Next steps - expanding the portfolio

[MsAli]

Hi All,

We (monalisa and I) have been quiet for sometime! Our last purchase happened in Feb this year. Since, we had been focused on planning our PPOR build, which is due to commence in April 2015.

We have built a decent portfolio in Western Sydney in the last 5 years, which is positive cash-flow. 2014 was big as we went past $1mill in equity. Given the growth in the last two years, we're pleased. We are now considering our next steps. We're keen to get insight from the many successful investors on SS.

Regardless, we know we have a long way to go and this is just the beginning.

We have a few options:

a) buy and hold - leverage ~1.2mill-1.8mill, serviceability permitting
b) subdivisions - lot purchase, subdivide and sell
c) small 4 unit development

b and c - are more risky, but will be a whole lot more learning as we are kinda bored from the vanilla buy & hold purchases. Further, we'd like to spring ahead (though also appreciate buy & hold is what has helped us get to where we are and we think we shouldn't fix what's not broken).

We're also looking into starting a side business in 2015 so that should help both serviceability and the intention to go out on our own by our end goal, just shy of 6 years from now.

2014 has been a year of immense personal growth and change. 2015, feel there is a need to re-invent ourselves from an IP / business perspective...

What are your thoughts? What would you do?

Many thanks,
MsAli

 

[datto]

My thoughts:

a) is the easy one. Boring, can be. But it's a cert.

b) and c) are more challenging can be rewarding but you enter the big head ache zone

Other thoughts, beer or coffee?.....beer!

Yep, property has been good over the last year or so. There are people out there hoping for the big crash so they can rub it in.

I'm dabbling in shares as a side dish.

 

[RetireRich101]

I too enjoyed the Sydney West growth, especially in the last 2-3 years. It is this growth that provided me with options that you listed above.

I am still glued to my 9-5 job. Despite being boring, option a) is still the preferred option for me, as it is less involved.

However in future purchase the property must satisfy option b) or even for smaller scale, it is a splitter or corner block, or proposed R3 zoning etc.

I am not looking big 20 years to come. just a paid off PPoR, and 3 houses with granny flat given a total income of 3 x $800/pw is plenty for me.

 

[superAndrew]

Buy and hold is good but it seems to me that it's time to move to the next stage while still continuing with a)

Maybe start off with b) first before you move onto c).

Start off small. If it doesn't go to plan, you will learn where you went wrong at a lower cost.

Cheers
Andrew

 

[oc1]

Why don't you speak with Chirag and get his assistance to put you into a deal? From your posts over the years i get the impression you want to be more active so option b) and c) is the way to go. You'll reduce your risk by having someone to guide/help you rather than reinvesting the wheel.

Good luck.

 

[evan1875]

You mearnt inventing not reinvesting

 

[ChrisA1]

Why don't you speak with Chirag and get his assistance to put you into a deal? From your posts over the years i get the impression you want to be more active so option b) and c) is the way to go. You'll reduce your risk by having someone to guide/help you rather than reinvesting the wheel.

Good luck.

You have both done really well over the past little while and I have enjoyed your posts and journey.

One thing you don't mention in your first post is the availability of time going forward. Will you both still be working full time? Would you be able to take chunks of time off to do steps required for b) and c)? From your post, it appears your plates are filling quickly.

I would agree with oc1. It would be great to have some guidance through the steps as you move to the next level (although I'm not sure of your risk profile - your possibly have a RP that may like to jump in boots and all??). I'm sure you're also talking one on one with others that have started the development or subdivision routes.

 

[westminster]

You could do a 3 unit development then you have a lot more finance options - 4 really restricts the number of banks you can use.

I think you guys want a challenge but you need to work out if you have the temperament for it. It does take a lot of patience and stress x 1000 what you have experienced with the PPOR site

But my gut says go for it.

 

[alexm]

You could do a 3 unit development then you have a lot more finance options - 4 really restricts the number of banks you can use.

Westminster, not wanting to hijack this thread however could you please elaborate regarding your comment above? Does a 4 unit development move into the commercial financing space?

 

[westminster]

Westminster, not wanting to hijack this thread however could you please elaborate regarding your comment above? Does a 4 unit development move into the commercial financing space?

Bankwest, Heritage and a few lower tier lenders will do 4 dwellings on one title. You can also do 4 under a commercial loan if you want but this may require a lower LVR

I know Heritage have become more restrictive and lowered their LVRs for 4.

 

[alexm]

Bankwest, Heritage and a few lower tier lenders will do 4 dwellings on one title. You can also do 4 under a commercial loan if you want but this may require a lower LVR

I know Heritage have become more restrictive and lowered their LVRs for 4.

