New Property Riches
- Thread starter Bill.L
- Start date
Kenneth
Further to those comments , this thread followed on from Michael Whyte's thread about a property he has recently in Brisbane , at a time when many recognise that the overall market in Brisbane is passed it's peak of the current cycle.
http://www.somersoft.com/forums/showthread.php?t=22750
So from that point of view it's as much about market timing as well as buying new houses ( though I'm aware that you're personal preference is for new properties , though you arrange for these to built yourself )
Kenneth as someone who has bought and held property for a reasonable period of time without seeing significant growth, as someone who sold in SE Q'land near the peak in 2003 and subsequently started buying in Perth before the current boom took off I'm suprised you're not more forthright in your opinion in support of timing over time in the market.
See Change
Further to those comments , this thread followed on from Michael Whyte's thread about a property he has recently in Brisbane , at a time when many recognise that the overall market in Brisbane is passed it's peak of the current cycle.
http://www.somersoft.com/forums/showthread.php?t=22750
So from that point of view it's as much about market timing as well as buying new houses ( though I'm aware that you're personal preference is for new properties , though you arrange for these to built yourself )
Kenneth as someone who has bought and held property for a reasonable period of time without seeing significant growth, as someone who sold in SE Q'land near the peak in 2003 and subsequently started buying in Perth before the current boom took off I'm suprised you're not more forthright in your opinion in support of timing over time in the market.
See Change
+++++++++++++++++++++++++++++++++++Bill.L said:
Hiya Bill,
1. You probably have forgotten about me/my case. As a foreigner, I am only allowed to invest in new properties and/or buy vacant land and to build a new house on it each time subsequently.
2. I've already sold 3 properties and make my own monies to date, which has allowed me to become a full-time property investor.
3. Buying after a property boom? Depending on what you actually mean and how we and other people see things.
4. In general, the Australian property is said to have peaked and is presently on its decline. Yes, as a foreigner, I am still investing
in the Perth property market. So to some people, I am perceived/considered as buying at the market peak.
5. For others who are more discerning, they know that Perth property market have still not peaked yet and that is why I can afford to continue to invest in the Perth property market.
6. As for myself, while it is generally true that I do not buy at market peak but there are times where there are certain exceptional circumstances where I will do so, such as what I am doing now as well as in 2003, selling off my properties in the Goldcoast property market in 2003 and buying another Goldcoast unit apartment off the plan at the same time period or/and staying invested in the Perth property market. I am also presently selling one of my Perth properties and buying new ones too in 2005.
7. I believe that other astute and smart investors are also investing throughout the different stages of the property cycle, by modifying their own investing strategy to appropiately suit the changing/different investing climate afforded at each stage of the property cycle.
8. Some smart investors whom I know who are presently doing it and is openly advocating this view, includes Michael Yardney of the Metropole Properties, and Kieran Trass of the Hybrid Properties Group, both of whom are also members of this forum.
9. Thus, just to provide some relevant feedback and to help provide a more balanced perspective and discussion, please.
10. To each our own personal beliefs and opinions, however.
11. For your kind update, please.
12. Thank you.
regards,
Kenneth KOH
Last edited:
+++++++++++++++++++++++++++++++++++see_change said:
Hiya Sea_Change,
1. What do you really mean when you say, "I'm suprised you're not more forthright in your opinion in support of timing over time in the market"?...Do you not know that beside selling my old properties in the Goldcoast property market in 2003, I am also further buying another new property in the same market in 2003 myself?
2. Honestly speaking, I am still trying to learn the real impact/concept of "TIME" vs "TIMING" in my own real life property investing experiences myself at this point in time and at this stage of my own personal property investing journey, as to come to a proper conclusion as to which is indeed the safer and quicker way towards wealth creation/retention through property investing: Timing or TIME.
3. Conceptually, I am for both, using both TIME and Timing to create wealth through property investing but exactly which way to go in real life, honestly speaking, I do not truly know it clearly, well enough and with full certainity for myself as such, at this point in time, such that I can easily and clearly explain to people specifically, why this approach and not that approach.
4. To me, to use only Timing exclusively to the extent of failing to use TIME AND failing to hold on to some properties long term is to miss out on the exponential future capital growth in the house values through its compunding effects, which is the real key to wealth creation, as argued by those investors who believe in the "TIME" factor.
5. Yes, I do agree that we do and can make small monies from time to time, using the Timing approach, and re-circulate our profits again as new capital to re-invest again to create new or/and higher/more profit level but ultimately, are we likely to be truly rich as a property millionaire, when we take this more active "Timing" approach towards wealth creation through increasing our own velocity of money circulation?
