should i hold or sell with loss??

[Kennethkohsg]

In regards to this property in specific, If i had the knowledge i do now back then i would never had bought this house. It is not an ideal house, low side, housing commision on the street, 12.12m frontage, 5 min from station(not good in my area) 2br fibro etc etc.. I can probably get 330 k for it now if i tried... leaving me wiht a 15k mortage (after paying agent fees)..

The way i see it is when houses in chester hill go up 7% my house will only rise 3% due to all the negatives associated wiht it..

I think i could probably break even if i hold it for say 5 years but 5 years is a long time where i can be using these funds to buy something better and more financially sound.

***************************************************
Dear GeorgesA,

1. What are your own figures and real losses (plus new investing costs) if you were to proceed with the "Sell with the loss" option and subsequent re-invest again?

2. What are your basis for saying that you will break even in 5 years time?

3. How do you intend to use these capital loss to benefit your future property investments?

4. Are you not expecting your property value to double by the end of the next property cycle? and if so, do you still think that it is still more feasible for you to still want to proceed to sell off your present property with a loss?

5. What are the lessons that you have learnt from this experience? What are some safeguards which you will introduce when you next invest again.

6. Looking forward to hearing your thoughts and further sharing on this matter again, please.

7. Thank you.

regards,
Kenneth KOH

 

[Kennethkohsg]

In regards to this property in specific, If i had the knowledge i do now back then i would never had bought this house. It is not an ideal house, low side, housing commision on the street, 12.12m frontage, 5 min from station(not good in my area) 2br fibro etc etc.. I can probably get 330 k for it now if i tried... leaving me wiht a 15k mortage (after paying agent fees)..

The way i see it is when houses in chester hill go up 7% my house will only rise 3% due to all the negatives associated wiht it..

*************************************************
Dear GeorgesA,

1. What kind of properties will you be looking at next? What are your investment criteria if any? Whereabout are you next thinking of investing?
What are the specific key drivers for investing into this partcular suburbs?

2. What kind of investment structure will you use when you next invest?

3. Does your future wife sharing your same investing passions and agree with you on your family money management techniques and your money spending priorities?

4. I trust you will further attempt to answer some of these questions yourself before you next invest.

5. If you further share with us your thoughts, I am sure that the members can further enrich your thinking further for your next property investment.

6. Thank you.


God Bless,
Kenneth KOH

 

[DavidMc]

2. I have around 35k saved for something else ( this money is sitting in the redraw.. i know i should have got the offsett- homepath doesnt offer it)), most likely another property which I will use as PPOR. I wil not be living in either of these houses as I will be living in a house that my dad has rent free.

I'm not trying to stress you out more, but...

If you're not aware 'redrawing' that money you have sitting in your investment loan is seen as 'new borrowings' in the eyes of the tax department. If you use this for personal reasons, then the full interest on your loan is not longer tax deductable.

Yes, this sucks, I know. I've been through it before. Search for some of my posts and you'll see me discussing this somewhere.

 

[Panic]

A loss is not a loss unless you sell, TIME will allow the property to grow in value.

If you can afford the cashflow loss each week it may be worth holding onto if you are looking at a LONGTERM investment.

TIME can turn a bad investment into a good one. I guess it all depends on your personal situation and your ability to service the loan.

It may take years though but chances are that there will be another boom sometime in the future.

Don´t be too hard on yourself , you can come out ahead if you look at this as a longterm investment. If you want to exit now though chances are you will make a loss.

"If you can manage the downside the upside will take care of itself"

This is probably the worst investment advice you can get.

I'm sorry to be so direct, but you can not justify bad investment by saying "time will improve it". That is BS.
This is like saying to a Japanese investor who bought at the peak in the 80's, hold your horses, wait for "some" time and it will become a good investment.

Thx
V

 

[see_change]

This is probably the worst investment advice you can get.

