for those interested I have done full doc with banks with nothing more then projected profit finance is easy enough theres also OPM or buying a small buy and sell to fund the next list goes on. we do find it hard putting a decent sized amount back into some deals but it's worked for a few yrs now.
Who here trades property for a living?
- Thread starter oc1
- Start date
Real wealth ...
I don't mean to rain on anybody's parade here... but some readers may see it that way I guess. I have the utmost respect for those who can "spot" an opportunity and "add value" on the way through. But you may like to read the book "The Millionaire Next Door". Trading is a job that creates income and cashflow but NOT necessarily wealth. And there's a big difference ! Wealth is that "thing" that keeps making you wealthier whether you get out of bed or not ! Wealth is invariably built through the acquisition , improvement and retention of growth assets. This is why you don't see many wealthy doctors/lawyers etc. (The book is the result of an extensive US study.) Sure, they may LOOK wealthy, they may have all the trappings but most are "balance sheet broke". Liabilities equal (or exceed) assets !!
So, by all means trade and have a fantastic income statement ...but pay attention to the balance sheet too
. Retain and Grow them assets !!
LL ... strictly buy and hold.
I don't mean to rain on anybody's parade here... but some readers may see it that way I guess. I have the utmost respect for those who can "spot" an opportunity and "add value" on the way through. But you may like to read the book "The Millionaire Next Door". Trading is a job that creates income and cashflow but NOT necessarily wealth. And there's a big difference ! Wealth is that "thing" that keeps making you wealthier whether you get out of bed or not ! Wealth is invariably built through the acquisition , improvement and retention of growth assets. This is why you don't see many wealthy doctors/lawyers etc. (The book is the result of an extensive US study.) Sure, they may LOOK wealthy, they may have all the trappings but most are "balance sheet broke". Liabilities equal (or exceed) assets !!
So, by all means trade and have a fantastic income statement ...but pay attention to the balance sheet too
. Retain and Grow them assets !!LL ... strictly buy and hold.
I don't mean to rain on anybody's parade here... but some readers may see it that way I guess. I have the utmost respect for those who can "spot" an opportunity and "add value" on the way through. But you may like to read the book "The Millionaire Next Door". Trading is a job that creates income and cashflow but NOT necessarily wealth. And there's a big difference ! Wealth is that "thing" that keeps making you wealthier whether you get out of bed or not ! Wealth is invariably built through the acquisition , improvement and retention of growth assets. This is why you don't see many wealthy doctors/lawyers etc. (The book is the result of an extensive US study.) Sure, they may LOOK wealthy, they may have all the trappings but most are "balance sheet broke". Liabilities equal (or exceed) assets !!
So, by all means trade and have a fantastic income statement ...but pay attention to the balance sheet too
LL ... strictly buy and hold.
agree that's why we do it long term is holding comms for us trading is a way to get us there.
Our litmus test.
Our litmus test, fellow travellers, is to sit quietly and consider...." if for some reason ( your choice ..or otherwise) I didn't get out of bed/went on vacation/ just got lazy ... for the next month/year/years ?? ...how much income would I have & how much wealthier would I be ?
Most ( even VERY high ) income earners can't survive more than a few months due to "commitments" ( car payments, rent/mortgage, school fees, personal credit cards ( bad debt), etc).
LL
Our litmus test, fellow travellers, is to sit quietly and consider...." if for some reason ( your choice ..or otherwise) I didn't get out of bed/went on vacation
/ just got lazy ... for the next month/year/years ?? ...how much income would I have & how much wealthier would I be ? Most ( even VERY high ) income earners can't survive more than a few months due to "commitments" ( car payments, rent/mortgage, school fees, personal credit cards ( bad debt), etc).
LL
This is a brilliant thread guys, really interested in reading your stories/thoughts!
Personally, I'm trying to do it as well (although on a much smaller scale than you guys!), but I don't seem to find blocks where there is instant equity like in the example you gave Oscar.
ie. The blocks I look at in your battle axe example seem to end up about even or so (by my estimates) if I was to do the subdivision straight away. eg. the one I bought late last year: Paid $380k
Could have cut off the back and sold the block for perhaps $160k, then sold the original house for $280k? Then take into account subdivision costs of $20k, and SD on purchase etc. of $18k. Similar sort of figures result when just demolishing and splitting the block down the middle.
Leaves a very slim margin at the end, and that's without taking into account holding costs. Now 5 months on this particular block looks brilliant because the market has risen, but that's reliant on the market, and not really what you guys are doing.
Just started that book yesterday! So far my theory is buy and hold too, but I do see merit in trading if it gets you into a bigger asset base as a result (although haven't done any of this myself yet).
Personally, I'm trying to do it as well (although on a much smaller scale than you guys!), but I don't seem to find blocks where there is instant equity like in the example you gave Oscar.
ie. The blocks I look at in your battle axe example seem to end up about even or so (by my estimates) if I was to do the subdivision straight away. eg. the one I bought late last year: Paid $380k
Could have cut off the back and sold the block for perhaps $160k, then sold the original house for $280k? Then take into account subdivision costs of $20k, and SD on purchase etc. of $18k. Similar sort of figures result when just demolishing and splitting the block down the middle.
Leaves a very slim margin at the end, and that's without taking into account holding costs. Now 5 months on this particular block looks brilliant because the market has risen, but that's reliant on the market, and not really what you guys are doing.
But you may like to read the book "The Millionaire Next Door".
So, by all means trade and have a fantastic income statement ...but pay attention to the balance sheet too
Just started that book yesterday! So far my theory is buy and hold too, but I do see merit in trading if it gets you into a bigger asset base as a result (although haven't done any of this myself yet).