6. I am not sure myself though a number of gurus had suggested that we probably would not IF we fail to hold onto our properties long term and use TIME and the accumulative compounding effects of capital growth to achieve exponential growth in house values and house equity/monies for ourselves....
7.... One thing that I am sure of however, is that whether we use the "TIME" or/and "TIMING" approach towards wealth creation, we still need some TIME to generate the required wealth level and/but NOT immediately.
8. Thus, the saying that property investing is a sure but "Get Rich Slow" way of wealth creation.
9. On the other hand, those who advocate using TIME to the total exclusion of not using Timing in their property investing, it is said that holding the properties long term in itself is a highy risky and dangerous proposition, for example, consider the past scenarios of high interest rate of 19%pa. in 1989, whereby many investors were known to have lost all their properties, as a result of failing to have sufficient cash/buffer reserves to properly service their huge debts and to cushion against other unforeseen circumstances.
10. I have personally heard/ known for myself of a certain multi-millionaire property developer with a family property portfolio asset holding of about A$32 million in value, who have recenty lost all their properties and being bankrupted in Australia.
11. So, which way do I go or should we go instead towards creating wealth through property investing?
12. I honestly do not know for myself at this point in time. I am still learning which way to go myself and by my own post, you can all see that I am clearly in this present dilemma in own real life situation, myself.
13. As such, I will greatly appreciate some wise gurus out there, who can further teach and educate me to clearly see the ultimate light at the end of this tunnel.
14. For your kind update, please.
15. Thank you.
regards,
Kenneth KOH
Hi BillL,
I wrote:
Found that because with new houses you get much more depreciation in the 1st 6 years, with the same serviceability you can buy more houses than if you buy old houses, therefore the total achievable portfolio value is more impressive than if you buy old properties, hence you can achieve the "one million property portfolio" quicker.
And you asked:
My experience has been that the lenders prefer to see $/week rental, and are not interested in depreciation. Could you please explain further??
I believe lenders( I am with NAB) look at income (=rental) but also look at previous year's tax report which would show a much lower taxable income (hence lower serviceability for further purchase) for old houses with not much depreciation vs new houses with huge depreciation.
I said "if buying new you can achieve the one million property portfolio quicker" which certainlty sounds very attractive to investors. How this portfolio performs over time in term of CG is another matter.
Regards,
I wrote:
Found that because with new houses you get much more depreciation in the 1st 6 years, with the same serviceability you can buy more houses than if you buy old houses, therefore the total achievable portfolio value is more impressive than if you buy old properties, hence you can achieve the "one million property portfolio" quicker.
And you asked:
My experience has been that the lenders prefer to see $/week rental, and are not interested in depreciation. Could you please explain further??
I believe lenders( I am with NAB) look at income (=rental) but also look at previous year's tax report which would show a much lower taxable income (hence lower serviceability for further purchase) for old houses with not much depreciation vs new houses with huge depreciation.
I said "if buying new you can achieve the one million property portfolio quicker" which certainlty sounds very attractive to investors. How this portfolio performs over time in term of CG is another matter.
Regards,
+++++++++++++++++++++++++++++++++++++++see_change said:
Dear Sea_Change,
1. To try to answer your underlying question directly head-on, "|Are you then saying that HAVE I held on to myGoldocast properties long term without selling them to re-invest into the Perth property market, I will not make my monies?"... Definitely Not, isn't it as I can well presume that
you can well agree with me on this position.
2. Thus, the real issue in contention is "Which way will give me more wealth and in a faster way, TIME vs Timing approach?"
3. My own tentative inner hunch at this point in time is, "IF all things being equal and I have successfully held onto to the same properties for some 20-30 years time, I am quite likely to come out with more wealth, using the TIME approach, rather than the Timing approach. So to say, I beleive that the slow and steady will win the (marathon)" race eventually.
4. However, the challenge for me then, is will I be fortunate enough and actually be able to do so safely over such a long term ( which in itself is a highly risky propostion itself) if I am to use only the TIME apporach only?
5. On the other hand, if I am using the TIMING approach, I can and do make small monies profit, from time to time. Do I ultimately able to make the same kind of big monies that I would, if I have successfully held onto the same properties long term? This is becuase I will have to also throw away part of my profits earned paying stamp duties, sale commissions and capital gains tax etc etc each time I buy and sell again. So, am I really working smart here ( and no doubt, I am definitely working harder) using the Timing approach than if I were to use the TIME approach?
