New Year - At a Crossroad.....

[sash]

Yeah...I know what you mean. Trouble is I have done about 2 renos last year...and am not keen to do another one. But you are right you need to add value to increase yields.....

I think my luck may have turned.....just bought a ticket to Brissie to look at a couple of competitively properties. Fingers crossed....I can snaffle something before the great unwashed get into the market.

I was actually refering to prices in Sydney, Melbourne, Brisbane, Adelaide etc
Property prices either need to fall, rents to increase or interest rates to come down.

I think we have a bit of room to move with rents but none of the other 2 factors seems likely in the short term so I guess we'll have to look outside the capital cities or to look for unique properties where we can value add and increase yields that way

 

[Samantha]

MTR what you said really hits a cord with me. I bought 3 development sites recently, 40 minutes outside of Perth and have been looking into developing. I have a job that makes me time poor (especially after my time spent on SS each night) and am still working through the strategic planning to educate myself fully before I adopt this strategy. I have a few other positive geared properties and a few negatively properties and these. I would be interested to hear more of how you go about it financially.

I have money freed up also and am working out whether to develop these blocks or buy more of these duplex sites with the funds I have available and support the neg geared properties and develop them later down the track.

You appear to have someone work through this with you and you have a clear vision about adding value versus being in a neg geared position. Would that be right?

 

[tab]

Hi all,

Well for me I have moved back to sydney from the UK.

I have 50k odd GBP sitting in the bank, hoping the exchange rate improves

Have paid my Erskineville unit down to under 80% LVR

I want to get into IP2, hoping to use 3/4 of my saving to buy and pay down enough to have it CF nuetral.

Now just need to find the right IP area - getting a little analysis paralysis! Fingers crossed the area I choose will see some CG and sit back and wait for the equity to build.

tab

 

[MTR]

MTR what you said really hits a cord with me. I bought 3 development sites recently, 40 minutes outside of Perth and have been looking into developing. I have a job that makes me time poor (especially after my time spent on SS each night) and am still working through the strategic planning to educate myself fully before I adopt this strategy. I have a few other positive geared properties and a few negatively properties and these. I would be interested to hear more of how you go about it financially.

I have money freed up also and am working out whether to develop these blocks or buy more of these duplex sites with the funds I have available and support the neg geared properties and develop them later down the track.

You appear to have someone work through this with you and you have a clear vision about adding value versus being in a neg geared position. Would that be right?

Hi Samantha
Congratulations on your purchases.

I am also still educating myself and don't think this will ever stop.

As I mentioned I have only started using this strategy over the last 6 months, but it definately is making a huge difference.

For me the figures just did not stack up in Perth, I saw better options in the East so I started looking at development properties in Melb. This would reduce exposure to just one market. Now also looking at Syd and Brisbane.

Yes, it does take up lots of time but with networking etc. you could minimise this. I networked with a RE agent in Melb who helped me secure a couple of excellent sites prior to hitting market/auction. He also helped with the architect who has been involved in many developments in the area. I don't think it is rocket science just a matter of researching what sells in the area, target group and making sure the figures stack up. I think the hardest thing is securing the right property.

I too have many neg properties, I believe where I was going wrong was that I was focusing on securing as many properties and as fast as I could and not looking at the big picture. With every purchase I was tightening the noose around my neck. I was then very reluctant to sell any properties.

What I do now is look at all my properties and strategise which need to be sold due to lack of return or whatever and work out how to move ahead to achieve lifestyle today.

Anything I buy now needs to either be cashflow positive by developing or plans, anything that I can actually make money from and inject back into the negative properties.

Hope this has has helped.

Cheers, MTR

 

[Player]

Give way to all traffic

When arriving at a Cross Road it pays to give way

Sometimes pausing to reflect (as this quieter time of the year allows) and ponder where one's portfolio is at and going to and what might be the correct course of action to further optimise holdings/equity and returns/cashflow.

I don't think one should necessarily accumulate just for the sake of adding more and more. If the traffic conditions at that cross road dictate sitting patiently and waiting, then best heed that caution lest an accident occur such as over-leveraging and the ensuing car wreck that my occur.

For those with significantly negatively geared portfolios and borrowings into seven figures, be aware that another 1 % increase alone in interest rates will cost another $10,000 per annum on an even million in loans.

If accumulating suits the plan and strategy of the individual and their pockets can afford negative shortfall, then a purchase now will be cheap in another 10 years.

