Hotspotting or Timing the Market

[Bigtone]

Finally!

http://www.homehound.com.au/listing/details-popup.php?id=12350671&pos=12350671_01


Finally got a piece of Sydney, paid $600k which is $100k more than if i was not so lazy last year.

I was determined to get something in the market as I still think it has a fair bit of growth ahead, also need some Sydney for diversity of portfolio as biggest market etc and also I needed to pay the extra $$$ to penalize myself for being so lazy!

Now where? Another one in Sydney, NSW Central Coast or straight to Brissy?

 

[MTR]

Congratulations, well done.

Very nice, how much will it rent for?

I am still on hunting for piece of Syd.

Cheers, MTR

 

[NickZed]

nice one bigtone. That's a great location. congratulations

 

[jph461981]

http://www.homehound.com.au/listing/details-popup.php?id=12350671&pos=12350671_01


Finally got a piece of Sydney, paid $600k which is $100k more than if i was not so lazy last year.

I was determined to get something in the market as I still think it has a fair bit of growth ahead, also need some Sydney for diversity of portfolio as biggest market etc and also I needed to pay the extra $$$ to penalize myself for being so lazy!

Now where? Another one in Sydney, NSW Central Coast or straight to Brissy?

Well done Bigtone, did you use a buyers agent or did you source this yourself?

 

[Bigtone]

Thanks Guys

Rental estimate is $530-$550pw and I bought through a BA as i have found NSW real estate the most difficult and frustrating system in the country!

They did a lot of work, missed at three auctions so glad they will now get paid as they deserve it

Cheers

BT

 

[BayView]

Paid $600k and rents for $550 p/w.

I hope the cash deposit was a doozy.

 

[Ms Jade]

Actually, I am surprised that the return is so good. I think that would rent for somewhat less in Melb. Yields in Sydney are also making it comparatively more attractive.

 

[farmilor]

Paid $600k and rents for $550 p/w.

I hope the cash deposit was a doozy.

I would take that in Mosman. And I doubt it would have been a cash deposit.

 

[Bigtone]

I would take that in Mosman. And I doubt it would have been a cash deposit.

You r right Farmilor no cash down, i am borrowing $700k to buy it.

Will throw $60k into offset account and let it pay itself for 5 years, as long as it is worth more than $700k in 5 years i am in front for putting no cash down upfront and nothing ongoing except the NG tax break i think it will be closer to $900k in 5 year so a good return on zero dollars.

Bayview i don't believe in putting big cash deposits into an IP, if it needs a big deposit to make it a good investment then it's not a good investment, there is an "opportunity cost" to any funds you contribute to any investment and people often ignore.

It often makes me laugh when people or spruikers talk about positive cashflow property and it is only positive because they bought it at 80%? where did the 20% plus costs come from?

A true + cashflow property in positive with 100% plus borrowing IMO.



Cheers

BT

 

[JIT]

It often makes me laugh when people or spruikers talk about positive cashflow property and it is only positive because they bought it at 80%? where did the 20% plus costs come from?

A true + cashflow property in positive with 100% plus borrowing IMO.



Cheers

BT

Haha, I agree with that, plenty of CF+ve props at 50% LVR too!

 

[units4me]

I always wondered about people who went on about being CF+, AFTER putting down a 20-30% cash deposit.

 

[jaycee]

You r right Farmilor no cash down, i am borrowing $700k to buy it.

Will throw $60k into offset account and let it pay itself for 5 years, as long as it is worth more than $700k in 5 years i am in front for putting no cash down upfront and nothing ongoing except the NG tax break i think it will be closer to $900k in 5 year so a good return on zero dollars.

Bayview i don't believe in putting big cash deposits into an IP, if it needs a big deposit to make it a good investment then it's not a good investment, there is an "opportunity cost" to any funds you contribute to any investment and people often ignore.

It often makes me laugh when people or spruikers talk about positive cashflow property and it is only positive because they bought it at 80%? where did the 20% plus costs come from?

A true + cashflow property in positive with 100% plus borrowing IMO.



