Replicating Success of Young Investors?

Was just wondering, what is the best way of going about buying these properties that all these young investors with huge portfolios have. Is it just going for the highest rental yield no matter where it may be?(as long as it is leased) Or do they try to balance having a high rental yield,positive cash flow and some sort of capital growth?

 

Are they actually making money? That's the real question.

Why not instead replicate some boring old flogs portfolio with a proven track record?

 

For what purpose? Name in the paper/glossy mag? If so have a read of how a lot of them have ended up post mining boom.

Walk your own path

Blacky

 

There are too many different circumstances preventing the same results by simply replicating actions.
You could do better or you could do worse.
It's been mentioned many times to run your own race.
Why would you want a huge portfolio anyway?

 

Post-APRA we're all going to have to find new ways of doing things.

 

What strategy would that be?

 

I have no idea.

 

Limit taking advise from anyone that hasn't seen a full property cycle. A few years ago, the rage for young investors were mining towns. Now, it seems to be "cash flow positive in hickville, mortgage to the hilt", which will cause its own issues when these properties require maintenance they haven't budgetted for, unable to put it back on the rental market for what it is now, etc etc.

Slow and steady wins the race.

 

The story of Kate Moloney should be a salutory lesson. The so-called property experts voted her the Young Investor of the Year, and held her up as a shining example of wise investing.

A year or two later it ended in disaster.

Of course, now we can all be smug and say that we would never invest in mining towns, but it is easy to be wise in hindsight. Who knows what other downturns are lurking to engulf others?
Marg

 

That's one thing the young ones aren't going to have experience with.
Knowing when to cash in your chips can be the difference between a lifetimes fortune and ending up with zero or worse.

 

one of the many issues looming is that many young professionals within the banking industry (under 40) have never experienced an economic decline, these are the ones formulating many of "growth strategies" for the banks. their confidence is admired and whilst they need not be alarmed, they should be very alert to some potentially troubling times ahead.

now replace the spiel on the banking industry and change to property investors and the same applies.

 

I spoke to someone during the week trying to unroll one of those disasters. One of their properties is in Karratha from memory and about to roll off IO. Their MB is trying to help them sort it out but it sounds tricky.

 

The trouble is that for many young single boom investors, it was basically a strategy of "throw darts at a map of Sydney and make money".

This is not the method going forward for most markets, there is still money to be made in manufactured equity, subdivisions, split and retain, development etc. But crazy capital growth for doing nothing other than having bought something and watched it go up, not so much.

Echoing the sentiment from above, there are plenty of single boom upswing investor "gurus" spruiking their strategies and mentorships and seminars. It will be interesting to see where they end up strategy wise in the coming 18 months with limited credit and no frenetic boom cycles to ride.

 

someone said run your own race and just keep learning along the way

MTR

 

I would go as far as to say there were more mature age investors buying up in mining towns..

 

Those who acknowledge this blind spot are going to do a bit better. While I'm a strong believer in making your own mistakes to properly learn lessons, reading stories like Kate Moloneys is a good reminder that doing well so far doesnt equate beingbulletproof.

Single here as in one boom, or ready to mingle?
The darts analogy is pretty accurate, even if it waters down effort put into research and forecasting. Literally throw as close to the CBD and hope the lender crosswind doesnt blow it off course too much.

 

Absolutely!

Most of the 'young investors' you see on domain/real estate ads with large high yielding portfolios were able to borrow at 95+% of the properties value, and as long as the rents covered the interest rate, the banks wouldn't blink an eye at lending again.

 

You also have to make life projections that will affect your investment plans. I see articles on investors who are really pushing the boundaries and talk about plans to buy 20, 50, 100 properties, but they're in their mid-20s and aren't really taking into consideration life events that can disrupt these plans, affect their cash flow and create financial stress.

If you're in your mid-20s and want to get married and have a family, you're going to need to move out of your share house paying $150 a week in rent living cheaply with a few pub meals and end up paying a lot more than that, upgrading your car, possibly supporting a spouse and 2.4 kids on a single salary. You will have to take into account an increase in all sorts of expenses from insurance to groceries, holidays and fuel. Every time you go out for a meal, it's not $20 - it's now $80. Your investment portfolio that you created prior to all this will still require servicing on a number of levels.

There is definitely an advantage in getting in early as it's much harder to push ahead once these 'events' have kicked in, but don't pretend you can keep buying and borrowing at the same rate. All of the above affects your borrowing capacity with lenders and we still haven't even talked about rising interest rates.

 

All true. It's always funny when you see someone come on here in their early 20's saying they want to retire by the time they are 30. Easy to do the calculations from mum and dads house. A lot harder when you get into the real argy bargy.