Hi everyone,
This is my first post and probably my only but I just wanted people to know things aren’t always as they say in the books. I have problems that seem to be growing by the day !!!
I read Steves book and did some reading early on here. I have bought a number of properties in cashflow +ve sort of back of Burke (my Dad says) locations.
I reached 15 properties and they had a grand return of about $300/pw gross.
That seemed to be great following the formula, $200/pw after tax roughly.
Then some maintenance issues came up. 4 hotwater systems at about $1000 each.
2 backed up sewarage systems at $400 each. 3 lots of tenants totally trashing the houses
cost me about $4000.
2 properties after fixing up from the trashed tenants have now both been vacant for 6-8 weeks with prospects of a new tenant not going to happen in the short term.
Worst of all I want to sell them all, and have been trying for the last 3 months and noone is interested. Not one inquiry.
My Dad told me not to buy these houses. He has had houses in Sydney for many years without half the problems I have had and had fantasic growth and could sell any of them tomorrow without a blink for a great profit.
I now agree with him, don’t believe all that you read in books for some great new plan (cashflow postive) the basics stay the same. Without a bailout I have only problems. I wish I had not read the book and thought I knew it all.
Niki.Welcome to the forum, I believe in +ve cashflow too but sometimes the price you pay to achieve this is simply not worth it. Why buy a house (a significant investment) to make $20 per week?
I think it took a lot of courage to admit your situation, especially in public and I’m sure there are plenty of people on this forum that have great ideas of how to fix it. Good luck with everything and succesful investing for the future.[biggrin] G7Originally posted by Niki:Hi everyone,
This is my first post and probably my only but I just wanted people to know things aren’t always as they say in the books. I have problems that seem to be growing by the day !!!
I read Steves book and did some reading early on here. I have bought a number of properties in cashflow +ve sort of back of Burke (my Dad says) locations.
I reached 15 properties and they had a grand return of about $300/pw gross.
That seemed to be great following the formula, $200/pw after tax roughly.
Then some maintenance issues came up. 4 hotwater systems at about $1000 each.
2 backed up sewarage systems at $400 each. 3 lots of tenants totally trashing the houses
cost me about $4000.Where is landlord insurance come into play?
2 properties after fixing up from the trashed tenants have now both been vacant for 6-8 weeks with prospects of a new tenant not going to happen in the short term.This is where your research come in before you buy those properties.
Worst of all I want to sell them all, and have been trying for the last 3 months and noone is interested. Not one inquiry.Good luck
My Dad told me not to buy these houses. He has had houses in Sydney for many years without half the problems I have had and had fantasic growth and could sell any of them tomorrow without a blink for a great profit.If it is not on the market then you just don’t know.
I now agree with him, don’t believe all that you read in books for some great new plan (cashflow postive) the basics stay the same. Without a bailout I have only problems. I wish I had not read the book and thought I knew it all.Maybe you should read more books to learn more. To me seem like you don’t know what you are doing.
[/quote]
Kind regards
Jet Dollars
“The road of some-day lead to the town of nowhere”Niki,
Running away from the problems isn’t always the answer.
Is there any chance of refinancing any of the properties with the cost of the recent expenses included over a longer term to bring the repayments down ie: if you had 23 years of the term left, then add the expense and refinance over 25 or 30 years.
ONce this has brought you expenses down a bit then reassess whether the twons are any good for the long term, if not then look at selling them off, if they should be good then perhpas drop the rent a little to try and secure a tenant to help with paying off the loans now.
Lastly, put osme aside for unexpected maintenace ie: perhaps 20% of the +ve cashflow should be put on one side for maintenace and do take out landlords insurance so if a tenant wrecks a place again, then it’s not out of your pocket.
Well, hope some others have some ideas for you too.
Good on you for sharing.
PKNever ever give up – persistence is the key.
Sometimes we have to go through these stages in life. Likfe is like a rollercoaster – if its been going downhill for tyou – then might aswell expect a rise in the positive direction.
Think of creative ideas to turn all this around.
kind regards,
George.I’ve found a way to help you save and earn whilst not selling or delivering any product. If interested, drop me an email or PM me to find out how
Hi Niki,
Sorry to hear of your troubles and I hope that this is not your first and last post. I can imagine that you’d feel pretty down about your situation at the moment.
