Whats your prefered strategy?

Option 1, 2, and 4.

 

1 & 9...buy & hold structured for CG.

 

HI Rix,

Do you ever add value to your ips or is it just not part of your strategy?

Cheers,

 

I only ever buy property for the purpose of CG, buy and hold. I definitely look for property where there is an opportunity to add instant equity through improving and renovating, this will generally ease the cost to hold. Sometimes even positive cash flow immediately, sometimes it may take a while. I answered 1 & 2 but maybe I agree with 4 as well but only as a bonus to the CG.

 

As my purchasing criteria is for near new townhouses & villa type property they are low maintenance & there is nothing much required to be done as it's still modern.

Occasionally I've increased my cash flow by installing an Air conditioner if I believe it requires a 2nd one/didnt have one to start with or a security screen door etc but that's about all.

 

Agreed mate, I think most investors buying near capital cities at 103% lend (equity plus balance loan) will find themselves in a negative gearing situation. It's just how the rent yield market is near capitals. I agree it is 1 back 3 forward in the long run if you buy right and realize capital appreciation. That's what makes you wealthy IMO, holding a large asset base, not having high cash flow properties. Cash flow helps a lot to service the debt, but rent is very sensitive to market changes, tenant demand and generally only grows at inflation rate. As we know, asset growth of good properties gets well ahead of inflation.

So to add to the statistics, ours would be 1 and 2 using splash of 9 in early stages of acquisition and portfolio growth. The leverage equity gains to bigger projects, greater scale. Probably stay with residential for now but will still study commercial for opportunities.

Cheers

 

Completely agree. yes, there are many (not forum members) out there who just don't get it. It still amazes me, I know people who have very high incomes, little to no debt and they are chasing positive cash flow properties because they believe its the holy grail of all property investing...$10 a week, $15 a week....

Personally I believe neutral and positive cash flow properties have an important place in a portfolio. I just think many people get the order wrong of when they need them and how to use them, imo. But that's just my opinion, I know everyone has their own take and I respect that too.

 

Well its worked for you. Did you find accessing equity took longer or not particularly?

 

Considering the the poll is asking your main investment strategy/style, I'd have to go with the majority and say Buy & Hold.
For a long term strategy, I don't think anything can come close to it.
Developing and trading properties in one form or another does not always classify as investing.

 

Yeah true - good point. I see property development more as a business, then the stock you hold are investments. That's more or less how I see it.

Thanks for ruining my poll j/k

i'm little surprised OTP only got 1 vote, as I hear it spoken about quite a bit.

 

Yeah, developing and value add certainly gets that exponential curve moving up faster than doing nothing, but the asset base has to be there to keep riding the curve.

 

How does renovating ease holding cost? How do you get instant equity? especially when banks are reducing LVRs and increasing servicibiity requirements. Spending money reduces your funds.

 

@Ace in the Hole I just find it conflicting sometimes, as we've spoken about before. Cant enjoy a portfolio but can enjoy the cashflow with lower lvr sooner..but then your portfolio growth takes a hit.. I guess it depends on age, portfolio size and what cashflow ones after...

 

It increases the rental return which increases the c.f. surplus

 

Seems like a bit of a balancing act and personal circumstances/goals.
Staying on the curve as long as possible is always going to get the best results.
My view is to take as little as possible to keep yourself happy so the rest can keep working for you.
Then one day, sometime in the future the time will come to bail once and for all to enjoy everything you've worked for.
Getting the timing right is the hardest part.

 

I should add that I was a tradie in another lifetime. I can do a very basic Reno for minimal outlay and bring the rental value up to ease the holding costs. I can and have also add instant equity

If you know what you are doing,you can often spend minimal money to renovate or add value to increase rental return. A recent property in western Sydney was achieving 350 rent per week, I added an ac, refreshed the kitchen and painted it, cleaned the entire place, yards were a mess, and now it rents for 420. Cost me about 3500 all up. Made all the difference in holding it though. Would have cost me 50 per week, now it makes me 20.

 

I have a place in Cloverdale. Rent was $320 pw. After a reno, rent went up to $440 pw. That is how renovating can east holding costs.

 

I am thinking about a strategy I have not tried yet. Last time I looked at Sydney, it was in a massive boom and I could not afford to buy there. Then I just kind of forgot about it and prices stagnated for years. I didn't think about jumping in again before the market boomed again. Anyway, I was thinking of cashing out when a market peaks and buying into a recovering market. It's worth thinking about.

 

The only real inhibit was in the starting out stage where I had minimal equity in my PPOR to work with for the first couple IP purchases..but still managed to purchase a prop per year.

Thereafter the compounding effect on CG was sufficient for further subsequent purchases, topping up LOC's along the way and borrowing the remaining 80% required to complete settlements.

 

Wow and only on 80% borrowing. Well done.