Making serious money from property all luck?

[Gremlin]

That’s his ‘90s strategy, which in hind sight is super duper. In today’s market it is void

No. That's my residential property strategy. And if I find residential property that fits the criteria, I'll buy it. It just so happens that I found lots of it in the 90s, not so much in the late 80s or 2000s. But that's okay with me as I've never felt the need to stay loyal to a particular asset class. In any given year I found myself very heavily skewed towards one market or another. And not all of the investments were the right decisions in hindsight, but I wouldn't change my strategy if I had my time over...

Point being, I don't believe luck played a part in buying property at a time when prices were falling in many markets and the general consensus was that property was a dog of an investment.

 

[Sunfish]

She checks her account once every 6 months for the money to arrive, which it always does. Nothing ever comes out. He checks his letterbox constantly for all of the bills arriving and needing to be paid.

It's horses for courses, isn't it?

I don't have a "landlord" mentality and tenants (and greedy gov. departments) give me the tom tits. On the other hand I LOVE reading broad brush economics which gives me a good lead on the investments and sectors likely to out perform.

Everyone who knows me can stop reading now..............................

The thread starter, Pauly doesn't though and may be interested in my opinion that resources are still in a bull run. All manner of things such as uranium, helium, rare earths, gold, silver, water, coal (still), iron (still) have bright futures. I am showing a 2,200% gain on a gold miner and as Daz says, I do nothing but look up the price every morning. (Bad habit, I know )

 

[Dazz]

It's horses for courses, isn't it?

No, I've never bought into that argument Sunfish. I reckon you ask any investor what they want starting off and their answers are all the same ;

1. I want the thing to grow its sox off.
2. I want the thing to pay out heaps.
3. I can't be bothered looking after it.


Some people are prepared to put the hard yards in to get as much of those three as they can, and others are happy to do less work - especially early on - and skimp on one or both or all three.


Some people just choice very unwisely.....but at the start there is so much noise as to what to do it must be extremely confusing. You've got 40 odd years of investing, with huge big filters set up to screen the noise out.

I don't have a "landlord" mentality and tenants (and greedy gov. departments) give me the tom tits.

Neither do I mate. You're not Robinson Crusoe in that dept. My Tenants reckon I'm a complete *******, but then anyone that deals with me feels that way after about 10 minutes, so you get quite used to it really. After that it's just fun !!

It's not my fault I'm a Landlord - the Banks made me do it.

 

[redwing]

Just to rehash an old thread

I found this interesting (from Yahoo Finance Message Board)

Quote:
-By dumb luck I was holding CBA in the late 90s, the growth then was terrific,in the 30%s.

-I used equity built up by increasing share prices to secure further purchaases on margin.

-I have not always spent the excess dividend, in some cases I have used it to pay the margin interest. I have not done this in about 5 years but did earlier.

There's no guarantee the growth I got earlier would happen again, but even using current variables you could do it, would need to manage margin and price fluctuations carefully.

Assume 12% growth, 7% dividend (as I beleive available on CBA at the moment) , Interest expense of 8%. Start out buying 100K with 75K on margin (i do not recommend this, although it's about what I did)..I'm assuming here that dividends have been reinvested..See the following table. You can see how you could get to about 1M net and lowish gearing in just over 10 years.

Portfolio Purchase Loan Net Gearing
1 100,000 100,000 75,000 25,000 75%
2 119,000 81,000 38,000 68%
3 141,610 87,480 54,130 62%
4 168,516 94,478 74,038 56%
5 400,534 200,000 302,037 98,497 75%
6 476,635 326,200 150,436 68%
7 567,196 352,296 214,901 62%
8 1,154,963 480,000 860,479 294,484 75%
9 1,374,406 929,318 445,089 68%
10 1,635,544 1,003,663 631,881 61%
11 1,946,297 1,083,956 862,341 56%
12 2,316,093 1,170,672 1,145,421 51%
13 2,756,151 1,264,326 1,491,825 46%

I found the above strategy interesting; with his strategy of regular gearing (every five years a Margin Loan top-up)to increase the total portfolio of CBA shares and net worth, starting with $20k in 1996 and achieving a net worth of over $1M by 2006 by selecting a quality share and regularly investing/gearing into it.....imagine how he would've gone if he purchased CBA when it first floated


he's now sitting on a dividend income of around $100k p/annum at an age of 38 (good on him for sticking with his strategy).

