What advice would you give yourself 10 years ago that you know now?

[Ben Kelleher]

Hello everyone,

After reading this thread from beggining to end, i thought it an appropriate time to make my first post. thank you for such a great read.

10 years ago when i was 13, i would have told myself :

• learn from your parents, their achievments and mistakes.
• start saving..........NOW!!

My grandfather said "you cant own a car, one of those cell phones AND a girlfriend, its to expensive and you wont be able to save. get rid of one, just have 2 of the 3 !!

should have kept the car.... haha

thanks again

Ben

 

[Deltaberry]

Hmm 10 years ago I would've been 15 so not much I could do. But philosophically speaking, I'd say 7 years ago when I was still 18 I should've traded the ups and downs of value stocks less and invested in values stocks more.

I won't say buy property earlier since that's with that benefit of hindsight that it's gone up. If it were so good, it's not too late now anyway.

Some other stuff - hmm maybe be a bit more entrepreneurial with ideas rather than just aiming for jobs that pay well. Not too late now I guess.

 

[shanh]

10 years ago I was a plain 15 year old, no idea about finance as well, aside from the bits and pieces of financial maths that was in the curriculum. Now I see the relevance of a lot of it.

If I could go back in time, I'd read all the books on finance, get myself a head start in educating myself financially. But I guess I might just not have the interest back then. It really depends on when "one's eyes open" so to speak. You need to take an interest in your finance before you can start on something.

If I had "woken up" 5 years ago, would've started saving like crazy.

But then it's never too late too start, it's the sticking with the plan that's hard.

 

[Deltaberry]

Nah learning finance is useless - only helps you land say a 6-digit job after uni or something like that.

In contrast my friend who knew nothing about anything, turned around $200k into $3m equity in a few years. Also 25. So I'd say, the advice would've just been to take some risks, follow the trend and go with your heart. The trend is your friend. Doesn't take a rocket scientist to work out the trend.

 

[bene313]

Although the 6-digit job might be required to come up with that initial 200k to put at risk DB.

Not many under 25s I know with 200k to invest unless it was a gift from Daddy.

 

[Deltaberry]

People are just lazy. he worked throughout high school and saved every dime, lived frugally. Making $25k pa since 17 while living at home and not spending gets you to $100k pretty quickly.

Of course, most people choose lifestyle and beer. Fair enough. Oh and gap years. But can't complain later on that's all.

 

[Ace in the Hole]

People are just lazy. he worked throughout high school and saved every dime, lived frugally. Making $25k pa since 17 while living at home and not spending gets you to $100k pretty quickly.

Of course, most people choose lifestyle and beer. Fair enough. Oh and gap years. But can't complain later on that's all.

I wouldn't say that people who don't save every cent are lazy....

There are some extremely hard workers who rarely rest in work and play, but may not have much money because they are not financially educated, or don't care to be, but they are not lazy...

 

[shanh]

Nah learning finance is useless - only helps you land say a 6-digit job after uni or something like that.

In contrast my friend who knew nothing about anything, turned around $200k into $3m equity in a few years. Also 25. So I'd say, the advice would've just been to take some risks, follow the trend and go with your heart. The trend is your friend. Doesn't take a rocket scientist to work out the trend.

I don't mean finance degree such, was referring to financial education in terms of investment. Can't comment on the usefulness of finance courses, as I've never done one. But I would refrain from making generalisations.

On the other hand, if your friend didn't know anything and ended up with 3 mil equity, then I call that luck. Hopefully he or she is not just going with the trend blindly now and actually knows what he or she is doing, as a millionaire. A lot of ppl Just went with the trend during the dotcom bubble, we all know what happened.

I agree however that saving is important, having a goal abt what you want to do with that money will def help. Some ppl save for a house at 18, others go on a gap year. Its just about what you want in life at that point in time.

Not everyone decide that they'll go into property at 18, but not havin g that goal at 18 doesn't exclude anyone from becoming successful down the track. Many ppl work their six fig jobs after uni and then start investing, end up as multi millionaires. There is not just one fixed road to success.

 

[datto]

My advice is that if you invest in cheap property you get cheap returns.

eg if you bought a $90k property 10 years ago, today it may be worth $220k

But if you bought a ,say, $180K property 10 years ago, today it may be worth $450K

The above is from my own personal experience.

 

[alexlee]

My advice is that if you invest in cheap property you get cheap returns.

eg if you bought a $90k property 10 years ago, today it may be worth $220k

But if you bought a ,say, $180K property 10 years ago, today it may be worth $450K

The above is from my own personal experience.

90 to 220 in 10 years is 9.35% a year. 180 to 450 in 10 years is 9.60% a year. I wouldn't consider 9.35% to be cheap. My bet is that the 90k property had a higher yield. I'll happily take two of the cheapies. Don't get blinded by the size of the numbers: calc the percentages.

 

[datto]

8.66% (for the cheapy) compared to 5.77% for the dearer if i remember correctly. Thats gross.

Maybe I should havebought 2 of the cheapies!

 

[alexlee]

8.66% (for the cheapy) compared to 5.77% for the dearer if i remember correctly. Thats gross.

Maybe I should havebought 2 of the cheapies!

So, almost 3% higher yield, with almost the same capital gains. I don't know about you, but 3% extra yield would give me much more serviceability, allowing me to buy more of the cheapies.

How do the numbers stack up when you compare THREE 90k cheapies against one 180k property?

