Your kidding us right?

You have a business with a 530k loan that puts $45k in your pocket every year and pays loan costs of 6k per mth.

And you want to replace that with an IP. Show me where you can get an IP in this market that does even close to your business figures for the capital involved.

Extremely hard to make an IP worth more – all have a maximum value regardless of capital invested. Businesses on the other hand have unlimited potential.

I wouldn’t consider selling this business at this point. A buyer will simply look at TO and see it’s falling. Nobody will touch you unless you discount heavily.

I would really have a hard look at the business from top to bottom. You need to analyse all aspects of its performance, measure that against other like businesses and figure out which parts are under performing. You would then try to either eliminate those cost centres or replace them with known better performers.

TattsLotto are we talking newsagent or mixed business or something else. If you fill in a few blanks I can give you better ideas and info to consider or check out

Don’t panic!! There’s lots of scope to fix the business even if it means diversifying or reorientating etc.

Nokia started off as a paper company then bought into rubber then electronics before making it’s mark as a cell phone maker. Businesses are like shape shifters. You can turn them into anything you like over time.

Jack

Used to design, build and develop many years ago. I didn’t know my ar$e from my elbow when I started but I had spent several off seasons as a teenager on construction sites.

In saying that though there’s no way I’d take on someone else’s failed project.

When you do your own development from the ground up you learn a lot and are thoroughly conversant with the project that often takes months if not years during the planning stages.

Dropping into someone else’s half finished project would be a nightmare in my book. Not the way I would suggest one learns the ropes.

Jack

I see this is turning into the idiots corner. <moderator: delete personal comment>

Have fun boys. I've got better things to do.

I’ll be sure to pass that onto the Irish, the POMs, the Greeks, the Spanish, the Yanks, the Europeans and the 100’s of Aussy mortgage holders going under every month. They obviously haven’t heard yet.
Jack

I think I’m mightily outnumbered by the buy buy buy crowd.

So I take it your expert advice is to buy into a falling market. I can see why you’re a mortgage broker and not a financial planner/investment advisor. Mind you with your investment philosophy you would do well at BoA, Fannie May or Freddie Mac. Oh that’s right they’re all mired in inextricable debt and will need bailing out again.

Jack

Totally agree.

Gobermint’s constant tinkering with the market has done nothing to aid affordability, quite the contrary.

I ran a removal business in Sydney several years ago and moved many a young client who actually had zero savings. The FHOG and a few bucks from the folks 110% leverage and you were in. Only to find within a few years that they’d bought at the top of the market on historically low interest rates. Adding to the pain was the increased commute costs and time lost moving out west to get that McMansion.

Many have ended in tears that’s for sure.

https://www.propertyinvesting.com/weekly-update/31-08-2011

Year on year fall in Melbourne is -5.0%

I would be seriously considering cashing out of any property for the time being not buying more.

Jack

Your problem Engelo is you’ve been caught out blowing off like you’re some astute PI when in fact both you and Nathan can’t substantiate your claims.

As for negativity I’ve simply questioned the discrepancies in your assumptions and you still can back them with anything remotely substantive.

If you think this is a battering then I think you will find the next few years incredibly trying.

The reason you’ve been taken to task is twofold; to make you stop and think more comprehensively about PI so that you can better survive into the years ahead; and secondly signal to others, who are not so knowledgeable but looking for information, that spurious claims by wannaby PIs aren’t all they’re made out to be.

A lot of the investment theory/philosophy I see espoused here is easily debunked with a few critical questions. Once exposed they immediately label one as ‘negative’ as a counter to their somewhat questionable advice. There are many industry professionals here (I use the word professional lightly), evidenced by their signature blocks, that offer dubious encouragement much of the time. I find the paradox of a professional who provides excellent technical advice to someone who’s either in or entering into an often highly leveraged high risk investment as ludicrous. The analogy would be the coach giving a swimmer last minute coaching tips knowing full well the chances of making it across the channel are remote and one will likely drown!

I see you like the swimmer. I’m trying to tell you don’t swim your gonna drown because the sea’s too rough. Ppl like Nathan though are strapping bricks around your waist and saying “Go for it Engelo you can do it”.

But anyway you’re a big boy now albeit with a thin hide. I’m not optimistic about your chances but good luck anyway.

155k is that including ingoing costs or excluding (buy price)…. returning $260/wk – so you have it leased??

Its negatively geared – costs you $20/wk

1hr from Syd CBD – like where would that be. There’s a lot of km’s 1 hr drive heading out depending on time of day. Midnight’ll get you to the Blue Mountains.

“Im pretty stoked with this deal bringing my tally to 3 properties” sounds like your more about acquiring properties to up your personal score.

“10 or more properties that are pretty much neutrally geared” What does ‘pretty much’ mean and is 10 a magic number or something.

So lets see. You’ve bought into an asset class that is coming off the biggest credit bubble in history. Values are moving down at varying rates depending on location and value position in the market. For all intents and purposes you are negatively geared. Because you are negatively geared I’d say you’re probably highly leveraged.

My guess is your investing strategy revolves around property values appreciating and rents going up.

Here’s what I think is MOST likely but not necessarily so.

Property values will continue to decline overall as concerns over global financial stability continues to dominate. Rents will come under pressure as rising unemployment starts to hit the working class harder and harder however lay-offs will come across the employment spectrum. CBD areas may take the initial brunt as financial institutions lay-off 1000’s (67000+ in Europe and 10000+ in the US in the last few months alone). Inner city areas may in fact have some of the highest unemployment rates.

Many analysts believe stagflation (increasing inflation with decreasing asset values) is occurring already. This suggests that while economies might stall or go into recession (note there is a growing consensus that the global economy is already in recession and heading for a depression) central banks will be forced to raise rates to contain inflation. On top of that it is also like that banks will push rates even higher as cost of borrowing in a liquidity crises continue to rise.

The problems that face property investors is that globally forces are growing that will in all likelihood overwhelm you. If you take the attitude “She’ll be right”, Australia is different, property always goes up then I’m afraid you’re doomed.

The next financial crunch already has a name… The Great Correction. It’ll make the 1930’s era Depression look like a walk in the park by comparison. How it plays out and when things finally snaps is anyone’s guess.

Like all investors in any market. If you’re over leveraged and holding the wrong assets you’ll be wiped out. Smart investors deleverage and shift their wealth to safe(r) asset classes to ride out market turmoil. Property is the least safe of all places.

See you on the bread line