I agree with your earlier post Kay, quantity is not always the best option.
When I first began in property I bought “as many” cheap houses as I could. Now I spend more time on each deal ensuring better quality, growth and potential. The deals are in a much higher bracket now and part of the equation before I buy is what I can do to “add value”.
The project on the table at the moment is refurbishing 40 rooms at a pub and changing the use from boarding house to tourist accommodation. By selling the lease I’ll recover most of the refurbishing costs and will achieve a much higher rent.
So one deal can possibly achieve as much or more than 30 deals in dollar terms
Cheers
JeffJeff- sounds like a huge project- you must be brave to take it on
It’as interesting, Jeff, that you talk about when yo first bought property. I knew bugger-all about property when me and my gf first bought in 1997- we bought a couple of units together- this is what I didn’t know:
* About depreciation and 1985/1987 allowances
* about sq metres and size of units
* about positive gearing and rental yields
* about determining hoh BC fees should be (on the unit I sold last year, my annual fees were $350- hehe- pretty cheap [blush2])
* about using equity (I thought you paid the whole property off- a la anita bell)Basically, I knew really nothing when I first bought (I’d read only Somers and a few other books). So I use my new knowledge to buy better. That means I now can determine *value* more than I could in the past. I have no regrets about the purchases we made in 1997, but it’s weird doing something you don’t really know much about.
Who knows, Jeff- perhaps in a decade’s time, I’ll be doing projects like you’re doing. But I would have to learn so much more, to move out of my current buy and hold units mode
Best of luck with your project, Jeff- sounds awesome kay henry
Hi everyone,[cap]
I’ve read this thread with interest — but could you clarify a point for me.[blush2]At what price range are you purchasing your properties. I guess this question is aimed at those of you buying a property every month or so.[specool] It seems to me that unless your properties are cash flow positive or at least cash flow neutral, the lending institutions would quickly put a halt to your acquisition plans. Oh yes — are you buying in major cities, regional areas or in rural locations. [light]
Regards
elikaHello all but firstly Kaye,
“if one buys a 500k IP, it is pretty much equal to buying 10 X 50k IP’s.”
No, because all other things being equal, you have ten rents coming in not one. I.e. your 500K property is vacant, your portfolio is vacant. 10 X 50k properties is spreading risk.
“Sure, the yield is going to be lower,”
which is another reason why a year ago I bought three houses for 80k instead of one ‘good one’ for 80k. the yields on the cheaper ones were higher. As the quality of house went up, there were less ‘problems to fix’ and therefore less opportunities to ‘make money solving those problems’ and also like you say, you don’t necessarily get proportionately more rent for nicer houses – the contary.
“The whole “how many IP’s do you have?” thing, is really like comparing apples with pears.”
It is if you really just want to know ‘what’s your net worth”? But as far as i am concerned buying my third property was not nearly as big a deal as buying my first. And I would rather have had the learning of looking, sorting out, purchasing, doing the numbers on, three properties over just having bought one.
“It all depends on what the properties are worth (if you have a growth strategy) “
not really!!! I reckon you will get much more growth from ten 50K properties than one 500k property. One 500K property, sure it might go up 20 percent a year if you’re lucky or at the top of a boom or in Manly or something. But my personal theory is that the bottom of the market houses in any particular market go up at a higher rate than more expensive houses in the same town. I.e. Wilandel’s 20k odd house being worth 40k 7 months later. You won’t read about 100 percent capital growth in that town in 7 months. In fact that house is so cheap it would hardly make a dent in the graph of ‘median house prices’. nevertheless, you ARE seeing crazy growth especially at the bottom of the market. It’s obvious really, because that’s where ALL house buyers in the market can afford….as you go up the market, there are less people that can afford the next price range up…and as house prices rise, people jump down a notch as they can’t afford where they wanted to buy any more….you get me???
“or how much income you are getting (if you have an income strategy).”
it doesn’t just have to be one or the other, it can be both. CF+ve gives you the means to support new investments and growth gives you the equity for deposits or ‘multiplication by division’.