I'm sorry to be so direct, but you can not justify bad investment by saying "time will improve it". That is BS.
This is like saying to a Japanese investor who bought at the peak in the 80's, hold your horses, wait for "some" time and it will become a good investment.

Thx
V

Ditto

See Change

 

[thefirstbruce]

This is probably the worst investment advice you can get.

I'm sorry to be so direct, but you can not justify bad investment by saying "time will improve it". That is BS.
This is like saying to a Japanese investor who bought at the peak in the 80's, hold your horses, wait for "some" time and it will become a good investment.

Thx
V

And this isn't the first time the time heals all advice/excuse has been put forth on the forum.

We have to remember that Jan Somers' IP strategy is
'time in the market'
not
'timing'

And Ian and Jan's overriding advice is to buy whenever you can afford, and hold until retirement.

The most significant advantage I see to this strategy is that it is incredibly time efficient for the investor...i.e. a very passive investment.....no requirement for endless nights of researching cycles and hot spots...minimal time spent on Somersoft forum, put all your properties in the hands of a PM and get on with earning a living, preferably in something nice and secure like a job with the public service.....

and better that it be Canberra.....BTW, read an interesting bit of research saying property prices have gone up in Canberra, against the national trend, immediately after the last two Federal Labor election wins..... i.e. when Labor gets in, the Commonwealth public service swells.....

I have given up trying to point out the logical advantages of timing (and no I don't believe timing cannot be predicted to some extent). I am happy for the majority to invest using 'time' only. This will always provide me with a buyer when I want to sell near the top of a cycle. And distressed vendors when the market bottoms out.

 

[Panda]

It is true that the property will probably grow in value given enough time. However, by how much and by when? If you cant answer these questions then your taking a fingers crossed approach to investing as apposed to any skill or a plan.

I believe that if one continues to rely on luck then that persons chances of success are significantly diminished.

One thing that I do that helps me cut through all the stuff and confusion when I’m faced with something Im finding hard to work out (often because emotion is involved) is that I reduce it to a single question, and that is,

How is this bringing me to my goal?

I have a specific goal that I am moving towards. The truth is black and white. Something is either getting you there or it is not. If its not, it has no place.


Normally I see within a second, after asking this question weather its helping me or hindering me.

To some that may sound like psycho mumbo jumbo, but it seriously works for me. Of course you need to work the goal out first. So you can ask the question.

But then if you don’t know where you want to get to, or where your going, then a loss making property will probably get you there fine.


Panda

 

[voodoo]

Hi george,

From past experience, i would hold.

If you can afford to hold the property, then why sell?

I once sold a property for a 10k loss and I will have to be in very desperate times to ever do that again.
I was new to investing and had an accountant nagging me to death to sell and invest elsewhere "no money in property" he would say.
It was on the market for over 12mths and I sold for a loss, 2yrs later and it tripled in value.
I do realise that I bought at the peak of the boom, held for about 8 yrs and sold just before it peaked again.
I am a little wiser now and would only sell for a loss as the last resort.
cheers

 

[grubar30]

And Ian and Jan's overriding advice is to buy whenever you can afford, and hold until retirement.

Amen to that.

 

[thefirstbruce]

But I suppose what Ian and Jan don't address in that piece of advice is "buying when you can afford to" is dependent on when you buy. Buying at the top of a market cycle will prevent you from buying again for a lot longer than buying at other times in the cycle. Which is Georges Dilemma...

 

[Kennethkohsg]

This is probably the worst investment advice you can get.

I'm sorry to be so direct, but you can not justify bad investment by saying "time will improve it". That is BS.
This is like saying to a Japanese investor who bought at the peak in the 80's, hold your horses, wait for "some" time and it will become a good investment.

Thx
V

****************************************************
Dear Panic,

1. I have no problem with Karina's advice. Neither do I consder it as a bad investment advice as you have done. This is because I fully recognise that there is no one simple way to skin a cat and that "one man's meat can be another man's poison", depending on his/her specific investing situation.

