Regretted buying an IP

[Jocker10]

Hello everyone.

There are many stories I read in this forum about how happy people are with their property purchases.

That it was a good buy.
The value has increased exponentially over few months.
That the property is cash positive and possible high capital gains.

I am just curious, is there anybody out there whose experience is other wise ?

I mean, have you had any experience buying an IP , then regretted doing so.?

I just want to have a feel of what people consider to be a "bad buy" as contrast to " good buy".

( or am I asking topic that has been discussed before ?)

cheers Jocker 10

 

[Sim]

The great things about IPs - if you wait long enough, any buy will be a great buy (in general).

Unfortunately a short term dud may put a dent in your short term plans though.

 

[Kristine..]

Funny you should mention that ...

Of course there are bad buys. There are darnright awful buys. There are buys which seemed like a good idea at the time ...

There are projects which are heavier than air and which never seem to get off the ground (eergh! there is a certain medical centre which comes to mind!)

But the beauty of property is that if you wait long enough it will forgive you.

Even Golden Beach will have its 15 minutes of fame!

There are tenants from hell

There are repairs and maintenance which need attention when you are absolutely skint and there is no money, honey!

Sometimes, we need reminding that all that glistens is not gold.

But if you wait long enough property will forgive you.

The knack, of course, is to only buy one dud every so often. Don't make a habit of it. And make sure you can get your hands on some extra credit in an emergency such as a hot water service going to God on Christmas Eve (yep, Dec 24th, 2002) or when the tenant rings up saying there is water pouring down the kitchen window from the upstairs bathroom (yep, this week).

So, Jocker (is that meant to be Jock-er as in eer um sports person or Joker as in Wild Card in a pack of cards?), do your homework and remember General Custer's famous last words 'Put your faith in God but keep your powder dry!'.

And remember, if you wait long enough property will forgive you!

Cheers

Kristine

PS Peter (below)

As far as regrets go, my main regret is not buying more and buying sooner.

I tried for years to try and persuade Mike to buy an investment property. The house was paid off, there was money in the bank, we were only 32, he was working off shore and on pipelines and making darn tooting good money. But Mike's English and in England at that time squatters were a real problem, so he was very resistant to being a landlord at all. I remember dragging him to look at a 2BR unit in Bayswater for $42,500 (1982) but I couldn't get him to buy. We bought a block of land instead and built a house where we were fairly miserable. Finally, I just went out and bought Investment #1 which has been a really good buy.

The regret is of not being more assertive earlier and of expecting that another person - who happens to be Mike - would see property and investment in the same way I did.

We really cannot expect anyone else to share our views. Even the dud is a dud in perception only. Paying too much now but looking back in ten years it will seem like a bargain buy. Markets come and go. Try and not make too many mistakes such as buying three when you can only get a loan for one or thinking that miracles will happen. They do, but sometimes the miracle takes ten years to manifest.

I bought five acres at Garibaldi in about 1976 for $4,998 and sold it in about 1986 for $5,000. However, if I hadn't bought it at all I would not have had the $4,750 in 1986, so even though I worked in Canberra specifically to pay the loan on that property, I am still proud of the purchase and have to say that property has at least instilled in me a sense of humour, perhaps even a sense of the ridiculous.

Even the medical centre will be OK if only I can get my act in gear!

 

[Peter 14.7]

An example

I am suprised none of us have listed a regret. Are we too vain to admit a flaw or do we all see property as good regard;less of outcome or are we all that great at it we never had a dog?

Personally I have never regretted a property but along the way I had more than one PM I have regretted that cost me $$.

I can say a friend who against my judgement recently was advised by professionals to - gear into Blacktown. Bad move being in the last 18 months.
A regret coming?

She did the same thing in Leichardt Inner City Syndey, buying in 1989 and selling in 1991 and lost money. The time of the last drop and bust.

FYI Peter 147

 

[np2003]

I was looking at this land that was released 7 months ago. Today just checked. Land price increased of $85,000.

Just amazing eh?

 

[Aceyducey]

I know several people who have made bad decisions on property.

In three out of four cases the bad decision was to sell, not to buy. They bought at the peak of the last boom and, convinced by the doomsayers that property behaves like shares & would drop like a stone, they sold out when the property didn't move up quickly.

