Millionaire's Club
- Thread starter BayView
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Our situation is mostly remarkably un-exciting. No high-flying deals or cutting-edge strategies so far.
This is going to shock the D&G'ers, but our recipe has been to simply buy real estate (PPOR's to begin with), and hold them for a decent while, and let CG do it's magic mostly.
I bought my first PPoR in 1985. Have had 3 more since then, with a period of renting in between one of them while one was being built.
We sold each PPoR to buy the next one, got lucky with one of them (Our B&B property bought in 1997) that doubled in price in 3 years, and the sale of this one made enough profit for us to pay cash for our current one (which is now and IP).
The B&B property was very neglected, we did a 12 month reno project on it to use as a B&B and ran it for 2 years. It was hard work and we had to extend ourselves quite a lot financially to be able to afford the purchase price and hold it, but it was worth it from the result of the sale. So maybe we made our own luck on that one.
Our current PPoR is our 4th (bought in 2000), has since doubled in value plus a little bit (so it's on target for the 7-10 year theory for prices to double).
We used the equity in this PPoR to start buying IP's in 2001, after I spent around 1 year doing research, reading loads of books, went to a few spruik-inars and then took the plunge.
We bought 2 IP's in 2 days on 2001. Both were neg geared, we renoed one over a 4 month period, and sat back for a couple of years, kept paying down the loans, reinvested the tax returns and the rents.
The neg gearing was a real strain, and I thought; never again - only CFPAT from now on (as per Marg Lomas' ideology).
We sold one of them in 2003 (the more expensive and most neg cashflowed of the two) and used the meagre profits plus equity to buy 2 cheaper CFPAT properties with great rental yields and great depreciation. I still have never seen them, and have never done any renoes to either of them - other than normal maintenance/repairs when the PM suggests.
We bought another 2 "cheapies" in 2004 - CFPAT with good yields and depreciation and continued on with the plan - pay down loan, re-invest rents and tax returns.
We sold the other neg cashflow IP (the first one we ever bought) in 2005 just before we moved to the US, because we were offered a great deal on our neighbor's block across the road with sensational bay views, and we were nervous about going to the US with a neg cashflow from this property. We didn't want to risk a cashflow problem and have to sell.
We used the profits from this one to pay a holding deposit on the block of land. It was on a 2 year settlement (the plan was to settle after we returned from the US), so it was costing us nothing to hold it until we got back.
Our PPoR was turned into an IP when we moved to the US and will remain this way until we sell it and begin building on the block in about a year's time.
While in the US we continued to follow the plan; pay down the loans, reinvest rents and tax returns.
Now we're back and renting ourselves, and holding all of the above. The block is the only cash drain currently.
The sale of our current PPoR will cover the block and building of the new PPoR.
So there you have it; buy when you can and make sure the properties are in good locations, pay down the debts as you are able, re-invest the profits and you'll get there.
We haven't tried to time the market with any purchase; but I did research all the areas where we bought our IP's for ongoing factors that would improve the growth and rent demand.
We have never done OTP projects. While they may be a good investment, I feel it's buying an unknown and hoping the market will go up to make it a good investment. They rarely have what I would call good cashflow - only depreciation. However, if I was offered one by a builderdeveloper at a cheap price because he needed to offload it, I may consider it.
I prefer to have the cashflow in my favour using existing tried and proven properties with good rent yields and depreciation and the CG can come, and even though we've had good CG, I'm not depending on just that.
To do development projects etc may get you there sooner, and this is an avenue I want to explore now that the wealth base is there.
This seems to be the common thread among those who have been successful.
Simple and consistent. Nothing fancy.
Find a strategy that resonates with you, get started, course correct along the way as required and consistently keep reproducing it. THAT seems to be the message I'm getting from people who have been successful.
It's working well for me so far!
Ditto.....exactly as Rob mentions. A simple strategy & consistently reproduced.
Well done L.A.Aussie and thanks for sharing your story. I would have been celebrating with you now that our duplex is finished, it would have just taken us over the million but thanks to the 4 WA properties losing so much value we have been knocked back to around $650,000. I was so proud too as the journey so far has only been around 4 years or so - I should have known it was too good to be true!
The mental thing though is that we don't have any actual money at all until something sells and are still on struggle street!
The mental thing though is that we don't have any actual money at all until something sells and are still on struggle street!
Sparky,
it's a minor set-back for you - at least you've still got the $650k to build on, and as you say; it's only been 4 years.
That's a great effort for that time-frame in my book.
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