Hi everyone, thanks for reading.
Over the last couple of years my husband and I have been enthusiastically pursuing investment (mainly property) in an attempt to secure our financial future. To date we have acquired 3 (budget) properties – including our own home – and have about 25% equity. Yes we are negatively geared but we live quite frugally on reasonable incomes so planned to make as many extra mortgage payments as possible. Everything seemed to be going fine until recently.
Lately we have found that no matter what we do, we seem to be forking out stacks of money, hand over fist. Of course we expected regular rates, minor maintenance/repairs and the occasional hot water service failure.
But on top of that we’ve had things like huge body corporate increases, severe plumbing problems ($thousands to replace underground pipes), shifting concrete pulling pipes out of walls (causing leaks) and so on. This has cost us many thousands of dollars to repair and as soon as we pay one thing, another seems to materialise. We have had thorough property inspections prior to making purchases so is it just terribly bad luck?
To be quite honest, we are starting to question whether we are on the right track. We are so disciplined but don’t seem to be “getting anywhere”. I’ve even wondered if we should just sell it all and “live it up” like our peers, buying only one “nice” house and splurging on consumer goods.
Does anyone out there have an opinion or advice on this matter? Please don’t just bag negative gearing as I’m aware of the alternatives; we considered “wrapping” techniques but didn’t have the time outside of work to pursue these things.
Frustrated Investor..
Mad…
I don’t think there’s be any investor on here that hasn’t had to fork out money for repairs etc. Anyone that pretends property isn’t high maintenace- to some level- is, I reckon, not being quite.. erm.. truthful
Some of the expenses you’ve mentioned would, I’d have thought, been fixed up by the Body Corporate.
I see property investing, as just that- reuiring my “investment”. I think of it as a small business in a way- there are outgoings, and sometimes, you don’t make a profit, because you have big expenses. I don’t see property as just adding value all the time. It’s not just about adding an aircon, raising the rent, and profiting. Pure maintenance raises no profit, and is essential to keeping our properties tenantable- but it gives us nothing back often. If we had a small business, we’d have to buy equipment, fix stuff- sure it’s all tax deductible, but for every buck we spend, we only get back 50 cents, so it’s not all profit.
I think having property is expensive. Some people say it is as easy as pie [baaa] but I would be very surprised if there’s not a heap of people out there who, like you, spend a lot of money sometimes, and who face some months of the year where it all seems like spending is all we do.
I found property to be super worthwhile when CG was a big factor. But when it is in a flatter peroid, my game now, is just to be patient, and go slowly, and not expect bucketloads of cash every week. Slow and steady
Not sure any of this is terribly positive, but just letting you know that I know how ya feel
For me, I don’t care- I don’t have the instant millionaire mentality, so I’m pretty realistic.kay henry
Thanks for your moral support Kay. We are definitely hoping that this is just temporary, because receiving bills in the $1000s (on top of our mortgages) each month could clean us out sooner rather than later!
Hi Madinvestor,
as Kay stated “many investors spend big $ on repairs etc.” JOIN THE CLUB.I believe in the big picture, if I did not stay focussed on this I would not be able to get ahead.
Though stating this, I have recalled the many nights my partner and I have studied our liabilities and assets, what we should/could sell and what we should keep to make life easier. At the end of the day have found it very hard to sell anything.
We are negatively geared 50%, we have a business and therefore if the business does not make the expected profits we are in trouble.
I think you should give it your best shot and ride the ups and downs. Dare to be different.[biggrin] Good luck
Hi,
you have to take the good with the bad.[tired] In some years expenses per property are hardly anything, but next year the onslaught is neverending. With a smaller property, painting, new carpet plus usual expenses (council etc) can wipe out profit for the year. Its happened to me twice. You just have to take the highs with the lows — and always have a little something in reserve to deal with the latter.In relation to costly repairs.[thumbsdownanim Firstly, an older property, particularly a budget one (your word), will tend to throw quite a few repairs at you — and these tend to be the more expensive ones such as the plumbing referred to in your post. My second comment is, who did the building inspection. Weren’t any of these things identified. [surprised]
Perhaps next time you are in the market for a property consider something built in recent years? Also I would have a chat with archicentre — tell them about the problems you are experiencing — ask them if they should have been identified as part of a building inspection.
Hang in there. It really gets better.[biggrin]
I know where your coming from.
I too hate repairs. But they are a necessary impact of investing. I think of repairs in this way;
1. Have to be done.
2. Get half back on tax so it really costs only half.
3. makes the property better – hopefully less mntnce in the future.