Sash, who is a seasoned investor, is obviously CF positive and looking to accumulate more. My comments above relate to those who are newer to this game and coming from the perspective of "missing out" if they don't buy sooner rather than later.

IMO make sure there are cash buffers (or off-sets) for the unexpected expenses and for at least another 2 % in variable rate rises. I still believe that the current credit situation is not one where maxed out LVR's should be a goal.

Don't drive (invest) by accelerating with your foot on the brake, however similarly, don't shift gears too fast and mash the fast pedal whilst the roads (financial worlds) are still slippery. Going too fast may affect braking/stopping distance and cause an accident.

FWIW, I feel with another few rate rises there will be more leisurely pickings around mid-year. I don't feel prices will crash, although the usual markets within markets caveat applies, however there will be morestock to select from and I don't think that investor demand will increase in direct proportion to the offerings that ensueby those in some financial strain.

At the end of the day, each person should folow their plan, strategy and do what suits their own circumstances. The above is merely my opinion, not advice.

Having invested and survuved through the late 80's and early 90's with the rapid interest rate rises, nothing surpises me anymore. Fasten seatbelts and drive safely within driving skill and prevailing road conditions. Drowsy drivers die. Sometimes pulling up for a rest break can do wonders for refreshing the driver and giving fresh perspective for the investing journey ahead............have a good trip

Happy investing

 

[sash]

Player

Very sound advice........thus why the thread. I agree with you 100%...your point about people getting in for the fear of missing out is particularly relevant. Now is the most dangerous part of the investment cycle....you have to be careful particularly as RBA has their hands on the IR lever!

I for one feel that we are up for at least anpther 1% in rates by Sept. 2010. This will definitely have an impact on property values...as you said no crash but definitely a stablising of the current hot market.

Just today....I was surfing and found some potential bargains in Qld. Some of these have the potential of returning 6% yield with steady rent increases taking the return to 8% in two years. So it looks very promising!

Sometimes pausing to reflect (as this quieter time of the year allows) and ponder where one's portfolio is at and going to and what might be the correct course of action to further optimise holdings/equity and returns/cashflow.

I don't think one should necessarily accumulate just for the sake of adding more and more. If the traffic conditions at that cross road dictate sitting patiently and waiting, then best heed that caution lest an accident occur such as over-leveraging and the ensuing car wreck that my occur.

For those with significantly negatively geared portfolios and borrowings into seven figures, be aware that another 1 % increase alone in interest rates will cost another $10,000 per annum on an even million in loans.

My comments above relate to those who are newer to this game and coming from the perspective of "missing out" if they don't buy sooner rather than later.

IMO make sure there are cash buffers (or off-sets) for the unexpected expenses and for at least another 2 % in variable rate rises. I still believe that the current credit situation is not one where maxed out LVR's should be a goal.

FWIW, I feel with another few rate rises there will be more leisurely pickings around mid-year. I don't feel prices will crash, although the usual markets within markets caveat applies, however there will be morestock to select from and I don't think that investor demand will increase in direct proportion to the offerings that ensueby those in some financial strain.

Happy investing

 

[The_Bludger]

Prices will rise 5% this year due to strong immigration. Buy up or you will miss out regardless of what rates do, within reason of course.

 

[Piston Broke]

I too have many neg properties, I believe where I was going wrong was that I was focusing on securing as many properties and as fast as I could and not looking at the big picture. With every purchase I was tightening the noose around my neck. I was then very reluctant to sell any properties.

Well done in looking from a different angle, some people never learn this lesson and spend the rest of their lives with a tight noose around their neck.

 

[our obsession]

Sash:

First of all Happy New Year!

As I am in holidays at the moment ..... I have a lot of time to reflect on my property strategy for the year.

Believe me or not I am at an investment crossroad! I feel that there are very few bargains around the market. Though the odd one or two I have enquired about have sold on the day. I have been here before.....but this time I have a lot more capital....

I have the itch to invest now but have held myself back as paying overinflated prices could be a mistake. I am looking at some regional areas which offer better prospects.

Would love to hear what others are doing?

PS - The reason I am itching is because my 4-5k per month CF+ income could be better spent than to the taxman.
__________________

Hope you have a great 2010 year too.

We are still accumulating, making sure they pay their own way, the Obsession Plan is to finish this last round of capitalising on some really nice-good value land purchases I made and then tickle up the equity, do a count, hopefully from there then invest in some shrewd little good cashflow returning business, just building on cashflow the whole time, good returns and other cashflow income producing streams..

