First CIP - Some interesting observations

[Monopoly]

Refer to original post.

Dazz, I (as I'm sure was Skater) referring to tenants overall, not just the original post.

Go back and read her post, it may shed some light for you.

There is nothing wrong with writing about Commercial property investments/tenants or Residential. What is not right, is the manner in which she feels "belittled" as a resi investor that is the issue.

But you're right, maybe that needs a separate thread in it's own right.

 

[Trogdor]

trog how much resi IP did u have before u did the commercial thing

Not many - only two!! And a reasonable share portfolio. Plus the new CIP now.

The goal is to get to a position where we can live of rents + dividends, and saw accumulating more resi-IPs as counterproductive.

Though admit its a fine balance between ability to build equity and killing your cashflow. Hopefully I can get some equity out of the CIP down the track, so difference between that or having gone another resi shouldnt be too great but cashflow is miles better.

 

[Ridin-High]

Not many - only two!! And a reasonable share portfolio. Plus the new CIP now.

The goal is to get to a position where we can live of rents + dividends, and saw accumulating more resi-IPs as counterproductive.

Though admit its a fine balance between ability to build equity and killing your cashflow. Hopefully I can get some equity out of the CIP down the track, so difference between that or having gone another resi shouldnt be too great but cashflow is miles better.

If u cool to talk numbers, could you PM me how much $$$ to get the CIP purchase (eg 30% + stamps + legals)... like the entry costs. I'm sorta figuring out where i need to be to do something similar

Regs.

RH

 

[Monopoly]

No - they are not!!!!

The economics are fundamentally different. That was my original point !!!

Resi is a great stepping stone but a fundamentally unscalable investment proposition.

You either cop awful net yields or end up having to manage a portfolio of many many many lower valued IP's, which is a chore in and of itself.

Two or three more CIPs for me and the accumulation phase is over, and the management is a breeze. None of this 10+ portfolio of resi stuff, with 10+ kicthens, bathrooms, sets of outgoings for me to fund, and whinging tenants.

Sure economically speaking, of course they are. I wasn't suggesting the strategy was similar.

As for the tenants. Sure they're different too, in that they're not occupying commercial properties to shelter themselves or their families from the elements whilst they sleep. But in terms of business, they are no different to residential tenants in that, they PAY for the priviledge of having walls surrounding them, be those walls four or four hundred!!! Commercial property is really about volume, and although that can be awesome, it can be equally as devastating it not played right.

I'm not knocking CIPs; quite the contrary. I'm just stating a simple basic fact that the tenant-landlord relationship is fundamentally the same, with (undoubtedly) far more advantages (and/or disadvantages depending on one's experiences of this investment vehicle) than your single residential investment.

Okay, I'll go back to my little resi corner and hand you back your CIP thread. Sorry for the detour.

Cheers,
Jo

Footnote: I have numerous HIGH rental yields, little (or no) "whinging" tenants and virtually a non-existant vacancy rate on all of them. So for me, resi IPs work extremely well.

 

[Trogdor]

If u cool to talk numbers, could you PM me how much $$$ to get the CIP purchase (eg 30% + stamps + legals)... like the entry costs. I'm sorta figuring out where i need to be to do something similar

Regs.

RH

Done, PM sent.

I suspect you can!!

Keen to hear more about your QLD experiences if you PM back.

 

[JIT]

Not many - only two!! And a reasonable share portfolio. Plus the new CIP now.

The goal is to get to a position where we can live of rents + dividends, and saw accumulating more resi-IPs as counterproductive.

Though admit its a fine balance between ability to build equity and killing your cashflow. Hopefully I can get some equity out of the CIP down the track, so difference between that or having gone another resi shouldnt be too great but cashflow is miles better.

Thanks for sharing that Trogdor.

I've personally aimed to be at 5 x RIPS ($2M-$3M gross value) +/- a PPOR, before considering the transition to CIPs, with the hope of starting off at a slightly higher entry point for that first CIP.

I figured having a few mill in RIPs compounding would generate enough equity for CIP deposits + costs.

Do you have a PPOR, or any plans to buy one in the future?

I was never keen to get one, but now feel like I'm missing out due to their CGT free status!

