1) I am currently reducing debt by selling some Ip’s and taking the capital gains. With a very large low value depreciation pool, I can, currently, offset most of my capital gains from sales. This won’t occur for long as LVP’s tend to run out quickly.
I am willing to keep and maintain IP’s which I own outright, but I am not happy to become a contract bank employee by maintaining IP’s for which the bank holds the lions share of ownership. Repaying loans and reducing debt is effectively ‘buying out’ the bank’s share of your Ip’s. I want to retire on the rental income, not pay it all to the bank in interest payments.2) Lot’s of my Ip’s were ‘cheap’ buys because of crook fences, no carports, worn carpet, need painting etc. Now is the time for me to rectify those shortcomings and hopefully increase the rents too.
3) With a better income and less debt, I can be on the lookout for the occasional bargain which comes along and actually be in the position to buy it.
4) Probably most important: With a cooler market, I can devote more time to my children, who, during the crazy time of property investing ‘full-on’ did not get my undivided attention. Time to stop and enjoy my ‘roses’.[biggrin]
If you want to get out of a hole, first stop digging.
Brenda, that’s a good strategy. While downsizing your overall portfolio you are increasing your equity and your cashflow at the same time.
I tend to sell off any non performing assets first and retain the income producing ones. In 2003 I sold my beach house because I wasn’t using it very often and very little income was being derived from it. I bought another commercial property leased to an oil company (lease expiry 2012 with a ratchet clause). I also fixed some of my loans for upto 3 years. It has good positive cashflow.
While I am not concerned about any market correction in property I do have a good buffer in that the oil companies will have to go broke first. If I did have any doubt I would not get rid of the golden goose to reduce debt but the luxury items first.
Cheers
JeffI agree, Brenda’s strategy is pretty sound regardless of market movements, and will position her well should house prices drop. Anyone planning to buy into a fallen market needs to ensure they will be in a positive equity position, which is obviously best achieved by lowering the LVR on their portfolio before or at the peak of a boom.
Brenda, I wonder if you would be willing to share your thoughts on selling IPs at this time?
The media have been reporting average time on the market growing to 4-6 months and vendors taking offers 15-20% below real estate agent quotes – how does this compare with your current experience(s)?Cheers, F.[cowboy2]
Thanks for the vote there Monopoly, its always good to get encouragement from the top tier like yourself.
Hi Brenda, long time no see. Great minds think alike. We settle a sale on one of our non performers in Perth next month and pay down another to get more cash positive. Renos and upgrades I do all the time. Did one in Redbank Plains in December and just did another in Kingston 2 weeks ago.
Its always good to fine tune your thinking regularly. None of our loans are fixed as we have always needed flexibility but we are converting a few stragglers to Interest only now the dust has settled a bit.
Still bought 2 more townhouses Dec/Jan in our pet area of Kingston. Can’t help myself.
DD
PS146 Certified Financial Planner
Don’t sweat the small stuff,and it’s all small stuff!!DD, you should get a pretty fair price in Perth at pres. Selling poor performers is a good idea. Once the capital growth has been achieved during a cycle, it is no fun at all to hold a maintenance high property till the top of the next cycle.
Market wise on my sales, I had no impossible dreams of what price I could get by selling. I think prices in most areas are too high anyway and could do with 20% off immediately. You are supposed to take your profit when you sell, not dip into the next buyers future profit by ramping up the price.
For my sales, the houses were on the market around 4 to 8 weeks before I got a bid. I listed the ips at the overvalued market price and just kept lowering the price each week, till I met the market. I had already worked out my lowest amount wanted, but thankfully, all three ips went under contract much higher than my lowest expectations.
Results were IP 1, purchased for $50k, latest rent $150pw, sold $130k.
IP 2, purchased for $30k, latest rent $105pw, sold $72k.
IP 3, purchased for $52k, latest rent $125pw, sold $86k.
None of the ip’s were nightmares or anything to own, I just needed to reduce debt and those 3 Ip’s seemed to be the hardest likely to sell. I thought whilst there was still a fairly interested market, now was the best time to sell them.
If you want to get out of a hole, first stop digging.
“Brenda” you have some excellent contingency plans for the future. You’re a clever woman.
Regards – Johnny1 [biggrin]
Thats right Brenda, rea;ising profit at a sale is good for the soul and will actually clear the decks for forward thinking again.
The two we sold in Bundamba recently were $109k to $165k sell and $120k buy to $185K sell so Im with you. The one that sold for $185k had a major storm leak into the bathroom in the week that followed the sale and cost a whopping $5k to rectify for the new owner. So we dodged a bullet on that one and we didnt even know there was a problem.
Sometimes you get lucky I suppose.
DD
PS146 Certified Financial Planner
Don’t sweat the small stuff,and it’s all small stuff!!
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