The Psychology of Declining Markets....

The stats that you have posted are taken from the December quarter in 2015, so they are 1-4months old. I own property in Western Sydney (among other parts) and I will be selling a place in Kingswood next financial year due to CGT implications so yes I am constantly talking to agents and monitoring the market. There is lots of interest in Western Sydney due to the affordability and future prospects hence the strong results. I actually expect this to decline slightly over the next couple of quarters slightly, but certainly no more than the other side of Sydney.

 

What is your place in Kingswood worth now?

 

I've only just discovered this forum today - love it!

I recently sold in Kingswood, settles in a week. I achieved a 110% increase in 3 years, needless to say I'm very happy.

 

Cash flow is critical. Like Sash, I believe in the dividend reinvestment plan for property portfolio building. My strategy is done using a different approach however, as my portfolio is not as mature and doesnt produce the massive surpluses on its own. Instead I have used NRAS to accelerate the process aggressively.

 

Its a dual occ. Around 700-750k

 

I have to also comment on Xenia's excellent posts. I embarked on a 5 year plan to "retire" on my property investments around, umm.... 5 years ago!

What I have discovered on the journey is that you absolutely need multiple streams of income if you want to escape the 9 to 5. I have 10+ properties now and some are performing very well (Kingswood case in point) however some are not, with bad tenants and maintenance issues among other things. The cashflows have been nowhere near my projections and without a change I was at least another full cycle away from reaching my goals.

I'm still working full time but in a bold and perhaps crazy move, I launched a side business in network distribution a year ago and it's the best thing I ever did. The cashflow boost has been significant and it has taken pressure off my property investments, while creating a residual income stream. So finally I can see a path to an early retirement, therefore I'm a huge advocate of multiple streams of income! They are not easy to create but well worth it.

 

Congrats, always a good feeling!

 

Tell you what when you sell it for more than 600k after six months...let is know....

 

and that feeling gets better having read all 159 pages of the brisbane thread!
edit: im joking..no one has read all 159 pages. Its big enough to be a novel in its own right...not unwarranted though.

 

Don't worry I will post it and tag you all over it

 

I sold my dual occ Blacktown property 2 months ago and have already seen a $100k reduction in comparable sales and listings. 3 local agents (along with the selling agent) agree I got out right at the last moment. Luck I guess?

 

Good job, its always nice to get the timing right. 100k drop is massive in two months- can I ask what the sale price was roughly?

 

Mid 8's

 

12% drop in two months- thats a cliff drop. I think you definitely caught the top of the peak

 

I think dual occ dwellings will be a very clever way to grow cash flow, moving forward. And strong cash flow will be critical to debt reduction strategies, so I expect dual occ will become increasingly popular, particularly in portfolio's where borrowing capacity ceilings are impacting, and additional cash flow is necessary to assist with deleveraging

NRAS opportunities, which are obviously the other superior cash flow generator, are almost all gone, so dual occ will be the next best thing or those who want to inject some stronger CF into their portfolio's , with a longer term view to the beneifts that will have on getting past servicing ceilings.

The problem is... where can you do dual occ at a lower price point, which is where many investors post APRA budgets will force them to look ?

With land prices in Sydney and Melbourne being so expensive, construction costs remaining high, I think large regional centres will be the ticket. There, land is far far cheaper, and a good dual occ product can be delivered for @ 450 - 500K. And by good, I mean detached. 3 bed house + rear detached dwelling so that they are always a genuine dual income producing asset.

I'm already seeing a lot of dual occupancy being done under 1 roof, in SE Qld corridors such as Ipswich, Redbank Plains etc... but most of those are really just 4 bed homes with floor plans adjusted to make them 3 + 1's for the most part. There's nothing wrong with that per se, but the better dual occupancy opportunities will be the detached ones, such as 3 bed houses with a rear detached 1 or 2 bedder for example, where genuine dual rental incomes can be generated when used as only an INV property , or where an additional rental income from the rear dwelling can still be generated even if you were to use the main dwelling for PPOR purposes.

 

Nope. Peak would have been September just before APRA kicked in. I suspect I could have achieved another $50k - $80k looking at comparables around that time but its near impossible to pick the top in a climbing market. Only really smell danger after its too late but luckily I acted quick enough when there was still some steam left. But then again, dual occ properties and properties with subdivision potential achieved the craziest prices at the top and was hardest hit when it dropped off.

 

Geez- a very unique situation for you. Certainly not a mainstream experience in the West

 

So in summary,
900k in sep, peak
850k in Nov, you sold
750k in Jan/ feb 2016, now

That is already 16.6% fall from sep to now based on your numbers.

 

Maybe I'm naive cos I haven't been investing for 20 years but if you're rent from all of your properties goes close to covering your mortgage repayments each month and house prices drop say 30%, don't you just hold on until they increase again? I don't understand how you suddenly go bankrupt? As long as you have a bit of coin in the bank for the odd vacant property how does it go so wrong?

 

I like your validation of dual income properties as the next best thing when nras vaporise.

One thing I was doing prior to the Sydney boom was buying properties that can be 'converted' to dual living without the need to fork out 100k to build a granny flat. This included a 5 bed 2 bath house that can be chopped up, and detached garage/ studio that could be converted to a granny flat under SEPP. It had costed me 25k to 40k for each conversion.

I like Perth and LCC and MBRC council in QLD because it allows this approach. I don't like Ipswich because they recently limited the foot print to max 50m2 for the granny flat