Well, back in 1999 in fact, just before the first FHBG, a young bloke fresh out of uni bought a house. He had saved up a good deposit working part time at uni while living with his folks and trading cars for profit from the backyard so only took out a 60% loan "just to be safe". He was too timid to realise an 80% LVR might have been a good idea and had no-one to guide him in such things. He just thought he wanted to move out of home and really didn't want to rent. He bought his house for $146k when his salary was a tick over $30k per year. It was an old 3x1 on 740sqm in Rivervale in Perth - a pretty down and out suburb at the time. He sold it in 2006 just after getting married for $280k. He was happy there was no CGT to pay.
After a couple of years, he bought a couple of property investing books and got dangerous. He asked the brother of his ex girlfriend (who knew about such stuff coz his old man was a seasoned builder / developer) if he knew of any property opportunities around. Turned out that he knew of a particular syndicate member who had pulled out of a bargain block next to the Joondalup (Perth) city centre. It was a new duplex townhouse proposition and there was a small window of opportunity to put their foot on the land.
So the young bloke, now armed with the knowledge he could draw down both his deposit, savings since and new equity went in with two others to buy the land as a very silent partner as he now had a pretty busy day job. The land cost $170k. The two (large and very nice) townhouses cost $500k to build. They sold for over $600k each after over four years of faffing around, netting this young bloke just over $100k once taxes and holding costs had been paid. The young bloke was a bit disillusioned though - the build had taken far too long and most of the profit came from movement in the market so he figured he should have just bought a couple of IPs instead. He would have done just as well and not have had to get back into the market and pay heaps of stamp duty and CGT. The seasoned developers (one of them was the builder) in the syndicate were quite happy with the result - the young bloke was pretty happy overall though as the builder had provided him with the finance for the build. I think it may have been because he liked the idea of an up and coming property investor as a son in law but alas it was not to be...
Anyway, while he was waiting for the Joondalup property to get built, he happened to notice a 4x2+study home open down the road in Rivervale. It was a 5% yield proposition and near new so had good depreciation. So he thought he'd try something like that as well. He bought it for $230k with an offer on the same day as viewing it in 2003. Now it rents for $400pw and most of the depreciation is gone. Its current value would be around $550k. One day the tenants flooded the whole back of the house but fortunately the LL insurance did pay up to fix the carpets...
A bit later on this bloke met the love of his life and before they got married he encouraged her to buy a house so she could at least get the FHBG. She went and bought a 2x1+sleepout house on a triplex development block in Nollamara (Perth) for $197k, without him even seeing the place. This was in 2003. They just sanded the floors and lived in it and sold it three and a half years later for $515k. Dunno what happened there but once again not paying CGT was a good thing.
A little after getting married, following the eventual sale and repatriation of the proceeds of the townhouses in Joondalup, a decision was made that this couple didn't want to live in Nollamara forever, as it wasn't really a step up from Rivervale. So they bought a small and old 4x2 + pool house in City Beach in Perth on 900sqm in 2005 to rent out as they couldn't afford to live in it. It cost $805k and today would be worth around $1.7m. The bloke bought it without his wife seeing it as she was sick that day. Some might suggest this was the riskiest part of the whole venture but he was only paying her back for doing the same thing to him in Nollamara. Luckily they trust each other....
It rented for the princely sum of $540 per week and really was a terrible investment. They put a cash offer in on this one on the advice of an inept mortgage broker who said it would be "no worries". Following signing up with a $50k deposit that broker apologised for using the wrong calculator and politely informed the couple that they were on their own before disappearing quickly. Luckily this lovely couple were able, amid a mild panic, to find a bank who would provide the necessary finance, provided the necessary cross-collateralisation also occurred as their combined salary was a bit more significant by then...
And it's getting late so I'll continue the next installment of this story when I get a chance.... as you can see this bloke (and couple) was no "pro" investor, just bumbling along from what seemed like one good idea to the next. Amazing what can happen with that type of strategy...
After a couple of years, he bought a couple of property investing books and got dangerous. He asked the brother of his ex girlfriend (who knew about such stuff coz his old man was a seasoned builder / developer) if he knew of any property opportunities around. Turned out that he knew of a particular syndicate member who had pulled out of a bargain block next to the Joondalup (Perth) city centre. It was a new duplex townhouse proposition and there was a small window of opportunity to put their foot on the land.
So the young bloke, now armed with the knowledge he could draw down both his deposit, savings since and new equity went in with two others to buy the land as a very silent partner as he now had a pretty busy day job. The land cost $170k. The two (large and very nice) townhouses cost $500k to build. They sold for over $600k each after over four years of faffing around, netting this young bloke just over $100k once taxes and holding costs had been paid. The young bloke was a bit disillusioned though - the build had taken far too long and most of the profit came from movement in the market so he figured he should have just bought a couple of IPs instead. He would have done just as well and not have had to get back into the market and pay heaps of stamp duty and CGT. The seasoned developers (one of them was the builder) in the syndicate were quite happy with the result - the young bloke was pretty happy overall though as the builder had provided him with the finance for the build. I think it may have been because he liked the idea of an up and coming property investor as a son in law but alas it was not to be...
Anyway, while he was waiting for the Joondalup property to get built, he happened to notice a 4x2+study home open down the road in Rivervale. It was a 5% yield proposition and near new so had good depreciation. So he thought he'd try something like that as well. He bought it for $230k with an offer on the same day as viewing it in 2003. Now it rents for $400pw and most of the depreciation is gone. Its current value would be around $550k. One day the tenants flooded the whole back of the house but fortunately the LL insurance did pay up to fix the carpets...
A bit later on this bloke met the love of his life and before they got married he encouraged her to buy a house so she could at least get the FHBG. She went and bought a 2x1+sleepout house on a triplex development block in Nollamara (Perth) for $197k, without him even seeing the place. This was in 2003. They just sanded the floors and lived in it and sold it three and a half years later for $515k. Dunno what happened there but once again not paying CGT was a good thing.
A little after getting married, following the eventual sale and repatriation of the proceeds of the townhouses in Joondalup, a decision was made that this couple didn't want to live in Nollamara forever, as it wasn't really a step up from Rivervale. So they bought a small and old 4x2 + pool house in City Beach in Perth on 900sqm in 2005 to rent out as they couldn't afford to live in it. It cost $805k and today would be worth around $1.7m. The bloke bought it without his wife seeing it as she was sick that day. Some might suggest this was the riskiest part of the whole venture but he was only paying her back for doing the same thing to him in Nollamara. Luckily they trust each other....
It rented for the princely sum of $540 per week and really was a terrible investment. They put a cash offer in on this one on the advice of an inept mortgage broker who said it would be "no worries". Following signing up with a $50k deposit that broker apologised for using the wrong calculator and politely informed the couple that they were on their own before disappearing quickly. Luckily this lovely couple were able, amid a mild panic, to find a bank who would provide the necessary finance, provided the necessary cross-collateralisation also occurred as their combined salary was a bit more significant by then...
And it's getting late so I'll continue the next installment of this story when I get a chance.... as you can see this bloke (and couple) was no "pro" investor, just bumbling along from what seemed like one good idea to the next. Amazing what can happen with that type of strategy...