Truly Passive

Discussion in 'Investment Strategy' started by Finfreedom, 7th Oct, 2019.

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  1. Finfreedom

    Finfreedom Member

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    Hi all

    Looking for some advise from experienced investors here. I am sure some people can sympathise with property investment not really being "truly passive". I wanted to get some opinions on this topic. My "why" of doing property is time with family and friends, but it can easily become a second job.
    With a portfolio of buy to let, what have people done if anything to actually make it hands off. Clearly just giving it to agents and letting them pick the most expensive quote for any repair needed is not going to be very profitable. So is it better to hire a property manager (even offshore) who keeps on top of things a good idea ? but then they eat into your profit. Is it possible to hire someone to manage the portfolio but they bring in just enough additional revenue to offset their wages ? then there's the additional headache of trusting someone with all your finances including banking logons.

    Any thoughts welcome here.

    Thanks
    finger
     
  2. The Y-man

    The Y-man Moderator Staff Member

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    If your properties are going to be in Melb, then here are the main assumptions:

    • you buy for cap gain, not for income (if you want income in Melb, go commercial IMHO)
    • property management is cheap (relatively speaking) - it won't employ someone unless you have a sizeable portfolio (it's 7% of rent)
    • if you don't like the agent, change
    • if you want more passive, do a commercial in a REIT - all the management fees, repairs, rent collection all done - you just receive what remains, and it can be as high as 7%pa


    The Y-man
     
  3. Shazz@

    [email protected] Well-Known Member

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    No such thing as passive property investing IMHO.
    You can try by:
    - Choosing competent PMs- do not try and get the cheapest.
    - buy new properties so there are less maintenance issues.
    - choose the right tenant (hard to predict, which is why you need a good PM)

    If you truly want to be passive investor, buy shares (ETFs and LICs). You will have no dramas with tenants, repairs, bills, etc. Easy.
     
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  4. Finfreedom

    Finfreedom Member

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    Thanks Y-man. Really appreciate your help!
    To be honest, I am not big on cap gain ahead of income. Income is now and cap gain in my opinion is not a true gain until you cash in and too many people get put off thinking about the tax bill or process involved.
    The portfolio is outside of Aus. so looking for systems, processes, techniques etc. people might have employed to get peace of mind for hands off investments.
    Thanks!
    Finguy
     
  5. Finfreedom

    Finfreedom Member

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    Thanks Shazz.. I agree with you on shares. its just that I have much more knowledge of property than shares. Also, just the physical existance of bricks and mortar for what you pay for as oppose to a digital asset that can slump or even disappear overnight.
     
  6. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker Business Member

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    Property investing can be just as passive as share investing in my opinion. If using an agent there should be nothing to do really, except to read a few emails each month
     
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  7. The Y-man

    The Y-man Moderator Staff Member

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    Totally out of my area of knowledge! :oops:

    I've only ever owned outside of Aust via REITs

    The Y-man
     
  8. Marg4000

    Marg4000 Well-Known Member

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    Well, good luck with that!

    We found we really had to keep an eye on our PM, they are only human and have their own issues going on, and even an excellent PM will drop the ball from time to time. Let alone the time one went through a relationship breakdown.... and another (highly recommended) went to jail for fiddling the trust account!

    The best investment advice we ever got was “no one else will care about your money as much as you do”, so I believe any totally “hands-off” investment is only possible if you are not chasing the best possible outcome.

    We have done this with a couple of parcels of shares. One is CBA, bought at $32 and reinvested dividends. Basically put them aside and ignored them. We now have triple the number I bought at whatever they are worth now. Just have a happy moment when the franking credits are refunded each year.
     
  9. Nodrog

    Nodrog Well-Known Member

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    Having owned both I can only assume you’re joking:eek:.
     
  10. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker Business Member

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    If repairs are needed, you just ask the agent to get them done. You just check your bank statements once per month and the agent statements to make sure they are paying.

    If you are a do it yourself type then there may be a bit of work to be done, but not much if using an agent.
     
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  11. Nodrog

    Nodrog Well-Known Member

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    Wait until a significant Reno is required, you gonna tell the PM to do whatever they think? For every one good PM there are nine terrible ones. PM’s were some of our biggest headaches. And wait until a tenant tries to sue you. I could go on with countless negative and stressful experiences from when we owned property. Happiest day of our life was when we got rid of them.
     
  12. Beano

    Beano Well-Known Member

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    No such thing as passive property investing IMHO
    My so call passive lessors property investments I still have to

    1: look at my bank account either once a month or once a year depending on the lease
    2: do my tax returns
    3: pay my taxes
    4: decide where to spend the profits
    5: review the lessees rental every 7 or 12 years
    6:p put up with the tenants complaining about the rent rises

    PS I wish I had gotten into lessors interest earlier instead of buying the houses . :)
     
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  13. Fargo

    Fargo Well-Known Member

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    I agree that there is no such thing as passive investing. Those that do aren't really investing they are just hoping same as gambling. I wouldn't consider EFT or LIC's totally passive unless you are prepared to accept results like Blue Sky, or EFT's such as KSM, QAG. KII, BNK. and IKO. You still need to assess and review the fees, performance and abilities of your fund manager and their allocations of funds. A lot make really bad choice's, just have funds to spend so spend it regardless or to meet a mandate. You should be getting and reading reports( even monthly) on their investment decisions, and why, if only for your own education. I think that property can be as passive as you can get you don't have to have dramas with PM's, maintenance or tenants. you still need to think about what to do with lease payments and tapping into CG and possibility of aggregating.. My Ag land I just pay the council rates once a year and check that lesase payment has been made twice a year, I can forget about it for three years, or even longer if I wanted to make a longer lease. The tenant is responsible for everything else with payments 6 months in Advance.
     
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  14. rizzle

    rizzle Well-Known Member

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    What do you mean here Beano?
     
  15. Finfreedom

    Finfreedom Member

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    Yes, what do you mean by this please ?
     
  16. Beano

    Beano Well-Known Member

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    Live for the moment

    The owner of the land is what I mean
     
  17. Beano

    Beano Well-Known Member

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    Live for the moment
    How Donald Trump’s Dad Made Him a Landlord at 3 | NYT News - News Daily
    Ground leases ...are what I mean.
    They in Australia , UK, NZ ,USA lots of places
    Own the land not the building
    The ABC building in Brisbane is on leasehold land
    https://www.google.com/url?sa=t&sou...gQIBRAB&usg=AOvVaw2iI2fXsxmcCnsh38BFEjvo&cf=1
    Sydney GPO
    Australia Post thinks again on $300m sale of GPOs - Sydney GPO Our Heritage
    Various hotels
    Sydney pub Criterion Hotel leasehold sold for over $15m
    Wellington's Museum Hotel sold, but not the art
    there are many buildings owners who are not owners of the land ...these are called leaseholders ...they are the tenants you want .
    A question I have is are there many PC investors who are also owners of these sites ?
     
    Last edited: 9th Oct, 2019
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