I’ve got enough for a fairly large deposit saved and I want to start building a property portfolio but I don’t know what to do.
What I found after extensive seaching was that properties with positive cash flow yeilds only exist in crappy places in the middle of nowhere.
Mt Isa for example.
I live in Sydney so for a start traveling there to buy it would be a costly hassel. And what good is a couple of thousand dollars a year cash flow if capital growth is about the same as inflation which is what you get in country Queensland.
It would take a couple of years just to break even and get back the stamp duty. And thats if the tenant pays the rent and doesn’t trash the place.I don’t like the idea of wraps because I don’t want to have to deal with the emotions of the person who I am taking advantage of.
One interesting stratedgy I thought of is to buy land a build a new house on it in an area where building works out cheaper than buying.
On completion the house might have an extar 20% equity in it. The net rent return might only be 5% and the loan would be say 6.5% but I could get a line of cedit off the bank against the equity and use it to make up the difference. It might then take say 7 years for all the equity to run down buy which time more equity will hopefully have built up in it.
So there qould be no monkey on my back and I could do it again and again.Another idea is to buy old studio appartments renovate and full furnish them and raise the rent. Around the state capitals these thing could be made into netural cash flow propositions. But if interest rates go up they turn negitive again.
or
I could buy large houses near regional universities and rent the rooms out individually to students. This could be a managment nightmare though and I don’t know if the local real estate agents would touch it.Anyway I can’t think what to do and I don’t wan’t to just buy a house and then be bogged down with a morgage for year while I sit around with my fingers crossed waiting for the next boom.
I need some inspiration.
Has anybody out there got any tips for me ?Thanks.
Sounds like you have done a lot of research and learnt a lot.
All property investment paths have some risks and hassles. Once aware of them, you have to work out if the return is worth the risk FOR YOU!!
You have some good ideas, some of which could work with a bit of effort and thought.
If you have ruled out all property options, then maybe property isn’t right for you and you could look at some other investment options. shares, small business etc.
Try to remember exactly WHY you want to invest, what do you hope to get out of the process.
Get pumped MARK.[drummer]
lifexperience
Originally posted by mark76g:I don’t like the idea of wraps because I don’t want to have to deal with the emotions of the person who I am taking advantage of.
Mark,
Now that’s an emotionally-laced statement
So are your comments about ‘crappy places’, about the possibility of tenants wrecking the place and being bogged down for years.
I reckon that you’re not ready to invest in property.
Be careful that about buying into biases, emotional and unsupported commentary in the media – whether negative or positive.
You need to get rid of those emotions and understand the facts to make a good objective property investing decision.
Think of what rules the stock market – fear & greed, emotions. Emotion also rules poor property investors (though sometimes different ones).
Cheers,
Aceyducey
In theory, there is no difference between theory and practice. But, in practice, there is.– Jan L.A. van de Snepscheut
i would agree with the others but i would also say this. you are not alone in wondering ewhat to do with your money. everyone is confused including seasones investors. all markets are volatile at the moment.
make a decison based on the risk you can ware. and also look for a good deal. there are good deals in any market. offer on 50 places and see if you can get something 20 pct under the market…(ie factor in the risk)
also standing still for a little bit off time is not always wrong either. better than going backwards.
I don’t like the idea of wraps because I don’t want to have to deal with the emotions of the person who I am taking advantage of.Well I’m glad your not wrapping, if you see it as a way to take advantage of people, You’ll give us ethical wrappers a bad name
Mark,
Some CF+ properties are completely remote, since the boom. If it suits you better to pay a bit more, and get less rental yield, then you’ll probably feel better about your purchase. There’s no evidence that I’ve seen that people who live in cheaper houses trash them.
Mark, many students won’t pay extra by the room if they can find houses to share that are cheaper. Or they will for a minute until they get wise and see that they can get cheaper accommodation with their friends. Regional uni’s still have cheap houses around, and some students will just gravitate there.
Renovating and furnishing old studio apartments- deends on how much you want to spend. Remember, you’ll be responsible for all of the items if they break in your furnished place, and most people have their own furniture. Also, you’d have to buy expensive furniture- depending on what tenants you are looking at- a bed itself costs around $600- how long qwill you take to recoup the costs? Reno’ing itself can be a road to overcapitalising. You could just buy a newer place that’s already got a tenant market.
You might be better off narrowing your ideas, and then reading all you can about one particular strategy and focussing on that.
kay henry
Hey Mark,
I’m no expert but I see that there are some investors making a stack of money out of students. Take this example for instance (it is true!): 19 year old guy arrives in Australia, starting uni in 2 weeks, needs a place to live. Finds out there is a place close to uni with other overseas students that live there. Thinks that this sounds easy and signs up. Meanwhile, the owner of the property has 7 other students in the same situation. All pay $100pw for a fully furnished room with lock on the door, including all expenses. There are 2 kitchens. The owner pays for a cleaner and a gardner. … now go and do the maths on this! This property would be worth no more than about $300k.
