Income strategies

[tarah]

Hi all,

What sort of strategies are people using to produce an income from IPs in the current climate i.e buying and subdividing, build, renos and selling to make enough of a profit so that the selling costs and CGT don't chew it all up? Or are most people just buying and holding atm? I normally buy & hold with a few renos but I would like to be a bit more active and turn over a few IPs in the near future as well as buy & hold.

Thanks

 

[random]

I've reno'd & sold for 4 yrs . Would have liked to have held one of those but it was interstate and I couldn't be bothered with that side of things.
Have decided to move mainly into build ups and holds from here on though and the latest is a double title number , extra large blocks . I want to put extra houses on it and storage , rent out the lot.

There's also another block on market right now perfect for units. If it's price drops I hope to grab that to , build 4 , hold 2 / sell 2.

Cheers

 

[Lofty]

Hi Tarah

We've worked in vendor finance since 2003. As a result, Karen & I now work in the business full time and it provides our lifestyle and also supports our buy and holds.

We believe our long term wealth is measured by the amout of equity we have in property. To accomplish this we use both +cf and -cf.

Our +cf properties are properties we buy and on-sell with vendor finance and our -cf properties are the properties we plan to hold forever ;-) Our +cf properties maintain our lifestyle and support the -cf on our long term buy and holds.

We've bought and sold heaps of our +cf properties but not sold any of our buy and holds. They're our long term wealth. The +cf properties, for us, are just a cash flow business, just like any other business you might own.

Using vendor finance to help our portfolio building and support our lifestyle works for us.

Cheers, Paul

 

[Dazz]

What sort of strategies are people using to produce an income from IPs in the current climate

G'day tarah, long time no see. I enjoyed the meal together. Hope life is treating you well.

The current climate (other than brass monkey weather) to us is identical to what went before....and what no doubt we shall experience in the future.

Buy and hold. Collect the rent. Pay the mortgage and outgoings. Keep the remainder. It ain't technical.

Being a rent collector is very boring and very unsexy...just the way I like it.

 

[tarah]

Thanks all. Most people I speak to say it's difficult to make consistent large profits from IP by selling unless you have subdivided or held the IP for a while and sold. I have done numerous calcs on properties I have checked out and also on my own. The ones I have renovated have increased the value but if I sold after all of the fees, CGT it wouldn't be worth the time and effort unless you did 5-10 of these per year.

Thanks Dazz - good to catch up for dinner let us know if you're ever back in SA. Yes, collecting rent is a bit unsexy! Ha ha! I think commercial is the way to go when you have the equity and CF to buy and back you up. Getting a bit fed up with resi IP repairs such as water leaks, water damage that tenants don't seem to notice until the walls and carpet become mouldy which leaves me with a fairly expensive repair bill!

Buying and holding is great for long term wealth building but I recently bit the bullet and sold an IP and it feels great to see cash! A combination of buy and hold and buy and sell each year is a good way to get the best of both worlds!

Any other people buy and sell IPs to create an income?

 

[Jen_PFR]

Buying and holding is great for long term wealth building but I recently bit the bullet and sold an IP and it feels great to see cash! A combination of buy and hold and buy and sell each year is a good way to get the best of both worlds!

Any other people buy and sell IPs to create an income?

We recently sold our two one-bedroom units. We're usually buy and holders, but had decided to replace these with two 2xbedroom units. So while we've been selling, we've also been buying. We sold our units ourselves (which saved a reasonable amount on RE fees) and are very happy with how it's all gone. The $ we made from the sales is going onto our personal debt, ie. the mortgage on the PPoR. Despite CGT etc, we will still have a reasonable amount to whack on that, which is nice!

 

[Aaron Sice]

build cheaper = more yield.

also 2 bed duplex-pairs can easily be reno'd into 3 bedders for very little money comparitively.

 

[Fudge]

build cheaper = more yield.

also 2 bed duplex-pairs can easily be reno'd into 3 bedders for very little money comparitively.

especially when the garage is under the same roof, and is converted to an extra bedroom.

F

 

[Aaron Sice]

especially when the garage is under the same roof, and is converted to an extra bedroom.

F

but then where's the garage?

you've just sacrificed a bedroom for a garage - prob a dead end.

 

[Fudge]

but then where's the garage?

you've just sacrificed a bedroom for a garage - prob a dead end.

Not a dead end, if do numbers before attempt.

If you do it without it though, you would make more money.

How do you get extra bedroom into same under roof footprint then Aaron? The older duplex pairs over my way aren't too roomy as they are, so wouldn't want to add an extra room, without increasing footprint?

F

 

[yadreamin]

Getting a bit fed up with resi IP repairs such as water leaks, water damage that tenants don't seem to notice until the walls and carpet become mouldy which leaves me with a fairly expensive repair bill!

