Using a buy & hold strategy, in how many years did you reach financial independence?
- Thread starter Ari_X
- Start date
HE
I think its great that you road the boom and if you have the desire to up skill using your equity that can get you there much quicker, as you say the buy and hold is too slow, all to their own.
I retired 9 years ago riding the Perth property boom, mother of all booms from 2001-2006 just had to sit on your hands and throw a dart and you made money, similar to what is happening in Syd at the moment. When the market crashed there was blood on the street, and blue chip has still not recovered.
GFC hit in 2008/9 when people were running for cover I was buying hard in Melb market which was booming, I don't think many people even realised this. I used various strategies ie put plans and permits together and on sold to builders Melb is good for this, renos, buy and holds, and sold the lot prior to the market tanking.
Went on to USA, purchased 8 properties on to 9 now cashflow properties, 20% gross yields, currently due to the Aus$ tanking this is generating aroun d $120K gross. So I live off this and also rents and my developments.
Started networking with developers on SS and have just completed my second development in Perth and commencing my third in Melb demolishing in 1 month, 4 townhouses, using oc1 who is I believe one of the best as he has managed to make money in any market, I am not about to reinvent the wheel.
This is a nice strategy where you perhaps sell 3 own one outright, bread and butter areas and easier to source finance. Alternatively sell the lot if you are cash poor and grow the money in the early stages?? depending on your scenario.
So in fact I have actually not retired but formed a development business that generates income but its not a day job because I have choices I guess.
MTR
Or LOW (Live Off Wife) if you're a stay at home dad
DT
put a new spin to this one, perhaps LOC, Live off a Cougar
blacktown LGA and some part of hills will be less affected in an event of price correction in Sydney. affordable range for many and high income demographics in part of hills!
HE
I think its great that you road the boom and if you have the desire to up skill using your equity that can get you there much quicker, as you say the buy and hold is too slow, all to their own.
I retired 9 years ago riding the Perth property boom, mother of all booms from 2001-2006 just had to sit on your hands and throw a dart and you made money, similar to what is happening in Syd at the moment. When the market crashed there was blood on the street, and blue chip has still not recovered.
GFC hit in 2008/9 when people were running for cover I was buying hard in Melb market which was booming, I don't think many people even realised this. I used various strategies ie put plans and permits together and on sold to builders Melb is good for this, renos, buy and holds, and sold the lot prior to the market tanking.
Went on to USA, purchased 8 properties on to 9 now cashflow properties, 20% gross yields, currently due to the Aus$ tanking this is generating aroun d $120K gross. So I live off this and also rents and my developments.
Started networking with developers on SS and have just completed my second development in Perth and commencing my third in Melb demolishing in 1 month, 4 townhouses, using oc1 who is I believe one of the best as he has managed to make money in any market, I am not about to reinvent the wheel.
This is a nice strategy where you perhaps sell 3 own one outright, bread and butter areas and easier to source finance. Alternatively sell the lot if you are cash poor and grow the money in the early stages?? depending on your scenario.
So in fact I have actually not retired but formed a development business that generates income but its not a day job because I have choices I guess.
MTR
MTR, now I'm jealous. Yes Perth, I slept right through the boom without firing a single shot. US post GFC as well however, I wasn't in a position cash wise to buy outright without borrowing. All regrets but I guess my lack of flexibility has both been a blessing and a curse ie accumulated a sound portfolio but haven't done anything particularly groundbreaking. Kudos to you though and food for thought.
Skater,
I think your calculations above implies you are getting better overall return than someone investing in areas with high CG but lower yield.
You said you buy properties with 7% yield while HighlyGeared buys properties with 3% yield. But you have assumed both your properties double in value around the same time. To keep it simple let's say they double in 10 years. That means your properties overall return is 14.2% pa (7% yield and 7.2% CG) while highlygeared return is only 10.2% (3% yield and 7.2% CG).
The reason why many investors are prepared to accept lower yield is because the difference gets made up with extra CG.
Secondly, you say that Highlygeared is losing money because he is negatively geared, but you are also losing money by paying tax on extra income you make. It all eats into your overall returns, meaning less money to reinvest.
Don't get me wrong both strategies have been proven to work for different investors. The point is knowing the pros and cons of each strategy, and what suits your temperament and circumstances.
Cheers,
Oracle.
Merits in all methods.
All that matters is buying well.
All that matters is buying well.
I tend to average about 5% yield on purchase. In recent times, my lowest yield has been about 4.4% in Brisbane and highest has been 8.5% (on day one) in Blacktown LGA. That was my last purchase in Sydney in 2012.
