Hi everyone
I have a question for those investors who subscribe to the above theory. When you say "Never ever sell" what exactly does that mean?
Does it literally mean to never ever sell and leave the property to the kids one day?
Or does it mean to hold on to until it is old enough that maintenance eats up all the cashflow?
Or does it simply mean to hold onto it until a deal better deal comes along that, even taking into account selling costs, stamp duty, CGT etc, will make you more money
Cheers
K
My spin on it is to never sell until you reach the point in time where you want to live off your investments or subsidise your existing wage allowing you to reduce your work hours. At this point you have a few options.
1# The rent on all properties pays for all shortfalls( Interest included) plus enough left over to live on. ( no need to sell any properties)
2# Sell some properties to pay the others off. The remaining properties a debt free and all the rent ( Minus holding costs) is yours to live on.
3# Build up a large enough portfolio that the equity growth is enough to cover costs plus your required income.Just keep drawing on the growth in the properties.
There are more options with many variations but i hope you get my drift.The main idea being when you are building on these portfolios if you buy and sell this eats up your cash through the buy/sell costs. If you choose well you should hold on long term. This does not mean that you should sell a pig if it is holding you back.
devo76, well put.
But as Linar says, you can always pass them onto your kids, so they have a head start into the buy and hold strategy and hopefully get to the positive return stage and continuous the growth, that us mums and dads have started up for them.
You need to start educating your kids when they are young, so you can be confident that your hard work will not be lost by kids that like to spend spend spend.
Agree with devo above. Important to weigh up costs (even if looking to enter a better deal) of sale and more importantly entry costs again especially stamp duty. Also on the way out does the CGT consideration (as relevant) still make the future purchase enticing.
Whilst I'm generally one to hold, my situation also allows that I have two pre-CGT properties (aside from our PPOR) that I will sell one day to pay out all IP debt accumulated to that point………and then some
. That's about another 10 or so years away, so at least one and possibly two property cycles away. Might even stagger the sale. Sell one after one cycle and then sell the other at a future point.WJH above also makes a valid point about educating the eventual heirs and beneficiaries about being savvy enough to manage a portfolio. My wife and I have an understaning that we are not bringing up our daughter to be a fool. At 8 years of age she has had some introduction to our portfolio (although not all our IP's) and helps me source potential purchases on rea websites and also google earth. She understands the notion of value in well located infill land as a commodity. She already saves a percentage of any money she receives and has been well versed on the Richest Man in Babylon notions of paying one's self first.
It is important to walk our talk and as well as leaving a legacy in the form of physical assets, to also lead by example and if all else fails………….control it all from the grave by way of tight testamentary trusts.
Linar wrote:Does it literally mean to never ever sell and leave the property to the kids one day?Possibly but more likely a long-term hold position
Linar wrote:Or does it mean to hold on to until it is old enough that maintenance eats up all the cashflow?You fail the investment strategy here ie you need to add value at some point in time that is you will need to reinvest which in this case may mean redevelopment to earn a fair rate of return. You would not allow your cash returns to drop unless you were in a position to accept reduced rents for a sustained period.
Linar wrote:Or does it simply mean to hold onto it until a deal better deal comes along that, even taking into account selling costs, stamp duty, CGT etc, will make you more moneyThis is a short-term strategy, you sell/refinance when an appropriate opportunity presents itself.
There is an interesting case in January's API magazine. Where a guy bought and sold for small profit and kept no properties and ended up with no assets at the end of his working life.
Devo,
Well put.
My plan is mainly B&H but the time frame on holding depends on current economic situation.
It also depends on the type of property as some are ear marked to be passed on to heirs and others to sell when there value reaches that of what is owed on better properties to make those properties debt free. A unit previously purchased for under 100K (2002) is nearly worth 300K now and will be used to pay off a nice house that had been previously purchased at just over 300K (2005).duckster wrote:There is an interesting case in January's API magazine. Where a guy bought and sold for small profit and kept no properties and ended up with no assets at the end of his working life.This one's happened to me already and I've had to start again from total scratch where as I could have actually held onto and owned 4 properties over the last 10 yrs or at least 2 or 3 of that no worries .
And been enjoying spare cash from them years ago plus the security of owning property but , blew the lot .I'm starting with a totally different strategy now that's focused on building up good holding stuff not only a profit.
And hopefully with times probably coming up over the next yr or two , should be some great opportunities to help rebuild to.I've started on 2 now and should be able to keep long term one of those which before I would've sold for sure and I tell ya what , feels great . Really exited about the decision.
Cheers
Hi duckster
What page in the API is that story on? I looked but couldn't find it.
Cheers
K
Hi K,
Page 38 Jan API has the piece that I think duckster mentioned.
. That's about another 10 or so years away, so at least one and possibly two property cycles away. Might even stagger the sale. Sell one after one cycle and then sell the other at a future point.
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