I agree that there are those who walk the walk and those who only talk the talk. you have to admire those who have built a large portfolio and dont mind sharing how they did it.
making money is easy. keeping it is the hard part.
I talked to a guy who had $3m worth of property leading into the early 90's recession. he explained how things slowly got worse for him, cashflow drying up day by day even though he sold property (in a falling market) quickly, finally ending up $500k in debt with no properties left.
I wonder how many people here realise just how easy it can happen? There is only one number that matters……..how long can I survive when (not IF) everything goes wrong?
yes crashy that leverage things works both ways , sadly we have many punters and industry gurus who havent lived through a downturn as an adult. Anything less than a boom feels like a catstrophe for some of those people.
I am a B(just), BTW
A
crashy wrote:I agree that there are those who walk the walk and those who only talk the talk. you have to admire those who have built a large portfolio and dont mind sharing how they did it.making money is easy. keeping it is the hard part.
I talked to a guy who had $3m worth of property leading into the early 90's recession. he explained how things slowly got worse for him, cashflow drying up day by day even though he sold property (in a falling market) quickly, finally ending up $500k in debt with no properties left.
I wonder how many people here realise just how easy it can happen? There is only one number that matters……..how long can I survive when (not IF) everything goes wrong?
Why was his cashflow drying up?
Were the properties he owned tenanted?
L.A Aussie wrote:crashy wrote:I agree that there are those who walk the walk and those who only talk the talk. you have to admire those who have built a large portfolio and dont mind sharing how they did it.making money is easy. keeping it is the hard part.
I talked to a guy who had $3m worth of property leading into the early 90's recession. he explained how things slowly got worse for him, cashflow drying up day by day even though he sold property (in a falling market) quickly, finally ending up $500k in debt with no properties left.
I wonder how many people here realise just how easy it can happen? There is only one number that matters……..how long can I survive when (not IF) everything goes wrong?
Why was his cashflow drying up?
Were the properties he owned tenanted?
Maybe like say he owned a building in normal market worth $15m, put $3m as deposit and $12m is loan. On falling market he forced to sell the property for $11.5m. That would leave him with (500K)?
crashy wrote:… I talked to a guy who had $3m worth of property leading into the early 90's recession. he explained how things slowly got worse for him, cashflow drying up day by day even though he sold property (in a falling market) quickly, finally ending up $500k in debt with no properties left.I wonder how many people here realise just how easy it can happen? …
crashy, anymore details you can share about that story?
the conversation was 10 yrs ago now, and at the time I had zero interest in property, so I probably didnt commit to memory everything important he said. He explained about interest rates going up & up to 18%, I think he had tenants in the properties. they were all Sydney properties. thats about all I remember.
blaze wrote:L.A Aussie wrote:crashy wrote:I agree that there are those who walk the walk and those who only talk the talk. you have to admire those who have built a large portfolio and dont mind sharing how they did it.making money is easy. keeping it is the hard part.
I talked to a guy who had $3m worth of property leading into the early 90's recession. he explained how things slowly got worse for him, cashflow drying up day by day even though he sold property (in a falling market) quickly, finally ending up $500k in debt with no properties left.
I wonder how many people here realise just how easy it can happen? There is only one number that matters……..how long can I survive when (not IF) everything goes wrong?
Why was his cashflow drying up?
Were the properties he owned tenanted?
Maybe like say he owned a building in normal market worth $15m, put $3m as deposit and $12m is loan. On falling market he forced to sell the property for $11.5m. That would leave him with (500K)?
This still doesn't explain a reason to sell.
He could lose value on the building, but still have a good paying tenant in place and have good cashflow.
My guess there is a debt serviceability issue here based on what crashy said, which is a totally separate thing from falling/rising values.
C and holding on well. Good time to increase rents without compromising vacancies because the tenants are now more aware of the mortgage rate rises and less likely to leave…if there is anywhere else to go to. We have 100% occupancy except for 3 weeks changeover on two IPs.
