Stategies - What is your strategy?

[Alex P Keaton]

Have you developed a particular ip strategy. What is your strategy?

I have read some peoples strategies but there seems to be a lot of people on here that dont go into the type of strategy they are putting into action. I'm curious how everyone goes about it. So I thought I'd type a list of questions similar to the interviews that have been conducted on SS.


1. What is your experience so far with ip? How many ip's do you own?
How often do you accumulate a new ip and how do you service your loans.


2. What type of property do you buy and what is your reasoning?
(unit, apartment townhouse, villa, duplex, house)


3. New or Old - And the reason behind your choice.


4. If Capital Growth is the most important factor in choosing an ip do you focus on buying proven performing suburbs with a past history of good cg i.e. inner city? or research the up-coming hot spots?


5. If positive cash flow is important to you. What % capital growth are you hoping to receive?


6. What type - buy and hold, flips, wraps, development, reno?


7. What advice would you give a newbie who is confused about all the options and strategies out there?


8. How long a period is your accumulation phase of investing? What does your long term strategy involve?


9. What is your exit strategy?


10. When you retire how much are you wanting to earn from ip pa and how you will go about it to achieve this.


11. What advice would you give a newbie who is confused about all the options and strategies out there?

 

[RumpledElf]

*cough* analysis paralysis *cough*

 

[The Y-man]

Kim,

Check ou
http://www.somersoft.com/forums/forumdisplay.php?f=4

Cheers,

The Y-man

 

[Alex P Keaton]

yep read all of them

 

[Alex P Keaton]

*cough* analysis paralysis *cough*

lol, no kidding!!

 

[boomtown]

Kim

While I appreciate and understand that you are keen to learn as much as you possibly can - and I think thats great - some people may be reluctant to give that much detail.

I would summarise my strategy as follows: Buy quality but pay purchase prices based on yield.

 

[BanjoSmyth]

Hey Kim

I love your enthusiasm!

The Strategy that makes the most sense to my mind is . .

1/ Buy a property that is structurally sound but in need of some cosmetic repairs.

2/ Spend a designated period of time doing the 'cosmetic repairs'

3/ Rent out the property

4/ Refinance

5/ Repeat the process using your new equity as part of the deposit for the new house.

This strategy obviously requires 2 main things - You have some spare time or freedom to do the small renovations (and of course the skills) and you can manage to save for your first deposit before you have any equity!

Best of luck with your Investing!

Cheers Banjo Smyth


www.BanjoSmyth.com
www.SharesPropertMoney.com

 

[The Y-man]

HI Kim,

Seeing as some time and events have passed since the interviews, here are my updated views.

1. What is your experience so far with ip? How many ip's do you own?
How often do you accumulate a new ip and how do you service your loans.

We've been at it for 10 years, and we've recently reduced our count from 10 titles to 6.

We don't accumulate IP's in a regular way - only on a "when we can" basis.
Loan is serviced by employment income.

2. What type of property do you buy and what is your reasoning?
(unit, apartment townhouse, villa, duplex, house)

We have bought at least one type of each to see which one works best over time. Jury is still out, but we suspect houses are best.

3. New or Old - And the reason behind your choice.

We have bought off the plan, brand new, and old - again to see which one works best. Out of the lot, old ones work best by far. You can not add value to new ones, and they have a lot of issues and problems to be fixed up.

4. If Capital Growth is the most important factor in choosing an ip do you focus on buying proven performing suburbs with a past history of good cg i.e. inner city? or research the up-coming hot spots?

Past history.

5. If positive cash flow is important to you. What % capital growth are you hoping to receive?

+ve cf is not our aim in IP's.

6. What type - buy and hold, flips, wraps, development, reno?

Buy and hold with minimal reno (cosmetic only).

7. What advice would you give a newbie who is confused about all the options and strategies out there?

Buy a cheap, small apartment to cut your teeth on, get some experience. Then go for a bigger property.

8. How long a period is your accumulation phase of investing? What does your long term strategy involve?

Another 20 years?
Selling all properties and converting to income producing instruments.... was my original strategy.

9. What is your exit strategy?

As time has gone on, in the current environement, I am thinking of changing the long term strategy to one of one big PPOR to sell in the future.

10. When you retire how much are you wanting to earn from ip pa and how you will go about it to achieve this.

Zero. I can achieve this by selling off all IP.

11. What advice would you give a newbie who is confused about all the options and strategies out there?

Direct you to question 7 which is the same.........


Happy playing.

The Y-man

 

[RumpledElf]

1. What is your experience so far with ip? How many ip's do you own?
How often do you accumulate a new ip and how do you service your loans.

We're on our first, bought it on a whim because we'd seen it for sale for absolutely ages, and they took our offer. I wasn't expecting them to take such a low offer The last few offers they took (contracts failed) were much higher.