Hi Tarah
not meaning to go off topic but in my resi leases its clearly states if the tennant does not report maintenance/breakage within 3 days then the cost of repairs/replacement is all theirs. Clearly a leak that sends carpet mouldy is older than 3 days.

And please when you discover how to ramp up the cash flow do share

I have just watched a dvd on renos to make cashflow , it was pretty good if you can afford to buy in a suburb of demand, and boy did they get the cash flowing.

cheers

 

[yadreamin]

but then where's the garage?

you've just sacrificed a bedroom for a garage - prob a dead end.

You could always wack up a carport

 

[Fudge]

You could always wack up a carport

Yep, this is what I was leading to, provided you have space on your plot, but agree that it would bite into any profits out of conversion (6m x 6m garage supply and install ~ $9000. 6m x 6m carport ~ $6000).

Thats why interested in Aarons take on converting 2 bed to 3 bed without sacrificing garage, considering that the duplex doesn't have any 'overly large' areas in it (i.e. to trhow up a wall, etc)

Cheers,

F

 

[our obsession]

Hi all,

What sort of strategies are people using to produce an income from IPs in the current climate i.e buying and subdividing, build, renos and selling to make enough of a profit so that the selling costs and CGT don't chew it all up? Or are most people just buying and holding atm? I normally buy & hold with a few renos but I would like to be a bit more active and turn over a few IPs in the near future as well as buy & hold.

Thanks

Buying well to begin with, that might be land, (for constructions), or already builts, keeping a very close eye on a couple of areas I know, have researched, and being an opportunist within that.

So, with some of my IP builds and buys, I have equity already, plus the areas I buy, well presented properties are relatively scarce and I get premium rental returns for them. So, not only am I buying well, creating that bit of equity, but getting returns to help with my cashflow/serviciability-all that stuff. Generally speaking by doing/achieving all that means I get to go IP shopping again, increasing my portfolio at a rate where it's finding/creating the deals, plus having funds to complete the purchases.

All up to me.

Growth can do it's thing, I'm not necessarily dependent upon it, but having said that, it happens anyway, and has been used to leverage off equity to buy other IP's anyway.

My strategy, I guess, is...ME!

 

[our obsession]

I'm not interested in selling anything, at the moment, I'm wanting to accumulate these little golden eggs, some of them back onto each others block, so I have, for down the road large parcels of land I may consider shifting off the houses and putting up units, but that would be a consideration-possibility just at this stage, no figures worked out yet.

But the point I make is again, buying well, getting that next door house at a very reasonable price and giving me more options for the future to play with.

And I do love to play.

This is all very much a game for me, so far, so good. The wealth creation game.

 

[our obsession]

...and for me, debt. Debt, (for me), is good, debt does not intimidate me, it is a tool, other people's money.

Like our country used "debt" to hold it's ground with the global financial crisis, that was perhaps, both tactical and a strategy.

I use debt to acquire my appreciating assets. So I guess it is both tactics and strategy.

So there is a multi faceted approach, and it is only my approach, for my needs and wants. My aims, my comfort level.

But certainly, DEBT is good. I have noticed over the few years I have been investing too, as proportionate, to my assets, even though the debt, technically increases, it is decreasing proportionate to my assets. If that makes sense.

If I were to graph it, initially my debt graph was close to assets, now the gap is widening.

Just like if I were our country, Australia, the proportion of debt is small, a tool, and there are not particularly many folk that understand that, they tend to get squirmish about debt, and that's fine too. We are all different, different perception and comfort levels.

At the end of the day we can only follow our own drum, our own strategy, we might learn a thing or two but the buck stops with each of us.

Our choice(s).

 

[ArJay]

Thanks all. Most people I speak to say it's difficult to make consistent large profits from IP by selling unless you have subdivided or held the IP for a while and sold. I have done numerous calcs on properties I have checked out and also on my own. The ones I have renovated have increased the value but if I sold after all of the fees, CGT it wouldn't be worth the time and effort unless you did 5-10 of these per year.

Hey Tarah... good thread.

Are you talking about doing the work yourself or getting in tradies?
Have always dreamed about reno-ing full time but in truth am a bit too chicken s**t to leave the cushy job.

We did a small hammerhead subdivision a little while back where we chopped off the rear, built and reno'd the front place. In hindsight building on the back was a bit of a waste of resources as the land would have sold with close on the same profit as the build.

Used the profit from the sale of the back to pay down the front a bit which we've kept and is roughly neutrally geared.

I reckon it's a strange time in the market at the mo and seems like there's not much margin left in the classic "adding value" strategies.

Been looking around at doing a similar subdivision project but in the areas we know well it's just not do-able any longer. With the stupid prices bigger blocks are commanding now the figures just don't add up. Add that to a potential swing in the market and it's too much risk for too little reward...

R