Cheers

BT

Tone I've often wondered why people do that also. I figured some say this "

A true + cashflow property in positive with 100% plus borrowing IMO." whilst they are looking... and this "positive cashflow property at 80% !!!!!" when expalining what they own :-D

Unless true former property types don't actually exist.. but they do I exist hear people say.. why then do people talk about the latter ?

 

[jingo]

You r right Farmilor no cash down, i am borrowing $700k to buy it.

Will throw $60k into offset account and let it pay itself for 5 years, as long as it is worth more than $700k in 5 years i am in front for putting no cash down upfront and nothing ongoing except the NG tax break i think it will be closer to $900k in 5 year so a good return on zero dollars.

Bayview i don't believe in putting big cash deposits into an IP, if it needs a big deposit to make it a good investment then it's not a good investment, there is an "opportunity cost" to any funds you contribute to any investment and people often ignore.

It often makes me laugh when people or spruikers talk about positive cashflow property and it is only positive because they bought it at 80%? where did the 20% plus costs come from?

A true + cashflow property in positive with 100% plus borrowing IMO.



Cheers

BT

Hi Bigtone,

Enjoying the thread. Just a question regarding your cashflow. If you are buying deals like the one you mention in Sydney, how are you managing to hold these properties? Either you have a huge wage or a business or the like. (Not that any of that is a problem - just curious).

I'm guessing the 60K in the offset will be used to pay the difference between the rental return and the holding costs over 5 yrs. Do you anticipate that the rent will cover the costs in 5 yrs time?





Regards Jason.

 

[Bigtone]

Hi Bigtone,

Enjoying the thread. Just a question regarding your cashflow. If you are buying deals like the one you mention in Sydney, how are you managing to hold these properties? Either you have a huge wage or a business or the like. (Not that any of that is a problem - just curious).

I'm guessing the 60K in the offset will be used to pay the difference between the rental return and the holding costs over 5 yrs. Do you anticipate that the rent will cover the costs in 5 yrs time?

Hi Jingo,

I started investing in 2003 and didn't make a repayment or contribution to costs until 2009, my strategy was to hotspot then re-value and take enough equity out to buy next one and enough to hold for a few years the new purchase, my income was not high. Overtime it did increase as my business grew.

In 2008 as GFC hit it looked like the business might struggle with the changes in the industry, i was confident but my partners were not, i borrowed against my portfolio and bought them out. The industry has strong cashflow and passive income so my cashflow is very good now. In Jan 2009 i decided to cover the shortfall myself as lending policies could have undid my plan if growth was slow or backwards.

So I will keep funding the rest of the portfolio but let this one pay itself with the $60k and tax break. Unless interest rates are low in 2015 it will likely be negative cashflow by a fair way and i will cover the shortfall from there.

cheers BT

 

[jingo]

Hi Jingo,

I started investing in 2003 and didn't make a repayment or contribution to costs until 2009, my strategy was to hotspot then re-value and take enough equity out to buy next one and enough to hold for a few years the new purchase, my income was not high. Overtime it did increase as my business grew.

In 2008 as GFC hit it looked like the business might struggle with the changes in the industry, i was confident but my partners were not, i borrowed against my portfolio and bought them out. The industry has strong cashflow and passive income so my cashflow is very good now. In Jan 2009 i decided to cover the shortfall myself as lending policies could have undid my plan if growth was slow or backwards.

So I will keep funding the rest of the portfolio but let this one pay itself with the $60k and tax break. Unless interest rates are low in 2015 it will likely be negative cashflow by a fair way and i will cover the shortfall from there.

cheers BT

Thanks Big Tone,

I find it interesting to find out how people have approached their investing. Your strategy of re-valuing properties and using the equity to hold the next one worked well and certainly paid off.

I am in a position currently to do the same, but I guess my risk profile is a little conservative!! I shall just keep buying as I can afford to fund them from my cashflow.

Great thread - very inspirational!

Regards Jason.