2. What type of property do you buy and what is your reasoning?
(unit, apartment townhouse, villa, duplex, house)

Its a house on a divisible block .

3. New or Old - And the reason behind your choice.

Ancient. Why buy a new house? In this area they cost 5x more than this old one and don't rent for much more. Overpriced, no yield, don't see how they could rise any more so I don't see any capital gains there either.

4. If Capital Growth is the most important factor in choosing an ip do you focus on buying proven performing suburbs with a past history of good cg i.e. inner city? or research the up-coming hot spots?

Don't care about capital gains, I fully expect prices in the area I bought to drop (at the high end at least)

5. If positive cash flow is important to you. What % capital growth are you hoping to receive?

Depends what we do, yield will be about 13% (based on loan value) if we don't subdivide, 25% if we do subdivide, or 15% if we build a transportable on the other half and rent that out too. House value will roughly double after it is renovated, with another house on the block too it'll be over triple. Yield as is with the house currently having no kitchen would be only 5% - negatively geared. No way.

6. What type - buy and hold, flips, wraps, development, reno?

Buy/hold and reno and develop if things go well

7. What advice would you give a newbie who is confused about all the options and strategies out there?

Keep your eyes peeled and buy something that feels right and the math comes up good for your personal situation.

8. How long a period is your accumulation phase of investing? What does your long term strategy involve?

Strategy? We bought a house on a whim, what strategy lol

9. What is your exit strategy?

Don't have one!

10. When you retire how much are you wanting to earn from ip pa and how you will go about it to achieve this.

Honestly? Too far ahead, don't care.

11. What advice would you give a newbie who is confused about all the options and strategies out there?

Stop thinking so hard!

 

[Alex P Keaton]

To buy or not to buy - Michael Yardney


Here is an interesting excerpt from Michael Yardneys website.


Now this doesn't necessarily mean you must buy a house because of its underlying land value.

In the established, densely populated inner suburbs of our capital cities, apartments and townhouses make great investments. Because there is no vacant land in these areas and town planning regulations make it more difficult and, importantly, considerably more expensive to build new apartments, the capital growth of apartments and townhouses is similar to houses.These units take on a proportionate value of the land that the whole complex sits on.

 

[Alex P Keaton]

HI Kim,


Buy a cheap, small apartment to cut your teeth on, get some experience. Then go for a bigger property.

sounds like good advice!

 

[Alex P Keaton]

Hey Kim

I love your enthusiasm!

The Strategy that makes the most sense to my mind is . .

1/ Buy a property that is structurally sound but in need of some cosmetic repairs.

2/ Spend a designated period of time doing the 'cosmetic repairs'

3/ Rent out the property

4/ Refinance

5/ Repeat the process using your new equity as part of the deposit for the new house.

This strategy obviously requires 2 main things - You have some spare time or freedom to do the small renovations (and of course the skills) and you can manage to save for your first deposit before you have any equity!

Best of luck with your Investing!

Cheers Banjo Smyth


www.BanjoSmyth.com
www.SharesPropertMoney.com

ta

..........

 

[Alex P Keaton]

1stop Thinking So Hard!

----------

 

[Bricks & Mortar]

Hi Kim,

Everyone's strategy will vary
Despite the variations ALL can work.
Property can be very forgiving especailly if your investing for the long term.


1. What is your experience so far with ip?
Bought and sold land, build on block of land (x2 buy & hold), land bank x1, buy: houses, units, duplex, blocks
How many ip's do you own?
Doesn't everyone ask that, my standard reply is 'enough', or more than fingers on both your hands depending on who is asking.
Is it relevant?...if it is, I'll need you to take off your shoes and socks and ...
How often do you accumulate a new ip
depends..sometimes nil in one year, last year five.
sometimes multiples sometimes individually when the time/price is right.
or perhap I should add when I can and the time/price is right.
and how do you service your loans.
LOC...Income from properties and my wage.

2. What type of property do you buy and what is your reasoning?
(unit, apartment townhouse, villa, duplex, house)
No apartments or villas, Stick to maximum of 11 units on the title if buying a unit separately.
Houses have bigger land content and possiblity for development.
Buying blocks keep control over whole title. Experienced a lot of pety troubling things on units as part of body corporate.
Also rental vacancy doesn't hurt as much in a block situation as usually the others remain tenanted.
(oh, and land can be expensive to hold unless you pay it off. Even though it wasn't included above)

3. New or Old - And the reason behind your choice.
Both,
New for depreciation,
Old for affordability and value add possiblities.