Thanks for the information.

 

[pinkboy]

This:

We have a few options:

a) buy and hold - leverage ~1.2mill-1.8mill, serviceability permitting
b) subdivisions - lot purchase, subdivide and sell
c) small 4 unit development

b and c - are more risky, but will be a whole lot more learning as we are kinda bored from the vanilla buy & hold purchases. Further, we'd like to spring ahead (though also appreciate buy & hold is what has helped us get to where we are and we think we shouldn't fix what's not broken).

and this:

We're also looking into starting a side business in 2015 so that should help both serviceability and the intention to go out on our own by our end goal, just shy of 6 years from now.

are going to burn lots of time, especially if your intention is to work full time still.

I think you should put aside some time and plan out some time dedication, earnings of each option etc, and see what you come up with that has the best time effectiveness for profit. No good dedicating another 30hrs a week to a business for low return, or dedicating that same amount of time to developing and you don't profit as much as you would have hoped etc.

Im not saying either option is a good or bad one, I just feel you will be better off dedicating your time for better returns, whichever that may be - business or development. There is time for both, just find the right mix.


pinkboy

 

[devank]

How about buying & holding sub-divisible or developable houses until you don't depend on day time job?
They may not be cash flow positive though.

 

[redwing]

We have built a decent portfolio in Western Sydney in the last 5 years, which is positive cash-flow. 2014 was big as we went past $1mill in equity. Given the growth in the last two years, we're pleased. We are now considering our next steps. We're keen to get insight from the many successful investors on SS.

Nice work, congratulations

 

[MsAli]

Hi all,

Thank you for your inputs!

Now thinking that given the home build being done during 2015, we will be looking into purchasing a further buy & hold properties interstate to add to our base portfolio before springing to the fun stuff aka sub divisions and development. Given we want to dedicate time to the business as well. And doing development with a new business would be challenging. Though don't quote me for it as we're quick to change plans to suit what's in our face and what feels best in the moment. No two days in a year are the same for us . Those into IP would totally understand!

oc1 is correct, we like being active in the game, so will definitely intend to be doing more complex/stressful deals...challenge is fun.

Want to get 'lucky' - I guess there is no luck without persistence, continuous improvement, learning and most importantly action. Would you agree?

Need more focus on next steps. This is a new territory.....want to get excited about it all again. Want the same mojo, drive, empowerment that we had when we first started the journey! Where to find it?

Regards,
MsAli

 

[jerryparker]

Sound like it's time for a trip to Queensland

Yes ,2015 the property clock moves to Queensland.

Brisbane , Sunshine Coast, Toowoomba and the Gold Coast are my targeted areas for house & land as well as new build townhouses and apartments.

 

[oc1]

Deposit and finance permitting, why don't you get involved in a 4 unit site (c), sell one or two (b) and hold the others (a). You knock off all a) b) and c) with the one deal. Start the side business once the building commences as most of the thinking happens prior to this stage.

 

[mflying]

MsAli,

You have done option A so you are aware of pros n cons.

with Option B and C,

If you are embarking on that journey,spend enough time in planning.

one aspect of planning is Purchasing Deve sites.

Phase 1

Buy 3 -4 sites.. spread out purchases in 12-18 months

Phase 2

Apply for DA for site 1

Phase 3

Start construction on site 1. Apply DA for site 2

Phase 4

Finish construction for site 1. commence construction on site 2

Rinse and repeat!


Why buy 3-4 sites to gather??

I find that it is very difficult to get a finance while you are developing a site.
So accumulate deve sites before you start developing.

 

[MsAli]

Thanks oscar & mflying. Considering, we may go down the b&h route for the time being.

 

[Player]

Ladies, well done to you both. I applaud your accomplishments to date. Moving forward manufacturing growth is likely to be a key strategy for those wishing more equity from their investments. You've had plenty of good responses above about developing and sub-dividing.

My question to you (unless I've missed it mentioned in this thread) is what is your portfolio LVR?

The reason I ask is that we are possibly heading into a recession here. Even if we don't, I wouldn't want to be holding too much debt as a percentage of portfolio value in case there is some softening and retracement of current values. I'm not saying it will happen, however I don't see a road ahead as bright and shining as we've had it for the recent past.

I'd be wary of having a high portfolio LVR. If you keep this in mind it may help you both refine the future strategy a little further and tailor it to your circumstances and equity position. I would also be stoking the offsets where you can on current (up to date) values to keep as a buffer and hedge in case you need quick investment cash or some short term serviceability boost in case one of your jobs goes.

0.02.............