Timing and harvesting

[Player]

Some of the smart money are harvesting their crops to sow a different seed.

http://www.businessspectator.com.au...selling-pd20110128-DJ56A?OpenDocument&src=kgb

Nothing new in this strategy. It not only relates to property, however to businesses and other cyclical assets that may see better use of the seed elsewhere in different orchards. Some may even be looking at selling high and re-entering the very same pasture at a lower price.........a bit like looking for that one " Alan Bond" deal in one's life.

 

[zed_kid]

Interesting article. It’s a bit too high flyer though so kind of hard to relate, but the underlying point is valid.

Do you think it’s time to sell in Melbourne player? Lock in some CG?

Edit: I don’t mean completely sell up and go off the reservation, I mean downsize the portfolio, reduce debt, free up cash

 

[Player]

Interesting article. It’s a bit too high flyer though so kind of hard to relate, but the underlying point is valid.

LOL. Yeah, a few tiers above my portfolio strength also however as you mention the gist of the intent is there.

Do you think it’s time to sell in Melbourne player? Lock in some CG?

Depends on how much one holds, where, and what performance there has been. Also what stage of life. As age progresses, yield is far more important for me.

This needs to be weighed up against what might be achieved elsewhere (over and above the costs of selling and buying again. The biggest ones being CGT (as relevant), agent commisions and the stamp duty to re-enter.

As you are aware there is no one property market in Australia. If your money/equity can do better interstate (and divest the land tax burden of holding to many in one state/city), then this needs to be assessed on a case by case basis.

Edit: I don’t mean completely sell up and go off the reservation, I mean downsize the portfolio, reduce debt, free up cash

Hi Zed,

yep, I understand that you don't mean sell the whole kit and caboodle.

Personally I sold one (pre-CGT) asset last year that has grown very nicely for me over the years. Those funds were put into personal purchase. Am also likely to sell another soon to invest elswhere, however not before putting into a bank (or two) whilst I reassess the likely home for those funds.

Depends upon the investor's age also. I still have exposure to high land content growth assets in Melbourne, so as you indicate I am not liquidating the entire portfolio here, however I now want better yield and I see some interstate markets, getting better value through a softening purchase price entry and to give me capital growth upside as well as a better yield.

Horses for courses at the end of the day. I don't buy the whole scare-mongering spiel from some sources of the media and datasphere, however having folding stuff isn't a bad idea IMO at present.

 

[zed_kid]

Hi Zed,

yep, I understand that you don't mean sell the whole kit and caboodle.

Personally I sold one (pre-CGT) asset last year that has grown very nicely for me over the years. Those funds were put into personal purchase. Am also likely to sell another soon to invest elswhere, however not before putting into a bank (or two) whilst I reassess the likely home for those funds.

Depends upon the investor's age also. I still have exposure to high land content growth assets in Melbourne, so as you indicate I am not liquidating the entire portfolio here, however I now want better yield and I see some interstate markets, getting better value through a softening purchase price entry and to give me capital growth upside as well as a better yield.

Horses for courses at the end of the day. I don't buy the whole scare-mongering spiel from some sources of the media and datasphere, however having folding stuff isn't a bad idea IMO at present.

Thanks for the reply player.

I’m not buying in to the scare campaigns either, but it gets people reading and sells papers. I do think that the times of throwing a dart at the map of Melbourne and making 10% CG YOY are over, for now.

Portfolio LVR is around 60% at the moment so it’s not a problem. The problem is cash. I have a lot of plans but not enough capital at the moment. There is one IP I’d like to sell. LVR @ 70% at the moment so it’s a good debt minimiser and should give around 200k in capital. This was a PPOR 2 years so I’m not sure about the CGT concessions. It feels ‘right’ at the moment to sell this particular IP as I think it had a great run. It’s in South Yarra so its blue chip, but its very ordinary just 2bed/1bath/1carpark. It’s been renovated and A/C added so I feel like its prime for a sell off.

Too bad its not my portfolio so I need to convince the portfolio managers to do it... might have to wash the dishes and take out the rubbish for a while to get in to the good books with them

 

[yadreamin]

Good thread Player.
Makes one do some serious thinking.

I believe there is a time for harvest.
It will be different for everyone. Age, health, plans and financial situation.

At the moment we have some forum members harvesting to build the dream home after sewing seeds for 20+ years.

Some members harvesting to move into commercial ips. Higher yeild and hopefully less annoying little problems.

Personally l am looking at harvesting to free up cash to move into the next stage of life. Moving away from the need to work full time. Neg-geared properties really hold you back as you get older.

We are busy checking the quality of our seed to see which paddock will produce the bumper crop.
cheers
yadreamin

 

[Intrinsic_Value]

Personally i think its an excellent idea for those investors that are prepared to be active.

Cycles never move in a constant % year after year.
The 'smart' investor realises this and adapts his strategy according to the season.

Perma property bears mistake this for an excuse to 'run to the hills because Armageddon is just around the corner'. Smart investors just realise that this is all part of the cycle.

Why would a smart investor be turbo charging their debt levels this late into the cycle???

In todays investment world, one doesnt need to be fully invested in cash to take advantages of potential future opportunities. They just need to have low debt levels. There is a very big difference here.

 

[contrary]

"... one doesnt need to be fully invested in cash to take advantages of potential future opportunities. They just need to have low debt levels. There is a very big difference here."

That is a very insightful statement.

 

[craigb]

yes i agree , our ppor offer accepted and in a few months we will harvest, thats the plan any way? and yes its subject to change,

 

[Player]

"... one doesnt need to be fully invested in cash to take advantages of potential future opportunities. They just need to have low debt levels. There is a very big difference here."

That is a very insightful statement.

Absolutely agree.

Here's a snippet form another post I made in the Demographia thread...........My usual rant about conservative LVR's (for most folks perhaps excluding those younger and on very high salaries) should poise many of us well for better pickings from the sideways/softening areas that tick the amenity/infrastructure and tenant demand boxes. Be sure to have your offsets and vals up to date ready to pounce.

In my post earlier in this thread, liquidating to cash for that particular asset suits me and my situation and potential plans right now. It isn't anywhere near my entire portfolio weight. Being fully invested in cash right now isn't what I was alluding to nor recommending for anyone.

However offsets and LOC's aside, sometimes having the folding stuff allows more flexibility (sic) and appeases lenders who view the borrower as someone who is active and likely affords better borrowing conditions for those too rent reliant.

I could of course be wrong, however that flexibility is necessary to me right now and this particular asset has " done it's growth work". To keep it for more speculative growth on it's poor yield doesn't suit my portfolio. I am moving to better yield (probably) in areas that have not seen the capital growth that Melbourne has up until recently.

Until cashflow becomes my queen, then cash will be king for this particular holding, when it is harvested.