I sacrificed on yield on that particular one in Brissy bc it was a (very) blue chip suburb with lots of knock down rebuilds going on. The value was in the dirt. Being a post war home (but readily rentable without any renos neccesary), its the kind of suburb where one can knock down the home, build a new spec 4x2x2 and sell it off/reval for $1.2+ million.
Having said that I do like the bog std 3 bed fibro homes you buy with a $2 or $3 in front and get 6% yield. But of late, I've been looking to populate my portfolio with more blue chip located properties...to the detriment of yield of course. They're nice to have and add a certain level of quality to your holdings but unfortunately keep you in the rat race longer (cashflow wise) if LOR is your goal.
Not exactly. I was implying that my Sydney properties may be getting a similar amount of CG, but with a higher yield. I also said that what suits me, may not suit someone else.
What I said was
That's right! With this, I am referring to my Sydney properties only. I do have other's that are regional, which still get CG, but not to the same extent as my Sydney properties.
What I have experienced over the years, is that I get just as good, percentage wise, CG on my outer Sydney properties as others get with properties that are closer to the City. Of course, it is hard to put it down exactly, because there are so many markets, within markets in Sydney, but on average, I don't feel that I have had any disadvantage with CG by buying in the areas I have bought in.
So, I get the best of both worlds on those properties.
Well....no. I've paid little to no extra tax on the income. Lower priced properties still have depreciation, which can wipe out any extra tax liability.
Precisely! My end goal was to live off rent. In order to do so, I have sought out properties with a high yield. Some of them in Sydney, some of them elsewhere.
Our first IP was in Ambarvale. The year was 1998! We paid $90,500, and got it rented immediately for $185pw. OK, so you won't find that kind of yield, even in outer Sydney now, but that is the kind of thing that I am likely to buy in Regional areas. That same IP is worth well over $400k today, and has put money into our pockets since day one.
Our portfolio is geared at around 50%, which includes regionals. We haven't paid down any debt. You don't get that, unless you are getting the grow as well as the yield.
Why jealous
Just thinking is central coast worth looking at?
Anyway better not derail this thread, its a good one
My (personal view) again - I don't like the CC from an investment standpoint. Commuting from the CC to Sydney to work would test anyone. It looks appealing on the map ie close to beach, within striking distance of Sydney and much more affordable. I'd probably liken it to, I don't know, Mandurah.
I'd take a Mt Druitt over something past Gosford any day of the week. If I HAD to buy in Sydney now, I'd probably look for dev site in the Inner West...Summer Hill and in towards CBD and parts of the Northern Beaches closer to Mosman - prices have jumped for sure, but not as over exuberantly as the West, Hills and Asian enclaves like Epping, Chatswood and Eastwood. Those are ticking time bombs IMHO with highly speculative prices.
Sorry I'm derailing the thread again - back on course pls
See, this is where we differ. From my perspective, blue chips come at a hefty price tag. So you end up with a large land tax bill. You also sacrifice yield, and I'm a yield kinda girl.
Of course, you've probably got an income that can easily afford this, but I never really got over the trauma of 17.5% interest rates on our PPOR, and us both being redundant. Although we didn't lose the house, we had an extremely hard time through those years, and it's a long, long storey, so we won't go there.
So, when I look at an investment, I look at all the worst case scenarios. To me, an investment is not an investment unless it brings some kind of immediate returns. I don't mind taking a risk, but it's always a calculated risk, as I don't want to ever have to revisit how we lived early in our marriage.
I also wanted to give Hubby the choice over whether or not he needed to 'work' in as little time as possible, so holding onto negatively geared assets has never really been a part of our strategy. In saying that, there have been a couple of negatively geared places, but they have been with an end game in mind. For instance we've got a unit that we bought, because it was cheap, assuming that the market would move in a couple of years. Well, the market did move & it's more than double what we paid, so it's going. It was never going to be a part of our long term goals, just a means to reducing debt on the keepers.
BTW, that Blacktown one sounds like something I'd be all over.
See, this is where we differ. From my perspective, blue chips come at a hefty price tag. So you end up with a large land tax bill. You also sacrifice yield, and I'm a yield kinda girl.
Of course, you've probably got an income that can easily afford this, but I never really got over the trauma of 17.5% interest rates on our PPOR, and us both being redundant. Although we didn't lose the house, we had an extremely hard time through those years, and it's a long, long storey, so we won't go there.
So, when I look at an investment, I look at all the worst case scenarios. To me, an investment is not an investment unless it brings some kind of immediate returns. I don't mind taking a risk, but it's always a calculated risk, as I don't want to ever have to revisit how we lived early in our marriage.
