Stategies - What is your strategy?

[keithj]

We had just started to purchase some shares and never dreamed of leveraging them.... doh!

I originally got the impression you had been invested in shares for a while.... if that's not the case then I certainly wouldn't suggest gearing into them - most suggest at least a couple of years of watching/paper trading/small sums before gearing. Especially at the moment!

If you've got $$ to invest in shares, why not put them into developing the IP instead ?

 

[Real-istic]

Hi Keith,

Our shares date back to the 90's but they were certainly not acquired with any sense of strategy or purpose, just a few rumblings and a very ad hoc approach and they are dwarfed by our property portfolio. We had already decided that this year we would turn from property pretty much exclusively to other investments (shares mainly) to diversify

We currently have 9 properties that when development and subdivision is complete will be 24 (seperate land titles). We have been lucky enough to be pretty much LOE for the last few years but due to the current market and conservatively looking toward the future this prospect is uncertain. With current constraints on feasability and profitability due to banking lending criteria our next 12 months development funds (and LOE funds) have dissapeared under the model we were using due to property devaluation. To continue to access funds to develop we are well aware that we need to change direction. We are now looking at holding costs being funded from other sources for that time. We have definately felt the change in the credit market and perceive it to just be getting worse so we are restructuring to weather a potential storm (I posted a thread called 'holding on in the big surf) which we hope wont happen! We have 5 kids including teenagers with private school fees to support now so we have to be more diversified and open to options

If we apportion 5% of IP values to blue chip shares (then margin lend against this) do you have an estimate harking back to your experience how many years margin lending may provide assistance to holding costs of IP's. Can we hope that a margin loan could cover this until the next property upswing? We realise you can't tell us how long a piece of string is.

Thanks for your time

 

[Alex P Keaton]

Mum and dad want to go halves with me in a $350 K ip. I am on holidays soon and I am going to talk to mb. Get things organised. Will be more affordable and less risky for me. I think it will be an ideal and realistic way of getting into the market. Will most likely look to buy this year now, perhaps the next 3 - 6 months. I want to invest in an index fund too.

 

[RumpledElf]

I have so many options open to me that my current strategy involves running around in circles looking very confused.

I really, REALLY need some professional advice and wouldn't know where to start looking to find some. Its not like the streets out here are paved with financial advisors ...

 

[Rixter]

I have so many options open to me that my current strategy involves running around in circles looking very confused.

I really, REALLY need some professional advice and wouldn't know where to start looking to find some. Its not like the streets out here are paved with financial advisors ...

Its rather simple really - Dont over complicate things!

1/ Decide what it is that you are ulitmately wanting to achieve from using property as your chosen wealth vehicle.

2/ Then allocate the time frame you are wanting to achieve it in.

3/ Then choose the best strategy (ie buy & hold, reno, flip, wrap, rejuv, etc) that going to deliver you to what you want to achieve, according to and best suited to your personal risk profile.

4/ Then attain your chosen strategy knowledge.

5/ Then keep actively appling that knowledge.

6/ Keep focused on big picture of what you are ultimately wanting to achieve.

7/ Dont let anything stop you or anyone tell you you cant do it.

8/ Never ever give up.

9/ Persistence wins the race!

Hope this helps

 

[RumpledElf]

Its rather simple really - Dont over complicate things!

Oh, its not simple at all. Some really major and very different choices and unfortunately some are beyond my control - notably the crap rental market and crap broadband availability. If I just wanted to accumulate an income stream for the future it would be tooooo easy.

Endgoals (within short time frame, ~1-2 years) would be something like:

- Sell IP, build custom house in other town, work from home with broadband
- As above but sell PPoR and hold IP if sale proceeds are high enough, move into IP while building then rent it out. Or sell it.
- As above but sell both PPoR *and* IP
- Wait until there's a commercial rental available in other town, work there during the day and only get broadband at work which should stop us going insane, hold one IP and sell other to fund shortfall and salary
- Sell everything, rent a house in other town in absense of commerical rentals and work from home with broadband (problem there with resi renting and a business) and hope we are earning before the money runs out
- Just hold IPs for longterm gain and continue trudging with business, unfunded and without broadband, which means it'll take bloody forever to start earning good money
- Hold everything, get a business loan against equity, pray for a commercial rental and let bank foreclose on IPs if the money runs out too soon
- As above but sell at least one property
- Sell IP/s and spend $3000 a month of spoils on good broadband at home, thus effectively wasting lots of money when I could move and get broadband for $50 a month
- Pray telstra gives us broadband NOW and eliminates this strange desire to spend tens of $1000s of current and/or future capital gains just so we can get broadband
- Pray for commercial rental to become available before we go down any of the other paths as this is the one option that would allow us to put everything off

You see my problem? It actually *is* very complicated. Where the hell do you go to get professional advice?

Edit: the two main goals are just business funding and broadband. I have no idea which combination of selling, not selling, lending, not lending, building, moving, not moving, not building, and combinations therof across 3 properties will give me *both* outcomes, although I can see plenty of ways to get one or the other. I'm sure its there somewhere, I'm just having trouble seeing it as I'm not familiar enough with tax law, business lending law etc.