 

[alexlee]

You either cop awful net yields or end up having to manage a portfolio of many many many lower valued IP's, which is a chore in and of itself.

Two or three more CIPs for me and the accumulation phase is over, and the management is a breeze. None of this 10+ portfolio of resi stuff, with 10+ kicthens, bathrooms, sets of outgoings for me to fund, and whinging tenants.

Yields might be initially low, but rents do go up. I recently bought one at 5.2% gross yield, and looking at the market I can increase the rent by 10% within 12 months. There are also differences such as lower risk of vacancy, higher LVRs available, etc.

Not that I have anything against comm: I certainly plan to buy commercial as soon as I learn enough to get past the 'but what if it's empty for a long time' fear. However, as you say yourself, you have 2 resi IPs. How do you know what it's like to have 10 IPs? Yes, there are 10 sets of outgoings to fund, but you get 10 lots of rent too. As for whinging tenants, my own experience with more than 2 (but less than 10, for now) resi IPs for 10 years is that it's not as bad as you think.

I repeat that I also see commercial as something that I want to get into eventually, and congratulations on the purchase. However, I don't see how praising one investment type means bagging other types. Clearly, some people have done very well out of purely resi IPs. One might be able to reach your goals faster with comm, or not. Clearly, there ARE risks with CIPs too.

 

[wylie]

Btw - what net $$ rental returns would you get from $700K (resi) IPs with great tenants and negligible maintenance, which you refer? Assume this is in Bris metro? Keen to hear more.

The house I chose for this example was bought for $156K about 11 years ago and rented back then for $190 per week. We have added a deck, inexpensive but solid timber kitchen, polished floors, very long retaining wall to level the yard when we dumped our pool fill into the yard, and painted (probably around $30K or a little more all up).

So cost base to us around $200K or just less.

Last appraisal was $750K but allowing for the dip that the market took a little while back, I use $700K in my calculations.

It was rented for $495 for the past year, and $465 the year before that (same tenants). Two of the original three tenants had moved and the one left was in effect sub-letting to another person and about to do it again. We decided to give notice.

It happened that it became empty (along with two other houses) the week my mother passed away so we just asked a managing agent to fill them all for the same rents so we could forget them. We knew we would have no trouble filling it at $495 per week.

If the timing had been different, I think we would probably have been able to get $550 per week.

Because we did it up progressively as tenants left, in our own good time, the maintenance is pretty much "zero" or close to. We had to do nothing this time, which was just as well considering the gruelling time we were having privately.

 

[Dazz]

Clearly, there ARE risks with CIPs too.

As an analogy, it would have been far easier and quicker for the Wright Brothers to have simply walked down that airstrip. Instead they took their time, studied hard and ignored the nay-sayers, the doubtful and the scared. The held their sights true, invested their time, energy, willpower and resources, managing to do something that the entire population has benefited from.

Not only that, but the experienced players in the aviation game are able to clock up many successful missions between failures. To them the vast majority of "risks" that new pilots encounter have been eliminated.

It's still only a mode of transport, and sure, walking is also.....but really, my only suggestion alexlee and others willing to have a crack, don't let the fear of flying restrict you to walking....or even running quickly.

Trogdor has taken off on his maiden flight and the wind beneath his wings is obviously feeling strong, and the view is looking bright. Can I suggest Trogdor, you play "Learning to Fly" by Pink Floyd really loudly in a darkened room and listen to the lyrics intently. Your motivation levels will go thru the roof, with fear swept before you.

 

[cu@thetop]

There is nothing wrong with writing about Commercial property investments/tenants or Residential. What is not right, is the manner in which she feels "belittled" as a resi investor that is the issue.

.

Only she can control how she feels.

No on can put you down unless you let them.

If shes making money out of it whats the problem.

People around here put too much emphasis on other peoples opinions (as opposed to facts) and not enough emphasis on their own judgment.

Once you stop seeking approval or validation from others the world gets a much more interesting place.

 

[skater]

Only she can control how she feels.

No on can put you down unless you let them.

If shes making money out of it whats the problem.

People around here put too much emphasis on other peoples opinions (as opposed to facts) and not enough emphasis on their own judgment.

