Bargains galore as house prices plunge

[Sailesh Channan]

Kenneth

I totally support your buying strategy.

One of my clients did exactly what you are doing for a period of about 8 years and now has around 15 properties in Sydney.

He is now slowly selling up as the 5 yr mark approaches to do the same in Brisbane with my help.

This strategy has worked well for him because he was making a developers margin by building house and land packages. He also saw massive equity gain in a rising Sydney market allowing him to continually utilise the equity for further purchases.

 

[Kennethkohsg]

Kenneth

Be aware that while the property market is ok , a property will normally sell for more that it's land and building costs BUT when the market is not so hot , the land and building costs will often be more than what you can sell for.

See Change

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Hi Sea_Change,

1. Thank you for your concern.

2. I do agree with you. That is why I will turn cautious in 2006 and monitor the market situation first before I will consider investing in the same Anchorage Estate. My present tentative exit strategy is to cash out 50% of my property portfolio in the Anchorage Estate at Rockingham in early Janaury 2007 and to review the market condition prevailing then before deciding what to do with the remaining 50% of my property portfoilio located there, which I plan to hold long term if the market siutation for this suburb is still very favourable in the long term.

3. In the meantime, I will continue to "buy-and-build" in the Anchorage Estate at Rockingham for the rest of this year in 2005, with confidence.

4. I know of the specific scenario as painted by you as having happened in a new emerging suburb within the Goldcoast property market right now ( which is located near to the Disneyland Movie World), as a result of excessive speculation in the land prices/development for the new land releases. It has now evolve to become into a temporary over-supply situation and the land (and completed house packages) prices have started to fall back now compared to its high prices 2 years ago, though I cannot recall this particular suburb name to share with our members at the time when I was writing this note.

Cheers + Regards,
Kenneth KOH

 

[alexlee]

It's all about what we want to do to get what we want. I certainly respect Kenneth for his hard (and profitable) work, but for me, I choose the lazier approach.

My own plan is to save as much as I can from the job (and I try to choose the place that will pay me the most), plow it into property and let it sit there for 10 years or whatever. Minimum involvement by me except to authorise repairs and so on suggested by the managing agent.

 

[Kennethkohsg]

Kenneth,

Fair cop gov'ner.

Sounds like your on to a lucrative plan and are executing well, good work! My plan is to leverage to the tune of around $2M and then let it return me 10% or so pa. If I can set the structure up correctly I can minimise the taxable component and keep most of those returns.

I've got a paltry $500K or so equity at the moment, but good cash flow from incomes in the $200K pa mark. So, servicability is not a big issue and I can get a LOC for around $400K which I can put down as deposit on loans for a mix of property and shares.

Each to their own, but if I can double my net worth every 5 years then I can turn my $500K into $2M in 10 years which can then fund a comfortable retirement. Its a simple broad brush plan but I'll fill in the details in the next few months and post it on the forum for the aficionados to tear apart for me...

Cheers,

Michael.

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Hi again Michael,

1. Allow me to further share with you the concept of "Growth Asset Portfoilio" vis-a-vis "Security Asset Portfoilio" which I have read from a book and using it for my own asset planning and property portfolio built-up.

2. In the initial stage of building wealth, the authors recommend that we build our wealth by acquiring high growth assets with annual ROI returns of more than 20%p.a and with aggressive/extensive use of leverage through productive loan debts when our younger adult days.

3. Once we have more or less achieved our intended assets portfolio targets, we will start to transfer some of our existing assets into the security asset portfolio which merely aim to target for a low 5%p.a growth. However, wealth presevation through asset safety and protection purposes are being strongly emphasised.

4. At this stage of the wealth building process, asset security and wealth preservation now becomes paramount importance and overriding considerations in our new investments so that we are able to keep the wealth generated through more tax-efficient and tax-effective strategy of asset management. Leverage will be minimised down to less than 50% LVR or/and the loans even completely paid off to have an umemcumbered assets holding, for eventual transfer into a family trust, at the later stage of our lives. This will then allow us to continue to generate a life-time of continuous residual passive income for the entire family.

5. At this stage of the game, we are actually more or less financially free already. We no longer go for high growth assets investments as in our younger days unless they are very safe and viable for us to make the investments with a reasonable returns.

6. Thus, to me, building and keeping our wealth through property investment required entirely different mindsets and investing strategies and considerations.

7. While I am presently slightly ahead of you, beside building my present growth assets portfolio aggressively, I have also started my own planning to build up my own security asset holding portfolio.

8. Despite not having achieved the financially free status presently as yet, I have actually start to live off my house equity to concentrate my learning process as a full time property investor for the last 2-3 years. I see this as a form of time leverage to speed up my learning curve in the mean time.