The people I am thinking of have refused to consider property since because it's too risky, too unpredictable & if they can't make a profit buying & selling property no-one can!

Needless to say they fell into the doomsayer category themselves during this boom - always prophecising that most people would get burnt, that property prices were too high (using one arcane formula or another) and that they expected to make a lot of money buying up assets when it was only worth a few cents on the dollar (business assets not property).

Only one person I know made a calculated bad buying decision - and that was because they wanted a tax deduction. Well they're getting it in spades in the Docklands!

One thing all of these people - primarily former business associates (and all on the $100K plus level back in the late 90s, early 00s when I worked with them) have in common.

None of them would ever seek the advice on a forum such as Somersoft.

They all knew too much to need expert advice on making investment decisions!

Even if they ever did read such a forum, their egos and desire to appear expert investors (and knowledgeable business executives) would prevent them from posting any negative experiences.

Cheers,

Aceyducey

 

[Bmok]

Hi Jocker 10.

In January 2000, we purchased a property at Coomera.

We had been to numerous "negative gearing" information seminars and visited the coast with one of these companies. After spending a day looking at possible purchases, we finally decided on a house and land deal in Coomera. They wanted a decision straight away and my wife was concerned about the rush. I thought that I knew better. I didn't.

We soon found that we had overpaid for the property by $50,000 approx.

Because of the negative gearing, we soon found ourselves in a tight spot financially and thought that we had better sell to stop the blood flowing from our wallet. That was when we found that we could only see for $150K when we bought for $200K. Couldn't afford to take a $50K loss with no income to cover it, so struggled on.

Finally prices rose and in January 2003 were lucky to sell for $215K and cleared our debts.

We have re-entered the property market and feel more comfortable with what we are doing. We have positive cashflow property this time around.

Cheers,
Bernard

 

[gazza]

In 1994, we bought a townhouse in Canberra (our first ever IP) for 142K. In 1996 , there was a change in federal government, the public service was pruned severely which resulted in a crash in property prices. This was followed by a bad tenant experience, plus the place was getting older and it showed (needed repairs). In addition, a lot of newer, shinier alternatives had been built. We decided to cut our losses and ended up selling in 97 for 117k. All up we lost around 50K. We ended up using the substantial savings each year(the property was heavily negative geared) to put into our own mortgage, which we reduced to zero and then upgraded our PPOR. As someone on the thread has commented, property however is very forgiving if you hold on to it long enough. Certainly though nobody (least of all me) could have forseen what prices have done over the last 5 years. A townhouse in that development sold recently for around 260K, so we might have been ahead had we kept it, but who knows. We have however learnt some valuable lessons from this experience, one of which is that you can lose substantial money on property, especially if you don't know what you're doing. This forum would have been invaluable back then.

 

[Robyne]

Never regretted buying an IP. Regretted selling. Don't ask or I will cry. Regretted buying one PPOR. I call the cost of these experiences tuition fees.

Robyne

 

[jahn]

Hi
Regret doesn't get you anywhere, but as others have already stated, time does make a big difference.
Our 1st IP had all the makings of a comedy of errors.
Listened to a financial advisor (and payed a large fee) and bought a renovated unit in Liverpool, at the recommendation of an agent that worked with the advisor and the renovator, and used their legal person as well. That was mid 99
All sounded OK at the time.
There were a few other minor things, but you get the picture.
As it turns out, we paid 147k for a unit worth approx 127K. It was neg geared.
We sold it 3 months ago for 220k to improve our PPOR loan, but I just can't explain how much the whole thing was worth in lessons.
Certainly not the lesson to avoid property.
I wish I had known about this forum then.

jahn

 

[geoffw]

Originally posted by gazza
In 1994, we bought a townhouse in Canberra (our first ever IP) for 142K. In 1996 , there was a change in federal government, the public service was pruned severely which resulted in a crash in property prices. This was followed by a bad tenant experience, plus the place was getting older and it showed (needed repairs). In addition, a lot of newer, shinier alternatives had been built. We decided to cut our losses and ended up selling in 97 for 117k. All up we lost around 50K. We ended up using the substantial savings each year(the property was heavily negative geared) to put into our own mortgage, which we reduced to zero and then upgraded our PPOR. As someone on the thread has commented, property however is very forgiving if you hold on to it long enough. Certainly though nobody (least of all me) could have forseen what prices have done over the last 5 years. A townhouse in that development sold recently for around 260K, so we might have been ahead had we kept it, but who knows. We have however learnt some valuable lessons from this experience, one of which is that you can lose substantial money on property, especially if you don't know what you're doing. This forum would have been invaluable back then.