The true answer to ‘do you have to pay CGT in Aus’ is a question for your accountant, not Jenman. (phish)
In NZ it depends on if the tax department thinks you are a property trader (i.e. “I buy properties and sell them for capital gains and live on the profits as income”) then yes, but if you are buying them for rental income then no. i think if you have held them for a year then it’s OK.)
But again it depends what you do with those profits. Who owns the property? You? a trust? A company? Are you a benficiary? how much do you earn from other things? etc etc
Therefore, q for a CPA.
cheers-
Minijoy to the world
PS Why haven’t I bought more properties? Well…firstly because i am a risk averse chicken who kind of likes 100 percent equity which I have at the moment, that is I own my properties all outright, secondly because I have been using the income off these properties to live on (I know it’s a bit naughty in terms of not getting my portfolio any further, but it will pay off later, because I am using it as passive income while I develop a new business venture intended for global domination) and there are a few more excuses to do with having been travelling several months of the year, not to mention doing my ‘day job’. PLUS on top of that being totally busy with my other part time-but-growing-in-a-big-way-thing which is bird-dogging deals for our voracious clients (at least 15 properties in the last few months for other people) – so I have actually “signed contracts” to buy more than 12 properties this year, I just haven’t settled on any of ’em….hehehe
joy to the world
Del,
Do you think NZ is a wiser choice than the OZ market?sg
Hi Shane,
I think there are still good deals to be found in OZ, however, they are not easy anymore…
NZ has plenty of good deals still, but it is getting harder to find “quality properties” at bargain prices. I would suggest that you go there in person if considering buying there.
I think the NZ market will still go strong for at least the next 6-12 months, but who am I?
I guess it all comes down to whether you are looking for a good long term property, or a short term investment. We don’t intend to hold all of our NZ properties long term. (just in case) We will keep some though…
Also, make sure you speak to a GOOD accountant, before buying anything in NZ.
Good luck,
Del
Del said:
“I think the NZ market will still go strong for at least the next 6-12 months, but who am I?”
Del, I think people really enjoy hearing your opinion about this stuff. You’ve obviously been successful in your strategies. Don’t downplay your contribution or opinions- you’re a star
kay henry
Hi Wilandel,
“NZ has plenty of good deals still, but it is getting harder to find “quality properties” at bargain prices. “
I agree, and it’s ironic that if and when NZ is not flavour of the month any more and “all” (myself not included) the investors go off the boil, that’s the exact time when you’ll be able to name your price and yet insane deals and yields. But then again you need the throngs pushing prices up if you are selling.
But once one gets how all of that works, one realises that none of it matters, one invests for the long term anyway. So in half the property cycle you get amazing yields, and in the other half you get amazing growth. It’s still amazing all the time though….
cheers-
Minijoy to the world
Hi Mini,
In about 2 yrs, we both will be able to set the town on fire (so to speak)…
I don’t like taking advantage of others in a bad financial position, but WOW, it’s going to be good buying all the great deals that most Australian investors don’t realise are even possible!
We will be able to pick and choose again.Regards,
Del
Hi Yack
i’ve bought about 20 homes in the past 12 months, but not one of them was in Australia. But on the other side i’ve sold about 15 (14 in OZ and 1 in NZ. Like your self i haven’t been buying , the reason is i couldn’t find deals that caught my attention. When i looked at NZ early last year i thought this looks like OZ about5 years ago so i got all excited. Today in NZ the situation has changed again and prices have risen. This means returns are less and the potential for capital growth is also less. I don’t expect to buy 20 homes in the next 12 months. And will focus on fixer uppers.
regards westan
I live in New Zealand and for a fee find cash positive deals there, email me at [email protected] to join our database
I dont intend to buy 20 homes in the next 12 months either Westan!
But I do hope to buy 3 or 4 in about 6 – 12 months time and (as I gain more equity increase my portfolio slowly), not altogether outright like Mini though!
