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"Strategy" - how does it look like?

Discussion in 'General Property Chat' started by MsAli, 25th Dec, 2015.

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  1. MsAli

    MsAli Well-Known Member Premium Member

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    I've been backing up my desktop machine that I barely use now to prepare for our move to our home in early 2016. As I was doing so, I found a file from 2012 "@MsAli and @monalisa Property Investment Strategy.docx". Early in our journey, it didn't make sense, what the h3ll strategy meant and why was the term thrown around so much without much context and realisation that newbies couldn't understand. Well I didn't understand it; However @monalisa and I prepared a one pager after speaking with a number of successful forum members....

    I believe that strategy evolves with time anyway. However the following is what we had put down on paper around what ticked our boxes. Thus far we have stuck to it (except for houses we like blocks >700sqm now). It will change in the new Sydney property cycle as we know more now than we did back then.

    Do you have something similar documented? If so, what is it? If not, would it be worth putting something down on paper which may act as a framework for your purchasing. Else as @Rixter once said to us, if you don't know what you are looking for, then all houses look the same!

    What?

    Houses / Units / Villas / Townhouses (Metro capital cities $160K - $300K and Regional $1 - $160K);
    • Yielding at least 7% (metro) and 10% (regional) in gross rental return;
    • Smaller blocks due to ‘unique’ factor;
    • At least 2 bedroom, with parking space / garage;
    • Maximum age 20 years, due to depreciation, which would facilitate with the property’s cash flow due to tax return;
    • Properties which require minimal work, and may require cosmetic value add to increase market value;
    • Below market value to comparable properties (5% - 10% discount)
    Why?
    • Low entry price, high return for units/townhouses/villas into high CG area, low entry level means greater number of holdings across more market areas hence minimising exposure and diversifying for high CG;
    • Low maintenance as external covered by strata;
    • Low land value for land tax purposes;
    • Building insurance is covered by strata;
    • Depreciation benefits;
    Where?
    • Proximity to transport, and access to other areas in the city (trains/buses/ferries/trams);
    • Shops / Large shopping centre;
    • Schools;
    • Hospital;
    • University/TAFE;
    • Further away from industrial / commercial areas;
    Indicators to consider:
    • Growing population (minimum population of 10,000)
    • Infrastructure;
    • Private investment/spending;
    • Government investment/spending;
    • Industries supporting jobs in the region;
    Other metrics
    • Manage interest rate risk;
    • Initial LVR 90% based on market value;
    Potential Strategies
    1. Buy and Hold - cashflow neutral/+ve and capital growth comes second [helps if you are starting out with low capital / income] - helps you hold more assets than otherwise. The property may have future potential for development also
    2. Buy and Hold - potential for capital growth and -ve cashflow - could be a drain unless you're on a high income and it may inhibit the expansion of your portfolio and therefore limit your exposure to the market
    3. Buy, Renovate and Hold - Renovation may just be cosmetic or even changing the floor plan to squeeze in an additional bedroom to increase value. Followed by a valuation, extract equity and buy the next property
    4. Buy, Renovate and Flip - has anybody made money on these (not just equity gains, I mean selling in a short space of time)? I saw these working well in a rising market in particular
    5. Buy and Develop (Development Approval (DA) for Subdivision / Build or DA and then Building) - typically development sites have low returns and therefore negatively geared. However, if the numbers work, these do allow for significant future gains through sale / equity
    6. NRAS (National Rental Affordability Scheme)
    7. Commercial Property
    8. Defence Housing
    9. Self Managed Super Fund purchasing
     
    Last edited: 30th Dec, 2015
  2. RSN83

    RSN83 Member

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    This is a great snapshot for us newbies.
    'Strategy' is just one of a thousand buzz words that you hear but don't necessarily know how to put in place exactly.
    Thank you!
     
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  3. Bran

    Bran Well-Known Member

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    I haven't until now, but it's almost solidified in my head. Ill write it down for the New Year. The finance side of things is underway, business is sorted, and I have a big and medium picture.
    The steps to get here are variable, and will be a combination of CG and yield play (but whilst cash flow isn't an issue, they must have something else in the latter - eg. developable block, value add) etc. After today, I've narrowed a small block of streets where I think I can achieve both. (PS, don't ask ;) )


    Are you still chasing the same yield/s?
     
