Re-assessing Strategy

Mark Laszczuk said:

However, I would also be looking forward to see where you feel you will be in five years or ten years and try an incorporate that into your decisions.

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Thank you for asking me to consider this. I'm an IT contractor. Whilst I've only ever experienced happy days, there is a good chance that the work could dry up for a few months at some stage during the next 5 years.

I know that I'll have a difficult time keeping my emotions in check if I were to be unemployed for a period whilst having a negative cashflow (even with my 1 year buffer I like to maintain).

I'll make sure to take this into consideration.

domcc1 said:

Thank you for asking me to consider this. I'm an IT contractor. Whilst I've only ever experienced happy days, there is a good chance that the work could dry up for a few months at some stage during the next 5 years.

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That's when you work wherever you can get it - even if it means working at McDonalds.

Mark

Mark Laszczuk said:

even if it means working at McDonalds.

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Ahem. Subway if you don't mind please

G'day guys

It's good to see the old threads again, had a read of my post 12 months ago and not bad, things are still on track and adding to the asset base.

How many IT contractors are on this forum? Way too many.

cheers
quoll

geoffw said:

Ahem. Subway if you don't mind please

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Did that sound like McDonalds? Cause I actually said Subway.....

*runs*

Mark

Hi again all,

Thank you for your thoughts. I've done up a little spreadsheet to help me figure out the difference between the following options I have to save up for my next IP deposit:

1 - (offset) - Putting the money into my offset account I have on one of my IP loans
2 - (growth) - Leveraging into an growth based share fund
3 - (income) - Leveraging into a income based share fund

Assumptions
- I will need the funds at sometime greater than 12 months (i.e. I won't miss the cash monthly).

Findings
If the share return is 10.5% or greater:
- The best net result is option 2 (growth)
- The best monthly cashflow result is option 3 (income)
* Note - if cashflow is important (which would be the case if I wanted the portfolio to be self funding, had cashflow problems and/or had many properties), option 3 (income) would be the best option.

If the share return is less than 10.5%
- The best net result is still option 2 (growth)
- Option 1 (offset) is better than option 3 (income) both net and cashflow

If I had a PPOR, option 1 (offset) would become much more attractive

(It's possible I've made a mistake in this spreadsheet. If this is the case please let me know!).


Regards,

David.

quoll said:

How many IT contractors are on this forum? Way too many.

cheers
quoll

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I work in IT, but i'm permanent.. Don't really see the point of contracting at the moment, I much prefer the stability and constant income!

Been contracting for 11 years - never a siingle day out of contract. 6 years with current contract (multiple roles though) - I managed to weather the IT downturn when many permies didn't (even in our team).

I wouldn't confuse permanent roles in IT with security nowadays.

Plus, I can claim overtime for long days, weekend work, travel etc - not many permies can do that. I'd be hard pressed to name a permie who actually gets their "leave-in-lieu" for the extra hours they work.

Give contracting a try - you may be pleasantly surprised.

Barracuda

barracuda2 said:

Been contracting for 11 years - never a siingle day out of contract.

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And Murray was too polite to mention the fact that as a contractor he is making a KILLER salary! 11 years of that sort of salary would set anyone up for life I reckon.

Cheers,
Michael.

You forget the racing addiction that blew it all....

barracuda2 said:

Been contracting for 11 years - never a siingle day out of contract. 6 years with current contract (multiple roles though) - I managed to weather the IT downturn when many permies didn't (even in our team).

I wouldn't confuse permanent roles in IT with security nowadays.

Plus, I can claim overtime for long days, weekend work, travel etc - not many permies can do that. I'd be hard pressed to name a permie who actually gets their "leave-in-lieu" for the extra hours they work.

Give contracting a try - you may be pleasantly surprised.

Barracuda

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Do have a preferred agent/contacts you deal with? or you just apply for a new contract role when your current one expires and so on?

What area are you in?

You can PM me if you like - don't wanna get a slap for off topic In general - don't align to an agency, you'll just limit yourself - just go for any jobs you like through any of them. Try the central advertisers like Seek etc. Don't rely on them to call you. Send resume and call them. And don't wait for the contract to expire before you start looking again, unless you like where you are and are sure of a re-sign.

NigelW said:

6) If we're going to gear up 80% is conservative. Why not gear up with LMI to 90-97%? (lazy dollars really get me worked up)

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90% geared?....a slight negative change in any variable (ie, rates, wages, vacancy, maintence, fuel, inflation) and you're in trouble....where's your room to move at this gearing?.....

