Seven year itch; "why"

I joined this forum seven years ago.

Nearly seven weeks after my seventeenth birthday, roughly seven weeks before graduating year twelve. I found this place through the old Freestylers forum, now (sadly) gone. Perspective; there are now 10,427 members on Somersoft; I'm #188.

A few months ago, it occurred to me that if I timed it well, I could end up with 1,000 posts on the same day that I would mark being a member of this forum for exactly seven years. That day, is today. Unfortunately, I've been a little busy and this is only about post 902. Doesn't mean a lot but the idea appealed to me at the time.

Seven years ago, September 2002, the world was a very different place. For me; then, a high school student between part-time jobs, and the only cares that I had in the world were whether I could beat my own time around the 10km course that I used to run, and whether I had the balls to ask the next girl out.

I remember looking at units after school, to avoid studying; I was always looking at property, even then. You could buy in suburban Melbourne for $100k. The GFC wasn't even a consideration. No-doc loans were available in abundance. I'm sure you can all remember the story, as well.

This forum, in many ways, has also changed significantly. Personnel aside, the tone and nature of information shared has changed, as well.

Yet, the interesting thing for me, is that whilst so many things have changed over time; the basic investment strategy underlying most conversations here, has not. Buy quality negatively-geared property when you can, hold it until the value and rent goes up and use the equity to refinance, buy again, and keep holding until retirement.

I'd like to ask, particularly of those who subscribe fervently to that theory, 'why'...?

Without hearing the old, property has always gone up and always will; what's that saying; past performance does not guarantee future results?

I ask why, because that's what I always do. Every day, challenging my own assumptions (and often, mischievously, those of others) rather than accepting what is, or what was, or what should be.

Property, I believe, is still an excellent vehicle with which to build wealth. Generally speaking, I consider myself (slightly) more of a bull than a bear. So please, don't get me wrong. I'm not suggesting that the widely-held view here is invalid, per se. I'm not even looking for an answer to my question, above. I certainly don't pretend to know everything, but I do know the buy-and-hold theory as well as most. But, rather than recycling and regurgitating the traditional views, do many people here seriously question the reasoning behind the path that they are walking down?

Such rigorous analysis may show that the theory is still sound, for you.

Or, perhaps, it may not.

Personally, I have found that by constantly challenging my own theories in this way, I can evolve - or confirm - my strategies to suit the changing circumstances at hand. It's worked well for me, and I wanted to share this line of thinking, in case it might be helpful for someone else here. Hopefully, I have not rambled on too much in the process.

It's such a powerful question, 'why?'. Do you ask yourself, often?
 
G'day James

Before I address your 'Why ... I Buy quality negatively-geared property when you can, hold it until the value and rent goes up and use the equity to refinance, buy again, and keep holding until retirement." I would like to ask you

How do you know your Membership Number?

Darned if I can find mine!

I joined 01-03-2001 and as of today have 2,397 posts - but then again, when do I ever stop talking?

Tell me where the Membership Numbers can be found and I shall tell you why I invest in property!

Cheers
Kristine
 
Great achievement James :)

Kristine,

Click on your name and then click on Contact Info tab. You will have a URL provided under "This Page". The number after "u=" is your number. E.g mine is = 7826...Yours is 20.

Ooh that makes me quite new compared to you guys. However i first joined in 2003 was active for 2 years but forgot all login password later and thus created a new profile...
 
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James,

Good work staying an active member for so many years, I bet you have seen many members come and go since you started. Just out of interest I checked out what member no. your father DaleGG is. NO.4 :eek: was he a founding member or something?

As for your question regarding capital gains I don't subscribe to the theory that property is garuanteed to double every 7-10 years but if it does you won't hear me complaining. I think that as long as wages and population keep growing then capital gains will follow. If capital gains don't occur I am content to sit and watch my portfolio become cash flow positive.
 
I think curiosity is perhaps one of the most under-rated qualities of successful investors. We hear frequently about the qualities of perseverance, self-belief, etc, but rarely does curiosity rate a mention.