I also wanted to give Hubby the choice over whether or not he needed to 'work' in as little time as possible, so holding onto negatively geared assets has never really been a part of our strategy. In saying that, there have been a couple of negatively geared places, but they have been with an end game in mind. For instance we've got a unit that we bought, because it was cheap, assuming that the market would move in a couple of years. Well, the market did move & it's more than double what we paid, so it's going. It was never going to be a part of our long term goals, just a means to reducing debt on the keepers.
BTW, that Blacktown one sounds like something I'd be all over.
Huge income is a relative thing Skater and whilst I'm on a 6 figure salary, its def not huge. The land tax bill is also relative - irrespective of the value of purchase, my land tax component is normally 75% or higher of the val whether its Blacktown or Newtown.
But I take your point and if I bought a shedload of 6-7% yielders in Blacktown, Campbelltown and Penrith LGA up until 2013, I would def be in a stronger position cashflow wise. And who knows, perhaps in an even or better situation equity wise too. I know my West purchases have outperformed the more glamorous ones. What, wait a minute...
Hehe, Hubby is on 6 figures nowadays too, & has been for probably the last 8 years, but prior to that, we were well below the average, so unlike a lot of others our age, we don't have a lot of Super, so this is it for us. I've always strived to cut expenses as soon as possible too, because the amount you need to retire on is a lot less, if you don't have those recurring little nasties, like a mortgage (PPOR) or rent.
I understand that, but you can hold onto more land before you reach the threshold if the value of the land is lower. While my Regionals aren't stellar performers CG wise, they do provide excellent cashflow and take up buggar all of the threshold.
Hehe, yes, well, you are at a different time in your journey to us too. I'm presuming you are younger, so will be holding on until at least the next upswing, while we are not. Hubby is on his way out of the job, and he can now concentrate on what he wants to do, rather than what he has to do, so some of our Sydney properties are being sacrificed in order for that to happen. If he was happy to continue, I'd be pulling the equity & leveraging up again (not in Sydney), instead I'm pulling the equity & parking it.
Bear with me as I skew this thread in my favour yet again....
I'm rather impressed with what some of the forumites have done including yourself Skater but bottomline/my reality is this:
Unless I can get my hands on a very sizeable loan in the near future to buy a commercial/resi/dev that will yield 10%+ net from day 1 (and I am working hard on this with one of my Banks), the 100% PURE LOR option won't be open to me for min. 15 years.
So the only plausible scenario I see that MAY allow me to pull the plug earlier (without selling anything Virgo or buying more) is:
- get properties to a self sustaining state - could theoretically happen within 24 months
- decelerate in terms of more purchases
- receive/manufacture another 25% of capital growth from where we are
- then go to bank/s and top up to 80%
- retire
Anyone got a better idea?
I'm rather impressed with what some of the forumites have done including yourself Skater but bottomline/my reality is this:
Unless I can get my hands on a very sizeable loan in the near future to buy a commercial/resi/dev that will yield 10%+ net from day 1 (and I am working hard on this with one of my Banks), the 100% PURE LOR option won't be open to me for min. 15 years.
So the only plausible scenario I see that MAY allow me to pull the plug earlier (without selling anything Virgo
or buying more) is:- get properties to a self sustaining state - could theoretically happen within 24 months
- decelerate in terms of more purchases
- receive/manufacture another 25% of capital growth from where we are
- then go to bank/s and top up to 80%
- retire
Anyone got a better idea?
Bear with me as I skew this thread in my favour yet again....
I'm rather impressed with what some of the forumites have done including yourself Skater but bottomline/my reality is this:
Unless I can get my hands on a very sizeable loan in the near future to buy a commercial/resi/dev that will yield 10%+ net from day 1 (and I am working hard on this with one of my Banks), the 100% PURE LOR option won't be open to me for min. 15 years.
So the only plausible scenario I see that MAY allow me to pull the plug earlier (without selling anything Virgo
- get properties to a self sustaining state - could theoretically happen within 24 months
- decelerate in terms of more purchases
- receive/manufacture another 25% of capital growth from where we are
- then go to bank/s and top up to 80%
- retire
Anyone got a better idea?
Playing devil's advocate, there's nothing wrong with selling some & taking some money off the table, especially if what you are selling is coming from a heated market & re-investing into a warming market. Of course, you cop all the fees by doing this, but, if serviceability is an issue, this will definitely get you through it, and is similar to what Seech did last cycle by following the growth from Sydney to Qld, to Nth Qld and then keeping cash to get back in again when he was ready to go again this time around.
You seem to be in a really good position with the amount of holdings you have, and once they all go through a cycle, you will have a shipload of equity, and that never goes astray.
If I was in your position, I'd look at maybe selling something in Sydney, and putting the profits into an emerging market and/or getting a PPOR. I'd also be looking at any non-deductable debts, and paying them off (if you have any).