As your dad will tell you successful property investing (or successful learning of anything I believe) is a learning curve, you will make mistakes and things will just go wrong. Many of these lessons are very valuable (thousands of $$$ worth) so don’t just overlook them and give up. Use them to learn and achieve future success. No plan is fool-proof in my opinion, think “worst case scenario” and “exit strategy”.
I can’t over estimate the value of a good landlords insurance policy. Also a good property manager (especially if your properties are far away from you in the “back of Bourke”). If you don’t have these in place at the moment now would be an ideal time to organise it as it appears you have no immediate way out of this situation. A trip to interview property managers for your “back of Bourke” properties is tax deductible.
In the past few years there has been significant capital growth in ALL areas of Australia. If your original strategy was to buy and hold then refinancing and using the equity to get you through this rough patch is an idea that I like. By the way I do believe that these sort of things come in patches. For us, some years nothing goes wrong and we collect our rent with virtualy no expenses. Other years (like this one!) I dread the sound of my property manager’s voice on the phone and we ends up a cash flow negative year.
If your original strategy was to buy and sell to make profits not only from rental income but also from capital gains then not being able to sell is a big problem. Are the properties listed with local real estate agents? Have you taken the agent’s advice on what is a realistic selling price? I’m not sure how long you have held the properties but with the growth that has occured in the past few years perhaps you could even drop the price a little and still come out in front.
On the other hand perhaps you could sell the properties that are not delivering the expected returns and keep those that deserve to be kept. Use the profits to reduce you debt or reinvest in something more to your liking (this is what I would personally do). I am hoping that all of your properties are not in the same “back of Bourke” town otherwise you will have flooded the market by trying to sell them all at the same time. If this is the case, then perhaps selling off only a few at a time might be a better idea.
I am definitly no guru or book writer but these are my thoughts. I hope things improve for you and that you don’t give up on investing because of this experience. Despite the fact that things might look bad at the moment, you have achieved more that many people ever will in property investing. Don’t waste all those valuable lessons – revise your strategy based on your current situation and keep going!
Even if you don’t stick with the forum give us some feedback on this thread because we care and because we can also learn from your experience. If you do decide to stick around then hopefully you can learn from the experiences of others as well (heaps less painful and expensive)
I wish you the best of luck with it.
Cheers
SonjaHi Niki,
I’d like to say welcome to the forum, and hopefully you will stay with us, as there is much you can learn from the vast array of investors here.
Positive geared doesn’t have to mean “cheap” buying. I have bought properties that are positive geared, simply because I paid cash for them. If you bought these properties and over-committed yourself financially, then your mistake is even more dire than you described; I hope this is not the case!!!
I have not read Steve’s book, but I can only assume from discussions with him, and those who adhere to his strategies, that he does not advocate buying without doing your due diligence first!!! Ever heard the expression “research, research, research”????
I would imagine MANY people will find themselves in your shoes, not because they read Steve’s book, or because positive cashflow doesn’t work, but because they have rushed in (armed with nothing but enthusiasm, greed and a sh**load of ignorance) and bought up “cheapies” that promised high returns, without taking the precautionary steps to ensure safeguards, ie. taking into account vacancy rates, repairs, proper number crunching and finally setting in place adequate insurances (as JetD mentioned, landlord’s insurance).
Hopefully, you will be able to offload these properties, or at least get them to a point of being tenantable again, to decent tenants.
Good luck,
Jo
P.S. Next time maybe you would be best to listen to “dear old dad”!!! [blush2]
My subject is probably misleading, I do not blame the book really. It is all my own faults. I rushed in to quick to make my wealth.
Sadly no landlord insurance, another mistake. Maybe I will try to refinance this is worth the try.
If I can sell then someone else only has my problems, this has been weighing on me to.
Thankyou for the ideas a work friend said I should try here.
I need to think very hard.
NikiThanks for that Niki and good luck with it all.
I agree that some of these properties that are cashflow positive are still bad investments and I would only ever (now) buy a property that had potential for capital growth. Without growth, cashflow is useless.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
i think nikis post is a set-up. someone trying to make a point. funny its taken you (niki) until now to find this website when you have already bought 15 cashflow properties. (considering youve also read the book)
and then you proceed to write something like that. maybe you shld have posted earlier and asked a few question…hehe
Niki – it does seem rather odd that you have gone through the rigorous process of buying 15 CF+ properties and only just discovered the discussion board that is referred to in Steve’ book. CF+ property is so highly sought after now that I would expect you would be inundated with buyers to take your properties off of your hands and can’t really see the problem… off load the 10 or so that still have tenants, using any capital gains to cover your mortgage on the last 2 until you find tenants. You may even be able to sell the untenanted ones to CF investors that will take a bit of a chance.
