Wisdom you gained through property investing

Is that the slight edge principle? If so then I don't need to get the book (I believe it's very small incremental changes applied constantly will compound into massive change when you look at it over time.)

Btw. I enjoyed this thread.. and I really liked the article in the recent thread about the 1% too... The 1% rule
It resonated with me and explains so much.

 

I would not agree with this. Please see the table. Average yearly CG growth over 2000-2015 is the same for the 4 biggest capitals. I was very surprised.

 

@Hwangers, great stuff mate, excellent

 

Check the table below immediately before 2008 (second last coloured section is Brisbane and last coloured section is Perth). Both tripled in value in those 8 years. That comes out to 15% return compounded year on year for those 8 years straight.

You may have a point, but using the rational of saying "look at prices since 2008" right after when both of them tripled in value and levelled off to correct the mind-blowing growth is a terrible argument once someone sees the last 15 years instead of just the time starting from the correction immediately after a massive boom. Remember that the property cycle is not a fixed length. The last one for Sydney was about 14 years.

"Ten years gone by, you would be lucky to have gained 30%."​

This exact statement could have been said about Sydney in 2012 after 9 years of under 30% total growth. If you decided it was a dud, you would have missed out on insane gains in the following 5 years.

 

wow, nice work @Anthony Brew

 

Thanks, but it's not mine to take credit of - I took it from another thread, but it makes the point.

Aso my gut feeling is very strong to stick with Melbourne over Brisbane for a long term buy & hold (since I can not afford Sydney any more), but I just made a very convincing argument against my own gut instinct. All of this gives me a headache.

 

Don't be afraid to have a crack and do "something" different. Fortune favours the bold. Sure there are risks....but I beleive the risk of doing nothing is greater than the risk of taking some measured and focused action to better your own future.

 

If you believe that your capital is better put to use elsewhere, cut your losses on underperforming assets. It's going to be tough given the high transaction costs and illiquid nature of property.. But ya gotta have the balls and conviction in your beliefs (as long it's well researched) to do it.

 

Value is in the land. But don't confuse land content with land value. A house on a 1/4 acre block in the outer suburbs isn't going to grow in value like that of a home or townhouse on a 300m2 block in an inner ring suburb in the city.

 

Great post. Well done mate

 

Pls let me add a few more

Short term vs long term. Now interest rates are on the rise, many investors still wanting to expand their portfolio, but are worried about further interest rate rise, or choosing the lenders who offer lowest interest rate. It is a legitimate concern and approach. With the possibility of interest rate rise, it is really out of our hands as investors, but we could use some strategies to mitigate the risk, such as large cash buffer, fixing interest rate on some loans, staging fixed term to 2, 3, or 5 years.

The choosing the lenders who offer lowest interest rate is something worth a discussion. Generally, lenders with the lowest interest rates do not have good servicing assessment, in other word, they are not willing to lend you money, thus investors can’t borrow much from these lenders to expend their portfolio. For example, let’s say we have lender A and lender B to use, and assume a property cycle is 10 years:

A’s interest rate is 0.5% higher than B,

A is willing to lend $500k more than B.

The savings on interest rate by using lender A is $500k * 0.5% * 10 = $25,000

The capital gain by using lender B (to buy a property at $500k) = $500,000

Thus using lender B, the investor can save $25,000 on interest repayment over 10 years. While using lender A, the investor pays $25,000 on interest repayment over 10 years, However, the investor also gain $500,000 on capital gain.

Focusing on long term and bigger goals


Concentration vs Diversification. Diversification has been discussed many times as a risk mitigation strategy on investment forums and publications. It is a great idea. But it might need to be explored a bit more re the timing of diversification. When a new investor starting out, with limited resources, it might be a good idea to choose any tried, tested and proven approach, and go hard on it, than spreading to a few investment vehicles with little return on each.

Your thoughts?

 

The circles of people you network with can significantly change investment outcomes. I'm following strategies I never would have considered if it wasn't for the awesome crew, knowledge and confidence gained via PC.

 

Leverage and compound interest. Most powerful lessons.

 

There is a longer time frame between property cycles and I cannot assume my rents will incrementally increase each year as it is totally based on market demand (as soon as a suburb is oversupplied with apartments and/or townhouses I see my rents go backwards with my IPs)...have bought for the long term, buy and hold strategy

 

I can relate to this.

In 2008, we bought a block of four 2-bedroom units, mainly to improve the cashflow for our property portfolio as yields are higher for units than houses.

When we purchased, rents were $330 to $335 per week. Over time (especially in the early years), we were able to push rents up to $385 per week.

Today, due to the appartment glut in Brisbane (caused in part by lower interest rates), our rents are now only $350 to $355 per week.

Yep, 9 years later, we are only getting $20 per week extra rent.

On first glance, It doesn't sound like our cashflow improvement strategy actually worked.

Thank God for lower interest rates. Our interest charges today are $30,000 less than what they were in 2008.

That is $600 per week lower and equivalent to $150 per week per unit rent increase.

 

Why can't you save on property with lender B and come time to buy more then go with lender A?

 

The best thing I learnt from the property game is that you can do things (which most 'investors' don't do) to significantly increase your chances of doing well and creating large amount of wealth. Its a game that if you learn to seriously play well, you can greatly increase the odds to your favour, and the results can be astounding in a relatively short period of time.

 

Don't underestimate the power of networking

 

100% Agree with you. I have said before, I wouldn't have more than half of what I have now if I didn't network well. The last 2 of my dev deal purchases alone were through back channels with a town planner/agent.

And networking is a skill you can develop. I use to suck tbh, a stuttering fool at one point

 

I just bumped the thread on this topic.