Forums / Property Investing / General Property / Strategies that are working in 2015 Australia

Viewing 12 posts - 1 through 12 (of 12 total)
  • Profile photo of JBCJBC
    Participant
    @jbenjamin
    Join Date: 2014
    Post Count: 34

    Hey guys,

    I’ve just read Steve’s recent book “From 0 to Financial Freedom, How To Do It Today”.

    I love Steve and his practical approach, but to be honest I found it somewhat depressing reading. His message in a nutshell is:
    – the world has changed from when he got started
    buying cashflow positive properties is still possible, but to build real wealth from it would take too long. You would run out of capital within 2 or 3 properties and then be stuck until you can save enough for another property
    – he suggests buying properties for capital growth over a number of years (including manufacturing capital), then shifting it all into debt free positively geared commercial property
    – even the most aggressive investors would struggle to build an adequate passive income within 5 years, 10 years is more realistic
    – on top of this, if you want to do it in 5 or even 10 years you need to stay in your full time job for this whole time and probably need to supplement your income with an ‘income accelerator’ such as an online business.

    So my question is – for experienced investors out there, do you agree, or what are some strategies that are working for you in the current market, that could be used by newbies starting out today?

    I am pretty inexperienced so I want to know if what I’m proposing to do is realistic. I like the idea of manufactured capital combined with vendor financed positively geared properties:
    1. Buy a simple single family residence, undervalued for the area (eg bottom 1/3 of property values for that area), in a suburb a bit out of town but still close to services.
    2. Basic rehab, nothing structural but new paint, carpet, possibly bathroom or kitchen etc.
    3. Revalue, draw down on the equity
    4. Sell it on vendor finance
    5. Claim the positive cashflow and use the added equity to purchase another one and go again

    Thanks for your time.

    Profile photo of D.T.D.T.
    Participant
    @dtraeger
    Join Date: 2014
    Post Count: 128

    Yep, it’s definitely changed. I doubt any 2 people will ever be able to do the same as each other. Opportunities come and go, there’s *always* something, somewhere, that money can be made from.

    Buying cashflow postive properties is absolutely possible. Some suburbs of Brisbane, most regional centres in all states and most of metropolitan Adelaide is positive cashflow.

    Strategy has never really changed. Find a method of making money that works and repeat until it doesn’t.

    I’m pretty happy and comfortable with numbers 1 through 5 in your list except for #4.

    D.T. | DT Property Management
    http://www.dtproperty.com.au
    Email Me | Phone Me

    Adelaide Property Management - whole Adelaide metro

    Profile photo of superAndrewsuperAndrew
    Participant
    @superandrew
    Join Date: 2014
    Post Count: 188

    I wouldn’t get too caught up in all those investment strategies proposed in books and by property gurus etc. I would use them more as an educational concept of how it works theoretically. There are many assumptions behind those strategies.

    As we all know everything changes all the time. So investing in property using a +10 year strategy that makes multiple assumptions seems a bit off. In 5 to 10 years things will be different from today and your strategy will change and so will the strategies proposed in the property books.

    Following certain rules that help you maximise your:

    • options
    • your investment’s value
    • and income generation ability

    now and in the future seems more realistic.

    Some obvious rules are:

    • Buy under market value – Negotiate hard.This helps you create equity straight from day one
    • Buy properties with development potential for now or in the future – High future value potential when rezoning
    • Over time add value by renovating, subdividing, etc

    There are plenty more.

    I agree with D.T. I wouldn’t go into #4.

    Cheers
    Andrew

    superAndrew | Property Analyser and Finder Tool
    https://property-analyser.com.au

    Profile photo of DWolfeDWolfe
    Participant
    @dwolfe
    Join Date: 2009
    Post Count: 1,253

    Hi all,

    I think there are still some basic strategies that work in today’s market. Buy an unrenovated property that already has positive cash flow then renovate to increase cash flow and add in some capital growth is one that might be a good starting point.

