It has been quite a while since I posted this: http://www.somersoft.com/forums/showthread.php?t=8756&page=1&pp=15 so I thought I should post an update. For those of you who have the Reno Kings book Real Property, you can download this table and add to the book.
Portfolio 2006 Les & Brenda
- Thread starter Brenda Irwin
- Start date
Great work Brenda. Amazing!
I suppose you plan to do it all again when the next boom starts?
I think your stategy is almost perfect. Paying off your loans now that there is no value anymore is highly sensible.
See ya's.
I suppose you plan to do it all again when the next boom starts?
I think your stategy is almost perfect. Paying off your loans now that there is no value anymore is highly sensible.
See ya's.
Great, well done!
I have a few questions:
How did you decide which properties to sell?
It looks like you hold 2/3 of your properties and sell 1/3, is this something you planned or did it just work out that way
Did you have a LVR that you wanted to get to or do you focus on the yield or even loan bal?
I assume after selling you are now looking at building up again?
Thinking about it, why did you sell? 10.6% yield would mean the portfolio supported itself and you have plenty of equity to do other deals - what is your plan?
Hope these questions are not too personal I’m just really interested in other people’s strategies.
Regards
Scott
I have a few questions:
How did you decide which properties to sell?
It looks like you hold 2/3 of your properties and sell 1/3, is this something you planned or did it just work out that way
Did you have a LVR that you wanted to get to or do you focus on the yield or even loan bal?
I assume after selling you are now looking at building up again?
Thinking about it, why did you sell? 10.6% yield would mean the portfolio supported itself and you have plenty of equity to do other deals - what is your plan?
Hope these questions are not too personal I’m just really interested in other people’s strategies.
Regards
Scott
Brenda is right you certainly dont buy in regional Qld with a view to the incredible capital gain.
In saying that we picked up over 40 houses to add to our portfolio in the Rocky and surrounding areas around 2002 and they have all nearly doubled in value.
Using the equity to borrow again and buy more is the way to go although some we are now wrapping off to either the tenant or local buyers to take advatage of the emerging profit rule rather than paying capital gains tax.
In saying that we picked up over 40 houses to add to our portfolio in the Rocky and surrounding areas around 2002 and they have all nearly doubled in value.
Using the equity to borrow again and buy more is the way to go although some we are now wrapping off to either the tenant or local buyers to take advatage of the emerging profit rule rather than paying capital gains tax.
Hi all. 
I think Peteb you have misread the cost column. It doesn't show all the purchase costs as some IP's are now sold and no loans on those. Total costs would have been $1,850,000 less sold IP's $1,275,000 and also less debt still owing of $630,429 leaves only a profit there of $55,429. Don't forget I had to renovate some IP's.
Topcropper asked will I do it all again? Hehehe, you betcha.
Vandalic, it just sort of happened to be Ipswich and Murgon. I was equally happy to buy in Toowoomba, Warwick, Oakey, Gatton, Dalby or Roma. Once the RE agents in Ipswich and Murgon found I was buying many, they sort of just kept ringing me with more bargains. I didn't want to disappoint them.
Cheeks, it wasn't just LVR, yield or loan balance, it was a combination of all of that plus maintenance costs, accountant costs, looming land tax costs, etc. How come if the bank holds a mortage over 80% of your properties, they don't have to pay anything toward the maintenance?
Wow Qld007 you really made good in the Rocky area. I wanted to go bigtime like that, but a combination of I wasn't real sure what I was doing in the first place, plus lender having kittens at my borrowing file crossing their desk every second week, made me cautious. Next time, I'm going Big Time.
I think Peteb you have misread the cost column. It doesn't show all the purchase costs as some IP's are now sold and no loans on those. Total costs would have been $1,850,000 less sold IP's $1,275,000 and also less debt still owing of $630,429 leaves only a profit there of $55,429. Don't forget I had to renovate some IP's.Topcropper asked will I do it all again? Hehehe, you betcha.
Vandalic, it just sort of happened to be Ipswich and Murgon. I was equally happy to buy in Toowoomba, Warwick, Oakey, Gatton, Dalby or Roma. Once the RE agents in Ipswich and Murgon found I was buying many, they sort of just kept ringing me with more bargains. I didn't want to disappoint them.
