Strategies that are working in 2015 Australia

I wouldn’t get too caught up in all those investment strategies proposed in books and by property gurus etc. I would use them more as an educational concept of how it works theoretically. There are many assumptions behind those strategies.

As we all know everything changes all the time. So investing in property using a +10 year strategy that makes multiple assumptions seems a bit off. In 5 to 10 years things will be different from today and your strategy will change and so will the strategies proposed in the property books.

Following certain rules that help you maximise your:

• options
• your investment’s value
• and income generation ability

now and in the future seems more realistic.

Some obvious rules are:

• Buy under market value – Negotiate hard.This helps you create equity straight from day one
• Buy properties with development potential for now or in the future – High future value potential when rezoning
• Over time add value by renovating, subdividing, etc

There are plenty more.

I agree with D.T. I wouldn’t go into #4.

Cheers
Andrew

The framework for your investment strategy should be considered dynamic and fluctuational AT ALL TIMES.

For Steve to say the way he worked things, they dont work like that anymore is fine.

Because no matter what ‘framework’ of litigation and banking practise you come across to start with .. it will be moderately different as your investment matures. However .. moderate changes add up over time .. leading to a significant change over a period of years. As an investor or speculator in real estate you MUST keep yourself informed as to what will either benefit or harm your investment in the short to medium term. It is part of your overall wealth strategy and not keeping informed can leave you with either expensive taxation on sale or per annum .. or even worse .. a loss of value on your investment.

And the market? You will head into a different market than Steve .. and a different market than Bob, Frank, and Peter. You will have to assess what the demands are in that market .. where the market sits on the investment clock .. what areas have the possibility of adding realistic and significant value.

As Steve notes in one of his books (OMG yes i did actually read at least 3 of them), he not only headed to Wendouree once .. he headed back again when the market condions were right. Because he understood the market .. he had experience in the market demands .. and he knew where the value lay.

So the answer for the 2015 markets is .. try to calculate what lies ahead in the market you have chosen .. for the next 5 years. If you can percieve value or an attractive market sector .. then go for it .. jump the boat .. take the risk .. talk to your lenders .. harasss your local agents .. and get to where you want to.

Because the first step will be yours to achieve .. and you will never regret it.

Catalyst wrote:

Can i ask how you are calculating cash flow in order to make most of Adelaide CF+. Must be different to the way i calculate it.

i.e outgoing(interest on 100% finance, rates, insurance etc) minus incoming (rent). Only counting 80% is not taking into account interest lost by using a deposit. ALL properties can be CF+ if you pay a big enough deposit but we’d be just kidding ourselves wouldn’t we!

Sure. I count 105% interest into all my properties because that’s how they’re all financed. That’s the only fair way as well when taking into account opportunity cost.

Just a couple of examples of my own recent buys if I may – $147k purchase with 250/wk rent in one suburb, $250k purchase of a duplex pair in another with 2 tenants totaling $400/wk , there’s many others along similar lines. These are in the northern suburbs, can do similar yields in the south except with slightly higher numbers. If you’re willing to do extra work like rehab / reno there’ll also be more reward available.

Part of what I like about Adelaide is that the costs are fairly cheap. The insurance and council rates on my Adelaide properties are far less than most Perth / Brisbane properties. Maintenance is also fairly cheap – it’s far simpler to find a repairman willing to do something for $100 than it is in other cities.

What’s helping it along at the moment is the low interest rates, but may as well make hay while the sun shines, right? :)

• This reply was modified 9 years, 9 months ago by  D.T..

Yes
If a property is doing well, why would you sell it?

It’s also complex for little gain. If I was to invest that much effort in finding someone who was willing to enter that arrangement, as well as understand all the legal and finance intricacies of it, I could have bought a few CF+ places by then.

Also, I think there’s one state where its not legal and another where its legal but not enforceable, ie other party can back out.

•Buy under market value – Negotiate hard.This helps you create equity straight from day one
•Buy properties with development potential for now or in the future – High future value potential when rezoning
•Over time add value by renovating, subdiving, etc

Very sound points.

If I were to add something it would be on the cash flow risk side of the equation.

The cost of debt now is the lowest it has been since I have been investing in real estate. I guess this is the same for all of us.

However, what I am reading and seeing is that people are not focusing now on the income potential of properties and focusing a little too much on capital gain “potential”.

There is a common argument that if there is no capital growth then “leap frogging” (thanks for the term Peter) is not possible.

If you remove your PAYG income (which is the goal of most investors) then how does your portfolio survive. Does it have the cash flow to feed itself. If not what steps could you take to achieve that.

Manufactured equity. Take something and create something. Take something good and make it better.

• This reply was modified 9 years, 9 months ago by  Don Nicolussi.