    I don’t know that I’d say a strategy that works now will work for the next 10 or even 5 years. Things change, people change and so does your investing. I’m not doing the same things in property I did 10 years ago, and I’m planning for huge change and opportunity even in the next few years.

    I think people get too hung up on the ‘I’ll do this then RETIRE!!! I’ll never work again!! I’ll be rich!’ It’s not so quick and easy and also if you retire, then what? Sit at home watching DR Phil? You’ll still need to ‘DO’ something and that’s where the online business etc comes in. You may not want to work for the man, but you may still want to do something.

    I’m not in love with vendor finance either, but if it worked for me in a deal I wouldn’t say no.

    Cheers

    D

    DWolfe | www.homestagers.com.au
    http://www.homestagers.com.au
    Email Me

    Profile photo of xdrewxdrew
    Participant
    @xdrew
    Join Date: 2010
    Post Count: 479

    The framework for your investment strategy should be considered dynamic and fluctuational AT ALL TIMES.

    For Steve to say the way he worked things, they dont work like that anymore is fine.

    Because no matter what ‘framework’ of litigation and banking practise you come across to start with .. it will be moderately different as your investment matures. However .. moderate changes add up over time .. leading to a significant change over a period of years. As an investor or speculator in real estate you MUST keep yourself informed as to what will either benefit or harm your investment in the short to medium term. It is part of your overall wealth strategy and not keeping informed can leave you with either expensive taxation on sale or per annum .. or even worse .. a loss of value on your investment.

    And the market? You will head into a different market than Steve .. and a different market than Bob, Frank, and Peter. You will have to assess what the demands are in that market .. where the market sits on the investment clock .. what areas have the possibility of adding realistic and significant value.

    As Steve notes in one of his books (OMG yes i did actually read at least 3 of them), he not only headed to Wendouree once .. he headed back again when the market condions were right. Because he understood the market .. he had experience in the market demands .. and he knew where the value lay.

    So the answer for the 2015 markets is .. try to calculate what lies ahead in the market you have chosen .. for the next 5 years. If you can percieve value or an attractive market sector .. then go for it .. jump the boat .. take the risk .. talk to your lenders .. harasss your local agents .. and get to where you want to.

    Because the first step will be yours to achieve .. and you will never regret it.

    Profile photo of CatalystCatalyst
    Participant
    @catalyst
    Join Date: 2008
    Post Count: 1,404

    Buying cashflow postive properties is absolutely possible. most of metropolitan Adelaide is positive cashflow.

    Can i ask how you are calculating cash flow in order to make most of Adelaide CF+. Must be different to the way i calculate it.

    i.e outgoing(interest on 100% finance, rates, insurance etc) minus incoming (rent). Only counting 80% is not taking into account interest lost by using a deposit. ALL properties can be CF+ if you pay a big enough deposit but we’d be just kidding ourselves wouldn’t we!

    Profile photo of D.T.D.T.
    Participant
    @dtraeger
    Join Date: 2014
    Post Count: 128

    Can i ask how you are calculating cash flow in order to make most of Adelaide CF+. Must be different to the way i calculate it.

    i.e outgoing(interest on 100% finance, rates, insurance etc) minus incoming (rent). Only counting 80% is not taking into account interest lost by using a deposit. ALL properties can be CF+ if you pay a big enough deposit but we’d be just kidding ourselves wouldn’t we!

    Sure. I count 105% interest into all my properties because that’s how they’re all financed. That’s the only fair way as well when taking into account opportunity cost.

    Just a couple of examples of my own recent buys if I may – $147k purchase with 250/wk rent in one suburb, $250k purchase of a duplex pair in another with 2 tenants totaling $400/wk , there’s many others along similar lines. These are in the northern suburbs, can do similar yields in the south except with slightly higher numbers. If you’re willing to do extra work like rehab / reno there’ll also be more reward available.

