Strategy advice required

Discussion in 'Investment Strategy' started by JMSmith, 12th Apr, 2017.

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  1. JMSmith

    JMSmith New Member

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    Hi,

    Seeking advice from those who may be able to help with our current situation.

    My wife and I feel we are in need of an entire change of thinking and a new strategy.

    We've held 3 properties in Brisbane since 2010 and have seen very little growth and have become concerned that if we don't do something about this soon we could potentially lose even more years to stagnation.

    Although capital growth would of been brilliant. Right now we are more frustrated at the fact that we have lost nearly 8 years holding properties which have virtually done nothing.
    We started out with a buy and hold mentality. But it feels like now we are holding rubbish stock with no future potential.

    Here's the current situation.

    PPOR Eatons Hill - PP 465k Current 545k 3/2/2

    IP1 Warner - PP 410k Current 460k 4/2/2

    IP2 Grange - PP 310 Current 320 2/2/1 unit

    Both IP's are cashflow positive.

    Currently after having held these for so long and with such little growth. We are considering selling everything and purchasing a single PPOR up to 12kms out of Brisbane CBD and something with scope for future development. Such as sub divide block in 2 or knock down, build new and on sell.

    We are constantly being given conflicting opinions. Our older generation family members ( with minor property investing experience) are saying to just continue to hold these properties and revisit in 20 years. Our real estate agent (perhaps not surprisingly) says sell the lot and buy closer in.

    We are completely unsure of what our next move should be in order to help us to move forward quicker and would be grateful for some of your expert opinions and advice.

    Cheers.
     
    Skyegirl likes this.
  2. Agent30yrs.

    Agent30yrs. Well-Known Member

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    Tough one! the good news is, you've had more growth than most who bought in 2010. !
     
    big max likes this.
  3. HUGH72

    HUGH72 Well-Known Member

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    Think about the transaction costs doing this, you would lose much of your CG. How sure are you that buying 12km will be better?

    Do you have much ppor debt and can you buy again while holding the houses? If they are not costing you anything I wouldn't sell, patience.

    I would sell the unit though.
     
    big max likes this.
  4. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    I don't really know the Brisbane market, but rather than looking backwards, what do you feel the outlook for these locations and properties is moving forwards?

    I've seen a lot of people sell because they think they've bought a dud that hasn't moved in a few years. Within a modest period of time, the market moves they miss out on significant growth. Selling properties and buying back in costs a lot of money (selling costs, capital gains tax, purchase costs).

    Take a closer look at surrounding suburbs and the suburbs between your properties and the CBD. Growth tends to roll outwards.

    Growth also tends to take its turn across the East coast capitals. Sydney and Melbourne have a boom, Brisbane tends to lag behind when S&M get unaffordable (Brisbane may be a bit vanilla for some tastes, Adelaide is pretty boring and Perth only rises occassionally). Right now Melbourne is going nuts and Sydney is on steroids. Eventually these markets will slow and there may be a lot of investors looking at Brisbane and thinking it's cheap with good yields.

    There's a good chance that Brisbane could be in for a boom, but that's speculation (and a little hopeful) on my part.
     
    big max likes this.
  5. JMSmith

    JMSmith New Member

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    We have given thought to the transaction costs and at the moment see them as just a part of moving ahead and would likely pay cash for these.

    Right now we are not interested in buying again. We have zero confidence due to whats happend and are thinking that it might also be good to reduce ppor debt.

    Which was actually an original plan from the start. Pay off first house before buying any others.

    Perhaps greed, naivety, lack of property education and listening to inferior advice got to us.
     
  6. big max

    big max Well-Known Member

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    The market will reward patience. In my view now is the wrong time to sell. You are in the market and with positive cashflow. You might find that the market picks up just as you sell out. I would be holding or buying in Brisbane right now.
     
  7. Anthony Brew

    Anthony Brew Well-Known Member

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    Some thoughts that might be useful to consider

    - Property moves in cycles
    - Brisbane/Perth had the most insanely astronomical boom from 2000-2008 (avg property tripped in value in just 8 years) and booms like that can not last forever and the bigger the boom (and that one was enormous), the longer the correction, and this has lasted pretty much since then (coming up to a decade).
    - It *may* soon be ripe to start moving again (I said may because I have no idea at all), but it would make sense that eventually it would start to move beyond basically nothing for such a long time. Also Brisbane/Perth tend to rise when Sydney/Melbourne stop booming, and Syd/Mel look to be not far from the peak.
    - From what I understand (could be wrong), the massive boom in Brisbane/Perth was driven at least in part by mining which is not so hot now, and the outlook also seems not so hot, so while it may start moving, there seems to be a fair chance it won't replicate the last boom. This does not mean it will not rise though. If it rises at 70% of the rate of before, it is looking pretty good. If it goes at 60% of before, it is still pretty damn good
    - What type of property is it? Brisbane is an absolutely terrible place to have apartments. You may need to think seriously about what to do with the apartment that you have and whether to keep it or not.


