Hi everyone,
It is a tempting thought to turn paper money into real cash while property prices are still at the level they are .
I have an IP that i purchased 12 months ago for $125,000. Thanks to a bit of value adding (mostly cosmetic) and market growth it is now worth $230,000. It is rentable for $240 so i could hold it quite nicely for passive income. Or i could sell at the top of the market and use the profit to buy more, like 2 more. I still have $316,000 of equity in all my other properties.I seemed to have managed to find both +ve and good capital growth. I have good local knowlege and a few agents that give me first look at new listings.
…..That above property was sold (to me) before they put the sign up !! Goes to show how important it is to get good rapport with agents.
My first purchase was $55,000 … now worth $180,000, the second i bought direct from the vendor at $ 62,000 now val $200,000 and the third is the one listed above. I have borrowed against 1 + 2 to buy 3 and now 4 . But up til now i have gone by feel more than anything else, i am now at the stage where i need to get wiser and more serious about what i am doing … i bought Steve’s first book today !!
Funny that back in the mid 90’s i was seeing all these properties in Geelong for around $35,000 to $60,000 and thinking that the rent would make a profit on the loan . I bought 3, i should have bought more but hindsight is of course a wonderful thing .
I have been working to a formula of buying low, adding value (i do most of the renovating myself) and renting. Being very careful get the best possible tenants i can, which means sometimes waiting. Then i get the property re-valued and borrow again. I do also work casually in between renovating but i hope to do the property thing full time . I am really glad i have found this site it is exactly what i have been lacking . No more fumbling around in the dark bumping into things ! someone has just turned on the lights so i can see what i am doing , and more to the point , have the support of like minded people.
Sounds to me like you’ve got it sorted!
I’m in a similar boat in that I have had great results over recent years and am tempted to ‘cash in’ now. I guess it depends on what you want to get out of your property portfolio. For me I have full time income from my day job and view my PI’s as a super fund which I will use to fund my retirement.
Given that you have proven capital and rental growth, I’d hang in there.
Cheers,
Shaun.Brownrabbit,
Have a look at a book called “Wealth Magic” by Peter Spann.. i think you’ll find it interesting.
congratulations on your achievements so far, you’ve done well for yourself !
Why sell an investment that’s performing well i say ?
Good on you for seeing the opportunities and taking the risk ! and welcome to the forum..
REDWING
“The man that thinks at 5o as he did when he was 20 has wasted 30 years of his life”
Thanks Shaun, and REDWING. I will check out that book too . All food for thought .I am toying around with the idea of developing next . The fouth IP is in Ballarat on two titles, with a big victorian character house on one title, vacant land on the other . My idea is this ….. to build a second dwelling (or find a house for removal) on the land title, and turn the house into a B’N’B …$250 per night . Tourism is where it is at in Ballarat .
My loans are all low doc due to my casual income status, so my rates are highish….. The low doc lender for the vacant land component of the fourth IP was very hard to find, but fortunately i found one at the eleventh hour! Otherwise i would have had to consolidate both titles , which would both de-value the property and remove the any options down the track that an extra title would give me .
I am also currently thinking of creative ways to lower my interest rates ….Get a full time job in the same field for three months and see if i can’t get converted to full doc loans. Or maybe re financing at the current valuations. I now have a LVR of 70% or less, so i shuld be able to get better rates than when i first borrowed at 80% . And fortunately my credit history is squeaky clean…I make sure my loans are paid BEFORE anything else, this does count for alot when i go to buy more property. Although i have all but one loan with the same lender, which i understand to be a bit risky as one lender can’t touch another lender’s security. I know one thing for sure i am going to keep buying, i am looking forward to moving into a new area where i can broaden my search. The net is great , but personally i have found the best buys BEFORE they hit the market .
Any way , enough rambling, keep up the posts everyone this is a great resource.BTW ,
i was wondering how the ATO would deal with someone that was didn’t have a PPOR , ie was living BETWEEN properties??? Which i have been doing lately so i can renovate in between tenants.I wonder how would they see me if i firstly moved into the main Ballarat house, then built a second cottage and lived there only when the main house was booked???