4. Think of the bigger picture – capital gains in 3-5 yrs time.
5. Alternative investments are not as worthwhile in the long run.
6. The longer your an investor the more positive cash flow become the properties.Originally posted by yack:I know where your coming from.
I too hate repairs. But they are a necessary impact of investing. I think of repairs in this way;
1. Have to be done.
2. Get half back on tax so it really costs only half.
3. makes the property better – hopefully less mntnce in the future.
4. Think of the bigger picture – capital gains in 3-5 yrs time.
5. Alternative investments are not as worthwhile in the long run.
6. The longer your an investor the more positive cash flow become the properties.Well said, and you hopefully will have a more tennentable property in the future.
I think you are going thru a unusual timing period, which will even out soon. The next few years may not seem like you are making much progress but when the bbom part of the next cycle comes round (ongoing debate here as to when ) you will be in good shape.
MadInvestor,
You are doing nothing wrong. You’re simply still on the (endless) learning curve.
However keep in mind what ‘budget properties’ actually means.
In future if you buy cheaper properties be prepared for significant maintenance costs. Ensure you get those building inspections done & ensure you have a maintenance budget factored into your calculations.
Cheers,
Aceyducey
Hi Madinvestor
I can understand where you are coming from as i have often asked myself this question when hearing how easy it is and nice perfect situations are touted.
I would say that you have equity in your properties after this boom. This being the case i would consider a LOC with some of the equity as a buffer so any expenses over and above your norm comes form the existing equity rather than your day to day living money.
Just a thought.[headphone]
regards
alfOriginally posted by MadInvestor:To be quite honest, we are starting to question whether we are on the right track. We are so disciplined but don’t seem to be “getting anywhere”. I’ve even wondered if we should just sell it all and “live it up” like our peers, buying only one “nice” house and splurging on consumer goods.
MadInvestor,
You guys are looking after you future!! Your mates are probably all living on tomorrows money. You may have to cut your losses with these ones and look hard to find places that qualify in “The Book”.
Its not just the investment that will pay off but the fact that you’re building an investing “habit” that will pay off big dividends in the future not like your mates who will be struggling on their super as a result of their expensive living habits.
Good on you.[thumbsupanim]
Am I rambling?[baaa]
Matt
I too am relatively new to investing and know that feeling when you race into investing with eagerness for all the joys of financial freedom and then get the instant reward of hard-work, frugality and doubt creeping in.
I am living with a mate on a similar income who is just a few days older than me. He is partying it up, driving a new sportscar, got all the latest and expensive fashion items……while i drive an old holden, barely spend time on socialising and pleasure at all and chew through cheese sandwiches on weeks when those unexpected bills come in.
I think with everything you need to find where you fit on a sliding scale. from 0 – 100%. For Investing I had committed 100% of my time, energy and effort but lately found I was unhappy at this level, even losing some of my personality. So I have just taken a small step back to fit in a little socialising and time with close ones, booked a weeks holiday to look forward to, and now commit maybe 80%.
Can I suggest you don’t throw the whole investing idea away. Maybe initially consider a small step back if you are overcommitted rather than chuck in that towel.
I think everyone agrees that what you sacrifice now will be worth 10 times more in the long run. But you still need to have a balance in the meantime thats right for you.
lifexperience
Nice ideas, LifeX
Mad, I’ve been thinking it over, and as LifeX says, ya gotta take time our for you. I have an ex, who’s an investor also. She says to me that we come in with nothing, and that the worst that can happen, is that we leave with nothing
) She pretty much does whatever she wants in terms of investments and lifestyle, and thinks “oh well, if this investment doesn’t work out, so what?” When I think about that, it’s not a bad way to think. Let’s face it, too much stress probably isn’t good for your health, and is RE worth having a stroke about?Whether we worry about our IP’s or not is not going to change the status of them. A 3% yielder is not going to become a 5% yielder due to our worrying about it
Maybe ya need a holiday, just like LifeX is doing. I don’t want to give up lifestyle, and make too many sacrifices for IP’s. I want to live life NOW, and not defer it until this magical wealth occurs.As for me, I would MUCH prefer to drive a nice car than to sell it off and put a deposit on another IP. I really enjoy my car and love driving around in it. Sometimes, we can just enjoy things for the pleasure they give us NOW, and not focus solely on sacrifice.
hehe- here’s a heads up for hedonism [biggrin]
Now I might go off and have a worry about yield
kay henry
Madinvestor, this suggestion may not apply to you, but it will to some other readers.
There are some astute investors who have a great way of coping with those unexpected repair bills.
They calculate roughly how much their depreciation claim will return them in cash, and keep that amount in reserve (remember it’s a non cash deduction) so they can pour it back into the property when needed. Sort of like a sinking fund.