6. Thus, my present thinking and approach to use both "TIME" and "TIMING" type of an integrated and synergistic apporach towards property investing, unless some gurus can clearly show me that a single, specific approach is more advantageous than the others.
7. For your kind update and further comments and discussion, please.
8.And to each, our own beliefs and opinions, please.
9. Thank you.
regards,
Kenneth KOH
************************************see_change said:
Dear Sea_Change,
1. I tend to agree with your version of interpretating Jan Somer's strategy.
2. However, the basic issue is whether can monies be made in new properties exclusively and my answer is still a "Yes".
3. Then only contending issue I think is, whose preference and why, rather than which is the preferred approach which some members are clearly to advocate here, objectively speaking.. though I do acknowledge that there are more flexibility and more opportunities in investing in resale properties per se rather than in new properties per se.
4. Thank you.
regards,
Kenneth KOH
++++++++++++++++++++++++++++++++TomL said:
Dear TOML,
Very well said. You have echoed my views clearly and succintly here.
Thank you.
regards,
Kenneth KOH
**********************************salsa said:
Dear Salsa,
1. This is exactly the crux of the issue. i.e what is being said is not neccesarily the true. The experienced and smart investors know that in real life, the theory may look appealing, but it does not truly work in real practice.
2. Only the the unknowing and naive novice investors do and may not realise the difference betwen what is said (and what is not being said) by some of the property spruikers. This is exactly why some of the members here are trying to point out about these property spruikers' claims in this very discussion.
3. For your kind uodate, please.
4. Thank you.
regards,
Kenneth KOH
ahhh,
That's the problem with doing too many post too quickly , yes I did say that , but that wasn't were Bill started off ( and in my haste left off )
The original purpose of this thread ( outside trying to confuse everyone ...
) was to see... to Quote Bill at the start
Does anyone know someone (or themselves) that has profited greatly by purchasing new properties exclusively?? Especially by purchasing immediately AFTER a property boom??
Unfortunatly , this is one of those posts which has developed in a series of rationalisations, red herrings , excuses , possibilities and exceptions but todate noone has posted details of someone who has done that.
PS Kenneth I wasn't aware that you had bought in the Gold coast ( Obviously I'm as guilty as everyone else in only hearing what I want to hear )
See Change
That's the problem with doing too many post too quickly , yes I did say that , but that wasn't were Bill started off ( and in my haste left off )
The original purpose of this thread ( outside trying to confuse everyone ...
) was to see... to Quote Bill at the start Does anyone know someone (or themselves) that has profited greatly by purchasing new properties exclusively?? Especially by purchasing immediately AFTER a property boom??
Unfortunatly , this is one of those posts which has developed in a series of rationalisations, red herrings , excuses , possibilities and exceptions but todate noone has posted details of someone who has done that.
PS Kenneth I wasn't aware that you had bought in the Gold coast ( Obviously I'm as guilty as everyone else in only hearing what I want to hear
) See Change
+++++++++++++++++++++++++++++++see_change said:ahhh,
That's the problem with doing too many post too quickly , yes I did say that , but that wasn't were Bill started off ( and in my haste left off )
The original purpose of this thread ( outside trying to confuse everyone ...
Does anyone know someone (or themselves) that has profited greatly by purchasing new properties exclusively?? Especially by purchasing immediately AFTER a property boom??
Unfortunatly , this is one of those posts which has developed in a series of rationalisations, red herrings , excuses , possibilities and exceptions but todate noone has posted details of someone who has done that.
PS Kenneth I wasn't aware that you had bought in the Gold coast ( Obviously I'm as guilty as everyone else in only hearing what I want to hear
See Change
Dear Sea_Change,
1. Cheers and thank you for acknowledging my this somewhat "unique" experience.
2. My short answer is Bill question then, " Yes, I will not, generally speaking". I think this will echo better with you now.
3. Thank you.
Cheers,
Kenneth KOH
I did not have immediate equity. On the contrary, it was a bit of a slump time. I had a loan approved for an amount. I suddenly had a lot of overtime available, and so was able to add extra over and above the specs for the originally approved amount (eg, garage, driveway, fence). When completed, the new valuation was lower than the original estimate, despite the extra features, due to a slump in the market, and I had to pay extra LMI. It was in a new subdivision.Bill.L said:
The 3yo IP- I don't really know what the price was comapred to 3 years before. I was a very naive investor then. However, I did buy in an area (Jerrabomberra) where there was a huge amount of vacant space- I did not realise back then that this suppressed values- most people wanted to build their own dream house on all that empty land, and not to buy an established house. So it was not only a new subdivision, it was a new suburb. The prices were stagnant, even declining.