 

[datto]

Well lets see, the cheapies were returning $150pw rent. multiply by 3 = $450.

The % are the same, its just that I would be investing $270K (mind boggling amount to borrow back then).

But if I did that, then my portfolio would be now be worth $220K x 3 = $660K.

Nice to have now, but one needs to be fearless in investing large amounts, and also have the abilty to borrow such high amounts.

So several cheap IP equal 1 expensive IP.

 

[atsim]

Another lesson: Live in the present. Enjoy every day that you have for its own sake. That isn't a new idea to me but I seem to keep learning it.

Im with robyne on this point. Ive bought and sold 6 times in the last 7 years and im now ready to sell my last two ips over next 1-3 years, with minimal gains , say 5-10% we will be debt free and have about $100kg to build on . Then we will pounce on 1 or 2 ips fully loaded. Thats the plan anyway

 

[alexlee]

Nice to have now, but one needs to be fearless in investing large amounts, and also have the abilty to borrow such high amounts.

So several cheap IP equal 1 expensive IP.

That's not my point. My point is that your opinion that cheaper properties have cheaper returns is wrong, according to your own figures. The higher yields allows you to borrow more. The courage, well, that's not even an issue if you don't think cheap properties are a good investment, is it?

The equation is not that several cheap IPs equal 1 expensive IP. In your own example, 2 cheap IPs = 1 expensive IP. But the significantly higher yields means given the same starting serviceability, if you buy cheap IPs you might be able to afford 3 of them, versus only 1 expensive IP.

This is a question of strategy, and whether your opinion that cheaper properties don't perform as well is actually based on reality (not according to your own figures).

 

[datto]

That's not my point. My point is that your opinion that cheaper properties have cheaper returns is wrong, according to your own figures. The higher yields allows you to borrow more. The courage, well, that's not even an issue if you don't think cheap properties are a good investment, is it?

The equation is not that several cheap IPs equal 1 expensive IP. In your own example, 2 cheap IPs = 1 expensive IP. But the significantly higher yields means given the same starting serviceability, if you buy cheap IPs you might be able to afford 3 of them, versus only 1 expensive IP.

This is a question of strategy, and whether your opinion that cheaper properties don't perform as well is actually based on reality (not according to your own figures).

maybe the CF yield is higher on the cheaper IP but the CG is higher on the more expensive one.

Also it is easier to manage one expensive IP than 2 cheapies. Eg better quality tenant, less likely to default or cause damage, less maintenance on one property as apposed to two.

But yes i agree the CF yield is higher on the cheaper IP.

 

[alexlee]

maybe the CF yield is higher on the cheaper IP but the CG is higher on the more expensive one.

On the numbers YOU gave, the difference is 0.25% a year.

Also it is easier to manage one expensive IP than 2 cheapies. Eg better quality tenant, less likely to default or cause damage, less maintenance on one property as apposed to two.

Do you in fact have experience with this? Or is this just what you 'know', like you 'know' the more expensive property gives better returns, even though the capital gains difference was only 0.25% a year?

 

[datto]

I have three rental properties at the moment. I can tell you that from my experience that it would be easier to manage just one IP.

Think about it, there are three water heaters, 3 stoves etc so there is more chance for something to need repair. And there are 3 lots of tenants who could lose their job, get sick or have an accident.

Also, even though, the CG difference may be only 0.25%, if you need to sell a property in a hurry, the expensive property would be easier to sell, I would certainly think.

Furthermore, I have noticed that when property prices increase (in sydney & metro areas) the more expensive properties are the ones that go up first. The cheaper ones in the outer suburbs usually go up last. Its as if they are just catching up to the rest of the market.

Therefore you could theoretically do this in a property boom if you owned a more expensive IP:

1. wait till your expensive IP booms in price, then sell (in a boom you can sell an IP with a click of the fingers)

2. buy several IPs in the outer suburbs which havent yet boomed (you buy at cheap price, coz you are cashed up)

3. wait for the boom to hit the outer suburbs and you would clean up on CG.

Now, if you just bought cheapies you would not be able to do that and therefore not make as much money.

 

[alexlee]

Think about it, there are three water heaters, 3 stoves etc so there is more chance for something to need repair. And there are 3 lots of tenants who could lose their job, get sick or have an accident.

And if your 1 tenant loses their job, your income goes to nil. If one in three lose their job, you lose 1/3 the rent.

Also, even though, the CG difference may be only 0.25%, if you need to sell a property in a hurry, the expensive property would be easier to sell, I would certainly think.

That doesn't make sense to me. Why is a mroe expensive property easier to sell?

Furthermore, I have noticed that when property prices increase (in sydney & metro areas) the more expensive properties are the ones that go up first. The cheaper ones in the outer suburbs usually go up last. Its as if they are just catching up to the rest of the market.

That might well be true, but that's timing the cycle. That's not the same as saying cheap properties give lower returns.

Therefore you could theoretically do this in a property boom if you owned a more expensive IP:

1. wait till your expensive IP booms in price, then sell (in a boom you can sell an IP with a click of the fingers)

2. buy several IPs in the outer suburbs which havent yet boomed (you buy at cheap price, coz you are cashed up)

3. wait for the boom to hit the outer suburbs and you would clean up on CG.

Now, if you just bought cheapies you would not be able to do that and therefore not make as much money.

Is any of this based on what you've actually done?

 

[Mr. Fabulous]

Is any of this based on what you've actually done?

Just to add to this....

- Have you taken buying/selling costs and CGT, etc. into account as well?