 

[Bigtone]

Thanks Big Tone,

I find it interesting to find out how people have approached their investing. Your strategy of re-valuing properties and using the equity to hold the next one worked well and certainly paid off.

I am in a position currently to do the same, but I guess my risk profile is a little conservative!! I shall just keep buying as I can afford to fund them from my cashflow.

Great thread - very inspirational!

Regards Jason.

Cheers Mate,

We all move the pace we are comfortable with, your strategy is a good one and will work long term for sure!

My life strategy (laziness) of leaving things to the last minute means i will have to work all night to catch up on work before i leave in the morning for a weeks junket in Vegas! I can never look forward to trips away because i know i will have to do heaps of work in the days before to get things in order. Cheers BT

 

[Kennyjaiz]

Cheers Mate,

We all move the pace we are comfortable with, your strategy is a good one and will work long term for sure!

My life strategy (laziness) of leaving things to the last minute means i will have to work all night to catch up on work before i leave in the morning for a weeks junket in Vegas! I can never look forward to trips away because i know i will have to do heaps of work in the days before to get things in order. Cheers BT

Thanks Bigtone, this thread managed to give me a good kick down the back side. Appreciate you sharing your wisdom and being so honest about your experience.

I agree with your assessment about Melbourne, Sydney and Brisbane (not that familiar with the other capital cities unfortunately). I am based in Melbourne. Started investing in residential properties in 2005. I was lucky enough to have secured 6 properties so far. (4 in Melbourne, 1 in Brisbane, 1 in Sunshine Coast). I also tend to look at high capital growth, but I am a bit more risk averse that you, and hence heavy on capital city properties (and limited regional investments). With regards to the position of Melbourne in the property clock, I think you are pretty spot on. (Reasons: http://www.somersoft.com/forums/showpost.php?p=667302&postcount=7)

I have been trying to buy another property (in Melbourne or Sydney) for 12 months now, to no avail. With a rising market, it is difficult to find something that is value for money - at least with a limited budget. In addition, I am an expert at the "lets wait and see how the market pans out" excuse. Would love to be a lot more further in my investment venture. However I am finding some difficulties in obtaining further finance. I buy all properties under my name, mostly negatively geared. Capital is not that much of an issue as I have built up some equity, which I can draw on. The challenge for me is serviceability. I would love to hear how you got over that, and your recommendation?! (The only think I can think of is to start accumulating cash flow +ve properties to increase my earning capacity, or start a company/trust fund to structure the properties).

So, if you don't mind:
How do you structure your loans?
Do you use multiple financial lender (and hence underwriter) to reduce the LMI cost?
Do you cross your collaterals? (Although it sounds like you use a separate account or subaccount for each individual property?)
Do you use a LOC?
Do you sell any of your properties (to capitalise on your gain and re-invest?)

Thanks in advance.
Kenny

PS. Sign me up for IPO when you list your residential property fund on the ASX

 

[Bigtone]

Thanks Bigtone, this thread managed to give me a good kick down the back side. Appreciate you sharing your wisdom and being so honest about your experience.

I thought it was up the backside not down

So, if you don't mind:
How do you structure your loans? All r low doc but i am trying this one in Mosmon as full doc, coming out of the dark and into the light, some of my rates r ridiculous i should refinance them if i get round to it and somone will take em
Do you use multiple financial lender (and hence underwriter) to reduce the LMI cost? yep over 10 diff lenders
Do you cross your collaterals? (Although it sounds like you use a separate account or sub account for each individual property?)never
Do you use a LOC?yep, most of my properties run through the same LOC, offset would work the same, i use those on a few as well,depends what suits and if lender requires u to use one of their accounts
Do you sell any of your properties (to capitalise on your gain and re-invest?)
only place i ever sold was my former PPOR in highett when i moved to Beauie
Thanks in advance.
Kenny

PS. Sign me up for IPO when you list your residential property fund on the ASX

put u down for $10m

Do u use a mortgage broker, if not get a good one (min 5 investments him/herself). I think buying cashflow + as a way to increase serviceability is a myth really. Lenders assess above market interest rate and only take a portion of rent so not many u could buy would increase serviceability. Just get the structure right and u can keep going.