It amazes me how often people, when confronted with information that doesn't fit with their experience, dismiss it as false rather than try and figure out why there's a discrepancy.
 
Why??....... drives us

Nice post James.

That theory is how I started. That is, taking the assumption of the negative gearing and presumed capital growth road.

I had people around me whom I was modeling/copying and their view was that this that this was the way to go. Whilst I didn't know everything (or much at all really), I did take action and in the doing I was also learning with each purchase. :rolleyes:

Back in 1985 when I started working I very quickly escalated into the top tax bracket at that time (around 60 %), negative gearing was flavour of the moment and with accountants espousing the benefits of the pay-off of tax relief whilst controlling an appreciating asset, this was the road I started upon. Over the years I have now refined my philosophy as buy and hold with the ultimate view of developing everything that we own, as the bulk of it is well located duples/triplex sites with old rental boxes. These days I am also more concerned with cash flow and any new purchases need to be ticking those boxes more and more ;)

Did my initial strategy serve me well. YEP. A couple of the early ones are pre-CGT. :D There is a strategy to sell them off one at a time as up-coming cycles mature again and stagger the harvest. Perhaps pay off some debt and/or put that money to a higher cashflow yielding asset(s).

The question "WHY?" can be very powerful. It enables us to reflect on our choices and chosen path/strategy in any apsect of life and also helps concentrate our focus of purpose so our efforts are not squandered on "time filling" yet "meaningless" activity.

It is often said that kids are the champion of questions and you won't hear me argue against that one. Perhaps it helps for us to be like children and have that innocence of always questioning (ourselves) to keep us focused on our chosen path and the result$ we desire.

Another perspective of the "why questioning" is that it actually drives us and motivates us. Particularly when inertia sets in, asking ourselves "why should we persist in spite of ??.........(name a circumstance that one could use as an excuse)", can help us to focus and provide some momentum to move forward.

It is said that if your why doesn't make you cry it isn't strong enough. I guess that gets back to core values and what it is that makes us do what we do.
 
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I'd like to ask, particularly of those who subscribe fervently to that theory, 'why'...?

I went through the process of reviewing my parents friends. The ones who drove nice cars, had a nice house and a good retirement were the ones who invested in property. Most were in the building industry.

I have a JOB (IT industry) and with my wife am raising two kids. They are in the middle of primary school. Paying towards an investment property is like compulsory savings and with the PPOR now paid, any shortfall is like paying rent like the family accross the road.

Why?
Leverage
Income, rents rise - mortgage stays the same
Tax benefits. I love the $15-$20k tax refund per year.
My aim is to build a $5m portfolio - Now at $2m. I assume the first first $2m is tougher than the $2m from $3m to $5m.
Secondary school fees already saved. Just sell the 2 bed unit in Frankston.
Dont trust financial advisors.
Control - I know whats happening with my properties. Shares -I have NO control. Look at Centro. Who saw that coming.
 
Yet, the interesting thing for me, is that whilst so many things have changed over time; the basic investment strategy underlying most conversations here, has not. Buy quality negatively-geared property when you can, hold it until the value and rent goes up and use the equity to refinance, buy again, and keep holding until retirement.

I'd like to ask, particularly of those who subscribe fervently to that theory, 'why'...?

Member 10,902 here :) still pretty wet behind the ears and asking "why this way, why that way" all the time.. Only after asking why, and digging further, have I made up my mind on a few things, deviated from the norm and am starting to develop my own strategy.

A few things which I think are often taken as the norm, and asked why?..

Is property destined to double every 7years. I don't think so.
Is buying neg geared property in the hope of future cg a strategy for me. Nope.
Is cg a function of land content? I don't think so.
Is using a re agent necessary for getting the best result when selling a property? Nope
 
I joined 01-03-2001 and as of today have 2,397 posts - but then again, when do I ever stop talking?

Tell me where the Membership Numbers can be found and I shall tell you why I invest in property!