When both houses started increasing I was very surprised. I had only even investigated the possibility because of stuff Peter Spann was telling is in his seminars. The first increase in values I used to pay off my $50K tax bill brought about from agricultural "tax effective" investments. When both places kept rising, I started to buy a few more properties.
Sorry. I am claiming that it has worked.Bill.L said:
Bill.L said:
Hi all,
Geoff, your experience with the PPOR is similar to ours, it went up with the recent boom, but took time. However in my case, if I had bought the cheaper old houses down the road (yes even in the bush), the percentage gain in equity would have been far greater.
In the particular case this thread was derived from, MichaelWhyte's first IP thread, the scenario is slightly different. It would perhaps be similar to purchasing around '91-'92 (depending on area) after the boom. The idea of purchasing for cap growth seems to fall down when I look at new, compared to established, especially when the older seem to have better yield.
Kenneth,
You talk about selling the Gold Coast properties in 2003. This was at the height of the boom, and investing the profits in the Perth market. This is a little different to purchasing on the Gold Coast in say '03-'04 or now. Can I ask when did you originally purchase those properties??
Perhaps your history/example of purchasing new to begin with, and then later changing the strategy to include development/timing is more appropriate.
bye
Geoff, your experience with the PPOR is similar to ours, it went up with the recent boom, but took time. However in my case, if I had bought the cheaper old houses down the road (yes even in the bush), the percentage gain in equity would have been far greater.
In the particular case this thread was derived from, MichaelWhyte's first IP thread, the scenario is slightly different. It would perhaps be similar to purchasing around '91-'92 (depending on area) after the boom. The idea of purchasing for cap growth seems to fall down when I look at new, compared to established, especially when the older seem to have better yield.
Kenneth,
You talk about selling the Gold Coast properties in 2003. This was at the height of the boom, and investing the profits in the Perth market. This is a little different to purchasing on the Gold Coast in say '03-'04 or now. Can I ask when did you originally purchase those properties??
Perhaps your history/example of purchasing new to begin with, and then later changing the strategy to include development/timing is more appropriate.
bye
++++++++++++++++Bill.L said:
Dear Bill,
As far as the 3 Goldcoast properties are concerned:
1st property -1993.- sold off.
2nd property - 1994- sold off.
3rd property -2003 - off the plan purchase yet to settle on it.
Cheers,
Kenneth KOH
Last edited:
Bill, in answer to your original post, I know of only one person who has realized large gains with property purchases in the last 12 months. He is a medical specialist who bought as an IP, a canal home in Minyama on the Sunshine Coast. He did it for the healthy negative gearing advantages offered by prestige property, in addition to the health demand for this sector during/just after healthy bull runs on the stock market.
When I spoke with him last time, he had been offered unconditionally, ~30% more than he paid.
When I spoke with him last time, he had been offered unconditionally, ~30% more than he paid.
Bill.L said:
Two questions:
1) Buying immediately after a boom
2) Buying new properties exclusively
Buying immediately AFTER a boom:
Very DUMB ... why would anyone do that? Wouldn't that generally be too late. The real point perhaps is that one CANNOT predict when a boom will happen, nor when interest rates or economic/political changes (changing tax law) might depress the market. You might then base your potential purchases on VALUE. Buying correctly valued properties would depend on your method of valuation. Comparative sales, although a good "indication" (only) of value are not much use at the end of a boom, as the previous three months of sales will by virtue of the market being at its peak, be way too high. A more objective method like 'Rental Reality" might be better suited.
Finding a property of good value (Fits Rental Reality) will be extremely difficult at the peak or just after a boom. THIS IS YOUR PROTECTION!
Buying a property "immediately AFTER a boom" ... certainly a property that did NOT fit "rental reality" would be foolhardy and an investor should not reasonably expect to make capital gains until the next property cycle boom.
Buying new properties exclusively:
I have purchased NEW properties, exclusively since 1991 . . .
Reasons:
a) Depreciation:
Property deductions have always been a great offset to income I receive from shares. So it has always made most sense to obtain these properties with the greatest deductibility.
b) Cashflow:
Mentioned previously in this thread ... the greater the cashflow, the more assets you can afford to control. (Own) Leverage in owning more assets is a good method in obtaining absolute return on your money invested.
c) Rentability:
I have alwways found new properties easier to rent . . . tenants seem to like new.