2. I was able to hold onto my last 2 Goldcoast properties with negative equity from 1995 till July 2001 until the market start to recover and then subsequently sell both the properties for a good profit in late 2002 and 2003
respectively. It was truly a turning point for me to realise in real life that over time, a seemingly "wrong" decision made can be corrected and made "right" again to earn much profits in due course when we can afford to patiently use the time factor in the property investing wealth creation process. Thus, i would say that Karina was right in saying what she said as can be borne out by my own real life investing experiences.

3. The most important lessons for me then are the investing lessons learnt about the nature of the Goldcoast property market and its roller-coaster property cycle trend, and to see how an initial positive decision made in 1993, to invest in an Australian property in the fast rising market, could be made "wrong" suddenly with a further acquisition of a second property in 1994 with zero deposit requirement, resulting in me having an overall negative equity situation for some 6-7 years before it start to break even again. It also showed that I did not then fully understand exactly how the Goldcoast property cycle trend actually operated in real life, despite my good head knowledge then. Consequently, I also realise the need to further educate myself on this topic in greater depth and details.

4. Consequently, with this new hindsight and wisdom learnt from my own past investing experiences, I now chose to avoid going through another roller-coaster ride down the housing prices in the Goldcoast property market, which has began to take place now. I have instead, opted to stay invested in the more steady and firm Perth property market and profit from it quite a bit during these few years, without having to passively wait out for the next property cycle to occur fully.

5. While I can agree that you are fully entitled to your own view, I think it is a different thing to openly claim and label Karina's advice as being "a bad investment advice" in this forum, simply when one does not agree with it or thought it to be so.

6. We can all agree to amicably disagree when views become "irreconcilable" given our different investing background and experiences;- but to accuse someone openly of giving bad advice in this forum, is a different thing altogether. It's first unhealthy remark made. To some, who are sensitive about such remarks made, it can deemed as "defamation" and one which can be sued in court.

7. It is certainly NOT my wish and hope that our healthy forum discussion here would degenerate or result in such unneccessary and nasty name calling each time when we do not personally agree with the other members' views.

8. As we have all started out with good intentions and sincere hearts to help others, let us also be more mature to be able to agree to amicably disagree with our own " irreconcilable differences" and leave it simply to the affected parties to decide for themselves whose feedback he/she wants to adopt and listen.

9. For your kind update and considerations, please.

10. Thank you.

regards,
Kenneth KOH

 

[Bill.L]

Hi all,

I'm another "ditto".

For those who keep talking about "the next property cycle", please remember that each cycle has a driver. The last one was probably due to the lower interest rates and the realisation that they would stay low, coupled with the baby boomers looking for a retirement investment. Previous booms in the 70's and 80's have been about inflation and changes in govt tax policies etc. You need to concieve the scenario that would lead to the next boom. For me if inflation remains flat then "the next property cycle" could be many years off.(unless we get 3% interest rates and have a japanese type blow off!!)

Bruce, there is a little part of Jan's strategy that is more than just buy and hold, and is often overlooked. It being the part of continuing to pay down loans with what you were paying into the original PPOR loan. This means that your equity will increase even during a prolonged flat spot in the market.(assuming the money does not have to make up for a huge negatively geared property.)

Seech, your posting way too many points before I get the chance to say exactly the same thing!!

bye

 

[tropic]

I am a beginner here and has been reading this thread with a lot of interest.
The question I have, what is considered as reasonable CF- investment? If you think GeorgeA property is too CF- then what is not?
I am thinking of getting an IP around 250K and the rent is 190/week.
So the repayment/year @7% is 17,550 and income is 9,880 (gross) + other expenses. The house in brick and tiles around 30 years old so depreciation is almost nil?
Now, is this also too CF-???

