time blogged an account from 4k to 22K trading Turkish lira. probly on archive.org somwhere. And on an Oanda managed account competition 160% in 12 months.

My point is I'm not buying lottery tickets, and while it's not easy the long term the plan is 2% return per month from my new hobby.

The only similar returns I got was trading options, but that was a lot slower as I had to wait for the right market conditions.

As for buying shares or LICs....as exciting as watching grass grow, maybe a bit less.
The only time I'd buy shares is at 30% or more index drop. 4600 was the ASX buy trigger, and that only happens every 5-10years.
RE gives me asset growth, not income. Low rates are also reducing returns on RE.
I did consider buying a business but they seem either dying or really expensive.

 

Did some quick calcs on the long term real returns for investing in real estate.
This includes rental income and outgoing expenses.

The low side was approx 7% compound over 30yrs
The high side was approx 10.5% compound over 30 yrs.

The difference between the two is enormous.
An extra 3% over 30 years mean that one property will pay for 30 years of good retirement!

An by most "expert" accounts the later was not the good investment type property.
No wonder i grow old and cynical of these clueless "experts".


edit: PS this is not theory. These are properties i have bought and sold.
PPS The returns are calculated on the Price of the Asset, not invested capital which is much smaller.
As posted before ROIC is over 20%pa over 30 years.

 

Hi @Piston_Broke - out of interest/education, in your opinion, what was the key factor in this one property being a standout from a performance perspective? And what were the factors that made it 'not a good investment type property' according to the so called experts?

 

The key factor was knowing a bit about property history and projecting out 20yrs.
It was the highest price on the street and the worst value according to standard metrics.
Was on the market for over a year.
I just thought what will this area look like in 20yrs time.

Was not easy going, many dramas and extra expenses that a standard IP would not have.
Everything that could go wrong went wrong, either by my inexperience or others.
All killing cashflow, while the std IP just slowly earns over time.

I asked many questions when I was younger to older RE owners and what it was like many years before. Turned out they were right, and I now get to take the credit for it lol.
A bit of luck, a bit of foresight, lots of bad luck (good luck would've added 500k more gains!) all mixed in.
I just had a long term plan at 20 that was about 20yrs to retire at 40.
Yeah, the retiring part was a bit naive, but at 20 what the hell would've I known.

 

Interesting .
Why ?
Ps I have nothing in super either

 

Great story, thank you. Would you mind elaborating a bit without getting too specific?

Are you saying that the assets that performed best over 30 years didn't necessarily provide cash flow? Why was this? And are you also saying that this was the lesson from the older RE owners / mentors?

Thanks,
John

 

Probably poor and hates money.

By and large the wealthy plough money into Superannuation hand over fist.

There isn't that much restriction from investing in Superannuation vs other structures, and the tax incentive is massive.

The reality is that if your someone that is constantly growing your Networth Superannuation makes lots of sense. It also gives great optionality for certain investments because of the low tax drag i.e. investing over shorter time frames. recycling investments.

You see investing in/through retirement accounts mentioned a lot in the U.S., barely talked about in Australia.

 

Great thread!

I purchased my first property at 20 and in my early 40's I lost a lot of interest in it so I began selling off what wasn't developeable - a villa and a townhouse a year apart. Next on the list is a house on 760sqm which is currently under contract. Then the plan is to build beside existing house and subdivide on a 795sqm block. Reno the older home and sell a year later, then keep existing new home. Then either divide or sell vacant land on part of a triplex block. Buyers pay a premium for vacant land so we will possibly keep the existing old house/land which the house is basically free. See how things stack up in another year. I'd be happy to hold two rental properties with small debts plus own our home. My husband has super and I have nothing so we need to start planning to try to even that out better before any thoughts of retirement. Financial plans haven't really gone as planned. When I interviewed my husband he had planned to retire at 50 but he has just passed that. He started out negatively gearing shares. $25k cash, $25k loan. Haha - before you judge me I rented out a room to him in my first property.

 

Hi @Piston_Broke - I hope you don't mind me quizing a little more - I'm really curious:

Worst potential value because of high outgoings, low incomings, lack of abiliity to add value, other?

Was it the specific house OR the specific area (ie street and surounding streets), or the general area (ie suburb or part of suburb)?

Why was it not a standard IP (high end house, boarding house, resi motel, other)?

 

Did you lose interest in property in the 40's when Australia was in the thick of WW2 ?

 

The OP clearly states in his post 'in MY early 40's' ...

 

Yes I was trying to make sense of that comment or if it was a joke. My parents were born in the early 40's and I doubt they would even know how to use this site, let alone being even older and selling off property at that time and still be able to use the internet.

 

So let me understand this thread, you are selling after 30 years of property investing, so boring properties, in order to enter Forex and keep yourself busy and occupied or for the excitement of trading and generating $10k a month? So am I to assume you did not generate that from your IPs?
What don't I understand?
I am the opposite only 20 years in IPs... longer with PPOR, yes constantly paying more land tax too, but I don't wish to try new busy/riskier investments, I still prefer property that is boring and long term...… especially that they do generate X times more than $10K/month and still continue rising in CG.
Personally I don't mind dabbling a bit into ASX but that is more for 'income' exercise but then if substantial returns are generated then again re-invested into property for my 'wealth' exercise.
By the way I totally agree with the Super, however, we had taken total control of our Super since 1995 and what made the difference is 'total control' aspect, hence we don't have any investor advisor fees and have made great returns because also directly invested into IPs. All investments are direct and decided by us hence minimal fees... 0.14% (only accounting and compliance, etc..) of total gross investments, which is so negligible.
The idea of setting up our own SMSF was after US Enron's company collapse, I thought at least if we go bust it will be our decision making not some large organizations, out of our control? The only downfall is constant government intervention as I no longer wish to grow it say to $10M although CG may eventually creep us there...?
Now I prefer to invest outside because of that uncertainty and constant changes, and since we are already past tax free member thresholds, but still generating a very comfortable income, which for now is 15% taxed and in pension phase some income will be taxed free (who knows if these rules won't change - may need to take out from there as spouse could access it already and I have few years to go...)?
I think what I am trying to say is that we continue to do what served us well, not having a clue what the crystal ball into the future will tell or do!
But I am interested to follow up your story and see how you go... so keep posting!

 

I think it’s hard work doing something you aren’t interested in. You may have chosen a long term path and if you continue lack lustre it’s not the best move. It’s ok to change paths.

 

RE or property to me is long term path, do others think otherwise, at least 30 year plan for us. But the poster indicated successful returns not lack luster so I am just trying to understand why change or the hobby becomes now a full time passion instead?

 

I remember quite a few conversations with PB over the years but vague on the details. I think he’s sane age as me but different paths?? I’m happy with how real estate has performed allowing me to be a stay at home mum but the decision was not taken lightly from banks assessing loans. My kids are now adult age - yay! I’ve been growing new frangipani variety but raring to go with building/ developing - like I’d dreamed of before kids