Maintenance (Repairs)
Probably the most important aspect of buying 'NEW' especially for a first time investor is the fact that you get warrantees on NEW property. Most item will have a 5 to 7 year warrantee on them.
Example:
You have just purchased a property, If you are like most investors, you have just squeezed into this purchase, from a deposit, serviceability and cash flow point of view.
Soon after settlement a major problem occurs ... requiring $10,000 to fix:
New property: This would be covered for the first 5 to 7 years
Old property: This comes out of your pocket ... just when you can't afford it!
"PROBLEMS always seem to occur a day or few AFTER the warrantee has expired ..." (Murphy)
My real point is that when you buy NEW, you have at least five years of CG to fall back on, by the time the warrantees expire. In which case you have plenty of equity to use for repairs and maintenance. (With older properties this is a drag on you existing cashflow, which can in the first instance make your life uncomfortable and secondly could prevent you getting more assets under your control.
List of properties:
Older Properties:
Double Bay $625K (1989) plus internal reno $150K = $775K
Market decline and it took until 1994/5 to reach the initial value. (Time wastage)
Concrete cancer, water problems - approx costs of 80K through the time period.
This property is currently valued at approx $2.5 Million.
Paddington Terrace $305K (1989)
Market decline and it took until 1993 to reach the initial value. (Time wastage)
Only minor maintenance problems.
This property is currently valued at approx $1.2 Million.
Edgecliff Unit: $195K
Market decline and it took until 1993 to reach the initial value. (Time wastage)
No maintenance problems.
This property is currently valued at approx $650K.
Brand New Properties:
Castle Hill 1 $210 (1991)
This property is currently valued at approx $580K
Castle Hill 2 $230 (1991)
This property is currently valued at approx $580K
Bracken Ridge 1 $130,500 (1997)
This property is currently valued at approx $250K
Bracken Ridge 2 $130,500 (1997)
This property is currently valued at approx $250K
Daisy Hill 1 $208K (1998)
This property is currently valued at approx $450K
Daisy Hill 2 $209K (1998)
This property is currently valued at approx $450K
Bridgeman Downs $209K (1999)
This property is currently valued at approx $400K
Wynnum West $159K (1999)
This property is currently valued at approx $350K
Manly West $203K (1999)
This property is currently valued at approx $450K
Noosa $234K (2000)
This property is currently valued at approx $600K
Newington $405K (2000)
This property is currently valued at approx $600K
Cabarita Bay $ 825K (2001)
This property is currently valued at approx $1.4 Million
Waverly Park $555K (2004)
This property is currently valued at approx $555K
Hendra $425K (2005)
This property is currently valued at approx $525K
Rose Bay $2.6 Million (2005)
This property is currently valued at approx $2.8 million
So, IMHO brand new property does work and from a cashflow point of view is much better.
Hope this answeres the questions,
Steve
Steve Navra said:
++++++++++++++++++++++++++++++++++++++++++++
Dear Steve,
1. Have you followed the thread discussion closely before you make this statement?
2. OR are you are intentionally suggesting if investors fails to use the rental reality formula for their property purchases, they are all "dumb" people, as far as you are personally concerned?
3. To each, our own beliefs and opinions, please. Let us be mature enough to agree to disagree where neccessary, please.
4. I do not think that the phrase, 'very dumb" adds anything constructive to the discussion except to serve as unintended "provocation" I suppose.
5. Perhaps, you might want to think through and review as it only serve to indicate/reflect your own "judgemental" attitude.
6. Personally, I sincerely appreciate if members could focus on discussing the topic/issue at hand and the ideas presented in the constructive manner and to avoid/minimise using hurting remarks/nicknaming or/and other uncalled emotional outbursts, please.
7. Thank you for your kind consdierations, please.
8. Thank you.
regards,
Kenneth KOH
Kennethkohsg said:
Hi Kenneth,
No offense meant to anyone
We all use our own methods in assessing what might constitute value.
Buying at the peak of a market wether you know it is the peak or not ends up being a "NOT SMART" decision ... even if only realised in hindsight.
Please notice from my own example that I did exactly this in 1989. Over the long term it will probably work out fine, but it cost me dearly in the shorter term
The question asked was about buying after the boom: I was reflecting that good due diligence is the best protection against that.
Aside from that have you anything positive to comment on in my previous post?
Regards,
Steve