By the way the property is in Perth 3brms on approx 700sqm 20 kms from CBD 5kms from the beach, if that makes any different to the Eastern State decision making.

 

[tigerGT]

re

Buying at the top of a market cycle will prevent you from buying again for a lot longer than buying at other times in the cycle. Which is Georges Dilemma...

The First Bruce


This is so so so so true.... in my case anyway...

 

[tigerGT]

In response to the set of questions posed to me by KOH:


1. What are your own figures and real losses (plus new investing costs) if you were to proceed with the "Sell with the loss" option and subsequent re-invest again?


I cant really work this one out as i dont know exactly what i am buying. All i know is that once i sell i would want to wait maybe 8months to a year and then buy again....



2. What are your basis for saying that you will break even in 5 years time?


I just made an assumption that the house went up for an average of 3% a year.... very rough assumption



3. How do you intend to use these capital loss to benefit your future property investments?

Well doesnt it meant that i can declare it as a capital loss to pay less tax when i sell next IP



4. Are you not expecting your property value to double by the end of the next property cycle? and if so, do you still think that it is still more feasible for you to still want to proceed to sell off your present property with a loss?


I just think that I can use the money that is tied into this property elsewhere for a more appealing property...If i buy and sell into the same market i see it as an advantage as the proerty i bought is on the lower end of the property values in chester hill and it isnt very appeaking. i.e if i sell for 330 and buy another house for 375k on a better street , block etc then by the time of next property cycle gain on the 375k property would be higher. Not only because of percentage on a higher house but because the demand for houses in my street would be less than demand for houses on better streets.



5. What are the lessons that you have learnt from this experience? What are some safeguards which you will introduce when you next invest again.

*The main lesson is timing
*research, research, research
*Would i buy this IP to live in? ( you have to sell one day)
*Use interest only option to an extent
*Always have a small deposit, at least 5%... Dont borrow 100%
*And a few other small things.....


What kind of investment structure will you use when you next invest?


buy a PPOR with offsett and pay as much onto it for a year then for IP

research, deposit, interest only, negative gear, some appreciation


I understand these are all broad answers but its the best i could do since im currently at work.....



p.s can anyone recommend a good book that deals with all there is to know about property investing which includes forecasting methods as well as positive and negative equity scenarios?????

I am going to go bookshop for lunch to purchase a good property book!!! please suggest

 

[Kennethkohsg]

p.s can anyone recommend a good book that deals with all there is to know about property investing which includes forecasting methods as well as positive and negative equity scenarios?????

I am going to go bookshop for lunch to purchase a good property book!!! please suggest

************************************************
Dear GeorgesA,

1. As for the property investment education purposes, I will recommend you to read the following books:
a. Jan Somers: Creating Wealth through Residential Properties.
b. John FritzGerald : 7 Steps to Wealth
c. Rory O Rourke : Taxed to Death
d. Steve Mcknight : From 0 to 130 Properties in 3.5 Years
e. Margaret Lomas: Positive Cashflow Properties

Happy Reading and Profit from your own self-education

Cheers
Kennethkohsg

 

[tigerGT]

Thank you Kennethkohsg,

The problem i used to find with these books is they operate on the assumption that all houses are worth 150k....

Not good these days considering average sydney house price is 500k

Cheers

Georges

 

[see_change]

In response to the set of questions posed to me by KOH:

2. What are your basis for saying that you will break even in 5 years time?


I just made an assumption that the house went up for an average of 3% a year.... very rough assumption



p.s can anyone recommend a good book that deals with all there is to know about property investing which includes forecasting methods as well as positive and negative equity scenarios?????

I am going to go bookshop for lunch to purchase a good property book!!! please suggest

Number 2 is a big assumption. After last peak in Sydney ( around 89 ) property went backwards for several years. In some outerwestern areas this period was close to ten years.

Crystal ball gazing to know how long it will be this time.