9. Thanks

regards,
Kenneth KOH

 

[Kennethkohsg]

Hi Sailesh,

1. Thank you for your kind words of re-affirmation.

2. It's pity and a shame that we did not actually manage to meet in person when I was last in Brisbane in 2003, though we did make some phone contacts to each other then. I was last in transit at Brisbane International Airport to/from Singapore to New Zealand only two weeks ago.

3. Now that you know what exactly I am doing and I now know that you have the actual experience of helping clients like myself, to succeed in doing what I am presently doing in the Perth property market, I sincerely hope to seek your kind assistance to help me source for reliable builder support there in order to replicate the same investing process in Brisbane/Goldcoast/Sunshine property markets in the near future.

4. At this point time, honestly speaking, I have actually tentatively planned to start re-positioning myself for the next Goldcoast property market up cycle trend in 2008-2009 period (and the Melbourne/sydney property markets during the 2006/2007 period) by researching into these new property markets in Australia myself.

5. However, I am open to investing there earlier if you can recommend me some exceptional growth suburbs, (which also operates atypical and independant of the prevailing property cycle trend,;- similar to the Anchorage Estate at Rockingham) that are presently prevailing in the Brisbane/Goldcoast/Sunshine property market.

6. However, I must honestly admit to you that I will be more cautious investing there in the Brisbane/Sunshine/Goldcoast property market now than as I would in the Perth property market as the Brisbane/Goldcoast property market and property cycle are known to be much more volatile and stretches over a much longer duration period than that in the Perth property market.

4. I look forward to your kind assistance and working with you in the Brisbane/Goldcoast/Sunshine property markets in the near future.

5. Thank you.

regards,
Kenneth KOH

 

[Kennethkohsg]

Hi Madmurf,

1. Thank you for your kind support and for being like-mindedness with me in this respect.

2. Still, I think that Sea_Change has raised up a valid concerns. What Sea_Change says and the scenario which he has painted in his post, does really happen in the Goldcoast property market, as far as I am concerned;- and for that matter, can also happen in any other property markets both inside Australia and outside Australia as long as the similar market conditions do exist.

3. Having said this, I do fully subscribe to and agree with your line of thinking.

4. Thank you.

Cheers + regards,
Kenneth KOH

 

[Kennethkohsg]

Hi AlexLee,

I thought I am also a "lazy" person too through "smart investing". However, apparently from your last post, I really take off my hat and salute you. You have indeed beaten me well, in this respect.

Wishing you "Success and All the best in your all (present and future) Endeavours!"

Cheers
Kenneth KOH

 

[XBenX]

4. At this point time, honestly speaking, I have actually tentatively planned to start re-positioning myself for the next Goldcoast property market up cycle trend in 2008-2009 period (and the Melbourne/sydney property markets during the 2006/2007 period) by researching into these new property markets in Australia myself.

In a light hearted manner... When your finished with your definative property cycle forecasting crystal ball can I borrow it =)

You might need to throw a few words like... possible, imo, etc

Nothing wrong with with predicting the market, it is just misleading when its said so definatively...

 

[Keen]

Kennethkohsg,

Would like to hear you're views on building in an established area as opposed to an estate.

I have just built an IP (Bunbury) including land for $168k (got the keys on last Tuesday) as is probably valued between $230 - $250k. It rents at $230 p/w (had 8 people lining up to see it probably should have pushed PM for higher) and on a shared 42c and 30c tax bracket is neutrally geared.

I am considering doing this again ($$$) - but seems to be very hard and drawn out work. I would build again due to equity gain, low maintence costs and lower costs per week (as servicabilty it what normally stops people from growing their portfolios). Will probably use the same House and Land Package people as I will ask for the exact same house to be built for the second house - just to make things easier.

It true what people say "Building a house is very stressfu" some say "I'd never to it again". Any tips in making this easier would be appreciated - I live 2 and half hours from the proposed area and have heavy family commitments.


Regards

Keen

 

[Ausprop]

with Len Buckeridge closing up Statesman and one of his other operations there is bound to be some interesting times ahead. All indications are for a significant price rise in new construction IMO.

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[madmurf]

with Len Buckeridge closing up Statesman and one of his other operations there is bound to be some interesting times ahead. All indications are for a significant price rise in new construction IMO.

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Ausprop

I heard Len B was making noises about closing shop but has this been official.

Keen

Well done on the property. This CGs and rental returns are very typical around the Southwest at the moment.
As you were happy with the builder can ask who the actual builder was and the suburb you built in.
FYI the price of building has increased about 4% per quarter over the last 18 months.
I know of a couple that decided to pay an extra 20,000 off their block before building. The house they originally chose went up 30,000 in that period of time.

I would be very interested in how much your original house would cost to build now.

Cheers

 

[Ausprop]

not sure how far he will go re closing up his empire but he is officially closing up Statesman Homes and has shut their display homes. He will announce the closure of another company today but he wants to let the staff know first.

