All Topics / Help Needed! / ROLLING THE DICE – advice needed please.

Viewing 11 posts - 1 through 11 (of 11 total)
  • Profile photo of parraboyparraboy
    Participant
    @parraboy
    Join Date: 2007
    Post Count: 17

    Hi Guys.

    I just wanted to gather some advice and thoughts on my little situation.  I have come to a sort of fork in the road and I want to make the next 10 years really count.   My scenario is this :

    PPOR –  fully owned valued at $480K    (  Western Sydney )

    IP No 1 :    BURTON  ( South Australia )
                    Bought 2007  $ 349,000
                    Valued at $450,00
                    INCREASE of $101,000 in 4 years

    IP No 2 :    MEDOWIE  ( NSW Port Stephens area )
                    Bought 2006  $ 290,000
                    Valued at $ 320,000
                    INCREASE of $ $30,000  in 5 YEARS

    IP No 3 :   TOWNSVILLE  ( qld )
                    Bought 2009   $ 402,000
                    Valued at $ 460,00
                    Increase of $58,000 in  2 Years

    They are all negative geared , all Defence Housing Properties, and apart from MEDOWIE have 6-12 years leases on them still.  All good quality houses with usual DHA specs etc.

     Q1 >       In terms of growth etc are they doing ' enough ' – are they progressing well enough considering GFC etc ?

    Q2 >        THinking of selling MEDOWIE and buying a NRA or another DHA in a better growth area ?  Medowie hasnt really 
                   gone to what I expected or hoped. 

    Q3 >        I was thinking about going again into another market possibly WA to catch the next wave or even SA again.

    I know these questions are a lot of what if scenarios but sometimes it is good to get feedback from those who have been there done that rather than an accountant or FA. 

    I know there are expenses in selling MEDOWIE but I am looking for advice on what I see as being should I sell MEDOWIE as there hasnt been much growth and buy elsewhere with growth potential or keep it.?

    Cheers, any advice is always appreciated.

    Enjoy your weekend,.
     

     Parraboy

    Profile photo of fredo_4305fredo_4305
    Participant
    @fredo_4305
    Join Date: 2009
    Post Count: 336

    Gday Parra boy, just touching base to see if you are in the Military?

    If not I can give you a bit of an insight into how DHA think.

    Cheers

    Profile photo of parraboyparraboy
    Participant
    @parraboy
    Join Date: 2007
    Post Count: 17

    Hi Fredo,

    No I am not from the miltary – My wife liked the security of the whole DHA property investments.  Doesnt like risk ! I  just started with a DHA property as my first investment property in DARWIN in 2002 and sold it in 2006 and paid my own house off completely and have stayed with the strategy ever since, although the success of that Darwin property has never really replicated itself to the other subsequent purchases.  My strategy at the start was to fully pay off my own home and now it is about building some foundations for the future I suppose.

    Thanks.

    Profile photo of fredo_4305fredo_4305
    Participant
    @fredo_4305
    Join Date: 2009
    Post Count: 336

    DHA in smaller cities are pretty good for capital growth. However in the bigger cities DHA houses are futher out from the CBD in less desirable areas as the rent Military members pay to rent them is accross the board. So therefore if a Military member is renting a house in Windsor in Western Sydney is the same as what they would pay renting a DHA apartment on Sydney Harbour. Therefore DHA pay more rent to you as opposed to balancing it with the Military members contribution.

    I think your properties have done pretty well considering the GFC however not as well as properties in the southern states.

    The problem I see with DHA is there isn’t much flexibility with rent and you have to sell it with a lease. They also charge 16,5% management fees and as DHA tenant who also has a property portfolio I would be disgusted if my agents managed my houses as DHA do. DHA’s properties as far as I am concerned are a little over priced and there isn’t room for negotiation. If you take into consideration the price, management fees, and the rent which is never the top you could get if it were rented on the normal market return wise they are about even. Adding to this that not many properties in the southern states are in high growth areas. DHA houses have to more or less be brand new which pushes the areas they can be further and further out as there are limited new houses in the city and there specs are as you mentioned very specific. Which inner city houses do not normally have.

    Property is a long term asset so if you do sell Medowie you may be robbing Peter to pay Paul. Why don’t you mix it up and try a mining area or a high growth capital city location? Diversity can be the key.

    I think you need to review your long term plan. DHA are a very non agressive sort of investment. If you are happy for them to slowly grow and have a good nest egg in 20 years time great but if you are looking for shorter term goals I would be looking at something else.