A – but only because I keep building and selling.
A, B or C????? I agree, what matters is the debt level and cashflow. I will take my 4 low LVR over 8 high LVR in the current market. 5 years ago, my opinion and thus exposure was different. Lasting in the game is all about being able to roll with it and avoid having to make hasty decisions.
mickHi all – out of curiousity, for those who hold 3+ properties, did you find it difficult to get a loan, as it is particularly hard to find positive geared property these days?
e.g. if your yearly out-of-pocket expense AFTER tax return (inc depreciation) is roughly $6000 per property, and you can afford to own 3+ properties, will the bank give you a loan even if you don't YET have equity?
Reason I ask is that if you're new to the investment game and own roughly 2 properties but haven't yet achieved capital growth, but can still support ongoing payment via your income, will the bank still give you a loan?
Cheers
AjayHi Ajay,
my fiance and I havent had any problems yet getting finance, we started buying IPs 2 yrs ago (we have 6 now) and we are highly geared (LVR 87%)
Ive spoken to a mortgage broker (Aussie home loans) and the loans manager at my local CBA branch and I asked them the same question and they both said they were more interested in our ability to service the loans(we both work full time) than the equity we had in our properties.. I guess it would depend on the state of your finances, car/personal loans credit cards ect (of which we have none)
also with the dropping of interest rates this should increase your borrowing capacity..
happy investing
crashy wrote:I agree that there are those who walk the walk and those who only talk the talk. you have to admire those who have built a large portfolio and dont mind sharing how they did it.making money is easy. keeping it is the hard part.
I talked to a guy who had $3m worth of property leading into the early 90's recession. he explained how things slowly got worse for him, cashflow drying up day by day even though he sold property (in a falling market) quickly, finally ending up $500k in debt with no properties left.
I wonder how many people here realise just how easy it can happen? There is only one number that matters……..how long can I survive when (not IF) everything goes wrong?
The most important factor is cashflow.
If I had $50mill worth of property right now, and it was cashflow positive, I wouldn't care if it dropped in value by half as the income keeps it afloat until the values return – as they always do.
Someone who is highly geared and neg cashflowed with this level of portfolio would have cause for concern, however the latest rate drops with more to come, plus the increasing rents eases the bottom line a bit.
The only prob with dropping values is it slows down further acquisitions in the near future.
crashy wrote:I agree that there are those who walk the walk and those who only talk the talk. you have to admire those who have built a large portfolio and dont mind sharing how they did it.making money is easy. keeping it is the hard part.
I talked to a guy who had $3m worth of property leading into the early 90's recession. he explained how things slowly got worse for him, cashflow drying up day by day even though he sold property (in a falling market) quickly, finally ending up $500k in debt with no properties left.
I wonder how many people here realise just how easy it can happen? There is only one number that matters……..how long can I survive when (not IF) everything goes wrong?
The most important factor is cashflow.
If I had $50mill worth of property right now, and it was cashflow positive, I wouldn't care if it dropped in value by half as the income keeps it afloat until the values return – as they always do.
This is much like the share market currently; many businesses have dropped in value, but the core business is still very profitable ( ANZ BANK for example) so it will steam along, making money and staying afloat until the sentiment turns and the value goes up. It's a good time to buy their shares pretty soon methinks.
Someone who is highly geared and neg cashflowed with this level of property portfolio ($50 mill) would have cause for concern, however the latest rate drops with more to come, plus the increasing rents eases the bottom line a bit.
The only prob with dropping values is it slows down further acquisitions in the near future.
What would you guys say is the best way to add to your existing property amounts and add IP to your assets?
I have a apartment I was left due to a death in the family. I am wanting to get another apartment and continue to add.
feel free to PM me as well or add me to msn
I currently have two properties and looking to purchase a 3rd one around Easter next year.
Ideally, I'd like to aim for one property purchase a year for the next few years.Anyone here from Perth and investing around North-Perth / Subiaco/ Leederville area?
