Some Questions ???

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"Re: Free the Worms Part 2, a newcomers response"

Reply: 1.1.3.5.1.2.2.1.1.1
From: Bruce Sutherland


Wow, another engrossing read on this damn forum. Also, great post Paul.

As another newcomer I’m prepared to have a go at explaining where I think I am/we are going (I’ve got the family responsibilities for this one

To start off I’ll explain our situation: we don’t own anything apart from our own property, however our house is situated on a large block (that can easily accommodate another dwelling) & we live in an area where there has been wonderful capital growth over the 6-7 yrs we’ve been here, so we have good equity.

I/we’ve begun researching a smallish cluster of local beachside & adjoining suburbs that ranges from top of the wasser to pretty basic blue collar sort of areas. The vast majority of the housing is less than 10-15yrs old apart from a portion of one suburb that’s older, really varied & coastal.

Now we’re 3-6mths away from getting into this but I reckon we have to try to embrace both strategies: firstly, I’m really confidant about getting long term growth & the possibility of further development from the older area that I mentioned. Secondly, to pay some bills and try to ensure that we can stay in & work the game to our benefit I believe that we’ve got to look to the adjoining poorer areas to aim for something that if not positive now will be asap.

Our income isn’t great so I really think we’re going to have to balance a hopefully strong capital growth –ve with 1 or 2 +ves (sort of, roughly, I hope etc, etc) before we’re likely to get back in for another bite at some good cap growth.

Another part of this is that as newbies we really have to dot a few Is & cross a few Ts and just get into the game without too much bulltwang. Obviously there are a number of strategies that tickle the fancy but from my staid ole point of view I can’t see past building a good, strong foundation before we get into too much embellishment.


BTW, one point I wouldn’t mind having clarified is why some people (Ian in this thread) insist on copying a post without adding to it. Ian, if you have added to it significantly I was that overwhelmed with all the reading that I missed your additions, therefore I apologise, but, I make the point that that format – huge copies – lends itself to skimming.

Cheers
Another Bruce

 

[noddy]

Re: Some Questions ??? Free the Worms Part 2

Reply: 1.1.3.5.1.2.3
From: Paul H


Michael Croft,

Here is another long post...this time as to where I am at; and where I am going and what goes through the mind of a newbie getting ready for their first buy.

Being Melbourne based; I worry that the market is too close to the peak; and that an investment now would tie up my funds for not a great level of growth over the next 2-3 years. Therefore; I am not rushing.

I read the post's by people like Dave targeting inner suburbs; and his research looks sound; however I see the 2 year settlement's in Melbourne at the moment as much too high a risk for me. I have also excluded buying in large complexes initially as the risk of having to compete with 10-40 other investors for the same tenant with exactly the same place worries me.

I read with interest Michael Yardley's posts for the mini-developer; and see good logical merit in that strategy. The probability of a "bargain" is lower; however the experience of Michael far outweighs my novice spotting skills. I also like the two options that this gives me in either buying at close to wholesale; or on-selling quickly at a profit.

I have had a look at flipping and from an initial look at the market; costs of double stamp-duty; and the flexibility needed would suggest that I come back once I have more cash to play with, a few properties under my belt, and wait till it is more of a buyers market. I'll watch and learn from the likes of Robert who seems to be doing this quite well.

Doing wraps I looked at as well; but had the following worries. 1/ Diminishing cash-flow over time due to inflation with little or no option to improve. 2/ Ties up available equity in a non-growth asset. 3/ Finding a lender that would enable more than 10 wraps as an individual/company (no partners) seems to be very hard. This limits my income to about $500 per week. Money partners are suggested, but splitting $50 per week 2 ways is not worth it to me. (Less profit/ more hassles by having partnership). A new financier on the market has made me look at this option again; but I'll probably keep clear unless I can be sure to be able to wrap 10+ properties AND be able to still borrow to acquire other growth properties.

My now position is roughly as follows (this year anyway)

I have looked at my cash-flow and project that my current income would allow me somewhere between $25-$35K PA for investing. Of this I have about $20K ready now.

I plan to follow two strategies; the first being to maximise my expenditure by targeting cash flow neutral/positive property that has the potential for improvement using the Michael Croft suggestions (Improve the property / add another property to the block). The second strategy I will look at is the Michael Yardley syndicate option with an open mind; to see what sort of return; over what period it takes; and how over time these developments have performed (should I keep?/should I sell?).

This week-end I plan to check through the papers; look at the prices in the emerging inner & bayside suburbs of Melbourne, and then see how the figures add up. I'm planning on saving another $10K before I buy; unless I find that SUPER deal that everyone seems to talk about..

I am not in such a hurry that I need to rush out and buy today; but as I get more comfortable with my strategy; my warchest gets bigger week-by-week.

Oh...and one last thought....I 'll probably talk to Rolf about arranging finance...he's earn't my vote on broker knowledge excellence.

PS...The first property speaker I ever went to see was Jan Somers at Castle Hill RSL. I liked the presentation so much I bought the book! This forum has now given me the understanding of the process that allows me to put into practice what I learnt from Jan in her book.

Well, that's probably enough posts for this year(or until I get a few properties!!).

Cheers,

Paul H.

 

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Re: Some Questions ??? Free the Worms Part 2

Reply: 1.1.3.5.1.2.3.1
From: The Wife


Thats not flipping, thats on-selling.

And you know, on average, across the board, the law of statistics show, that most property rises in price, no matter what. So really, its no big deal, unless you want it to be.

All that most people in here want to do, is maximize their dollars.

Flipping is a quick cash method, designed to enhance a portfolio, not 'make' a portfolio.
Flipping isnt a strategy, its a 'tool' in a strategy.

I dont believe flipping will work for you if you are a full time employee, I believe the most succesfull flippers, are the ones who work full time on their own wealth. Much like Steve Navra's method of increasing your income, its does a similar thing, its a tool from the same box.


This is what I see as 'most peoples' problem, they want to find one strategy, and stick to it, I feel this cuts out a lot of opportunity. I reckon its essential to have a plan/strategy, but its essential that you are flexible.

TW
~Life is a daring adventure, or nothing at all~

 

[Rolf Latham]

Re: Some Questions ??? Free the Worms Part 2

Reply: 1.1.3.5.1.2.3.2
From: Rolf Latham


Hiya Paul

Thanks for the kind words )

I too am into risk management - too much so for a lot of people. Not so much from the investment exposure angle since I know little about that, but the lending exposure.

2 year settlements are not a problem in themselves. Its finding a finance backer that will give you 90 or 95 % at TODAYS value and stick to that as a minimum. AND give you the option of taking 90 or 95 at the the time of settlement if the value is higher. Dont want much do we ?

Its all about a mixing pot of different ideas and methods that you are comfortable with - a form of risk management in itself called diversification (here we go DFP1 again!) (although Buffites would disagree.) There is NO cure all Im sure, otherwise why would there be a forum such as this ?

Ta


Rolf