Cheeks, it wasn't just LVR, yield or loan balance, it was a combination of all of that plus maintenance costs, accountant costs, looming land tax costs, etc. How come if the bank holds a mortage over 80% of your properties, they don't have to pay anything toward the maintenance?
Wow Qld007 you really made good in the Rocky area.
I wanted to go bigtime like that, but a combination of I wasn't real sure what I was doing in the first place, plus lender having kittens at my borrowing file crossing their desk every second week, made me cautious. Next time, I'm going Big Time. Brenda Irwin said:Next time, I'm going Big Time.
Fantastic job Brenda and Les, I'm impressed!!!
Bring on 'next time' so we can all do it Big Time!!!!
Cheers
Hi all,
As a former treasurer once said, "that is a beautiful set of numbers".
Brenda, you are truely a gem with your foresight in the purchases, and your willingness to share your story. (without charging people $3k for the pleasure)
Do you have a comment about the difference between the valuations in 04 and the sale price of some of the properties?? Was it poor valuations, changed market conditions, combination or something else??
Again thankyou for your sharing aand all the best for the new year.
bye
As a former treasurer once said, "that is a beautiful set of numbers".
Brenda, you are truely a gem with your foresight in the purchases, and your willingness to share your story. (without charging people $3k for the pleasure)
Do you have a comment about the difference between the valuations in 04 and the sale price of some of the properties?? Was it poor valuations, changed market conditions, combination or something else??
Again thankyou for your sharing aand all the best for the new year.
bye
Hi Bill, IP no. 21 was a double story brick with a swimming pool. Should never have bought it I guess as there was no end of constant fixing up. One of the most frequent fixes was fan lights. The pool made excess water an issue with the tenant seldom bothering to pay it. The house just wasn't that attractive from the road and with a tenant in place it made viewing by buyers difficult. It was just one of those houses that you couldn't seem to get rid of and the more you tried, the more it stuck. It had 5 contracts on it before one finally went through. Most collapsed during finance. Glad to be rid of it.
Ip 24, I thought was subdividable but found it would be quite expensive as the house enroached on the subdivision slightly and would have had to be moved. Oddly, during the drought, an abandoned well opened up in the gard. Handiman had a great time refilling it with all manner of rubbish before concreting over. The house was big and as well as the three listed tenants, they always had several 'overnight' stayers. Neighbours said the grounds were contantly filled with cars. I took the money offered and bowed out from that one.
When the book was published, Murgon was just experiencing capital growth. It took that long for the ripple out from Brisbane to get there. Roma has not long had their growth either. Not sure how stable those values are and they could well drop by 10% in a few years time. Considering selling a few more in Murgon next financial year to reduce debt. Can always buy them back in a few years time if the values have dropped. Buying is easy, its the selling which can be tricky.
Ip 24, I thought was subdividable but found it would be quite expensive as the house enroached on the subdivision slightly and would have had to be moved. Oddly, during the drought, an abandoned well opened up in the gard. Handiman had a great time refilling it with all manner of rubbish before concreting over. The house was big and as well as the three listed tenants, they always had several 'overnight' stayers. Neighbours said the grounds were contantly filled with cars. I took the money offered and bowed out from that one.
When the book was published, Murgon was just experiencing capital growth. It took that long for the ripple out from Brisbane to get there. Roma has not long had their growth either. Not sure how stable those values are and they could well drop by 10% in a few years time. Considering selling a few more in Murgon next financial year to reduce debt. Can always buy them back in a few years time if the values have dropped. Buying is easy, its the selling which can be tricky.
thanks Brenda!
Hi Brenda,
hadn't been on the forum for a while and just took a peep over Xmas and looked through my old messages and found one from you in reply to me thanking you for your wonderful inspiring posts and advice! I was wondering how you were going and today I see you're still around and going strong!. Have downloaded the zip file, and looking forward to checking it out over the New Year break. Thanks again for sharing, you're still so inspiring.