4. If Capital Growth is the most important factor in choosing an ip do you focus on buying proven performing suburbs with a past history of good cg i.e. inner city? or research the up-coming hot spots?
Yes, seaside, affordability becomes an issue in CBD
Near CBD seems tried and justified, although safer a lot more expensive. You can spread the risk by buying outer.
Yes, Research upcoming hot spots... trouble is hot spots are just that... the cycle/investors change the hotspot locations.
It's still guesswork, but eventually they all move .... you try and guess (based on figures) which are more likely to move up faster and stay there.

5. If positive cash flow is important to you. What % capital growth are you hoping to receive?
Hope for as much as possible, spread the risk:
dollar cost average - win on some, and not as much on others.
Your not purchasing with just CG in mind,
Your buying for returns and CG
(lower than buying for just CG properties - but you can only hold so many NG properties)

6. What type - buy and hold, flips, wraps, development, reno?
yes, except 'flips' save that for pancakes and eggs
and 'wraps' for birthday gifts.

7. What advice would you give a newbie who is confused about all the options and strategies out there?
start with one... buy and hold,
Remember It's LONG TERM.
Whether you can or cant renovate, develop, sell (buy/wrap) isn't important
The big picture will only cause confusion and you probably spend years procrastinating.
Start with the basics and it will all develop from there.
Also ignore advise from people around...There will usually be a negative sentiment from most people who don't invest in IP's including friends and family.....all the what if's and what about might get you down when starting out. and again remember it's LONG Term.

8. How long a period is your accumulation phase of investing? What does your long term strategy involve?
I sincerely believe our accumilation phase is done.
Y-man says 20yrs. Long term will depend on the cycles,
Could be doubling 7,10, 20 years no guarantees!
but you can accelerate within a cycle. This is where timing, not time plays an important part.
Not much point in wrapping or flipping in a declining market but value add with renos, build/develop as approvals can take years may be advantageous. And the reverse may apply in a rising market as dumps may sell for the as near a price as renovated ones etc.
Alternatively sacrifice a larger component of your wage to buy more and accept a higher risk, but that depends on your SANF.
You have to employ a strategy that suits you, not all will be happy with the same formula.

9. What is your exit strategy?
Sell down some, possible LOE with a diversification: super, shares, IP's returns and cash.
Hopefully that way you safer at any point of the cycle. It's a bit like keeping a buffer while investing.
But open to suggestions.

10. When you retire how much are you wanting to earn from ip pa
100k is the usual mark that's quoted and it certainly sounds better than the pension.
and how you will go about it to achieve this.
Consolidated with a ten year plan in 2002 although the retirement figure has risen since then.

11. What advice would you give a newbie who is confused about all the options and strategies out there?
baby steps... you experience will develop as soon as you get your feet wet.
After you've bought your first you will start to learn all the intricacies

 

[ernie]

My strategy in a nutshell:

1. Save and/or Pay off Loans
2. Buy when I can, at a price I like
3. Repeat

Works well for property or shares

For property, save for the PPOR, have only bought units and apartments so far. Why? Because its what I could afford at the time. Prefer new but have bought used, mainly for the deductions and new seems to get slightly better rent. Not particular about any area. I just look at historical price data and how the suburb feels like and if I'm happy I buy. I stay away from the usual stuff -- burning cars, dirty streets, etc Long term strategy is to just keep buying and never sell (thanks, Jan!). Not thinking of an exit strategy -- more a function of my age (long way from retirement) and buy and hold strategy. My advice to a newbie? Get started and buy something. Doesn't matter if you make mistakes. Your learning goes up exponentially once you get your first property in the bag.

 

[Rixter]

My strategy in a nutshell:

1. Save and/or Pay off Loans
2. Buy when I can, at a price I like
3. Repeat

Works well for property or shares
.

Whats you exit strategy Ernie?

 

[The Y-man]

Whats you exit strategy Ernie?

He says in his post that he is not intending to exit

Cheers,

The Y-man

 

[Rixter]

He says in his post that he is not intending to exit

I dont plan to meet my maker but I know I will one day

 

[Rixter]

He says in his post that he is not intending to exit

I dont intend to exit this world in a hurry but I still have to plan for when I do

 

[JIT]

As time has gone on, in the current environement, I am thinking of changing the long term strategy to one of one big PPOR to sell in the future.

You mean to take advantage of the PPOR CGT exemption?

What about the non-deductible interest on the borrowings factor...or would you buy in cash outright?

Once I have "enough" high growth resi. IP's (a couple more to go, there's only so many tenants/agents/PMs/BC managers I can put up with) my thoughts were to get one big PPOR, do a "debt-recycle" thing while holding it (ie. making the PPOR debt tax-deductible), then sell the PPOR CGT-free some years down the track (after hopefully having realised huge CG) and put the proceeds towards income-producing assets (ie. buying more, or reducing debt on existing assets)...