 

[mary&mat]

I guess I'm in a lucky situation (luck we made ourselves really),

I think you just answered your own forum post

I get miffed when people say 'you're lucky' b/c you own 'such and such'....no, we worked damn hard & took risks others weren't willing to take, we researched & most importantly, we acted.

You can too Pauly

Regards,
M&M

 

[oracle]

Just to rehash an old thread

Redwing,

The biggest problem I see when people quoting such example with hypotheticals is everything looks clear when looked in hindsight. There are 1000s of companies listed on stock exchange. Out of which I would assume there are atleast half a dozen companies which over the next 10years will show similar growth rate as CBA during the 10yrs from 1996.

But how easy is it to recognise it? Even if you believe you might have found such a company how realistic it is to invest in that company with the gearing ratio you talk about?

How many such companies showed similar growth or better like CBA did to only become worthless after a few years of phenominal growth?

It does take special skills to find gems like CBA and to make it sound simple is bit unfair.

I am sure people who leveraged into property in 1996 have achieved satisfactory returns on their investments today not to mention if they bought a property close to city with favourable zoning changes they would be equally pleased to see the CG as someone who purchased CBA shares in 1996.

Cheers,
Oracle.

 

[Dazz]

I think you'll find oracle there were many many hundreds of thousands of oldies who subscribed for the $ 5.40 initial offer back in 1991.


You meet thousands of the grey nomads travelling the country side who currently enjoy the dividends and imputation credits pumped out by the CBA.


They didn't do anything special....life isn't fair.....the vision isn't meant to be crystalc lear.....and if you can't "see" without the assistance of hindsight, well, investing ain't the thang for you.


Don't wish it was easier or fairer oracle, wish you were better at it.

 

[Kristine..]

... I am sure people who leveraged into property in 1996 ...Oracle.

G'day Oracle

Or what about the people who leveraged into property with full borrowings (105%) in August, 2006 just prior to the GFC - and 35 kms from the CBD - and getting about 3% gross yields?

Well, I'm happy to say that this particular property has improved in street value by about $1,000 per week every week since purchase.

Not bad for a flat market. Imagine what it could have done in a strong market? Imagine what it could do by the ten year mark?

Current rent (new lease last week) is now showing 4.57% gross return against purchase price, but alas, still showing only about 3.46% against market value.

Still, equity growth of about $200,000 in four years ain't all that bad.

You gotta be in it to win it.

Go buy something and then tell us all about it!

cheers
Kristine

 

[oracle]

I think you'll find oracle there were many many hundreds of thousands of oldies who subscribed for the $ 5.40 initial offer back in 1991.


You meet thousands of the grey nomads travelling the country side who currently enjoy the dividends and imputation credits pumped out by the CBA.


They didn't do anything special....life isn't fair.....the vision isn't meant to be crystalc lear.....and if you can't "see" without the assistance of hindsight, well, investing ain't the thang for you.


Don't wish it was easier or fairer oracle, wish you were better at it.

I never said investing is easier or fairer. But to quote examples of one company out of possible 100s of blue chips and say if only is unfair in my books.

I am sure there are thousands of grey nomads travelling around the country wishing they didn't invest in Telstra and bought at $9 odd a share to only see its value drop to $2.78.

I certainly do not expect certainty before I invest. Investing is a risky business and with risk comes rewards. Mind you I was buying right/left and center over the past 4 months of uncertainty in the sharemarket only to now enjoy double digit CG of my portfolio value with healthy dividends on it's way.

