Too Many Eggs.........

[Little Rooster]

Hi All

I am still very much a newbie around here but am wanting thoughts on the following scenario. Firstly I know that there are obvious pit falls but i suppose it is managing the "balancing act" that is obvious with the strategy.

As stated in my "joining post" we are perth based and have 2ip's in the 10k ring of the CBD and am waiting to settle on the 3rd in 5 weeks time

First Ip bought 2006 - cost 164k - value 420k after Reno's
Second, May 2013 - cost 377k - value 420k after Reno's
New Ip Feb 2014 - cost 365k - value after reno's 420k 'hopefully"

Now to the initial question:

All our Ip's are in the same complex, hence too many eggs....

If the location is excellent for schools, transport, shops and access as well as having previous experience in a particular complex with acceptable rents, is it such a bad thing to keep buying in there if the "price is right" and you know you could do 15-20k of reno's and still have equity in the property to be able to tap into it in the shorter term?

As we can withstand a bit of volitility with the ebbs and flows of the particular areas values, due to our long term hold strategy, does it fly in the face of the property investing rule book 101??

As an aside, I have already assured Rolf that our next one will be elsewhere if we can find an equivilent property !!!

Sorry if its a bit long winded and I look forward to your feedback?

Regards

Little Rooster

 

[perthguy]

There is no simple answer to your question. I diversified my IP portforlio by investing in Perth and Melbourne. Since then, it seems when the Perth rental market is up, the Melbourne rental market is down, and vice versa. That means that the return from at least one of my properties is pretty average for much of the time

 

[TMNT]

How much were the renos?

 

[HD_ACE]

how many does the complex consist of?

cheers

 

[Little Rooster]

How much were the renos?

Hi TMNT

Spending an average of 15k

Regards

Little Rooster

 

[geoffw]

How can a little rooster even have any eggs? ;-)

 

[Little Rooster]

How can a little rooster even have any eggs? ;-)

Haha classic

 

[Singo]

Owning 3 out of 5 is totally different from 3 out of 50. Size of the properties, the location etc should be considered as well.

 

[MTR]

Interesting, looking at the best performer in terms of equity is property no. 1, however Dec 2006 is when the Perth market crashed, so you purchased at the peak of the cycle in Perth, which generally means you paid too much at the time?? Have you just seen massive growth over the last couple of years??

My advice is spread your eggs around, there are many markets moving at the moment.

I invest in any market in Australia that is rising, its not the number of properties you purchase and its not a race, but its about timing, you can make much more money if you jump into a rising market.

MTR

 

[westminster]

All your IPs in one complex might be good, might be bad. It really depends on the complex.

For example, if you had a block in Westminster and you bulldozed the house and built 3 units and owned them all and rented them out you are effectively having all your eggs in one basket as well.

Depending on the size of the complex owing xx% could be a good thing if you can keep a reign on the strata and help keep the complex in good condition. On the downside the bank may say that the risk for them is too high if the ratio of owners:renters gets too high etc.

It really does depend on the complex and where it is.

 

[travelbug]

When you say you want an equivilent property- what makes this one so great? There are lots of places that are close to schools, shops etc.

Your return on reno is $2 for $1 so not bad but not great if you are doing the work yourself. By the time you add stamp duty, buying costs etc you are not that much ahead.

I'd be looking elsewhere now that you have 3. What if there are major works to be done? Is it an old complex? That's 3X the special levy if there needs to be one. Unless it's a small complex and you want control of it.

 

[see_change]

One alternative to diversification I've heard is put all your eggs in one basket and watch it very closely .

We tend to buy multiple properties in one area , then , Look for another area .

Cliff

 

[hobo]

how many does the complex consist of?

cheers

I think this is a key aspect as well.

 

[Little Rooster]

I think this is a key aspect as well.

Hi All

There is 20 plus units in the complex

I am also the strata treasurer and have been on the commitee for 4 years.

As a further update, another unit has just sold this week, post Reno's for
440k

Regards


Little Rooster

 

[westminster]

17 to go until you own the whole lot then

 

[The Y-man]

17 to go until you own the whole lot then

No, only 7 more (or 8 to be sure) needed - then Little R has control of the body corp so can do anything, like raising ridiculous levies so everyone exits and sells out cheap.

The Y-man

 

[Little Rooster]

No, only 7 more (or 8 to be sure) needed - then Little R has control of the body corp so can do anything, like raising ridiculous levies so everyone exits and sells out cheap.

The Y-man

Hi Y-Man

I love your thinking as that is actually my long term plan

The complex is predominately elderly so I just have to bide my time, own them all and then reduce all the strata levies to suit

 

[westminster]

Every strategy has it's pros and cons.
If eventually you'd like to control the whole development then go for it, just be aware that some banks might not like it so it might be best to talk to a few uber knowledgable brokers who know bank policies to see if it's going to be a problem for you.