The ATO must hate us creative types !cheers RABBIT
Hi brownrabbit
Congrats on your success.
In regard to selling don’t forget to factor in the CGT and other selling costs. In general this will come to about 20-30% of the gains that you have made so when comparing selling to simply raising money against the increased equity you are better off simply getting a loan to provide the money and retain the property for future capital growth.
It is my experience that I have always bought the next property at a higher price than the last even when the new property is a very good price in the market.
So I would suggest that you try and hold on and follow up on some of your other creative ideas based on borrowed money
Cheers
Yeah ZIZ,
i am definitely going to try to hold onto Prop 3, the tempting bit is selling it will wipe out 2 of my loans which would be nice,money to poor straight into the new venture in Ballarat …..(no CGT, or so have been told as i have been calling it my PPOR for the last 6 months while i have been working on it.) I’m sure i will have more of a plan in place after this week , i settle Ballarat on Wednesday . A bit scary as it is my biggest purchase to date, but the bank vals came in higher than the purchase price so that is a good start, and it is in a prime position for capital growth. I know the market is slowing down in capital cities, but regional areas seem to be still strong, and from what i can gather high end properties seem to be less effected by market fluctuations. I saw a house in the same area on a much smaller block listed for $800,000 last week , i was blown away …this is Ballarat afterall!!
CHEERSfrom my experience, I wouldn’t sell again. You are just wasting money on agents fees, CGT and then stamp duty etc when you buy again. Your current properties are going to keep going up, so why not jsut keep them and borrow against the growth for the next lot.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Terry,
If you don’t sell, doesn’t some of your borrowing capacity dry up eventually, unless you have huge equity (I don’t), and a huge income (I don’t).
I am fairly highly geared right now (not in terms of LVR, but in terms of high repayments or capacity to pay). I don’t use tenants to merely pay off my places- their rent goes straight into the mortgage, so effectively, I pay double per week on the mortgage. I won’t be able to buy again for the next 4 years if I don’t rearrange my finance.
Waddya think?
kay henry
Hi Kay Henry,
I agree with TerryW, about not selling, but if you have to sell, i would suggest try to sell a minimal amount of property each year.
Personally for me im gonna sell one of my properties and hope fully be able to purchase more investments from the profits made, but i do see your point and i agree with you about your borrowing capacity eventually drys out.
Lets say for example you make 80k and thats the profit from just one property, you can then go out and buy 3 small 75k properties all at 20% cash deposits and have them all positive cash flow too and still have some left over cash for what ever use… This is just a senario, but you end up with more
An old saying “Sometimes to win, you have to lose”
cheers
s.i.sSave on a regular basis
“People forget that by saving just $3 per day and investing it sensibly over a working life, you’ll end up with around $1 million.”
http://www.theenlightenedway.com/tools/mil_calc.shtmlsis :o)
If you buy 3 more properties, you still have to pay about 165k back. what happens if you don’t have tenants during the repayment period?
I am intending on cutting down on my debt somewhat (even though my LVR is less than 70%) because my debt is more than 5 times my wage and I’m getting a bit worried about it. Halving my debt and then having more choices to make about my next purchase will make me feel a bit more relaxed.
debt up the wazoo is not a perfectly comfortable place for some.
What do people think? Are you comfortable with your debt levels?
kay henry
Hi Kay Henry,
I love debt, the more debt i have, the more money ill make.
But i love high debts, i mean the bigger the invested debt, the more money you can make.
Actually ive got that problem now, one of my properties is vacant, im guessing maybe up to another 4 weeks vacant, because of christmas, but i always factor in vacancies when caculating any ROI, not really too worried about it, i guess its just something you expect.
cheers
s.i.sSave on a regular basis
“People forget that by saving just $3 per day and investing it sensibly over a working life, you’ll end up with around $1 million.”
http://www.theenlightenedway.com/tools/mil_calc.shtml
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