Books

Jan Somers , Story by Story and More wealth through Property investing ( or something like that )

Dolf De Roos .... Realestate Riches

Keiron Trass, Grow Rich with the Property Cycle ( probably relevant to your situation )

Steve Mcknight - His latest one and also Peter Spann's latest one.

Most authors seem to have their own personal style of investing , and the books tend to be " How I made money out of property investing , rather than text book styles discussing all the different ways you can make money. That's why I think you need to read several different books.

John Burley's Money secrets of the Rich ( ? exact title ) is also worth reading along with Rich dad Poor dad ... the list goes on ... Who moved my Cheese, the Richest man in babylon

See Change

 

[Kennethkohsg]

4. Are you not expecting your property value to double by the end of the next property cycle? and if so, do you still think that it is still more feasible for you to still want to proceed to sell off your present property with a loss?


I just think that I can use the money that is tied into this property elsewhere for a more appealing property...If i buy and sell into the same market i see it as an advantage as the proerty i bought is on the lower end of the property values in chester hill and it isnt very appeaking. i.e if i sell for 330 and buy another house for 375k on a better street , block etc then by the time of next property cycle gain on the 375k property would be higher. Not only because of percentage on a higher house but because the demand for houses in my street would be less than demand for houses on better streets.

+++++++++++++++++++++++++++++++++++++++++++
Dear GeorgeSA

1. There is always opportunity costs for all our decisions and 2 sides to a coin.

2. If you work out your figures properly and in details, your choice/alternative will cost you this much, in $ terms, if you proceed with what you intend to do. On the other hand, if you allow things as it is now, you also know what is the costs which you have already worked out its cost.

3. If you proceed with your choice/alternative, are you sure to achieve your expected benefits in future? This is why quality research and due diligence is required before you can be sure about it in the first place.

4. What if you mis-calculated the risks involved or/and fail to achieved the expected benefits associated with your choice/alternatively, what are the further consequences and losses which you have to bear? Are you able take these further losses and consequences. If yes, you may proceed with your choice/option. If not, it is not safe for you to take your chocie/option at all.

5. Question your own assumptions used and input parameters in your calcullations and work out the various costs and figures under the different scenarios, believe me that you will have learnt quite a lot even before making an investment decision.

6. If you still cannot decide things for yourself and needs more feedback from the experienced members to help/guide you, continue to post your queries into this forum.

7. As a general guide recommended by Doo De Rolf, one will need to bear the 100:30:3:1 rule before making an investment decision. i.e scan/research at least 100 properties, make 30 offers, expect 3 potential vendors tol respond and finally decide on 1 property which you want to invest in.

7. So the more you "shadow-box" with yourself and the more you go through this investing research process, I have no doubt that the more you will be educated about the properties and its suburbs and also the more monies you are going to make in the near future for your property investments eventually

Cheers,
Kenneth KOH.

 

[Kennethkohsg]

Thank you Kennethkohsg,

The problem i used to find with these books is they operate on the assumption that all houses are worth 150k....

Not good these days considering average sydney house price is 500k

Cheers

Georges

*********************************************
Dear GeorgeSA,

1. Please do NOT rule out these books so fast before you have digested the fundamentals of property investing.

2. Both Jan Somers and John FritzGerald ( as well as Rory O Rourke) have clearly explained why it is better to have 5 properties worth A$100,000 each, rather than to have a property worth $500,000 as your IPs. It's a number game. If you still cannot understand why this is so, please go back and read their books again.

3. Please note that Rory's book contains actual real life examples used by his clients across real time dimension, to give his readers a good sense of reality and realism of what is achieveable and what is not within one life-time period.

4. Strictly from the wealth creation and property investing perspective, perhaps you should consider other more affordable properties elsewhere and be more objective and detached in your own decision-making. It is more important that the figures work well, rather than you like the property unless you are buying a house as a home to live in.

5. For your further conisderations, please.

6. Thank you.

regards,
Kenneth KOH