Hi all
This may sound like a silly question but how do you recognise a dog.
Is it lack of capital growth
Is it lack of rental demand
Is it because it loses money
Is it just lack of demand at a particular timeThe reason i ask this question is that a few years ago a friend had a house and they wanted $60000 for it. It was an ex housing trust house on a large corner block. It was in immaculate condition.
Well he couldn’t give it away reduced the price to $55000 no takers on the market a total of 7 months so took it of the market.
This was (1994)Was this a dog of a property.
Lets go forward a few years and lets see what happened.
eventually sold for $85000 (1997)
one year later sold for $125000(1999)
one and half years later sold for $189000(2001)
2 years later sold at auction for $358000 (2003)Whats your thoughts
cheers
alfHow can you call that a dog?
Just cause it didn’t sell doesn’t mean it was a dog?
What was it renting for? Why did he sell it?
Maybe he priced it too low and all thought something was wrong with it.
There are many factors to look at here. where was it for example.
Byronent
Adelaide SAA dog is the one with four legs, a tail and hair all over!
Robert Bou-Hamdan
Mortgage Adviser
http://www.mortgagepackaging.com.auFREE Finance-Related Newsletter – Click Here
Comments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty Ltdyes but how does he relate that to a dog?
Byronent
Adelaide SAThat is my point… it has nothing to do with a dog!
Robert Bou-Hamdan
Mortgage Adviser
http://www.mortgagepackaging.com.auFREE Finance-Related Newsletter – Click Here
Comments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty LtdI would’ve thought that the learned few of the forum would know what i was referring to other than a four legged hairy animal. I was using the Peter Spann term for a non performing asset.
The property was owner occupied
It was 10 km from the CBD
It was in a preodminatnly housing trust areaAt this time there were many one could buy at these prices in this area but nobody wanted them at that particular time.
The thing is that this area was stagnant for years. Then it took of like most areas.
Yet had you spoken to many in the game at the time they would tell you to steer clear not a good area.
Cheers
AlfI would have told you to jump on in and buy up.
These areas you described are my favourite.
Take SA Salisbury. You could have bought a 2 bed Flat here for $35k not even 4 years ago, now anything under $100k is a print error.
My point is if you are near CBD, most areas will increase at some point. If the return is positive, I am guessing the rental would have been close to $100per week at the time, then I would have held on, or bought up or even borrowed against it.
Byronent
Adelaide SAHi Byronent
Yes i know what you mean.
Yes i remember the Salisbury/Parafield Gardens and adjoining areas houses were $50000 and renting for $120 a week. I spoke to my accountant he told me get into Managed Funds and to steer clear of these areas and the property market. I would lose money big time.
Well one has to move on. I wonder if similar circumstances will arise again but with different numbers.
By the way i changed accountants.
cheers
alfAnd alf, I knew what you meant!
I thought my second post explained my point.
Robert Bou-Hamdan
Mortgage Adviser
http://www.mortgagepackaging.com.auFREE Finance-Related Newsletter – Click Here
Comments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty LtdIt usually isn’t the investment which is a dog, rather it is the investor.
Usually the investor is the one that wrecks perfectly good investments. I have seen CF+ properties turned into CF- & CG- by a bad landlords/investors. I have also seen profitable business (that needed no input from an owner), turn into dogs by bad owners/investors.
Investors are always seeking new information out and are usually near the front of trends (demorgaphics, the state of play, etc) so while your friend might of thought it was a dog, an investor looked at the potential for capital growth by looking at other cap. cities CBD growth rates, or saw rental yields becomming attractive and, thought it was a good enough deal to buy.
To me almost no investment is ‘bad’ it is the investors who are the ones that make an investment ‘bad’.
Rgds.
Lucifer_auOriginally posted by Lucifer_au:It usually isn’t the investment which is a dog, rather it is the investor.
This is a joke right??? Lucifer, you are such a cracker!!![lmao]To me almost no investment is ‘bad’ it is the investors who are the ones that make an investment ‘bad’.
Oh [eh]…my mistake, you were serious!!![blink]Does that mean there are mongrels as well as pedigrees out there buying property??? Goodness gracious!!![blush2]
Lucifer_au you sound like a man of my own heart. I totally agree with you on this one.