OK, so who would want to live there? But people do. It is a matter of making life easy for people with different needs to you and I. And it appears to work.
I have also seen a similar thing done in the same area however with fewer students. Even so, it produces positive CF.
All the best!
Ali G
That response really isn’t very helpfull.
What are you trying to tell me ?
I have put a fair bit of time in to researching property.
My comment about wraps was purly my opinion. I’m sure there the sort of investment that really suits some people.
But as for my comments about crappy places I can’t see it any other way. I’m not saying people in cheap housing are any worse tenants than those in expensive housing. But I just can’t see a way I could make cash flow positive investments work in Australia. With the travel costs the hassel of maintaining a property in a far away area, the risk of the tenant doing damage or not paying rent there really isn’t that much in it unless I got really lucky and landed a spectacular deal.
I remember looking around in brisbane for a commercial property with an sold lease that returned 9-10% net and being laughed at by the real estate agent “Sure they exist matey, but if one comes in I’d buy it me self and if I didn’t somebody in the office would.”
“I’m not ready to invest in property” Now thats an emotional statement. You make it sound like getting married.
A truly rational person would have said something like “I don’t agree with you and here are the figures or this is the reason why”
So do you have any useful advice ?
Originally posted by mark76g:A truly rational person would have said something like “I don’t agree with you and here are the figures or this is the reason why”
Mark,
I’m sorry that none of the very experienced investors who replied to your post qualify as ‘truly rational’ in your book (which is clearly the textbook on the topic).
And I’m sorry you don’t understand why many of us felt that your attitude, emotions and lack of a solid plan in your post demonstrated that you’re not ready to go out & spend hundred of thousands of dollars on property investments.
Why don’t you go find a group that agrees absolutely with your point of view (a mirror might be useful). Then you’ll feel you’re amongst totally rational people.
However I wouldn’t be able to speak for their investment track record.
Cheers,
Aceyducey
In theory, there is no difference between theory and practice. But, in practice, there is.– Jan L.A. van de Snepscheut
Hi Mark,
I only have three words for you…FORGET PROPERTY INVESTING!!!
Obviously, you don’t like the idea of wrapping, you don’t want to be “bogged down” with a mortgage or sit around waiting for the next boom; so am I correct in thinking you want a “get rich quick” scheme??? If the answer is yes, then maybe you should look at other vehicles.
Either way, all the best in your decisions.
Jo
Mark,
You can have your opinions on wraps and crappy places, just like the rest of us do. This place is about people having discussions on real estate. It doesn’t matter how long you’ve been investing- your opinion can be expressed- and it will probably be challenged, just as everyone’s is. Take the insults with a grain of salt- there’s a wide variety of opinion on here.
kay henry
Mark said:
I don’t like the idea of wraps because I don’t want to have to deal with the emotions of the person who I am taking advantage of.My comment about wraps was purly my opinion. I’m sure there the sort of investment that really suits some people.hmmm, who’s throwing insults [biggrin]
I feel that insulting people who wrap by calling them unethical & saying they take advantage of people isn’t such a good start on a forum with a large wrap element. (note I haven’t done any wraps myself, but I know many people who do – in a thoroughly ethical manner)
Mark, My (rationally arrived at) opinion remains the same. From your comments you don’t seem enarmoured of property and you don’t seem to have a goal to your investing.
Work out what you want out of life & look around at the investment alternatives.Make your own decision on what type of investment is best for you in view of your goals.
Cheers,
Aceyducey
In theory, there is no difference between theory and practice. But, in practice, there is.– Jan L.A. van de Snepscheut
mark – heres the advise youve been looking for – on a plate.
buy an apartment, off the plan, at docklands, from one of henry kayes companies. dont worry about a deposit – these guys will help you out. ask them fro a free valuation also. buy it soon because there will only be growth for another 6 months.
hope this helps
onward and upwards
Putting the negative remarks aside, I do have a recommendation [for Mark] that may be worth considering.
Real estate investment is not only about buying, maintaining or developing property. In fact, a reasonable portion of my portfolio is simply “investment” focused – at times we do not visit properties, but rather analyze market data and financials in determining whether to proceed or not – as with stocks and bonds, for example.
Because you have an understanding of the share market/trading, and apparently do not want to become involved in the ground work associated with maintaining a property/tenants, etc, then I recommend looking at real estate from an investment only perspective.
In saying this, you will need to know the market, sales trends, supply/demand etc intimately – as with stocks, but you don’t necessarily have to deal with the day-to-day issues associated with your investment.
The best way to approach this is find like-minded people that offer diverse experience and are willing to commit other skills, i.e. negotiating land, planning, building, management, etc – your role is to participate as an investor.
Aside from experience and skills, this team would provide far more leverage in terms of investment/finance, than you can accomplish individually.
If you do your homework and take one step at a time [and gain “knowledge”], then your ultimate goal [profit from capital growth] will be achieved.
— Michael
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