Like you, Kristine, I took something of a break from the forum for awhile at one point. For some time, I was also trying to only post when I thought that I had something of particular value to add, and could go weeks with reading the forum daily without actually saying anything. I remember at one point, I had a higher kudos than post count. That, and the ability to quote multiple posts in one (like this!) probably has something to do with my lower level of activity compared to some.

And I'm sure, most will know why you invest (especially as per a few of your most recent posts). I know that I didn't articulate my point as well as I could have; the idea, I guess, was to ask if people were asking themselves why they invest in the particular manner that they do and whether that strategy was assured of working in future, compared to other potential courses of action.


Just out of interest I checked out what member no. your father DaleGG is. NO.4 :eek: was he a founding member or something?

Yeah, I think so. I didn't know this until after I found it myself, though. Seemed to happen a lot, especially in my younger years, where I'd think that I'd discovered something revolutionary only to find the old man had been doing it for years. :eek:

This version of SS, though, is the second or third reincarnation, I think. People like Sim and Rixter and Kristine and Rolf and a handful of others have been around this end of the woods for much, much longer than I have.


I think curiosity is perhaps one of the most under-rated qualities of successful investors. We hear frequently about the qualities of perseverance, self-belief, etc, but rarely does curiosity rate a mention.

I was going to steal MJA's signature line of 'intensely curious' for this thread; I'm a fan. I was told the other day that I'm at least twice as curious as a cat, but with eight less lives. I told her that it was just as well that I've also developed a habit of falling on my feet.

Like you, I think that curiousity is a fantastic quality to have. The pursuit of practical knowledge and the need to question everything. How to think, rather than what to know.


Nice post James.

Thanks, Michael. As always, you managed to articulate exactly what I was looking for. Brilliant reply, thankyou.


This would have been so much better if you were graduating year 7 ;):D

I did like the fluency of the numbers. But nah, then I'd still be at uni or working in real estate. That'd be no good. It was another fortunate thing though, that I somehow managed to skip year nine and finish high school a year early. A couple of my mates did that as well, only they were already a year ahead. One couldn't get into his uni course of choice as he was only 16 when he finished VCE and didn't meet their age requirements. Poor guy's still studying. He'll be a rocket scientist (aerospace engineering?) when he's done, though, so I suppose that makes it worthwhile.


Why?
Leverage
Income, rents rise - mortgage stays the same
Tax benefits. I love the $15-$20k tax refund per year.
My aim is to build a $5m portfolio - Now at $2m. I assume the first first $2m is tougher than the $2m from $3m to $5m.
Secondary school fees already saved. Just sell the 2 bed unit in Frankston.
Dont trust financial advisors.
Control - I know whats happening with my properties. Shares -I have NO control. Look at Centro. Who saw that coming.

And fair enough. If this reasoning stands up to your own questioning, then all power to you and all the best with it. It is encouraging to know that people do still ask, and answer, questions of themselves rather than blindly following the herd. Even if this herd is a little different to the norm.


Member 10,902 here :) still pretty wet behind the ears and asking "why this way, why that way" all the time.. Only after asking why, and digging further, have I made up my mind on a few things, deviated from the norm and am starting to develop my own strategy.

Top work. I may not necessarily agree with all of your conclusions, but what a boring place this would be if everyone had the same view. I particularly like that you've started with one idea and over time, developed another perspective. Evolution is a beautiful thing.



All I was looking to do with this thread, is to get people thinking. Be curious.
 
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Member 10,902 here :) still pretty wet behind the ears


Good work VB, you beat me by a country mile. Member # 12,797 here and completely dripping wet behind the ears.



Hi James,


Great question - you would be an interesting young chap to meet. Hopefully our paths cross one day.


In terms of your "why", I've stopped asking unfortunately. I seem to have slotted nicely into a form of investing that both suits my personality (OO is still trying to come to grips with me being a healer :p ) and my risk profile.


