How many IP's do you have?

[MichaelW]

one could argue having a $$$ value is also meaningless, as you could have 1 PPOR worth $2 million and 1 IP worth $1 million, it doesn't mean they are good investments.. lower priced IP's would be better than 1 large priced IP.

Hi crc,

Or maybe those higher priced IPs have better yields and growth potential than a bucket load of cheap garbage in some backwater postcode. **sorry, couldn't help the poke, and seriously just kidding**

Just because its expensive doesn't diminish its potential IMHO. I voted 1 IP, but didn't realise at the time I could count my PPOR as well so it should have been two. But even my two are worth $2M combined, and the IP is the development site with a GR potential of $2.7M so is a leveraged play if we get any growth. I calculated the other day that 14% price growth in units in that postcode as happened the year before last would equate to a $378K increase in my GR. So, a $750K cost IP "option" (current value $1M) with a strike price of $1.2M that can grow 38% in value with only a 14% lift in actual prices in the postcode? I don't mind holding it for a while...

So my portfolio puts me in the mega-novice category. I can live with that. Still, I like my portfolio and if Sydney goes 40% over the next 5 years as touted by BIS then I'm in retirement territory. That would take the value of my properties to $5M and I'd obviously exercise my "option" and develop Mona Vale at a cost of $1.2M taking my total debt to $2M. Net worth $3M, sell down one of the units and have nice positive cashflow and an asset base then worth $3.8M and debt of $800K odd? I can certainly live with that...

But that's my strategy. I'm no Steve McKnight. But maybe once I've got these nice big "prime" properties in my portfolio and positive cash flow, then I'll look at diversifying into some smaller "affordable" properties somewhere like Adelaide or Melton or wherever else is the hot cheapie/yield postcode at the time. Or maybe I'll just go again with another development. Who knows, we're talking five years time, anything can happen!

Cheers,
Michael.

 

[sash]

Attention Moderators, is there a way of finding out which people voted for what; as I remember not that long ago that either the thread author was able to view it (which Sash said they couldn't), or the general forumites? Be good to know so that others could learn from these experts who have accumulated more than 20-30 IPs, etc.

There was an option in creating the survey to the Networth Poll view who ticked what...I thought about ticking it but did not.

Maybe a good one to to take away for next time.

I agree...I am very keen to learn from how the ones who have 20-30 properties and how they keep track of things. I have difficulty with my 7-10.

cheers
Sash

 

[sash]

But that's my strategy. I'm no Steve McKnight. But maybe once I've got these nice big "prime" properties in my portfolio and positive cash flow, then I'll look at diversifying into some smaller "affordable" properties somewhere like Adelaide or Melton or wherever else is the hot cheapie/yield postcode at the time. Or maybe I'll just go again with another development. Who knows, we're talking five years time, anything can happen!

Cheers,
Michael.

Interesting post Michael......I have concerntrated on lower quadrant of properties....have sold one and have low gearing with positive cashflow. But now I am thinking of stepping into the development and properties in better locations....I would not have considered this as a viable option if it were not for the sub-prime crisis/ interest rate rise and the impact to the OZ market.

 

[crc_error]

Hi crc,

Or maybe those higher priced IPs have better yields and growth potential than a bucket load of cheap garbage in some backwater postcode. **sorry, couldn't help the poke, and seriously just kidding**

hehehe usually though you would find the higher priced IP's have lower yield percent.

For example, my recently purchased IP has a yield of 4.6% and it cost me $365k

However if I spend double in this area, say $700,000, i very much doubt you would get double rent.

I saw a property advertised in Kew Melbourne for $1.2 mil, and the rent expected was only $550 per week! I would say getting better yield would be my choice, as I hate to think of the shortfall needed in that IP!

You need to find the right balance between yield and growth, but I agree getting a cheap IP in the middle of no where, is not the way to go as growth would be limited there.

 

[ianvestor]

hehehe usually though you would find the higher priced IP's have lower yield percent.

For example, my recently purchased IP has a yield of 4.6% and it cost me $365k

However if I spend double in this area, say $700,000, i very much doubt you would get double rent.

I saw a property advertised in Kew Melbourne for $1.2 mil, and the rent expected was only $550 per week! I would say getting better yield would be my choice, as I hate to think of the shortfall needed in that IP!

You need to find the right balance between yield and growth, but I agree getting a cheap IP in the middle of no where, is not the way to go as growth would be limited there.

I honestly don't know the yield on any of my properties. I've never calculated it but seem to keep getting wealthier. They were all bought with CG in mind.

 

[steveadl]

**

But even my two are worth $2M combined, and the IP is the development site with a GR potential of $2.7M so is a leveraged play if we get any growth. I calculated the other day that 14% price growth in units in that postcode as happened the year before last would equate to a $378K increase in my GR. So, a $750K cost IP "option" (current value $1M) with a strike price of $1.2M that can grow 38% in value with only a 14% lift in actual prices in the postcode? I don't mind holding it for a while...

I like the way you calculate Michael!

Doing it that way - I get a 22% lift in value of my main development block from a 10% rise in house prices of the suburb. The other one I get 25% for 10%.

The only unknown in the calculations is the increase in construction costs of now vs say 5yrs from now.

 

[MichaelW]

The only unknown in the calculations is the increase in construction costs of now vs say 5yrs from now.

Spot on mate! That's the same concern I have. i.e. How much will my "strike price" increase over that period. Either way, I don't think it will grow at the same rate as the leveraged price appreciation...

Oh, and to be completely fair, I should discount that 38% price appreciation on the site by the annual net holding cost of about 3% (8% IO loan less 5% yield). Still, 35% would be nice. Would take the site valuation from $1M today to $1.35M in a 14% unit price growth year assuming steady construction costs and constant dollar margin assumptions.

Cheers,
Michael.

 

[handyandy]

Its interesting.

With the net worth poll and a lot of previous polls we always tend toward a bell shaped curve but in this polls instance there is really no clear trend.


Is it because there is a higher portion of beginners (ready for the next boom) participating in the forum ?

Just to put some mystery to rest I voted for 50+ but when I count our properties I am counting each individual rental as a property. This is not strictly true as we have some blocks of units which are under one title (flats) and consequently can not be subdivided unless I strata them.

These properties, in the main, are not high value properties and in fact the bulk (in number) are in Cabranatta, within 2 blocks of the station.

Average rent will soon be $200 pw (decided that rents are to low and need to be lifted) and average value is most probably about the $190k.

Our current 2 reno's (2br units with garage full reno - kitchen, bathroom tiled throughout) will each be rented out for $230 pw

A 2br unit, no garage, just rented out for $195 pw. In this one we renovated the kitchen, including granite top and replaced carpet, painted walls but not the trim or doors and didn't touch the bathroom at all. Original purchase price was $56k in '99.

Cheers