Assuming your post is genuine I suspect the problem may be that these properties aren’t really CF+. $300 a week clear divided by 12 is only $25 a week yet you haven’t paid for insurance or created a maintenance fund. I would consider these to be CF- and not even negatively geared as they sound as though they have no growth potential.
Do not despair as there are plenty of people here who can help you through this. Perhaps you may like to start by picking your worst (or best?) property and disclosing all the details here so we can go through the financials of it and offer some advice.
Extensive list of ‘Off The Plan’ property available for sale in Perth.
John – 0419 198 856
Niki, thanks for this thread.
There are so many success stories on here, that it sometimes can give people the idea that property investing is all roses.
It is eye-opening for some of us to hear that things can go all wrong, too.
Please let us know how things are turning out for you.
Celivia
Hi Niki,
It seems to me you have learnt the VERY hard way!
Although I am newish(?) investor, I have become very well read in regards to investing in property, and nearly every strain had said – research is the key!
If and when I invest in property offshore or far away from home I have learnt (through experience as well as advice)
that you need a good rental manager, and always landlords insurance!I wish you well in your endeavours, perhaps you could get some more help from the forums, they are a veritable fountain of knowledge!
regards Trisha[bow]
I believe this will become more common as we go through the cycle of increasing interest rates.
Growth is king not cash flow. You want income -get a job – you want to invest – by assets that appreciate.
My advice would be to liquidate the worse of these properties and hopefully you dont incur too great a loss.
Most will tell you +ve cashflow is the only way to go. Forget about –ve gearing and praying on a capital gain it’s too risky. Hmmmm……
I see +ve cashflow props out the back of Burke as the biggest risks in property investing for exactly all the reasons you outlined!!!
hi im nikis sister
this is my only post but just letting you know things arent always in the books you read. ive read heaps of books on negative gearing and 12 mos ago bought 3 properties wch people told me would grow heaps in value. i was out of pocket 3,000 a month.
unfortunatley the market turned and i lost my job and now i have negative equity. mum told me cashflow was king but i didnt listen and now im in trouble.
i now agree with her…i wish i hadnt read those books and thought i knew it all.
rgds
nikis better looking twin sistercute, rogue…
It’s likely that any post that people disagree with, will be discredited by some. So a person saying that pozz gearing hasn’t been all they’d have liked it to be, will be called a fake.
I dunno whether the post is a fake or not- I used to think this place had so many plants saying how great positive gearing was, that pi.com was a nursery.
I think any kind of property investment can be expensive. Sometimes there are expenses that we couldn’t have expected. I’ve certainly had expenses for my IP’s- all the way through, and I find it annoying, but not the end of the world. I do try to buy properties now, though, that don’t have too many obvious expenses coming up, but contingencies always probably need some cash back up- just like a small business might need when a piece of equipment fails.
15 properties – that’s a lot. If I look at the maintenance I require on one IP, and multiply it by 15, I would not feel comfortable. But then, income of the IP’s helps :o) Still, I would rather have less IP’s, and have less worries. I’ll be happy with 8 by the time I retire (long way off).
kay henry
I think it might be best if the whole family sits down and decides to combine efforts.
Have a good rounded porfolio. A bit of both. Let the positive geared ones finance the ones with better growth prospects.
Niki,
Just a suggestion if you are looking for a creative solution to your portfolio problem.
Why don’t you write to each of your current tenants asking them if they would like to buy the house they live in at fair market value, at a reasonable interest rate on vendor terms.
The repayments on a high yielding property will probably be lower than their current rent (favour 1), they get to become owners of the house and enjoy all of the associated wellbeing and economic benefits that come from that (favour 2) and they could use a really low deposit of $2K or so (favour 3), maybe even FHOG.
You will therefore have a similar cashflow to what you have now, plus cash deposits, plus NO MAINTENANCE hassles. I bet some will jump at it.
Just my $0.02.
Cheers
skippygirl
)They don’t get to own the house while you are vendor financing it to them, until they refinance or pay the debt off. Niki, the house will still be in your name.
kay henry
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