 

[Rixter]

Oh, its not simple at all.

You see my problem? It actually *is* very complicated.

Things are as simple or only as hard as one perceives them to be - its just people's 'perceptions' that complicate things!

Food for thought.

 

[MCS_80]

Things are as simple or only as hard as one perceives them to be - its just people's 'perceptions' that complicate things!

Food for thought.

I agree Rick.

I had a work friend come to me today with their problem and they thought the world was ending as they know it. I sat down for 5 minutes and helped them rationalise their thoughts. They left with a huge smile on their face and a whole new outlook.

Lifes simple. We humans make it difficult.

 

[RumpledElf]

Things are as simple or only as hard as one perceives them to be - its just people's 'perceptions' that complicate things!

Well, depends if you want the 'best' outcome or just any outcome. If I sold everything I had at once, I'd have a huge capital gains bill and a lot less money to spend. I hear there's ways around this sort of thing, but I don't know them well enough to apply them. I don't know how business loans work - thus they seem complicated to me and I end up leaning towards cashing out assets when there is probably a much better way. I don't know what a new house will cost to build or if I can even afford to build, I don't know what my house will sell for or if I should sell it, I can't work out the 'best' scenario myself, and this forum is apparently not a very good place to ask such things and wading through lots of tax department legalese will make my head explode, hence needing professional advice. Which is probably going to involve a day trip to the city later this year when I'm closer to finishing the reno. Sure, you guys can all say go educate yourself first, but where the hell do I start? I'm on a fairly tight timeframe here (need to make some hard decisions before finishing the reno), I do like to plan in advance and I'm prone to thinking out loud. The fact that we could cash out and get business funding from this deal at all only occurred to me last week, kicking myself I didn't think of that sooner ... but it added another option to the mix.

The commercial rental/broadband issues are unfortunately totally out of my control and no amount of positive thinking will make *that* pair of problems less insurmountable.

'Simple' would be selling the PPoR, keeping the IPs, renting in Adelaide, weaning the kid, sticking her in daycare, getting a 9-5 job and throwing away a lot of dreams.

 

[Rixter]

'Simple' would be selling the PPoR, keeping the IPs, renting in Adelaide, weaning the kid, sticking her in daycare, getting a 9-5 job and throwing away a lot of dreams.

No one can help you out here....only you can decide what is right for you.

The greatest stumbling block to achieving anything of importance in your life is circumstances. We let circumstances get us off the hook when we should be giving it everything we've got. More dreams are shattered and goals lost because of circumstances than any other single factor.
How often have you caught yourself saying, "I would like to do or have this but I can't because...?" Whatever follows "because" is the circumstance.

Successful people use circumstances to catapult them on toward their goal, while the masses use them as road blocks. A circumstance may cause a detour in your life but you should never permit it to stop you.

George Bernard Shaw is quoted as saying, "People are always blaming circumstance for what they are. I do not believe in circumstance. The people who get on in this world are the people who get up and look for the circumstance they want and if they can't find them they make them."

Napoleon said, "Circumstances hell, I make them."

The next time you hear someone say they would like to vacation in Paris, or purchase a particular automobile but they can't because they have no money. Tell them they don't need any money, your reward will probably be a blank stare followed with, "What do you mean I don't need any money?"

Explain they don't need the money until they make a decision to go to Paris or purchase the car. When the decision is made, they will figure out a way to get the amount needed. They always do.

The circumstance they are using is one of the most common: a lack of money. The real cause of their problem is lack of decision. You always attract what you need when you decide it must be done. Try this yourself today. You know the task you have been putting off "because..." Make a decision, forget the circumstance or adopt Shaw's theory, but get it done!

Good luck.

 

[BayView]

Oh, its not simple at all. Some really major and very different choices and unfortunately some are beyond my control - notably the crap rental market and crap broadband availability. If I just wanted to accumulate an income stream for the future it would be tooooo easy.

Endgoals (within short time frame, ~1-2 years) would be something like:

- Sell IP, build custom house in other town, work from home with broadband
- As above but sell PPoR and hold IP if sale proceeds are high enough, move into IP while building then rent it out. Or sell it.
- As above but sell both PPoR *and* IP
- Wait until there's a commercial rental available in other town, work there during the day and only get broadband at work which should stop us going insane, hold one IP and sell other to fund shortfall and salary
- Sell everything, rent a house in other town in absense of commerical rentals and work from home with broadband (problem there with resi renting and a business) and hope we are earning before the money runs out
- Just hold IPs for longterm gain and continue trudging with business, unfunded and without broadband, which means it'll take bloody forever to start earning good money
- Hold everything, get a business loan against equity, pray for a commercial rental and let bank foreclose on IPs if the money runs out too soon
- As above but sell at least one property
- Sell IP/s and spend $3000 a month of spoils on good broadband at home, thus effectively wasting lots of money when I could move and get broadband for $50 a month
- Pray telstra gives us broadband NOW and eliminates this strange desire to spend tens of $1000s of current and/or future capital gains just so we can get broadband
- Pray for commercial rental to become available before we go down any of the other paths as this is the one option that would allow us to put everything off

You see my problem? It actually *is* very complicated. Where the hell do you go to get professional advice?