Thanks
Its not "how many you have " Its "how many you own ". I know many young & not so young people that spout they have several investment proterties. Having more then 1 property is not a sign or indicater of smart investing or wealth. As mentioned in Crashy post "There is only one number that matters……..how long can I survive when (not IF) everything goes wrong?"
I would rather have 1 investment property that I own, that makes a good C.G. and Income. Than 10 that have 0 growth and are negativly geared. Thats only my opinion, Im sure there are many others that suit diffrent investers.
Cheers
T………..
Tony B wrote:Its not "how many you have " Its "how many you own ". I know many young & not so young people that spout they have several investment proterties. Having more then 1 property is not a sign or indicater of smart investing or wealth. As mentioned in Crashy post "There is only one number that matters……..how long can I survive when (not IF) everything goes wrong?"
I would rather have 1 investment property that I own, that makes a good C.G. and Income. Than 10 that have 0 growth and are negativly geared. Thats only my opinion, Im sure there are many others that suit diffrent investers.
Cheers
T………..
That all sounds great in theory, but think about how many people who can afford the time in their remaining lives who can pay off not only their PPoR (which is not an asset unless used to create more wealth) and ONE IP.
Not many.
it is seriously doubtful that you would own 10 properties and have none go up in value, or rents go up. They will all go up at different rates, but still up eventually, and so will rents.
Also, if you only have one IP worth $200k, and it doubles in value over 10 years and you pay nothing off the principle, you have a nett worth of $200k not including any cashflows (rents) and tax returns from it.
But, if you have five $200k properties all running together simultaneously, and pay nothing off the principle, after 10 years your debt is still the same, but your nett worth is $1 mill.
This is the power of leverage and how much exposure you can have to the market.
Of course, it's a double-edged sword; the more debt the more welth, but you can lose more too.
This is where cashflow management, property selection and LVR monitoring are critical to be successful.
Tony B wrote:Its not "how many you have " Its "how many you own ". I know many young & not so young people that spout they have several investment proterties. Having more then 1 property is not a sign or indicater of smart investing or wealth. As mentioned in Crashy post "There is only one number that matters……..how long can I survive when (not IF) everything goes wrong?"
I would rather have 1 investment property that I own, that makes a good C.G. and Income. Than 10 that have 0 growth and are negativly geared. Thats only my opinion, Im sure there are many others that suit diffrent investers.
Cheers
T………..
That all sounds great in theory, but think about how many people who can afford the time in their remaining lives who can pay off not only their PPoR (which is not an asset unless used to create more wealth) and ONE IP.
Not many.
It is seriously doubtful that you would own 10 properties and have none go up in value, or rents go up. They will all go up at different rates, but still up eventually, and so will rents.
If you only have one IP worth $200k, and it doubles in value over 10 years and you pay nothing off the principle, you have a nett worth of $200k not including any cashflows (rents) and tax returns from it.
But, if you have five $200k properties all running together simultaneously, and pay nothing off the principle, after 10 years your debt is still the same, but your nett worth is $1 mill.
This is the power of leverage and how much exposure you can have to the market.
For example; we own our PPoR, which came about through a previous PPoR going up in value very quickly, which we sold and the profit from it payed for our current one, but we have a number of IP's that are all still in debt. But our exposure to the market is such now that if the market goes up by even a couple of percent each year, the cap growth is more than our two average incomes combined. The debt is high, but our LVR is low (54%) and the portfolio is pos cashflow, so the ratios are very solid.
Of course, it's a double-edged sword; the more debt the more wealth, but you can lose more too.
This is where cashflow management, property selection and LVR monitoring are critical to be successful.
I'm not concerned by investment debt. I manage it closely, but I'm happy to take on millions of dollars of it because it will leverage the cap growth and the income over time.
Many people want to get out of ALL debt. That is a saver mentality. Nothing wrong with that, but it is a very slow way to get rich.
You want to clear away any consumer debt for sure, but learn to take on investment debt in a safe, secure manner.
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