Think u should go straight to Brissy now or maybe for a little less head to Central Coast NSW, it will go well i believe.

BTW 6 properties is good going and u have lots of equity so that is sweet, well done!

Cheers

BT

 

[Kennyjaiz]

I thought it was up the backside not down

Well, it kicked my back side - up, down and all around - seriously considering legal action for assault charges

I think I've worked out why you have been so successful in such a short period of time. You were responding to my post at 2.40am. So I gather you are an android that does not require sleep?

All r low doc but i am trying this one in Mosmon as full doc, coming out of the dark and into the light, some of my rates r ridiculous i should refinance them if i get round to it and somone will take em

Do you use a business structure (not necessarily a company)? or as an individual?
With the credit policy tightening, it may be a bit difficult to load up properties on low doc, but I will definitely investigate. Thanks.

yep over 10 diff lenders
yep, most of my properties run through the same LOC, offset would work the same, i use those on a few as well,depends what suits and if lender requires u to use one of their accounts

I have 4 lenders for my 6 properties in order to minimise my LMI. (The major financial providers only use 2-3 major underwriters, which makes it difficult to fully diversify the cost of LMI). But having multiple lenders limits my ability to pool my LOC. How do you manage to have 10 diff lenders and still run your properties through the same LOC. (I guess that's more of a question for a mortgage broker)

put u down for $10m

Certainly don't mind risk-free money investments

Do u use a mortgage broker, if not get a good one (min 5 investments him/herself). I think buying cashflow + as a way to increase serviceability is a myth really. Lenders assess above market interest rate and only take a portion of rent so not many u could buy would increase serviceability. Just get the structure right and u can keep going.

I used a mortgage broker for the first 2 properties, but haven't since. Unfortunately I haven't been able to find a competent one that I can trust. I have a tax accounting and financial planning background (It was short-lived and I no longer practise in those fields). While they may be well-intentioned, I have found that mortgage broker are only too keen to give financial advice. And the mortgage brokers I have experienced so far, lacks the attention to detail I require (besides the rate, the lender, the LMI, the functions/features, I need them to be aware of the exit fee, on-going maintenance fee, the ability port the loan to another property and advise accordingly, etc). I have managed to out-do a mortgage broker for all of the remaining properties, but I agree with you. I need to find a competent mortgage broker who knows their stuff and assist me through my challenges. Do you have any mortgage broker you would recommend in Melbourne?

I tend to agree with you with regards to cash flow positive properites. It will have negligible impact but limits the captial growth component. BUt I do think it is well suited to investors starting out with limited budget and income.

Are you working on Properties full time these days? Or do you still have another full time job on top of your property investments?

Think u should go straight to Brissy now or maybe for a little less head to Central Coast NSW, it will go well i believe.

Yes, I think I've missed the opportunity in Melbourne and Sydney already. Brisbane is probably a good idea. Where would you recommend? (I will of course do my own due diligence). I tend to look at houses with high land content (>600 sqm) within 15km of the CBD and high captial growth in the short term (rental is secondary). Budget is under 400K. My exisitng brisbane property is in Zillmere (north).

BTW 6 properties is good going and u have lots of equity so that is sweet, well done!
Cheers
BT

Thanks BT. I have been lucky. Most of my properties are in Melbourne within 15km of the CBD and they have demonstrated extra-ordinary growth in the past 12 months. While I do not count on this continuing, as you said - it is sweet. I hope to maximise my opportunities and be a little bit more agressive.

Again, thanks for your invaluable wisdom and generosity.
K.

 

[Paul Do]

Well, it kicked my back side - up, down and all around - seriously considering legal action for assault charges

Don't be too hard on yourself. Obviously if you gear to the hilt and prices keep going up, you will look like a genius.

The problem is that they don't.

Over the long term it's hard to make money with Low Doc loans - the additional interest margin doesn't make it worthwhile.