PS must share with you that my partner never wanted me to start investing as he's a very cautious person. Yesterday we just signed up for our 4 IP (conservative compared to you, I know!) and he turned round to me and congratulated me and said he was so proud of my knowledge etc etc. I told I woudn't have been so knowledgable if it hadn't been for this forum and the people on it like you who have given me the confidence to keep going.
cheers
Arriety
Hi Brenda,
hadn't been on the forum for a while and just took a peep over Xmas and looked through my old messages and found one from you in reply to me thanking you for your wonderful inspiring posts and advice! I was wondering how you were going and today I see you're still around and going strong!. Have downloaded the zip file, and looking forward to checking it out over the New Year break. Thanks again for sharing, you're still so inspiring.
PS must share with you that my partner never wanted me to start investing as he's a very cautious person. Yesterday we just signed up for our 4 IP (conservative compared to you, I know!) and he turned round to me and congratulated me and said he was so proud of my knowledge etc etc. I told I woudn't have been so knowledgable if it hadn't been for this forum and the people on it like you who have given me the confidence to keep going.
cheers
Arriety
The downsides to the Irwin's approaches
Dear Irwin's,
I'm sure you don't need any more encouragement or pats on the back.
So, for the education of new investors, here are some thoughts on the potential "downsides" (you may argue otherwise) to your approaches, having read this thread and the previous "20 IP's in 5 years" thread.
Please note though, I appreciate each person's approach will depend on their knowledge at the time, their financial situation, risk profile, personality, stage of the property cycle etc...amongst others.
Potential downsides:
1. Purchasing in joint names and absence of trust structure, either family trust or hybrid discretionary trust, which has many implications including asset protection, income tax, land tax, flexibility and also issues in regards to superannuation, especially SMSF.
2. Purchasing on P+I basis, rather than IO.
3. Purchasing in rural towns.
4. Purchasing multiple properties in the same area.
5. Buying cheap and possibly higher maintenance and higher tenant risk properties, in higher supply, lower demand areas.
6. More time required to manage a large number of small value properties.
7. Much higher risk portfolio, particularly at the end of a property cycle.
8. Properties chosen more for the "yield", rather than true quality as an investment with capital growth potential (just my opinion).
9. Purchasing sight unseen properties.
10. Cross-collaterisation.
11. Properties were purchased after 1998, prior to and during boom market conditions, so the same approach may not work at the current stage of the property cycle.
Further, another way to look at that impressive spreadsheet could be as follows (note: I included the PPOR in the figures):
$2,690,000 total value of all properties held
- $630,429 outstanding loan balance
= $2,059,571 net equity
$43,752 net income
- 18, 000 maintenance of all properties at $1000/property
= $25,752 real net income p/a
So, you have about $2 million worth of equity that is generating a net income/cashflow of about $25,000 p/a.
This as a percentage figure is just 1.25%. Not that impressive, but having said that, you may not be quite ready to retire yet anyway, so it may not be such an issue.
Something to think about though, especially for "positive cash flow" investors...
I feel that it is really the net equity figure that makes you wealthy, and the trick then, is to convert this equity into passive income...
My thoughts only...
Is there anything you would do differently with the knowledge and experience you know have?
GSJ
ADD: Also, am I missing something here or is the LVR on your portfolio 23%???
Dear Irwin's,
I'm sure you don't need any more encouragement or pats on the back.
So, for the education of new investors, here are some thoughts on the potential "downsides" (you may argue otherwise) to your approaches, having read this thread and the previous "20 IP's in 5 years" thread.
Please note though, I appreciate each person's approach will depend on their knowledge at the time, their financial situation, risk profile, personality, stage of the property cycle etc...amongst others.
Potential downsides:
1. Purchasing in joint names and absence of trust structure, either family trust or hybrid discretionary trust, which has many implications including asset protection, income tax, land tax, flexibility and also issues in regards to superannuation, especially SMSF.
2. Purchasing on P+I basis, rather than IO.
3. Purchasing in rural towns.
4. Purchasing multiple properties in the same area.
5. Buying cheap and possibly higher maintenance and higher tenant risk properties, in higher supply, lower demand areas.
6. More time required to manage a large number of small value properties.
7. Much higher risk portfolio, particularly at the end of a property cycle.
8. Properties chosen more for the "yield", rather than true quality as an investment with capital growth potential (just my opinion).