 

[Keen]

madmurf,

Block costs $42k (Apr 2004 contract signed) -still can't beleive it. Was an orghaned block in an established area of Usher close to but not on Ocean Drv.

The House was built by Dale Alcock though I would not recommend using the HomeBuyers as I had all sorts of trouble with them.

The House costs around $112k - I spent an additional $14k on a Patio, Shed, Retic, Lawn, Retaining Wall etc.

Total $168k
I spoke to an agent today who will be valuing it - looks more like $250k+

Im ear marking another area - but will revisit the Builder to get an idea of a new price estimate and then run the figures.As I've done before I'll pause see if I can do better and then decide.

If youv'e got the servicability and if (If) there is a rental market I feel Binningup and to a lesser extent Myalup (Beach side) offer great CG potential.

Perhaps Binningup could be your new calling card now that Dalyellup has sky rocketed?

Regards
Keen

 

[DD1]

changing market

From our 'sea change' causing us to move last year we can confirm first hand that it was not just the top end of the Sydney market that dropped substancially.

We first listed our house in Feb 2004 for the then current price of $429k being a 5 bedroom 2 bathroom in Sydneys west we thought that was fair.

The market mooved we dropped the price, the market moved we dropped again. Finally we sold the house for $ 350k. It is a case of choosey buyers but why the hell not. If the market means you have several choices, be as selective as possible to get your personal best results.

The interest rates will be stable for a while now so confidence will remain slightly on the up. www.quartile.com.au have a quarterly report on what they think the right moves are, guess what, the whole country is "hold" except for you guessed it, Brizzy and Cairns which are still the best buys country wide.

Cairns south is the next boom town with 2000 new homes scheduled for just south of Mt Sheridan alone, this will be an inner suburb if things keep moving in the same direction. The problem with Cairns Noerth is the mountains. Not much space for new subdivisions so look to the marketers of medium density there to splash the advertising pages for the next few years. South however has just had major road upgrades to accomodate the forcast growth.

Brizzy is still going to benifit from the Land Tax in NSW and double stamp duty hits. Another major sector to get a hit along at the moment is the ACT unit market. Why? as the land tax on house lots gets out of hand, people are sacrificing the land component to stay below the threshhold for the tax.

Guys, the sad people out there trying to scare us all might actually believe what they are saying, but I for one am sceptical about their scepticism.

Keep smiling.

 

[House_Keeper]

The interest rates will be stable for a while now so confidence will remain slightly on the up. www.quartile.com.au have a quarterly report on what they think the right moves are, guess what, the whole country is "hold" except for you guessed it, Brizzy and Cairns which are still the best buys country wide.

Quartile have places to sell mostly in Queensland. No wonder their 'report' is promoting only Queensland! How did they miss the growth in Western Australia?

 

[julieo]

The interest rates will be stable for a while now so confidence will remain slightly on the up. www.quartile.com.au have a quarterly report on what they think the right moves are, guess what, the whole country is "hold" except for you guessed it, Brizzy and Cairns which are still the best buys country wide.

DD1, How much does it cost to subscribe to Quartile. I went to look at the Brisbane report and they want me to fill in my details and said they will contact me. What does that mean??

Regards
Julie

 

[DD1]

Quartile

Julie, sorry it was so long ago when I got into quartile reports im not sure if I even had to pay back then. Press a few buttons on the site, im sure there is a way to review the info without a cash outlay.

Good Luck.

As for them promoting Queensland, what about the 1 billion just assigned to hospitals in SEQ, the extra 10,000 uni students, 5000 each for Ipswich uni and the new springwood campus, 800 jobs at dinmore meat works, the new pulp mill that adds $400 mil to the economy and reduces the same in imports each year, Steggles adding 120 staff and explanding their plant, the 1200 a week moving into SEQ and I havent even touched Cairns yet, sure quartile are happy to promote tiehr own developements but they also have melbourne and darwin happening soon and are honest with their predictions there.

We are all entitled to our opinions and this is only mine. Unit and townhouse pricing is the flavour of the month as peoples portfolios are getting bigger, the land tax threshhold is now making these markets a more atttractive propspect for some.

DD1

 

[Kennethkohsg]

Dear Keen,

1. You may want to consider "sub-contracting" out project management work for a fee. I am presently see this option and have to pay a A$5,000 house design and project management fee for all my new house construction so that I have more time for read up and develop myself in the other areas.

2. Alternatively, you may want to review your current working system with the builder and see how you can supervise more time-efficient and cost-effectively, with having more effective dialogue and developing more specific performance indicators for your own remote monitoring of the house construction progress.

regards,
Kenneth KOH

 

[ibeginner]

Hi, Kennethkohsg

You are a clever guy. I could not agree with you more. Cheers