Hi all,
Just to be clear, when I say ‘buy and hold’ strategy, what I am referring to is purchasing as many as possible of simple, standard block sized new homes in good suburbs and renting them out. No subdividing, flips, renos etc. Just buy, rent and hold.
I know that countless people have done well out of this approach in the last 10 years, particularly due to it being so simple and easy to manage that it is possible to acquire a lot of properties. It’s ease of execution is probably also the reason there are so many investment clubs pushing it.
What is everyone’s opinion on how this approach will go over the next 10-20 years from now? Will it be worthwhile?
What do you think would be the single easiest, most effective thing to focus on when buying these homes to maximise the long term return?Jay
i believe this will always be a solid investment strategy since over a 10 – 20 year period you will always see the peaks and troughs in a market, and be able to make informed decisions about when to on sell ? (if at all)
in 10 – 20 years one would assume, provided you can make some payments on the principal rather than interest only that the property/properties would become +CF at some point if not quickly depending on the deal.
Assuming during this period you have accumulated several i.p's, all becoming positively geared over a few years hard work, this strategy in my opinion and somewhat limited experience is a solid way to gain a residule income through property. I personally think that making a few cosmetic changes to one of your properties to add value ie small changes in kitchen & bathroom, light fittings, a small decking area etc, before onselling and using the profits to pay down the other mortgages to a point where they are positively geared is a wise one, and although it might take a few weekends work, will speed up the process when looking to get your portfolio paying you.i think the hard work to get positive cashflow is most important because once that is achieved you can sit and watch the growth happen without worrying about servicability or a glass ceiling on how much more you can invest if the right deal came along.
Im no expert but i hope its food for thought and i look forward to hearing what others have to say too!
have a nice day
Good question and something I get all the time from other people. My thinking is this "Will I sell my PPOP for less money in 10 years time ..I don't think so! If this is the case then surely my IP's will be worth more. Now whether that is 100% or only 50% it still makes sense as an investment strategy.
On the subject of +CF as your rent increase year on year you will eventually achieve a positive situation. I don't believe in putting my own cash into IP's ..rather use the bank's money
. I certainly agree that if you can make some cosmetic improvements you increase your equity and rent potential right away.The other thought is do you buy for capital growth (older property) or cash flow (outer suburbs). I guess it depends on your situation
Lets check back in ten years and see how we've done
I 'm going to buy a couple more IP's just in case it all works outBuy and hold (and a bit of a reno here and there) is my strategy. Some might think it's boring – but it works for me. I see property as a long term investment – I'm not into flips, wraps, ect but I can appreciate they have their place and some people do extremely well from these strategies (owner of this website included).
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
It's hard to go wrong if you buy in good neighbourhoods and stay on top of things. Make sure you have a good real estate agent and that you aren't renting the property for below the market value.
As everyone has said, properties will probably always go up. So if you can afford it then it is a good strategy.
I prefer to go positive cash flow as I am making money from day one. If you go negative cash flow then you will want your capital gains to be significant as they need to outweigh the money you are pouring into the property in expenses every month.
But yeh, if you can afford it then it sounds like a pretty solid idea.
One caution, if you leverage yourself too far (eg having 95% LVR's) then if interest rates go up a lot it may make your cash flow very tight.
Ryan McLean | On Property
http://onproperty.com.au
Email Me
. I certainly agree that if you can make some cosmetic improvements you increase your equity and rent potential right away.
I 'm going to buy a couple more IP's just in case it all works out
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