How DO you do it Mini?
Trisha[biggrin]
Hi Henry Kay!
Surely your one or two 500k property would not be positively geared?… Or would they?…
Cheers,
Isabelle
Is Henry Kay here? *pokes him*
Isabelle, I made the comment because I was saying it is not really a competition as to how many houses one buys. A person could have a million dollar house in Sydney (I don’t) and be happy to buy another million dollar house. Their wealth would be just as much as someone who might buy 30 positively geared houses. In fact, I would argue that the person with the million dollar house- which made “invisible money” during the boom… would be far better off financially.
So my point was… it’s not how many you buy. It’s how much wealth you can generate.
Oops… to answer your Q, Isabelle… the 1 house would not be positively geared, presumably… but I know I’d prefer the million equity, than a few X $50 coming in each week with negligible equity from CF+ houses. In fact, the million house might have .025% return… but I doubt the owner is too concerned about that.
kay henry
“I would argue that the person with the million dollar house- which made “invisible money” during the boom… would be far better off financially. “
Kay of course you would argue that and you always do because in your paradigm you cannot accept that CF+ve properties go up in value. they do!
My funny little properties have gone up in value in a year more than any Sydney ones did at any time in the boom. I think the highest was Manly at 27 percent or something, well mine did more like 50-100 percent capital gains in a year, ADD to that 20 percent cashflow returns.
A friend of mine bought a 6k section which is worth 30-35 k a year later. try THOSE figures through your calculator and see how much you would have if you’d bought a million worth of those rather than one Sydney property.
OK, land is ‘negatively geared’ but then so is the Sydney million dollar house (trying to compare apples to apples)My friend bought there because research (which was out there for anyone to have done) showed there would be a likelihood of increased demand in the future where she bought her land.
another point is if you had a million dollar house (likely negatively geared) you would probably have to stop there unless you made more income from OTHER sources, I mean to buy more deals – you’d max out. whereas the person with 30 CF+VE properties would be able to keep on buying and not max out without having to fund from other income.
Also the person with capital in 30 deals rather than all in one basket is much more flexible. Sell one, or five, or ten, move them into this over here…the person with all capital in one property can only basically do one deal – refinance or sell to realise this ‘invisible money’. By this I assume you mean capital gains which I realise you are still convinced only happens in ‘Sydney’ (or similar.)
While you stay in your paradigm there are not a lot of options for you. I know you must do what is right for you, but I wish you would realise that there are many ways to ‘do it’ even if they are outside your comfort zone. and just because you wouldn’t do it doesn’t mean it couldn’t work beautifully.
cheers-
minijoy to the world
Mini,
Usually I qualify my statements these days to add, “in Australia in 2004” to discuss positively geared properties, because I know there are different markets performing other than the Aussie market. Frankly, the positive residential properties left in Australia, as you’d know, are now pretty much relegated to mining towns, wheatbelt towns, and rural and isolated towns.
I only have a couple of properties, Mini, as do you, and my properties outside of sydney have had decent CG, but if I was buying *today*, and thinking forward for 7 years, I would be thinking about growth- as you also do.
As for funding properties with other income, well yeah, that’s something I’ve always known I would do. I fund them by working and adding money into them. It works for me.
kay henry
Hi Kaye,
I agree with you about Australia right now. I predict there will be deals in Aus again, but they might not be aplenty until everyone is way cold on property and sick of it and sick of watching prices going down and selling like lemmings and nobody is buying! *That’s* when i will be buying. Meanwhile for *now* I am buying in other markets as you know!
“I only have a couple of properties, Mini, as do you,”
hehehe
as DID i!!! a lot can happen in six months, hehe…“but if I was buying *today*, and thinking forward for 7 years, I would be thinking about growth- as you also do. “
indeed!
CF+ve with growth potential is my favourite sort of deal!“I fund them by working and adding money into them. It works for me. “
so be it!
cheers-
Minijoy to the world
You must be logged in to reply to this topic. If you don't have an account, you can register here.