What Gazza didn't mentioned is that as a result of the townhouse, he had an appearance on Pault Clitheroe's "Money" program.

I believe Paul advised to sell- so even he didn't see what was going to happen to prices.

 

[gazza]

Thanks for reminding me Geoff! Yes , Geoffw and Brenda are not the only tv 'stars' on this forum . Unfortunately my appearance was for the wrong reasons ie. negative equity, unlike the positive stories about Geoff and Brenda. I had gone looking for advice on what to do with my dud investment, unfortunately no advice was really forthcoming. At that point in time I had just reduced the mortgage on the IP by 20K, I was told that seemed a good idea and to see what happened. Prices continued to fall and the bad tenant experience was the last straw. As someone else said. I don't regret buying this particular IP , I certainly have learnt from the experience but the whole episode did set me back quite a few years.

 

[Sunfish]

Seems Canberra can be a dangerous place to invest.

My bro bought a ppor there well before Gazza did and in spite of keeping it for a number of yrs sold at a significant loss. '96 sounds to be about the time. But he bought elsewhere and eventually made a profit. But what is a profit on a PPOR is you use all your funds to buy another?

Thommo

 

[Jocker10]

Hi,

Thanks people for your replies.

It might have cost you 3-5 minutes to write, but to me, your replies are worth a $$million.

It just shows that we need to be careful with all our IP decisions.

When property prices are going up, everything looks rosy and sparkling and very easy to overlook that mistakes can be made.

But its comforting to realized too what Sim and Kristine pointed out. --- "But if you wait long enough property will forgive you".

( BTW Kristine -- Jocker10 is for the wild card . I am yet to find an image I could use with my username - avatar )

My first attemp on IP was last year and it went very smoothly. From finding ,buying, finance etc.

And I said to my self, surely it could'nt be this easy. Or could it be first time lucky.

Which prompted me to post this thread.

Thanks again for sharing your experiences.

I am ready for my next IP, and I hope there is such thing as " second time lucky".

Cheers Jocker10

 

[JFEWSTER]

Jocker10

Go by the numbers!

Use Somersoft PIA or your own spreadsheet.

Factor in very low capital growth for the next few years. If growth is better than that - well done. For the forseeable future (as I see it), cashflow is king at the moment and negative gearing is risky unless looking very long term.

Don't under-estimate maintenance costs, nor land tax, nor selling costs, nor the fact that better bargains may soon be coming.

After all, you make your money when you buy!

Realise that many of the regular posters to this forum are very bullish, (a lot of husband/wife combinations) that are more interested in telling everyone how good they have done rather than warning newbies about the negatives, even at this time of the market. Not that it is a bad time to buy now. You've just got to know your stuff.

Realise also that it is dangerous practice to post negative experiences on this forum. You will be shot down quickly and will be referred to as a "gunna" or a "chicken little". Therefore, many will refrain from doing so.

This means that the forum does not provide a balanced opinion between the positives and the negatives. You have just got to read as much as possible (on line and offline) and draw your own conclusions. Study the numbers! Thats what really matters!

Acccording to some- You will never get divorced! You will never lose your job or if you do -you will always have something else to walk into! You will never have your I.P. trashed, nor have your tenant do a runner owing 15 weeks rent.( happened to me twice in ten years on the same property- first time I paid the bill- second time landlord insurance paid the bill). Your partner will be fully supportive and won't complain one little bit when you take her weekly shopping money to repair a hot water service on the I.P.

Of course, with knowledge, these events are manageable. But it can sometimes be a steep learning curve! Keep reading Somersoft, knowledge is power, but don't believe it's always easy.

If you buy at the top of the market, well and great - hopefully you will always be in a position to let time heal all wounds!

As sim said,

The great things about IPs - if you wait long enough, any buy will be a great buy (in general).