Edit: the two main goals are just business funding and broadband. I have no idea which combination of selling, not selling, lending, not lending, building, moving, not moving, not building, and combinations therof across 3 properties will give me *both* outcomes, although I can see plenty of ways to get one or the other. I'm sure its there somewhere, I'm just having trouble seeing it as I'm not familiar enough with tax law, business lending law etc.

If having broadband is the critical factor in all this (sounds like it's necessary for work?), and you are prepared to move in order to get it, then it sounds as though it wouldn't be too much of a misery to move out of the PPoR and go somewhere else?

If that's the case (and this is good as many people struggle to give up the PPoR) I'd be thinking that a good move would be to rent out the PPoR, hold the IP and move into a rental yourself in the next town where you can access the broadband.

That way, you'll have the rent from both the PPoR and the IP, and the income from the work at home to cover your own rent plus any existing loans on the PPoR and IP.

Naturally, you'd need to run the numbers to see how you'd go renting, paying mortgages and getting rent from the two properties. I guess you could also estimate an income from the broadband work at home to help with the calculations.

 

[RumpledElf]

I wouldn't personally rent out my PPoR, or recommend that anyone else buy a rental in this town. I'd end up with arguments over who buys the water if the tenant doesn't conserve and uses it all up (them buying it themselves would have to be a lease clause), I'd have to be horribly picky about who rents it and I wouldn't get much rent anyway - selling makes more sense, especially considering the high ratio of holiday houses here. I could juuuuuuust build a house with the sale proceeds but I couldn't cover renting elsewhere on the rent profit, if I could even find a tenant that pays rent.

I have land in the town I want to live in that kind of came free with the IP (it is on a double size allotment, I may not even need to subdivide it if the council is happy with dual occupancy and I keep the IP) and there is mains water and broadband there, but the average rental there is over $200 a week and rentals are rare as hen's teeth. The average rental where my PPoR is is $50 a week according to the last census. Getting a transportable delivered without needing a loan makes sense to me if I can work out how to build one for $salepriceofppor-$owingonppor ... probably still need some money from the bank to get it all connected to services.

The best option of all of them so far is looking like -

- Finish IP reno and get it rented out on a 1 year lease
- Hope commercial property comes up for lease at around this point (I'll probably go doorknocking looking for a sublet situation)
- Revalue IP, get small loan to cover surveyor, subdivision costs, final fixing up of PPoR for sale
- Use time during lease to get approval and whatnot of a new house
- Try not to get pregnant again and screw up business plans again
- Put PPoR on market during second half of lease for way more than we'd like to get just in case some interstate sucker buys it at that price, pray it sells, and try and get settlement for when lease ends
- Move like sardines into IP while waiting for new house to get delivered
- Carry furniture 6 feet into new house when it arrives
- Resume trying to work out what to do with IP, business loans etc from a much better financial position

Of course by the end of that list we'll have $250-300k of IP+PPoR 'value', $80k or so of debt (or less if we get lucky with selling the PPoR), and hopefully I'll be back working by then so I won't be stressing so much about loan serviceablity. Unfortunately we got the grumpy nocturnal model at the baby factory and they don't take refunds ...

The estimated income from the business venture is around the $10-50k per *month* mark but needs several years to get to that point unless we can scrape money together to hire some more people, unfortunately.

 

[jingo]

The best option of all of them so far is looking like -

- Finish IP reno and get it rented out on a 1 year lease
- Hope commercial property comes up for lease at around this point (I'll probably go doorknocking looking for a sublet situation)
- Revalue IP, get small loan to cover surveyor, subdivision costs, final fixing up of PPoR for sale
- Use time during lease to get approval and whatnot of a new house
- Try not to get pregnant again and screw up business plans again
- Put PPoR on market during second half of lease for way more than we'd like to get just in case some interstate sucker buys it at that price, pray it sells, and try and get settlement for when lease ends
- Move like sardines into IP while waiting for new house to get delivered
- Carry furniture 6 feet into new house when it arrives
- Resume trying to work out what to do with IP, business loans etc from a much better financial position

Of course by the end of that list we'll have $250-300k of IP+PPoR 'value', $80k or so of debt (or less if we get lucky with selling the PPoR), and hopefully I'll be back working by then so I won't be stressing so much about loan serviceablity. Unfortunately we got the grumpy nocturnal model at the baby factory and they don't take refunds ...

The estimated income from the business venture is around the $10-50k per *month* mark but needs several years to get to that point unless we can scrape money together to hire some more people, unfortunately.

Hi Rumpled Elf,

It sounds as though you have worked out what to do. Perhaps there is no need to run it by a financial planner? They can only make things a lot worse. Believe me!!!!

Regards Jason.

 

[RumpledElf]

Heh, that list only covers the best option for the next year + finishing reno

The business funding side of things is waaaaaaaaay out of the scope of this forum though. But we have several other side projects up our sleeve to help with that too. Fingers in too many pies ...