9. Purchasing sight unseen properties.
10. Cross-collaterisation.
11. Properties were purchased after 1998, prior to and during boom market conditions, so the same approach may not work at the current stage of the property cycle.
Further, another way to look at that impressive spreadsheet could be as follows (note: I included the PPOR in the figures):
$2,690,000 total value of all properties held
- $630,429 outstanding loan balance
= $2,059,571 net equity
$43,752 net income
- 18, 000 maintenance of all properties at $1000/property
= $25,752 real net income p/a
So, you have about $2 million worth of equity that is generating a net income/cashflow of about $25,000 p/a.
This as a percentage figure is just 1.25%. Not that impressive, but having said that, you may not be quite ready to retire yet anyway, so it may not be such an issue.
Something to think about though, especially for "positive cash flow" investors...
I feel that it is really the net equity figure that makes you wealthy, and the trick then, is to convert this equity into passive income...
My thoughts only...
Is there anything you would do differently with the knowledge and experience you know have?
GSJ
ADD: Also, am I missing something here or is the LVR on your portfolio 23%???
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GSJ said:
Yes, come on Brenda and Les...
What are you thinking????
Making $2,000,000 from $10,000 in 7 years like that is all wrong!!!! I think you should give it all away and do it again 'properly'!!
I do see your points GSJ, but....
The fact remains that what the Irwins have done is simply amazing. It is also a fact that shares would not have achieved anything even remotely near this result. [As the bank would lend only a pitance, and there may have been margin calls in the early 2003 panic share selloff]. Negative geared property wouldn't have done it. [As they would have run out of cashflow]. Brenda and Les have made a fortune from nearly nothing using the only way they could have, and done it perfectly, with perfect timing. Well done!
See ya's.
ps. Just read your post a few more times GSJ. I at first took it as being slightly criticle of the Irwins. You are not being criticle at all. Apologies. You are just offering some more advice and asking the Irwins if they would change the stategy at all. Your point about the dismal current yield on the properties current values is also good. All your points are very valid.
.........Cheers.
pss. To expand even further, I've said the Irwins used the perfect stategy for the time. But, today, 5/6% gross rental yields for bush property is abissmal.....on any measure.
2 million in unlisted property trusts could return $140 000 per year with perhaps some modest growth in earnings.
2 million in listed property trusts could return $120 000 per year with perhaps some modest growth in yield and capital.
2 million in high yielding shares could return $100 000 per year fully franked with probably some good growth in both yield and capital. And depending on an individuals tax position, the franking credits would be substantial. Enough for an overseas holiday!
2 million in high growth shares could return $60 000 per year fully franked with possibly some spectacular growth. Plus some franking credits.
A combination of all 4 could give $100 000 a year without any of the usual tannant renting repairs worries. Plus growth in capital and yield well in advance of inflation.
The fact remains that what the Irwins have done is simply amazing. It is also a fact that shares would not have achieved anything even remotely near this result. [As the bank would lend only a pitance, and there may have been margin calls in the early 2003 panic share selloff]. Negative geared property wouldn't have done it. [As they would have run out of cashflow]. Brenda and Les have made a fortune from nearly nothing using the only way they could have, and done it perfectly, with perfect timing. Well done!
See ya's.
ps. Just read your post a few more times GSJ. I at first took it as being slightly criticle of the Irwins. You are not being criticle at all. Apologies. You are just offering some more advice and asking the Irwins if they would change the stategy at all. Your point about the dismal current yield on the properties current values is also good. All your points are very valid.
.........Cheers.
pss. To expand even further, I've said the Irwins used the perfect stategy for the time. But, today, 5/6% gross rental yields for bush property is abissmal.....on any measure.
2 million in unlisted property trusts could return $140 000 per year with perhaps some modest growth in earnings.
2 million in listed property trusts could return $120 000 per year with perhaps some modest growth in yield and capital.
2 million in high yielding shares could return $100 000 per year fully franked with probably some good growth in both yield and capital. And depending on an individuals tax position, the franking credits would be substantial. Enough for an overseas holiday!
2 million in high growth shares could return $60 000 per year fully franked with possibly some spectacular growth. Plus some franking credits.
A combination of all 4 could give $100 000 a year without any of the usual tannant renting repairs worries. Plus growth in capital and yield well in advance of inflation.