Once you stop seeking approval or validation from others the world gets a much more interesting place.

Firstly, I do not seek approval or validation from others at all. I don't particularly give a toss what non Resi investors think of me. Why would I? I'm a big girl and quite confident in the asset class that I invest in.

What I do object to is the relentless jibes at all the Resi Landlords, especially when they come from the one person all the time, and are often thrown out to the newbies that are having problems and asking for assistance. Now, in saying this, that one person has become much more palatable of late, so if we can keep that up, the forum becomes a lot nicer place as a whole.

 

[vincenzo]

Congratulations Trogdor

Another member here that is very interested, to read anything you'd like to share with us, about commercial investment properties ​

I don't mind any jibes I cop for only being a resi landlord btw, I see it as a much needed kick up the bum.

 

[Monopoly]

Trogdor, I did forget to add....

Congrats on your new investment strategy. It doesn't matter what it is, be it resi or comm, as long as you're doing something that you enjoy and it's making money for you....your efforts should be commended.

And of course....SHARED.

 

[vincenzo]

And of course, we would be gratefull for anything you share with us, including jibes for only being a resi landlord

 

[Monopoly]

And of course, we would be gratefull for anything you share with us, including jibes for only being a resi landlord

Speak for yourself!! I wouldn't jibe someone/anyone for being only a comm landlord/lady, and therefore prefer no such reciprocation for my being only a resi landlady.

 

[vincenzo]

Ok, those of us with thick skin (which can be developed from years of performing maintenance for tenants or from cleaning up the mess tenants leave behind for example) would be gratefull for anything you share with us Trogdor, including jibes for only being a resi landlord

 

[JIT]

RIPs are a great base for building wealth, even CIP bulls here would agree with that I'm sure.

But after a certain point it has its limitations, let's just admit this and move forwards.

Personally, the only RIPs I plan to buy in future would be PPOR's and upgraded PPOR's, so I can keep up with the jones' .

 

[Monopoly]

Ok, those of us with thick skin (which can be developed from years of performing maintenance for tenants or from cleaning up the mess tenants leave behind for example) would be gratefull for anything you share with us Trogdor, including jibes for only being a resi landlord

Thanks (as per the kudos message I left you) I do understand what you're trying to say, and...

Yes it's true cleaning up after tenants can make one want to throw in the towel, and certainly puts things into perspective but I'm not sure it necessarily helps thicken one's skin. It takes more than dragging out a mop and bucket on occasion to make me turn my back on an investment vehicle that has provided more pluses than minuses in the profit department!!

 

[vincenzo]

Thanks for the kudos... not what I was expecting

Yes it's true cleaning up after tenants can make one want to throw in the towel, and certainly puts things into perspective but I'm not sure it necessarily helps thicken one's skin.

But you didn't throw in the towel did you? I bet it only made you more determined to see your investing succeed... you sure it didn't thicken your skin?

It takes more than dragging out a mop and bucket on occasion to make me turn my back on an investment vehicle that has provided more pluses than minuses in the profit department!!

You don't have to turn your back on resi, i'm not planning on doing that either, but who knows what i'll end up doing

 

[Monopoly]

Thanks for the kudos... not what I was expecting

You're welcome.

But you didn't throw in the towel did you? I bet it only made you more determined to see your investing succeed... you sure it didn't thicken your skin? :

Actually, it'd didn't do much of anything. What thickened my skin was watching the fire brigade trying desparately to extinguish the flames that they (the tenants) had set alight!! That made me determined!!

You don't have to turn your back on resi, i'm not planning on doing that either, but who knows what i'll end up doing

Glad to hear it, and I wouldn't recommend one vehicle over another; only what you're comfortable with and which of course, makes money for you, be that resi or comm; both have good merit and great potential.

Incidentially, I've been a comm landlady (up until recently) and it's not because I didn't do well $$$-wise that I walked away from it, nor would I discourage anyone from turning to it as another viable strategy. I am nowhere as knowledgeable about it as some here (true) but I don't feel that I need to defend one investment type over another, nor how I choose to invest over someone else's choice or as the only/best option.

Each to their own....