If you think of depreciation as compensation for wear and tear, it’s logical for it to be set aside for upkeep.
I don’t do this an I have absolutely no excuse – apart from laziness and disorganisation.
Scott
The very reason I dumped IP’s and now live the good life…good riddance to property, would rather risk my money on the ASX!!
cajun – please explain. I would like to hear your experiences and why you have turned your back on property investing.
How long were you doing it? Where were you doing your property investing? How much time were you spending on property?
I am sure newbies and those doing it a long time would love to hear your experiences.
Aahh! A topic after my own heart…i have recently seriously considered chucking it all in as tooo much hard work.But,then i go to my 9 to 5’er,& see & listen to the crap they spin,& think :”I cannot work here forever…” then,i pray like anything that god will “show me a sign” & sure enough…he/she shows me a “for sale” sign. I laugh, & buy the next!
But seriously,it can be very depressing,tiresome & a bottomless pit for your time,money & energy.
Finding a balance is the key.So,today i rested, t’moro i go look at another house…is that balanced??[biggrin]Hey Misty,
Can’t recall if you ever mentioned it or not, but if it’s okay to ask, how long have you been investing in property?? You seem to be disillusioned at times, which is sad, because albeit a challenging form of investing (depending on the market, vacancy rates etc etc) it has it’s good moments.
I do know how you feel at times, and believe me, I started when I was 18, got the tenants from hell straight off the bat, they got months and months behind in the rent, I was managing it myself (naive and thinking I knew it all) and when I tried to take possession of my IP (which was my very first home) out of spite and viciousness, the little darlings torched it to the ground!!! [bawl]
Now that’s enough to make anyone want to throw in the towel, but I didn’t; I stuck it out, perserved, got savvy and thanks to determination, due diligence and a little elbow grease, I can afford to sit on my hiney all day every day without worrying about money ever again!!
Okay okay, I hear you…my point: It’s a hard slog sure, but keep at it, and one day you’ll leave people like me for dead!!!
Go girl!!!! [medieval]
Jo
Hi Mad
I noticed you mentioned, “we considered “wrapping” techniques but didn’t have the time outside of work to pursue these things.”
We too, like all of us, were busy at work but we decided to research wrapping. This research led us to think that wrapping might require less time than rental properties.
After having completed 4 wraps we have not only found there is less time involved but, we belive, a whole lot less heartache. Why? Our wrappee’s have a buyers (not tenants) mentality and they are responsible for all maitenance costs.
Maybe you could re-visit the concept and possibly even wrap one/some of your existing properties.
I hope this helps.
Cheers, Paul
PS. There are CGT consequences to wrapping a property that you have previously rented so check this point out with your accountant.
Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
MadInvestor
That’s the joy of investing in RE.
Things do break down and we just have to battle them as they come. There’s not much point worrying about it.Do the sum. If you sell it now, will you forgo a greater profit in few year’s time when the upswing arrives?
Property is a lot more stable than shares…that should make you feel a little more secure.what’s that saying – something like sell the mould, keep the gold – sell the trash, keep the cash??? no, i’ve got that wrong, but Steve has a saying which i forget – basically, if your investments aren’t performing, sell them and buy a different one instead. Negatively geared to begin with, and costing you heaps to run on top – what are you waiting for, capital gains? And then what? how much will it have to go up before you have recouped let alone made anything? Not saying it’s bad or good, have no idea, but if they aren’t working it doesn’t mean that PROPERTY INVESTING is no good, or even that you and property investing don’t fit, it’s just those particular properties that aren’t working out.
As long as you’re not emotionally attached to them you should be able to sit down and work out whether they’re getting you towards your goals or not.i’m a control freak and so I can’t imagine ever buying something with a body corporate. (never say never though.) Which seems like where a lot of your problems are coming from. if you buy single family homes then you’re the boss. You get your builder’s report, you fix the urgent, and schedule the rest.
Not arguing with the fact that a lot of properties need maintenance. but how does one stay in control? is the question.
1) insurance covers those weird ones (like when a fire place caught fire in one of my properties, had to be repaired, and cost as well as subsequent loss of rent in that time was all paid for)
2) builder’s report – you said you did that, but then your body corporate mucked it up so you weren’t in control of what had to be spent and when
3)the stuff that happens
broken windows, leaks in roof, hot water system element. Yeah, I’ve had all of those, but they are less than $200 usually, and as for the roof, well a builder’s report means I knew the roof needed attention some time, but for the time being you can just patch and silicone, and then repaint or repair better later to your own schedulejust my three cents
cheers-
Minijoy to the world
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