    Part of what I like about Adelaide is that the costs are fairly cheap. The insurance and council rates on my Adelaide properties are far less than most Perth / Brisbane properties. Maintenance is also fairly cheap – it’s far simpler to find a repairman willing to do something for $100 than it is in other cities.

    What’s helping it along at the moment is the low interest rates, but may as well make hay while the sun shines, right? :)

    • This reply was modified 4 years, 9 months ago by Profile photo of D.T. D.T..

    D.T. | DT Property Management
    http://www.dtproperty.com.au
    Email Me | Phone Me

    Adelaide Property Management - whole Adelaide metro

    Profile photo of JBCJBC
    Participant
    @jbenjamin
    Join Date: 2014
    Post Count: 34

    Thanks heaps to everyone for the responses, those are some really helpful answers.

    @dtraeger
    @superandrew
    I’m interested to hear why you are both suggesting staying away from vendor finance? Because you’d ultimately be giving up a cash cow?

    Profile photo of D.T.D.T.
    Participant
    @dtraeger
    Join Date: 2014
    Post Count: 128

    Yes
    If a property is doing well, why would you sell it?

    It’s also complex for little gain. If I was to invest that much effort in finding someone who was willing to enter that arrangement, as well as understand all the legal and finance intricacies of it, I could have bought a few CF+ places by then.

    Also, I think there’s one state where its not legal and another where its legal but not enforceable, ie other party can back out.

    D.T. | DT Property Management
    http://www.dtproperty.com.au
    Email Me | Phone Me

    Adelaide Property Management - whole Adelaide metro

    Profile photo of superAndrewsuperAndrew
    Participant
    @superandrew
    Join Date: 2014
    Post Count: 188

    I’m interested to hear why you are both suggesting staying away from vendor finance? Because you’d ultimately be giving up a cash cow?

    I wouldn’t want to become a bank. Not worth the hassle.

    superAndrew | Property Analyser and Finder Tool
    https://property-analyser.com.au

    Profile photo of Don NicolussiDon Nicolussi
    Participant
    @don
    Join Date: 2005
    Post Count: 1,086

    •Buy under market value – Negotiate hard.This helps you create equity straight from day one
    •Buy properties with development potential for now or in the future – High future value potential when rezoning
    •Over time add value by renovating, subdiving, etc

    Very sound points.

    If I were to add something it would be on the cash flow risk side of the equation.

    The cost of debt now is the lowest it has been since I have been investing in real estate. I guess this is the same for all of us.

    However, what I am reading and seeing is that people are not focusing now on the income potential of properties and focusing a little too much on capital gain “potential”.

    There is a common argument that if there is no capital growth then “leap frogging” (thanks for the term Peter) is not possible.

    If you remove your PAYG income (which is the goal of most investors) then how does your portfolio survive. Does it have the cash flow to feed itself. If not what steps could you take to achieve that.

    Manufactured equity. Take something and create something. Take something good and make it better.

    • This reply was modified 4 years, 8 months ago by Profile photo of Don Nicolussi Don Nicolussi.

    Don Nicolussi | Mortgage Broker - Home Loan Warehouse
    http://homeloanwarehouse.com.au
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    "I think of finance as a technology, a way of getting things done." Robert Shiller

    Profile photo of Jacqui MiddletonJacqui Middleton
    Participant
    @jacm
    Join Date: 2009
    Post Count: 2,539

    I find that people are so busy focusing on how to get themselves out of the workforce in the next 5 years that they overlook the obvious pot of untapped money in their super. It is quarantined money that is quite often whittling downwards in balance that can so easily be resurrected into a SMSF and used to acquire property. Yes it is true that it funds income for retirement years, but this is not to say it is money that should be ignored. Why not work on the short term outside of super AND the long term inside super. The money is there… might as well use it! :)

    Jacqui Middleton | Middleton Buyers Advocates
    http://www.middletonbuyersadvocates.com.au
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    VIC Buyers' Agents for investors, home buyers & SMSFs.

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