Duds and Dogs, lemons and lessons

[xactly]

Lets examine what makes a lemon property.

there are so many.."..Heyyyy... have i got a deal for you!!!" spruikers out there
(yes Im including some of the posts here, They aint selling but the inference is the same as a Henry Kay bash.. The markets is HOT HOT, ANYWHERE in 2770 will set u up for life!), I noticed an information gap in this time of increased buying interest among us in somersoftian land.

I thought it might be instructive in this era of the ""somerset leading indicator" explosion (thanks Seech) and new member interest to explore that.

My retrospectoscope is much more accurate than my crystal ball..
Lets begin...

THE LEMON
A house I nearly bought. got scared by the amount of money I was up for and pulled out. Thank God. Stayed on the market for months while brisbane boomed, very poor capital gain years later.
THE LESSON
Only avoided this lemon by accident. Fear Saved me. Why no growth? entry point too high. And its a small house on a little block surrounded by massive McMansions. Completely out of character for the location. Aim for the centre of the micromarket. The fringe properties in an area have less demand therefore less growth.


THE LEMON
Friends house. Fell in love with new development. no fences! enviro friendly!. community pool and cultural centre. bought land. Built architechtural dream home. dropped serious coin on landscaping. 600m block next to babbling brook.

later... realised ..didnt like the community, Enviro friendly means rich nutters with middle class guilt. No fences mean living in peoples pockets. brook=swampy=mozzies. Tried to sell. 200K negative equity. People lining up to rent trendy house but glut of rentals means rents barely enough and the tenants want to bargain as they think they are in a position of strength (they are..).

LESSON
New developments =future glut. Just up the road you could and still can, buy acres for the price of a trendy 600m block. Dont pay for gloss. Look at the fundamentals. See beyond the shine at what you actually get for your money.

THE LEMON
Sisters in laws. Multiple tenants. sporadic rent payments. house is worth land only.

LESSON
They scimped on the upkeep. Let it fall to pieces. Poor property management. Should have kicked the tenants out years ago. Bleeding Hearts equals poor Business. Neglect means the equity drops. And we like equity, tasty, tasty equity....

Over to you guys...

 

[MTR]

Plenty of lemons and lessons, so what would you buy today???? over to you

 

[TMNT]

No offence but I didn't understand any of the entire post
Especially the first bit

 

[The Fence]

The Lemon: So called developer pair of gay guys come to small country town and buy up vast tract of perfectly flat land to make a motza on.
Didnt do enough DD and found out this land is the spillover point of any major flood.

Lesson: Still trying to sell said land and the neighbours are using it to graze stock on as that's all it's good for.
Maybe get out a map for a start and see where the water flows.

 

[robbiejuve]

Lemon: As you can imagine certain ethnic groups buy amongst themselves and seem to trust their own kind more. I had an Indian mate, they had an Indian family friend who was a developer. Had a heap of land down the coast that was "guaranteed" to be rezoned residential and when it does they will make a mozza.

My mate bought and nothing happened, family friend disappeared. Holding now because don't want to deal with the pain of realising a loss.

 

[xactly]

Plenty of lemons and lessons, so what would you buy today???? over to you

The purpose of this thread was to learn from others mistakes (Thru the retrospectascope)

What would I buy today.... (using my crystal ball)...well... its never going to be as accurate as learning lessons from the past because generally humans arent good at foretelling the future.

There are enough speculative threads on todays best buy. I disagree with most of them.
Why?
Because investing must be tailored to personal circumstances.
eg:
No use going for the great capital gains play with negative cash flow if you are on a low income. A prominent Poster has just bought multiple units. great for him...ONLY someone like him. Otherwise the risk of being sent broke is unacceptable if your cash buffer is nonexistent.

eg:
lots of talk of renovating. "pick up a cheapie, paint and retire". Some people have done very well.
Tis not for me.
I hate renovating. And I make more money at work. I have limited time for leisure and have no plans to cut tiles and spread grout on my day off.(only one or two a month until recently). i applaud it in other people. Go Brenda!

So I wanted to approach investing from a different angle.
But since you asked what I am buying today.....
I will swop you a Lemon story for my buying story..Deal?

In 5 weeks I will have doubled my numbers of IPs. offer accepted last week. others pending. I have reasonable hopes it will settle . Resi and first commercial.

I buy
- neg geared, but turn them positive quickly as i have high cash flow. Interest rates have helped lately!
- lots of depreciation.
- very rentable yuppie boxes in small developments with Xfactor. views or location walkable to trendy strips, parks etc

views and parks are free.

NOT multiple pools, saunas, multiple lifts, tennis courts etc
those arent Xfactor, those are B/Corp cash drainers
-some have manager on site: they weed out undesirable tenant behaviour quickly!

Set and forget units and villas. A lot like Rixter targets, and Seech lately.
It works for me as i am blessed with a high cash flow and am pouring in the cash. Would NOT work for anyone with low cash flow, a knack of renovating (waiting for cap growth is too slow for them .. they want equity quickly). or an unstable/ intermittant cash-flow.