George "vote no for 90%" Grubar

FrankGrimes said:

I work in IT, but i'm permanent.. Don't really see the point of contracting at the moment, I much prefer the stability and constant income!

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Full-time work gives you security?.....maybe, but not as bullet-proof as you would think....companies go belly-up, they amalgamate, get taken-over, get sold, etc....your job security can mean diddly in situations like this....I've been there, as both a contractor and full-time.....but its usually the full-time workers who stress, worry and generally fall-apart emotionally in such situations.....contractors just take it on the chin and see it as another opportuity to move on...

and anyways, contracting is much more challenging and exciting....it keep your on your toes, and that's the only way you'll really grow.......full-time jobs make people complacent, comfortable and erode your skills....


George

What im doing now

Well in this flat house price part of the cycle im finding that tassie houses and SEQ units are still on the rise. So im constantly helping people get these.

As far as our personal investing, having sold down to 14 from our peak in 2003 of 23 to get into our house here in Coffs left us perfectly placed to sit out the leaner stretch before the next boom. Since then we have bought 2 townhouses in SEQ and you guessed it 2 more houses in Launceston taking us back to 18 IP's. The townhouses were bought for $99k and $100k and just got one of the others we own in the same street valed at $125k. This means already in 12 months we have made an additional $50k on these units. The houses bought for $116k and $116.5k, second house was valued at$125k on purchase and with the moving house prices this is now worth $135-140k each. Im sure you can work out thats another $38k+ and these we bought in October last year.

Cashflow is quite tight but sustainable with all the rates and B/C fees and land tax and maintenance. After doing a rate review on a few of our lowdoc loans(now over 2 years on most so automatically get rate reductions for Rams and Suncorp) we realised that the next 12 months by sitting on our butts, we will be able to rip a title out of each loan. This will leave us 5 IP's in the safe.

Once this is achieved we will swap these 5 smaller titles for the balance owing on our PPOR. So with a 1 mil+ house to play with and the current $40k costs for our PPOR swapped to be IP interest and now tax deductable, this means it will then be time to look for larger projects with bigger cap returns.

I strongly believe with all the rumours hovering around that Sydney is about 12 months off starting to rise properly, but once this starts the ball rolling, if Oil and Interest Rates arent too harsh on us, we could see the first national, all at once, every state included boom.

The national shortage of qualified builders and tradies will jack up contruction costs further and blow out completion times and this again will trend existing properties up.

Our forcast is for more shock treatment from the press, trying to spook us like the sheep they think we are, and some absolute classic deals appearing as rental markets tighten and returns return(sorry).

So im perfecting my Age of Empires 3 gaming strategy and keeping my ear to the ground for all of the bargains to assist others in the mean time.

Im also training to be a pilot so hopefully buy Chrissy I can go view my properties personally.

Great thread.

DD1

DD1 said:

I strongly believe with all the rumours hovering around that Sydney is about 12 months off starting to rise properly, but once this starts the ball rolling, if Oil and Interest Rates arent too harsh on us, we could see the first national, all at once, every state included boom.

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And this will impact on yields how?

They're already very low with investors in Sydney currently sitting on 3-4%...a boom will cause these returns to drop….there simply can't be a demand in the market for depressingly low yields….if there is, then that’s the only way another boom will occur…of course, rents could rise but I doubt that could rise that far that quick….

Put differently - the current property market in Sydney, Melbourne and most parts of Brisbane is just not conducive to smart investing, and its definitely not at a level that will inspire, of all things, another boom.

Hey, I could be wrong….and if so, then I’ve definitely overestimated the returns investors want from their money…

George

grubar30 said:

Hey, I could be wrong….and if so, then I’ve definitely overestimated the returns investors want from their money…

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Investors only count for 30% of the market in Australia. The 70% owner occupiers who buy based on emotion don't take care so much about the yield are the people who have the most impact on prices. Whilst things like rates, yields, affordability and the like are taken into consideration I believe people will primarily buy when need/want to buy. This might be due to marriage, reaching that 1st home deposit goal, started a family, downsized family, separation, etc.

London has an average yield of 2.5% and has been growing just as strong as Australia over the last forever.

Not saying that it will happen but am saying it's not totally unrealistic.

So im perfecting my Age of Empires 3 gaming strategy and keeping my ear to the ground for all of the bargains to assist others in the mean time.

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DD1 any hints so I can sneak up on my unsuspecting 11yo and whoop his ... you know what?

Rixter I learnt of your idea from Peter Spann several years ago at one of his seminars, are you actually practicing this ATM or are you aware of anyone who is? Not sure what the cash bond bit is though? Not sure really what the advantage of them are?

Ta
Greg