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Thankyou GSJ for your post. I am not in the slightest offended, in fact, I am appreciative of your comments. Yes, it seems I did everything backtofront and wrong but somehow it worked out fine. It seems there is no totally right or wrong way to invest. It seems to be more a question of timing in the market and mine just accidentally happened to be very good.
Topcropper, thankyou for listing alternatives to my investing strategy. They will all be duly investigated. Any excuse to run some more figures. Les and I love numbers.
Thanks to all others for your appreciation and congratulations. I post not for my own gratification, but so others can see alternatives, and true examples, and then see what would work best for them. If more understanding of investment is achieved, it places less stress on investors. Ultimately, it puts less stress on personal relationships of investors which is the pinnacle of happiness and investing. Sorry, I hope that makes sense, I'm not much good at expressing things deeply but the sentiment is there.
Topcropper, thankyou for listing alternatives to my investing strategy. They will all be duly investigated. Any excuse to run some more figures. Les and I love numbers.
Thanks to all others for your appreciation and congratulations. I post not for my own gratification, but so others can see alternatives, and true examples, and then see what would work best for them. If more understanding of investment is achieved, it places less stress on investors. Ultimately, it puts less stress on personal relationships of investors which is the pinnacle of happiness and investing. Sorry, I hope that makes sense, I'm not much good at expressing things deeply but the sentiment is there.
Hi all,
GSJ, I just had to put my 2 cents worth in here.
All those points you raise are what made the purchases such a good investment. Most people could only see risk, and therefore the potential returns were higher.
A curious thing about investments is the risk reward ratio. Most people will want to only invest in what has a low risk, but good return. They therefore jump into investments that have shown a good track record.(Before the investment had a good track record, it was perceived as a poor investment, but that was the right time to buy)
A couple of examples: Inner city properties in the early '70's were considered a bad place to invest, as many areas had turned into slums over a long period of time.
Shares were considered a poor investment(more a speculative gamble) in the early '80's as the track record had been poor over the previous couple of decades (especially in the US).
The more someone points to an investment/strategy that cannot lose, the more my B***S*** radar rises. I can still remember what a great investment office/commercial trusts were touted as at the end of the '80's, before many collapsed(or froze the fund).
When you look closely at Brenda and Les's strategy, you find that the current strategy for them is reducing debt but keeping a high cashflow. If inflation continues to rise, but their debt continues to shrink, the income produced from their portfolio will start to look very healthy.(it doesn't look too bad to me anyway, from a $10,000 base)
bye
GSJ, I just had to put my 2 cents worth in here.
All those points you raise are what made the purchases such a good investment. Most people could only see risk, and therefore the potential returns were higher.
A curious thing about investments is the risk reward ratio. Most people will want to only invest in what has a low risk, but good return. They therefore jump into investments that have shown a good track record.(Before the investment had a good track record, it was perceived as a poor investment, but that was the right time to buy)
A couple of examples: Inner city properties in the early '70's were considered a bad place to invest, as many areas had turned into slums over a long period of time.
Shares were considered a poor investment(more a speculative gamble) in the early '80's as the track record had been poor over the previous couple of decades (especially in the US).
The more someone points to an investment/strategy that cannot lose, the more my B***S*** radar rises. I can still remember what a great investment office/commercial trusts were touted as at the end of the '80's, before many collapsed(or froze the fund).
When you look closely at Brenda and Les's strategy, you find that the current strategy for them is reducing debt but keeping a high cashflow. If inflation continues to rise, but their debt continues to shrink, the income produced from their portfolio will start to look very healthy.(it doesn't look too bad to me anyway, from a $10,000 base)
bye
Bill.L said:
This is why I cringe when I hear promoters (even those who are otherwise reputable and have spots on the ABC) claim that 'their' favoured asset classes have 'enduring' or 'timeless' value, when it is very clear to me that fashions change (over say a 30 to 50 year period) and assuming continued above average performance by extrapolating some past figures is a mugs' game.
As for the 1.4% yield from the $2m net equity, I don't see this as a major issue. The critical thing is that $2m gives the Irwins' a lot of choices and the list provided by topcropper is just a few.
Peter