Ive shown you mine
Show me your lemons MTR????!

Cheers
Xactly

 

[MTR]

Hi xactly

I don't have a lemon to date, because I have always sold for a profit and we all know property is a forgiving beast, does not mean I wont have a future lemon, time will tell

However, I have learnt many lessons along the way, too many to list and in the main more about strategy.

The biggest lesson I learnt was I wish I started property developing (3/4 unit sites) 12 years ago when I started this game, its property investing on steroids, generating cash flow and equity and on completion a shiny new property almost fully owned.

Cheers
MTR

 

[xactly]

No offence but I didn't understand any of the entire post
Especially the first bit

None taken.

A lemon is a dog, a dump, a cash drain, a financial millstone around your neck. A how the hell can i get out of this before I ...ugh...

Nobody wakes up in the morning and says
" today Im going to sign a contract on the worst financial disaster of my life!!! Yeah!!!!"

How did people get into this mess?
lets find out.

Plenty of people predicting the future on here.
Lets examine the past. The Lesson.

Socrates: a life unexamined is a not worth living.

heres another one

The Lemon:
Commercial this time. Original landlord bought shop front off the plan. now trying to sell. Original selling price was for a 4.4% yield. On the market for over a year.
I made noises in the realtors direction. He is gagging for a sale but realises he is never going to sell with a comm yield = to a resi yield!!. The landlord wont budge and the shop next door is for sale for 75% of the price.

The Lesson.
You will never sell in a flat depressed market with unrealistic expectations.
If your original price was too high you are screwed in the short term.


try this

The lemon
trugaboff high rises, The hilton development at Surfers, and half of hedges avenue on the Gold Coast. they all lost up to 50% value over the last couple of years.
Friend of a friend in 2009 went thru hedges Ave open house beachfront .

Sticky beaking, not serious.
Said idly to the realtor. they are dreaming. I would only give you 4Mil. When they got home, the realtor rang and said
"were they serious? the Seller will take it."
They bought it and 2 years later it was worth half again!
But they dont care, its a family lifestyle choice.

The lesson.
look at market fundamentals. High holiday population fluxes and transient populations make bad investments. As do non-scarce investments. 27 floors of 2 bedders is a tough one to make money from. Unless you built them.

or look at the Gladstone thread.
The tennants are back in power, the market supply has outstripped demand.

The lesson
don't buy after the Boom

Is that clearer for you TMNT?
Best wishes on your investment journey.

Cheers
Xactly

 

[xactly]

The biggest lesson I learnt was I wish I started property developing (3/4 unit sites) 12 years ago when I started this game, its property investing on steroids, generating cash flow and equity and shiny new property almost fully owned.
)

Were they they lemons for your buyers?

Not trying to pick a fight.
I really admire developers/builders/renovators,
I dont have the time or patience and to be honest I dont find property investing exciting! or the solicitor meetings or lease wrangling etc etc. I find it tedious.

Shares are much easier to look after.

What i am curious about is
" dont buy off the plan" with tales of shonky builds or new builds going backwards. People have been really hurt.

BUT
Obviously Developing is the game on Steriods as you say!
Have your builds been good for the new owners?
Do you monitor them down the track to see the new values? even out of interest?
Did you keep any? Why/Why not?

*Disclaimer*
i have just bought off the (half finished) plan, settles in Feb 2014. So Im glad developers exist! I don't have the skill set and I believe in Win /wins.

Not trying to diss Developers, Im just curious as to what they/you think of their builds down the track and whether they turned out as well as you thought they would and why (lesson)/why not (lemon).

Or is that long term aspect of property developing not on the radar?
is Developing a short term game and when they aren't yours, then it doesn't matter anymore?
Sort of like a used car?
I really don't care what happens to the cars Ive sold. Not my problem anymore.

Cheers
Xactly

 

[MTR]

xactly

The latest deals gone wrong are really about people not timing the market correctly, investors who actually ignore the warning signs. This happens a lot, they get caught up in the moment and they convince themselves that they are going to make a bucket load of money, the reality is the opposite.


I have an acquaintance who is currently trying to sell OTP apartments in Karratha, the boom was over before she started, however she ignored this, greed got in the way. I find it bizarre that someone can be so intelligent yet completely stupid at the same time.

MTR

 

[xactly]

xactly

The latest deals gone wrong are really about people not timing the market correctly, investors who actually ignore the warning signs.

MTR

Yes! in a nutshell!
I havent bought for 5 years. I am an investing tortoise. Slow and steady and risk averse.
Why should I? I had time as the markets went nowhere. I am looking at a lot of irrational exuberance now and new posters.

Should I buy when I dont have a job is my favourite one so far.

maybe its the begining of the new boom, maybe not. signs are good to cautiously put my buying boots on.
I have been helped so much on this forum, I would like to contribute.