1. They are yet to be determined, but we are researching and contemplating and learning about a few businesses. Obviously something we do not need to be hands on in.

2. A venture into commercial property is a possibility. Where is rogue lone wolf ideas man TPFKAD?

So, basically it has been simple, accumulate good returning property, buying well and adding some value to some, all that fun stuff, then had a bit of a look around, noticed Bayview and his cashflow businesses ideas, and couldn't help but notice TPFKAD good returns etc on commercial-so that is next possibility.

Or, if I change my mind, I just might keep doing what I seem to do well, acquiring and building IP's with good returns.

I'm actually open to offers. Contigency Obsession really.

 

[craigb]

Happy new year , to all.
I have spent the last two years building our home ,and now the buisiness , simply to alighn all of the planets, i hope to have bandaged all of my servicability issues , and roped down very tightly all of our equity dramas ,and two years of financialls finally in the pipe line, all done and dusted, sheesh!

So as my planets alighn , my intensions are to be buying from march/april. my expectations are Two a year, and yes, they will be renoed to create a gain.

I am not certain of what the market will do this year, it might be 5% or 15% but i can see the tide for the FHB has gone with a few folks still waiting to get top $$$ for there homes , the FHB'ers will not be pulling strings this year , and the 7% interest rates will sound the horn for some to dump their propertys , on to the market, this is when i wish to be ready to strike,

 

[jingo]

Great Thread Sash

I have enjoyed reading this thread. Very good ideas and information presented by many, particularly MTR, Sash and Player amongst others.

This time of the year is a good time to reflect on one's portfolio. Each year at this time I take a snap shot of our net worth and record it. I have been doing this for a number of years. I also keep a financial journal/note book each year. I enjoy reading back on previous year's books to see how the journey has progressed.

2008 was a challenging year - with the GFC, job uncertainty, huge falls in the share market.

2009 has been a lot more stable - buffers are strong and the property market has been strong.

I cannot confirm my networth this year until some valuations come back. I have a rough idea of what it is based on sales of similar properties in the areas in which my IP's are in. I am pleased with what has been achieved to date.

Our plan is to keep accumulating IP's and to set up a trust to buy shares/index funds in. I need to broaden my search for IP's as currently they (and our PPOR) are all in Melbourne, and I would like some exposure to other markets.

An investor's job is never finished!!

Regards Jason.

 

[lizzie]

I certainly see that you have moved up to be a developer. Perhaps...a point to ponder on more....., congratulations.

that was my first thought for your situation ... you "buy" at wholesale by building yourself (or, should i say, getting the builder to build for you), revalued at retail and you get retail rent and then end result is top tax depreciation dollar - so cashflow can be physically very positive, but the depreciation puts you negative on paper.

 

[lizzie]

I too have many neg properties, I believe where I was going wrong was that I was focusing on securing as many properties and as fast as I could and not looking at the big picture. With every purchase I was tightening the noose around my neck. I was then very reluctant to sell any properties.

yes - last boom cycle i did this. bought too many neg geared properties due to fear of missing out ... only to have the boom end, too much debt, interest rates going up and i was forced to sell several off at a loss just so we could stay aflaoat.

very very important lesson that made me a lot more cautious, take a harder look at our situation and change our direction.

pity some never learn from such a near miss.

 

[sash]

The Brissie trip was successful....managed to sign a contract for a very run down house in the Northern suburbs for less than 270k. Now all I need is for the bank and he the Qld DPP (yes that is correct Department of Publc Prosecutions) to okay the deal by Monday.

My friend who went up with me also signed up a deal...so all is going well to date.

How things change in a matter of days.....

Yeah...I know what you mean. Trouble is I have done about 2 renos last year...and am not keen to do another one. But you are right you need to add value to increase yields.....

I think my luck may have turned.....just bought a ticket to Brissie to look at a couple of competitively properties. Fingers crossed....I can snaffle something before the great unwashed get into the market.

 

[joanmc]

This is a great thread. I, too, feel that I am at a cross-road with my investing. We have been jobless for a year exactly now and it has been a big learning curve. We bought one more house in 2009 in a strategic position but now we are thinking of maybe culling a few of the not so good ones and paying down a bit more debt. we are still day trading but even that feels a bit hollow somehow so we are looking at farming our block!

It must be this time of year!