We trade as well. Last year we traded 14 properties while also adding a few to our "hold" portfolio. In a perfect world we would hold most of them, however, cashflow is king. Having said that, I am of firm opinion that there is no use holding a property just for the sake of it and hoping it will double in 10 years. The only properties we hold are those that we know are of excellent potential. I have seen alot of people buy properties (that perhaps have an instant 20% equity position) and hold onto them even though they may be in a bad position, have a high chance of vacancy, not a good area etc. We buy those properties as well, except the difference is that we will add a bit of value through a reno then off load them.
All of the properties we traded last year were in the Western Sydney areas in a so called falling market and so far this year we have traded 4 in the same areas with another 4 in the waiting. I personally think that if you can combine the two methods, it opens up many more opportunities which in our case have been more agents calling us, cashflow, reputation of our end product for buyers and therefore quick sales, and most of all doing what we love.....playing with real estate.
As someone else stated, finance can be an issue however we go by the saying "find it, fund it, farm it". We don't mind paying for private funds which is around the 20% pa mark if the deal still works and we have also been fortunate enough to have 5 Simultaneous settlements and therefore didn't need to obtain finance.
In closing, it all comes back to how well you purchase a property, the rest is just how you choose to manage it. At the end of the day all that counts is that you are in the game!
All of the properties we traded last year were in the Western Sydney areas in a so called falling market and so far this year we have traded 4 in the same areas with another 4 in the waiting. I personally think that if you can combine the two methods, it opens up many more opportunities which in our case have been more agents calling us, cashflow, reputation of our end product for buyers and therefore quick sales, and most of all doing what we love.....playing with real estate.
As someone else stated, finance can be an issue however we go by the saying "find it, fund it, farm it". We don't mind paying for private funds which is around the 20% pa mark if the deal still works and we have also been fortunate enough to have 5 Simultaneous settlements and therefore didn't need to obtain finance.
In closing, it all comes back to how well you purchase a property, the rest is just how you choose to manage it. At the end of the day all that counts is that you are in the game!
Hi dash11
I am very interested in trading, I have a substantial property base but would now like to improve my cashflow.
I am in Perth and the market is going backwards in many pockets.
If I were to purchase a property well under market value with intension of a quick makeover I am concerned that I would have a problem selling as the market is currently swamped with properties.
I would be interested in some tips or ways of minimising my risk.
I also agree with LL, but it would be great to be able to do both.
Thanks everyone for a great read.
Cheers, MTR
I am very interested in trading, I have a substantial property base but would now like to improve my cashflow.
I am in Perth and the market is going backwards in many pockets.
If I were to purchase a property well under market value with intension of a quick makeover I am concerned that I would have a problem selling as the market is currently swamped with properties.
I would be interested in some tips or ways of minimising my risk.
I also agree with LL, but it would be great to be able to do both.
Thanks everyone for a great read.
Cheers, MTR
G'day Steve
i only buy vacant blocks and reconfigure the boundaries and add extra titles where I can to force growth. It seems to work well. For example one of the deals I bought last week involves 2 blocks side by side with total frontage of 48 metres. So i'm going to split into 3 blocks of 16 metres frontage. Each block is over 500m2 so no need for drawings. Easy. I've been looking at established areas with houses on them but I can get the numbers to work as well (on a % basis) unless I build.
G'day Steve
i only buy vacant blocks and reconfigure the boundaries and add extra titles where I can to force growth. It seems to work well. For example one of the deals I bought last week involves 2 blocks side by side with total frontage of 48 metres. So i'm going to split into 3 blocks of 16 metres frontage. Each block is over 500m2 so no need for drawings. Easy. I've been looking at established areas with houses on them but I can get the numbers to work as well (on a % basis) unless I build.
Thanks for that Oscar. Glad I'm not the only one that can't seem to make it work with houses. So perhaps what held me back in the particular example above is that the house probably still had a notional value of $20k or so in the price? Now that I think about it, I also paid a premium to secure the deal (for various reasons) - so that would be an extra $5-10k.
Was about to say that taking those points into consideration, it may have brought it to a decent profit margin, but I'm forgetting that the front block wouldn't go for $280k without the house.
hmmmmmm back to the drawing board!
Thanks again though mate, good food for thought.does the 10-20% include the 9% or so GST?
if you think about it, CGT is taxed at half of ordinary income rates plus there is no GST, so if you are paying 10% as a trader you will be paying 5% as a passive investor. I suspect the reason your rates are so low is because you are claiming dev costs as you roll on from one project to the next. the effect is not unlike a passive investor investing in trees, (assuming they will actually make a profit one day), in that it defers your tax from one year to the next but if you were to retire tomorrow the tax would come home to roost eventually.
hi ausprop as already stated I have no idea how the tax works I pay accountant he does the figures and so far all have been 10% this is ran as a business as has been established for some yrs now so if I were to retire tommorow tax has been paid but I would not make anything just like any brick mortar business. .
always open to learning new tactics my long term is to hold comm
have been looking at motels also lately found a bargain but my funds a tied up
anyways I am still under 30 so have a bit of time to make mistakesalways open to learning new tactics my long term is to hold comm
have been looking at motels also lately found a bargain but my funds a tied up
i think you are on the right track... entirely IMO. for me the thought is... instead of buying the motel or shed or whatever... what if you were to develop it?
yes that would be an option good food for thought although the bargain I am looking at returns 18% and has traded well for some yrs I know of a few motel development sites where we live problem is funding unless going to private group then returns need to be 20% to secure the deal in our experience and don't like the idea of jv developing is risky and always have what if... this means missing out on a heck of alot of deals but gives us a good safety net.