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  4. MsAli

    MsAli Well-Known Member Premium Member

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    Bran, I look forward to you sharing a high level version :).
     
  5. Bran

    Bran Well-Known Member

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    I'll post on Christmas Eve 2018 ;)
     
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  6. Soul

    Soul Well-Known Member

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    + Owner occupier appeal
    life style factors, walking trails or beach etc
    landlocked
    land slope and trees especially protected ones
     
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  7. bob shovel

    bob shovel Well-Known Member

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    @MsAli how did the strategy go looking back? Buying townhouses/units vs houses?
    You've done well and from reading the strategy has paid off
     
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  8. Xenia

    Xenia Adelaide Property Manager Business Member

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    Similarly, I have books filled with strategies and ideas and goals, some have evolved to something bigger and better, other things have been achieved.

    I think it is a great idea to always plan something on paper.

    All my business and investment strategies are thought out in advance.
     
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  9. hash_investor

    hash_investor Well-Known Member

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    You must be invested deep into druitt :)
     
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  10. neK

    neK Well-Known Member

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    Hmmmmm maybe i should start putting things down on paper instead of thinking about it during work meetings and not paying attention :p
     
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  11. neK

    neK Well-Known Member

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    Lately my strategy has been:

    1. Work out long my debt will take to pay down on current surplus income.
    2. Work out what is required to speed this up (land bank vs development - all cashflow dependent).
    3. Understand how the actions of #1 and #2 will affect my family life and weigh up what's important - Trying to establish the optimal balance between the two.
     
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  12. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    At least write it down whilst your are thinking in work meetings so it looks like you are taking notes :cool:
     
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  13. bob shovel

    bob shovel Well-Known Member

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    Haha I used to do that and spin my book round to do drawings. Every now again you need to interrupt with something that sounds important, extra browny points :)
     
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  14. MsAli

    MsAli Well-Known Member Premium Member

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    Hi @bob shovel - it has worked - like everything in Sydney :). Low entry price early in the journey worked. Though in hindsight houses did better. At the same time the houses in the same price bracket wouldn't be in as convenient locations.

    Key has been to keep things simple and stupid. Looked at subdivisions early on as well as in regional etc....kept coming back to Sydney thankfully. Next cycle, for sure the focus would be more houses - with balance between "well located" and those in satellite suburbs - cashflow vs. capital growth balance. I think making the investing too fancy is where things can go pear shaped. If the yield works & the location works, then buy in bulk. Duplicate what you know.

    Thanks for sharing Ken.

    I'm interested to hear from forum members - on what their strategies have been. They may not have documented them; If it's working, then it's worth sharing =)

    paging @skater, @Travelbug - who have recently retired. I'm keen to hear what they stuck to / evolved in their strategy.

    Also there are forum members who have been doing developments of differing scales - how are those going - what? when? why? etc... @D.T. , @DaveM , @MTR, ++ @Beanie Girl
     
    Last edited: 26th Dec, 2015
  15. Tim & Chrissy

    Tim & Chrissy Well-Known Member

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    My strategy took a bit of a hit today. I was looking for 7% return on properties in the outer ring of Brisbane to boost my CF. The ones I had identified had granny flats. On one of the other threads I was told that it is against BCC rules to lease granny flats separately to the main house.

    Back to the drawing board!
     
  16. HUGH72

    HUGH72 Well-Known Member

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    Just move a few suburbs over from Inala and you will be in Logan LGA where this is a viable option.
     
    Last edited by a moderator: 4th Nov, 2016
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  17. Eugene82

    Eugene82 Active Member

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    Thanks for sharing MsAli. Great to see someone else's way of approaching property investing in current conditions
     
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  18. 4point5million

    4point5million Well-Known Member

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    You would get close to 7% with this, but you would need to do some work

    29 Diamond Street Slacks Creek Qld 4127 - House for Sale #121589230 - realestate.com.au
     
    Last edited by a moderator: 4th Nov, 2016
  19. 4point5million

    4point5million Well-Known Member

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  20. MsAli

    MsAli Well-Known Member Premium Member

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