If only life was that simple!

Even if they ever did read such a forum, their egos and desire to appear expert investors (and knowledgeable business executives) would prevent them from posting any negative experiences.

Sorry acey. It's YOU who scare people away!

I now await the good o'l acey bashing

 

[Kristine..]

Hi John

Well, I guess everyone's perceptions of the forum are different.

There was a time when I didn't post much as some of the more influential people (at that time) became very sarcastic towards me and made lots of snide comments no matter what experience or opinion I was posting about.

However, unless I am missing something (rose coloured glasses and all that) we are all fairly mild mannered folk at the moment.

There have been many posts over the years regarding problems and failures, particulary concerning the actual management of properties.

Geoff has posted detailed notes regarding his recalcitrant tenant and there has certainly been more than a few reports on Tribunal hearings.

I have shared my trials and tribulations regarding renovations and subdivisions and my singular appearance at the Tribunal for the medical centre permit.

There has certainly been a plentiful supply of tales of woe. Flooded basements, burnt out kitchens, termites, neglectful property managers, over buying, under selling, and anything else you can think of.

Perhaps, though, because we are here to share experiences and to encourage each other, encouragement is not usually in the form of 'my tenant did a runner' or 'we had to use a flame thrower to kill the fleas' or whatever.

John, success is never easy. It takes many years to become an overnight success. I have chipped away at my own ambitions over almost thirty years now, sometimes working three jobs to meet expenses. I haven't done this for ego or even for wealth. It's really been because by personality I am a battler and far too bloody-minded to give up once I've started.

Anyway, life is full of challenges and it's all great fun. Most of us who have been here for a while will extend the hand of encouragement to anyone who cares to ask. We all have different personalities, ways of speaking and views on the world.

Please make as few or as many contributions as you see fit and do share your less than golden experiences, too, including how you got out of the mess whenever one occured.

Regards

Kristine

 

[Jas]

Originally posted by Thommo
Seems Canberra can be a dangerous place to invest.

My bro bought a ppor there well before Gazza did and in spite of keeping it for a number of yrs sold at a significant loss. '96 sounds to be about the time. But he bought elsewhere and eventually made a profit. But what is a profit on a PPOR is you use all your funds to buy another?

Thommo

96/97 waas a bad time to sell . the market bottomed out then.

Slight rise and fall from 91 -97 ( you could buy a place for the same price in those two years), then big up til now.

Jas

 

[quoll]

Jocker10

Originally posted by Jocker10

And I said to my self, surely it could'nt be this easy. Or could it be first time lucky.

Which prompted me to post this thread.

I've found the easy decissions have been the better ones, they just seem to be right and even if you have to work to make it happen the effort doesn't seem to count.

By easy I mean stress free, you might have to work to find a broker/lender that will arrange finance and you might have to work to get the valuer to up the quote a bit but the stress level is low and the comfort level is high.

Hope you understand, I know I do. LOL

Cheers
Quoll

 

[see_change]

I think Kristine summed it up farily nicely

Originally posted by Kristine..


The knack, of course, is to only buy one dud every so often. Don't make a habit of it.
Kristine

We have 18 IP's . Of those eighteen , one has caused about 50 % of our hassels , another 2 have caused about 20 percent each. The remaining 15 share the remaining 10 % .

These three properties were amongst the first one's we bought , and following on with what we learnt with those , we have had minimal problems with subsequent purchases.

These problems realate to Property management.

On the positive side , each of these three cost us between 65 - 67.5 K and are now worth abut 100K more , so we can't really complain...

Basically , now when we buy in cheaper areas, we buy nicer houses , which are N C& T, have no obvious negatives, ie not on busy road etc , and are structurally sound., and are in the popular rental bracket.

See Change

 

[MJK]

I'm like you Kristine, too bloody minded to give up... it would kill me to quit. I just want to "show em all"!.

Fortunatley my only regret is selling my first IP for 210K which I bought for 142K and 2 years on is now worth 350-400K. We held it for 7 years and just as it began to grow we sold it! But even a mistake like that made me 50 grand.

We all wish it was faster and that we bought 2 when we bought one and 4 when we bought 2 etc...

I have to say Jocker, we're almost there. No real regrets.

MJK