The point I am trying to make is people make it sound as if CBA was a screaming buy in 1996. It was as easy as counting 1-10. Let me tell you people who bought CBA at $60 in 2007 are still waiting to break even after 3 years. So in my books CBA would have been dud investment had you bought it in 2007 but would have given fantastic return had you bought at $30 bucks just one year later.

Cheers,
Oracle.

 

[jrc]

I think in the second tranche of CBA people were underwater for a while. But there's a difference between CBA and investing in an old technology company like Telstra. Also with CBA people could see how its competitors were going, whereas Telstra was always going to lose market share because of deregulation.

 

[jaycee]

I never said investing is easier or fairer. But to quote examples of one company out of possible 100s of blue chips and say if only is unfair in my books.

I am sure there are thousands of grey nomads travelling around the country wishing they didn't invest in Telstra and bought at $9 odd a share to only see its value drop to $2.78.

I certainly do not expect certainty before I invest. Investing is a risky business and with risk comes rewards. Mind you I was buying right/left and center over the past 4 months of uncertainty in the sharemarket only to now enjoy double digit CG of my portfolio value with healthy dividends on it's way.

The point I am trying to make is people make it sound as if CBA was a screaming buy in 1996. It was as easy as counting 1-10. Let me tell you people who bought CBA at $60 in 2007 are still waiting to break even after 3 years. So in my books CBA would have been dud investment had you bought it in 2007 but would have given fantastic return had you bought at $30 bucks just one year later.

Cheers,
Oracle.

Isn't judging whether to buy or not buy at a certain price part what an investor has to do ?

 

[oracle]

Isn't judging whether to buy or not buy at a certain price part what an investor has to do ?

Yes, that is correct and it doesn't just apply to shares but even property. The good thing about property is it is a lot more foregiving than shares even when you buy at the wrong price. Give it enough time and it will come back to form higher highs (Generally speaking..)

Cheers,
Oracle.

 

[BayView]

It seems like everyone who's made there money has been lucky and ridden a boom, and the people you don't hear telling the stories are the people who brought too late.

Most people who are lucky are the ones who simply bought, and/or did some research (work) to identify an area that was likely to go up in the near future..

The ones who bought late are the ones who did no work, followed the crowd and then bought where the crowd did.

Commonly called (by me and no-one else it seems) a "Pengiun".

If you watch the penguins on the beach at Phillip Island you will understand what I mean.

We made our own luck by buying when we could - and often when we really couldn't afford to.

 

[Fudge]

There are instances that timing may assist, however, if you are investing for the long term, this is really not a major player.

I can't remember the analogy, but it was what Dollar Cost Averaging is to shares, but it is done to houses.

Once you have enough money, just buy, wait for appreciation and increase in equity, and do again. (Not specifically waiting for any cycle.....but in saying this, need to know some info regarding property, just like you do when dealing with shares)

If anyone knows what the term or saying is, refresh my memory.

F

 

[intrigued]

I never said investing is easier or fairer. But to quote examples of one company out of possible 100s of blue chips and say if only is unfair in my books.

I am sure there are thousands of grey nomads travelling around the country wishing they didn't invest in Telstra and bought at $9 odd a share to only see its value drop to $2.78.

I certainly do not expect certainty before I invest. Investing is a risky business and with risk comes rewards. Mind you I was buying right/left and center over the past 4 months of uncertainty in the sharemarket only to now enjoy double digit CG of my portfolio value with healthy dividends on it's way.

The point I am trying to make is people make it sound as if CBA was a screaming buy in 1996. It was as easy as counting 1-10. Let me tell you people who bought CBA at $60 in 2007 are still waiting to break even after 3 years. So in my books CBA would have been dud investment had you bought it in 2007 but would have given fantastic return had you bought at $30 bucks just one year later.