    Your older generations advice - do they have any reasoning for their advice? If so, what is it based on?
    Your real estate agent - would never ever trust them. Better to spend time reading on this forum - it is a gold mine of information.


    Note. These are just thoughts to consider if they have anything useful in them to investigate further for yourself.
     
  8. Lenny

    Lenny Well-Known Member

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    When your RE agent says sell and buy closer in what specifically are they suggesting? Their answer may tell you a lot about their motives.
     
  9. myusernam

    myusernam Well-Known Member

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    If the were p and I u would have a significant portion paid down. Why not switch to p and I? Its not like you have 10 or 20. If they're cash flow positive let them pay themselves off.
     
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  10. JMSmith

    JMSmith New Member

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    RE agent is being quite helpful. He merely stated that we should only be buying within 12kms and that would be as his opinion.

    However it's information we could have used 8 years ago. I tend to agree now in hindsight. But we cant turn back the clock.
     
  11. couq

    couq Well-Known Member

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    In the same boat JMSmith, have a place in Brisbane which is frustrating as I also bought in 2009 at the peak. With asking here I have decided to hold for another few years and believe that there will be a property cycle and perhaps when Melbourne and Sydney peak off Brisbane would be possibly next in line being 3rd largest city and may offer more than just mining.

    Saying that though Brisbane looks to have some great value in the 10-15km mark with agents being very keen to follow up enquiries: very good buying conditions
     
  12. Jingo

    Jingo Well-Known Member

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    Hi JMSmith,

    I can understand how you must feel. However, the portfolio is positively geared. Would it be possible for you to stash spare cash/savings in the form of an offset account against the properties?

    Are you in a position to buy any more property? When the steam comes out of Sydney and Melbourne, it could be good to focus on an area that achieves solid growth and buy a property in one of these cities.

    Have another read of Jan Somer's books. There are many stories in there of investors who have given up and missed out on creating wealth for the long term.

    Hang in there and don't give up.

    Kind regards

    Jason.
     
  13. ORAC

    ORAC Well-Known Member

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    My comments are as follows:
    1. Whilst everybody would like rapid growth in a shorter period of time, this doesn't always happen, depending on where the market is. One always makes their best informed decision at the time. However, as your IPs are cash-flow positive, that's not a bad place to be in terms of sustainability (whilst there might be an opportunity cost, you are not physically losing money month to month).
    2. You've held your IPs for 8 years, so you haven't been through a full 10 year cycle yet, as commented above, markets happen in cycles, it's usually "nothing, nothing, nothing, then bang". So you need to at least consider riding out a cycle. For Brisbane, "being the Bridesmaid, and never the Bride recently" - think about scenarios like Commonwealth games, a big infrastructure project gets going, the new Casino taking shape in a few years, etc", Brissie could be on the cusp of better things (but yes, it's a long wait) - same situation in 90s, it took until like 2003 before the market boomed from the low of 1991.
    3. Even selling up and buying a property 12km out, still considered to be "far out" by some, is not a guarantee either. Recent observation indicates that land prices have really increased. People selling subdivision sites, splitters are asking and getting way with far too much money for those sites where the opportunity to develop immediately is somewhat diminished. Am seeing 810sqm sites / post war houses in Everton Park wanting $700K plus lately, when it costs like a $100K to do a subdivision, and 405 sqm lots selling for like $400K or so, there's not a lot of money in it until the next cycle.
    4. Perhaps before doing anything, it would be worthwhile becoming better informed on where the market is at, what can be done, where you are at, getting further knowledge and experience. As previously recommended, one of the best ways to get further insight into the Brisbane market, and "real deals" is by attending some Brisbane Property Networking Group (BPNG) meet-ups Brisbane Property Networking Group, you will be able share experiences and see what others are doing and have done - this may give you further insight to your own strategy. Whether you sell up and move on or not will be your decision, but at least you will become better informed so when you make a decision it would be the right one for you.
    Hope this helps.
     
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  14. Robert Rich

    Robert Rich Member

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    Totally agree - you gotta draw the line in the sand and evaluate what you want your equity invested in for the next 5-10yrs. The problem is the small amount of equity you currently have in your IPs would struggle to make a 10% deposit after Fees / Stamps / CGT.
    I don't know the QLD market, but if the two IPs are CF+, then they're affording you the time to wait and see at least..
    All I seem to be reading these days is Mel/Syd too expensive and people sending their money up north. I would suggest very thorough research from a wide variety of sources about the growth prospects / cycle movements in your suburbs over the coming years and take it from there.