I am not a smart wheeler dealer investor. I like it boring and conservative. index funds,LICs long time frame. Yuppie boxes for those with massive disposable incomes and no financial sense.

pay it off and do it again.
I have adapted Buffets mantra.
dont lose money

Well.... i negative gear in the short term.... but I dont lose money ...in the long term...yet.

 

[MTR]

Were they they lemons for your buyers?

Not trying to pick a fight.
I really admire developers/builders/renovators,
I dont have the time or patience and to be honest I dont find property investing exciting! or the solicitor meetings or lease wrangling etc etc. I find it tedious.

Shares are much easier to look after.

What i am curious about is
" dont buy off the plan" with tales of shonky builds or new builds going backwards. People have been really hurt.

BUT
Obviously Developing is the game on Steriods as you say!
Have your builds been good for the new owners?
Do you monitor them down the track to see the new values? even out of interest?
Did you keep any? Why/Why not?

*Disclaimer*
i have just bought off the (half finished) plan, settles in Feb 2014. So Im glad developers exist! I don't have the skill set and I believe in Win /wins.

Not trying to diss Developers, Im just curious as to what they/you think of their builds down the track and whether they turned out as well as you thought they would and why (lesson)/why not (lemon).

Or is that long term aspect of property developing not on the radar?
is Developing a short term game and when they aren't yours, then it doesn't matter anymore?
Sort of like a used car?
I really don't care what happens to the cars Ive sold. Not my problem anymore.

Cheers


I dont have the time or patience and to be honest I dont find property investing exciting! or the solicitor meetings or lease wrangling etc etc. I find it tedious.
My accountant who is also a developer deals with this and sorts out structure etc. not an issue for me.

Shares are much easier to look after.
Am sure they are, not my bag and the big one is the ability to LVR with property is very attractive.

What i am curious about is
" dont buy off the plan" with tales of shonky builds or new builds going backwards. People have been really hurt.

All comes down to product, timing and research, I also know investors that have made a bucket load of money in a rising/booming market.

BUT
Obviously Developing is the game on Steriods as you say!
Have your builds been good for the new owners?

I started off with land and house packages in my early investing days, I only built what people wanted and worked on a formula that sold, and I also held stock. It was also a rising market, lots of fat in the deal, building 4 pa. I chose reputable builders, I just sold one the other day and sold on day 1, still proud of this product, builder still around and has a very good reputation.

With my development sites, I have researched extensively and will only build quality, over cheap and tacky, will make more money and easier to sell, of course how high spec you go will be dependent on the area, but buyers like certain things ie stone bench tops, overhead kitchen cupboards etc.

Do you monitor them down the track to see the new values? even out of interest?
Sometimes, just out of curiosity

Did you keep any? Why/Why not?

Yes, land and house packages. But this is not the only strategy I use, I land bank, look at areas that are ready to be rezoned, buy 3/4, sell a few reduce debt, move on, ie State housing areas, pick them up cheap, ready to develop in the very near future, while still developing today. The plan is just do 2 pa, will see if I increase this moving forward. There is other stuff I am doing as well.

With my Perth 3 unit site, will sell 2, keep 1, own it almost outright.
Melb, 4 unit site, not sure yet which way I will go.

MTR


Xactly[/QUOTE]

 

[MTR]

Yes! in a nutshell!
I havent bought for 5 years. I am an investing tortoise. Slow and steady and risk averse.
Why should I? I had time as the markets went nowhere. I am looking at a lot of irrational exuberance now and new posters.

Should I buy when I dont have a job is my favourite one so far.

maybe its the begining of the new boom, maybe not. signs are good to cautiously put my buying boots on.
I have been helped so much on this forum, I would like to contribute.

I am not a smart wheeler dealer investor. I like it boring and conservative. index funds,LICs long time frame. Yuppie boxes for those with massive disposable incomes and no financial sense.

pay it off and do it again.
I have adapted Buffets mantra.
dont lose money

Well.... i negative gear in the short term.... but I dont lose money ...in the long term...yet.

In the 5 years you have not invested there have actually been many rising markets in Australia, ie Perth, Syd, Melb.

All to their own.
When one is watching the markets closely it becomes very interesting, especially when you see a rising market, suddenly everything is under offer, and there is not enough stock, you know then you should look at jumping in and buying as many properties as you can afford.

 

[xactly]

In the 5 years you have not invested there have actually been many rising markets in Australia, ie Perth, Syd, Melb.

When one is watching the markets closely it becomes very interesting, especially when you see a rising market, suddenly everything is under offer, and there is not enough stock, you know then you should look at jumping in and buying as many properties as you can afford.

Thanks MTR!
No lemons from your post but lots of lessons!
the last 5 years i have not invested in RE but shares have been kind.
nothing to boast of. Intrinsic Values posts blow me out of the water.

doubling my stake jumping in now, and am soon to be maxed out.
Next boom will be interstate buying for me. Good luck with your developments I may need you!