After a while, you just get comfy with what you are good at. I remember life in my 20's and 30's, always challenging, always seeking, always bucking authority figures, never taking anyone's word on stuff. The biggest thing was never allowing oneself to linger in the comfort zone. My goal was always to stretch and strain that zone, until once scary things became do-able, and then easy peasy.


However, I have now found my niche and it has been good to me. I now quite enjoy my comfort zone and have no great desire to question / expand / figure out what path to take. The path has been trod, and yay unto the Lord he doth say "It hath been a good and noble path, and the traveller did look back and reflect....and it was so." Whoops - slipped off into a bit of religion there. <slaps oneself>


I found you stopped questioning "why" when you pin-pointed exactly what you were seeking. That is the hardest bit. The usual - I wanna be rich and never work again ain't it. Once you've managed to nail that down, the path to get there is easier - but still difficult.


That saying that we over-estimate what we can achieve in 2 years but grossly under-estimate what is achievable in 10 or 15 years is very true. The results from this game we all play is linear in the early years, parabolic in the middle years and hyperbolic in the later years. When you continually need to change the vertical scale on your graphs to fit the data in, the "noise" in the earlier years that got you so excited all becomes a simple flat line.
 
The only constant is change...

Hi James

For me, they "why" bit changes all the time. To give you an example. When I started this investing game eight or so years ago the main advantage of RIPs was the extreme leverage into a relatively "safe" asset, according to my perception at the time anyway. When you're starting with very little, getting leverage into a growing asset is a key consideration so the basic strategy you refer to makes a lot of sense. So the focus was "prime" property near services, transport etc that was inevitably -ve geared / cashflow neutral at best.

However that is all very well and good until you hit serviceability limits. After trying my hand at developing to "manufacture" some growth, which in the end came from a rising market anyway, I realised that apart from getting a better paid job I was best served by focussing on cashflow for the portfolio. Which inevitably leads away from traditional IPs into areas of greater perceived risk. A recent example is our Karratha purchase, which has a great yield alongside a higher perception of risk for most of us (including me!).

Also, early this year, we came to the conclusion that blue chip shares were being sold at bargain prices so we jumped in with a significant portfolio there using RIP equity (as well as a small margin loan) to capitalise. That share portfolio has been our best performer so far this year at least. The "why" was there was a great opportunity to buy high dividend companies at good yields which I hadn't seen for many years, using borrowed funds at very low IRs. By comparison, the properties I could find around the place looked fully valued - so we changed tack and it has done very well for us (so far!).

We expect to change tack again soon. For example, at the moment there are some very nice CIPs out there on good yields with good leases. When we can find one in our price range that stacks up on the detail we will jump in - unless a better prospect comes along! We're open to whatever is out there that looks under-valued and would give us a good cash flow. The current restrictions on lending for CIPs have created a window of opportunity IMO in terms of pricing that probably won't stay open for very long...

I had a conversation with a fellow property investor yesterday, who expressed the opinion that he will always be a property investor because "property returns are always much better than shares". I have no such illusions - I am of the opinion that a strategy of following the opportunities as they arise in the market out there is superior to one that just repeats the same thing. Flexibility and a willingness to take a look at anything from a strictly financial viewpoint has been key to maximising our wealth... YMMV!
 
Thanks for the insightful post James- the early start will put you streets ahead of the general populace.

As for "Why?" I found I got to a point when I would ask "Why not?" Continuing self improvement and questioning assumptions is the measure of a successful person it is said.

Happens when you hit 40 I guess:eek:
 
James,

A related discussion in this thread by jingo:

http://www.somersoft.com/forums/showthread.php?t=55770

I think flexibility is important, but once you find a strategy that works well for you (ie. suits your personality/risk profile as Dazz mentions), sticking to it is good too.

Chopping and changing too much can be ineffective.

Might seem like one is doing something to advance and fast-track the cause, but patience may reap greater rewards down the track.

Perhaps a generational thing... ?

Regarding -ve RIP investing, I think it still has its place, but is not the be all and end all of investing.
 
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