Cheers,
Oracle.

I highlighted that bit
$60 K invested when you suggest at a price of $60.00 per share is worth $61,792.00 at close today, and it did it all by its self, and we forget we also get tax credits on other income. oh and 7.5% return next FY.

So you got a bit to learn yet, but you are getting the idea. And yes your $30 you have been great but $26.00 was even better.

Regards

 

[redwing]

I can't remember the analogy, but it was what Dollar Cost Averaging is to shares, but it is done to houses.

Once you have enough money, just buy, wait for appreciation and increase in equity, and do again. (Not specifically waiting for any cycle.....but in saying this, need to know some info regarding property, just like you do when dealing with shares)

If anyone knows what the term or saying is, refresh my memory.

F

Capital Growth Averaging

Explained in detail by Rixter in this post here

 

[redwing]

certainly do not expect certainty before I invest. Investing is a risky business and with risk comes rewards. Mind you I was buying right/left and center over the past 4 months of uncertainty in the sharemarket only to now enjoy double digit CG of my portfolio value with healthy dividends on it's way.

Great news Oracle...wish i was in the same boat; still have a couple of dogs in the kennel that need to go to new homes.

Keeping others though

 

[Propertunity]

Nice post Propertunity.

Thanks I think I am going to put it into my latest client newsletter. I keep looking at that graph and realising what a great asset RE really is

Can I have the name of your tiler - he sounds great....

Umm, no...and I know you were only asking hypothetically.
Cheers, Dazz.

 

[oracle]

I highlighted that bit
$60 K invested when you suggest at a price of $60.00 per share is worth $61,792.00 at close today, and it did it all by its self, and we forget we also get tax credits on other income. oh and 7.5% return next FY.

So you got a bit to learn yet, but you are getting the idea. And yes your $30 you have been great but $26.00 was even better.

Regards

Intrigued, I am sure you poured in all your life savings and borrowed more on margin loan at $60 a share paying anywhere between 8%-9.5% interest costs in 2007.

Based on your figures I would have made $1792.00 in 3 years on my $60K investment. Or put it another way 0.98% compounded per year. Or would be still in the red if I had to pay margin loan interest as well. I am sure all those people are on there way to financial freedom.

Look, I am not saying CBA is a bad company to invest in. I already said in my previous posts it's a gem and it requires special skills to find such a gem and invest enough money in it that you retire from that investment one day.

Part of buying any company is the price you pay. Every company Warren Buffet has invested in was owned by other investors as well. But how come Warren's investment returns are way above others? It's because not only did he discover a gem (outstanding company) but he also got the timing and the price right to buy the company.

Cheers,
Oracle.

 

[jrc]

Reading several of the stories on here how people made some money, most of the stories have somewhere in them "after buying the property for x amount the price went up by 70% (some large figure) in just this short amount of time because of a boom"
It seems like everyone who's made there money has been lucky and ridden a boom, and the people you don't hear telling the stories are the people who brought too late.

So is a house, after rent and tax deductions, are you destined to only really ever to make say 7-10% profit yearly and only if you get lucky see a massive capital increase?

7-10% profit annually means you double your money approximately every 7 - 10 years (rule of 72). If you borrow your gains are magnified based on your cash in ie you put 20% down, value increases 10%, your return on the 20% is 50%. Of course if it goes the other way you've done 50% of your dough.

Yes people may have ridden a boom, but deliberately successful people have a strategy. I'm sure Kristine's initial purchase made sense as an investment at the time she purchased. In my own instance I purchased a cheap block of flats in 2001 because the income made sense, the capital growth was a bonus. So the initial money we put down is now almost 8 times as much, but because we like others then used the increased equity to acquire other property our initial investment is worth 13 times as much. If we'd been more aggressive with lower deposit initially our initial investment would be worth about 30 times as much.

Having said that, I'm not a great fan of buying a loss making investment and relying on the capital gain to get me out in front.