    Which reminds me I need to contact DHA about the leak in the wall they said they were going to fix a month ago :)

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    Those properties look like they are performing badly. Is there any prospects of capital growth? if not then it may be worth considering selling them and investing the money elsewhere where you can get a better return.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069

    Hi Parraboy

    Welcome to the forum.

    I agree with Terry, those numbers aren’t overly spectacular. Do you suspect that the Medowie property has growth potential? Is there anything to suggest that the area will increase in value? Is there something that you can do cosmetically to the property to improve its value?

    I’m generally a buy and hold type of guy – but that property just doesn’t seem to be doing a lot.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of parraboyparraboy
    Participant
    @parraboy
    Join Date: 2007
    Post Count: 17

    Hi Terry W and Jamie M,

    The medowie purchase was a bit rushed and a little underdone.  AS far as further growth, I dont think there will be anything major.  Whilst my holding costs are Ok, I may have to bite the bullet after June and try and offload it.  Do the other figures look Ok ?   hope so, otherwise I am in a bit of strife….

    Thanks guys

    Profile photo of angelinsydneyangelinsydney
    Participant
    @angelinsydney
    Join Date: 2011
    Post Count: 270

    Hi Parraboy,

    Take it from someone who's been there and done that.  I've had to swallow a bullet once – a rather large one.  But as the Chinese proverbs says, "Take one step back and two forward."

    What I learned from selling a non-performing asset is this:  I got to fight another day.  If you carry Medowie for too long and too far into your journey, it will likely bog you down.  Unless as Jamie said you suspect Medowie has growth potential.

    Take care.

    Angel

    Profile photo of GiumelliGroupGiumelliGroup
    Member
    @giumelligroup
    Join Date: 2010
    Post Count: 73

    Hi Parraboy,

    Good to see your a blue and yellow supporter that's always a good start.

    You have to have a clear and defined strategy going forward for the next 10 years of what you would like to achieve from your portfolio. For me personally i will not buy anything that does not see a minimum of 10%pa in capital growth and a rental yield of 7% + in the current markets.
    What we teach clients is you have to look at your portfolio as a business. Within a business you have employees, some good, some bad. You need to treat your properties in the same respect and find out which of your properties give you the highest returns with the minimal amount of effort vs the bad properties that give you the lowest returns and require lots of effort/cash-flow.

    Not knowing your entire situation and working off the above listed information i would get rid of Medowie and look for a better investment. If you like the area take a look at Cessnock/Raymond Terrece/Rutherford etc where mining is having a huge impact on these towns. Remember the key to investing is research!

    Give me a call if you want to have a chat!

    Profile photo of Andrew_AAndrew_A
    Participant
    @andrew_a
    Join Date: 2003
    Post Count: 392

    Parraboy one quick way to do a bit of benchmarking is to compare your houses with houses in the area you have bought, use the free ABS, Residex data for houses and compare growth with these numbers to your individual properties. If you aren't adding value to your houses then that's really all you can achieve, you check your areas are performing well, and if they aren't is there some reason there might be some mean reversion or improvement in the future.

    ABS quarterly data
    Residex Data

    DHA properties are neither good or bad, just deals that need to be weighed on their own merits. In the last twelve months we have purchased some DHA properties on behalf of long term investor clients. It's not unusual that I see some very poor results for previous DHA investors as they simply paid too much at the time, what might have been perceived as low risk (guaranteed rent and new carpets!) was anything but for these buyers.

    Also there is the issue of location, to me location trumps most other considerations, so the hierachy of investment decisions should be 1) location and budget 2)Best property to suit (Is there a DHA property here?) rather than.. 1) I will buy a DHA property 2) Hmm where are they and what can I afford?

    It's my experience that the threat of vacancy and bad tenants is sometimes given too much weight by investors and this is perhaps one factor in why DHA properties can attract a premium price. Hedge your risk with good insurance, property management and good buying and you have no need for rental guarantees or any other hand holding.

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069
    Andrew_A wrote:
    It's my experience that the threat of vacancy and bad tenants is sometimes given too much weight by investors and this is perhaps one factor in why DHA properties can attract a premium price. Hedge your risk with good insurance, property management and good buying and you have no need for rental guarantees or any other hand holding.

    Totally agree, I hear the same concerns all the time. Great advice Andrew.

    In regards to property managers – call a couple in the area, have a chat, ask about their current vacancy rates and get a feel for how they operate.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

Viewing 11 posts - 1 through 11 (of 11 total)

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