Jo, I am going to have to agree with Lucifer. It really depends on how you pull off the investment as a dog for one could be a gem for another.
Alf, can I ask who the accountant was? Sounds like you are a local also. I have made lots of great deal in Salisbury/Brahma Lodge/Para Hills. Just about to do two subdivisions, just waiting on approvals.
One was a dog investment, well in the eyes of my mate, so naturally I had to take it off his hands. I mean what are mates for. I even showed him the numbers, his wife thought I was nuts and told me that if I was so sure then I should buy it and do it myself. Well I did just that and it is looking to be a great deal. He should never have listened to his negative geared wife. haha
Byronent
Adelaide SAUnderstood byronent,
But that hardly classifies the investor as a dog, maybe misguided and suffering from poor judgement, but that doesn’t make him/her a dog; just foolish (maybe even stupid)!!![blush2]
Cheers,
Jo
Hi Byronent
Yes quite happy to share the accountants name with you. PM if you like
Subdivisions is not something i have attempted at this stage. Seems like you know what you are doing so great to hear.
I am at a stage that i am deciding which direction to take.
Reno
Sub
etcOr just wait for a while.
Cheers
AlfPM on the way Alf.
Jo ok I concede, dog may be harsh and foolish is probably a lot diplomatic. But you get my drift.
Byronent
Adelaide SAIt usually isn’t the investment which is a dog, rather it is the investor.
This is a joke right??? Lucifer, you are such a cracker!!!>For want of a better word… perhaps bad would of been better?
—To me almost no investment is ‘bad’ it is the investors who are the ones that make an investment ‘bad’.
Oh …my mistake, you were serious!!!>Just because investments might have low returns dosen’t mean that they are dog/bad investments. For example at the moment US bonds are pay some where in the region of 1%-3% (depending on time frame, etc, etc, etc), however I’ve been reading a bond traders postings on a forum, and he is making 1-2% per month (not yr.) by trading US Gov. bonds (although I cannot verify it, he has posted his trades (inc. losers)) so I’m guessing he is making money… Hence it’s not the investment thats bad but it’s the investor!
—Does that mean there are mongrels as well as pedigrees out there buying property??? Goodness gracious!!!
>Of course, they just look for different things!
—By the way i changed accountants.
>ARRGGGGHHH!!!! Who would of ever thought that the ‘professionals’ could get it (so) wrong???!!!
Rgds.
Lucifer_auHi
Well i just had to show you how the accountant did the calculations to convince me the property market was bad deal.
House price 55000
costs……..5000
all up……60000Rent 130pwX52..6760
[email protected]%i/o=3900
maintenance…1000
lawn/garden… 250
coun rates…..400
water rates….300
ESL………… 40
Total……….5890In 6760
out5890
=870pa (Positive) To my mind in my naivity i thought this was a good deal.He insisted that it was not and said the following
always
underestimate your income and overestimate your expenses.So he proceeded to show me that one must only calculate 40 weeks rent.
rent 130pw @ 40 weeks=5200
outgoings………….5890
result ………minus 690He said you are losing money for some else to live in the property and there is little chance of capital growth.
With this formula nothing was positive cashflow that is 40 weeks rental calc.I thought the 12 weeks vacancy was a bit excessive but he would not hear of it. I had known him for quite a few years and i guess respected his intentions.
He went on about vacancy rates/research etc and convinced me not to buy in those areas and anywhere else as it would lose me money and get no where. Voila Managed Funds thats the answer.
Well there are times when i wish i had just done my own thing and not listened to him. He was also a financial advisor.
regards
AlfAnd he gets an upfront and trail commission on the managed funds and nothing on the sale of a property.
Robert Bou-Hamdan
Mortgage Adviser
http://www.mortgagepackaging.com.auFREE Finance-Related Newsletter – Click Here
Comments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty LtdWell i can tell you, that is not my current accountant so i am relieved.
You realise there are some Property Managers that guarantee rentals. i mean they say we promise to give you X no matter if we rent it or not. So your 40 weeks goes out the window instantly.
Anyway, you learn from your errors faster than your successes and if you don’t, you deserve to be burned.
Byronent
Adelaide SAAlso : 1994 was a slow year, low liquidity, hard to move stuff. Fast forward to boom times and the opposite is true.
todays dog is tomorrow’s poodle…
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