Happy new year folks! I’m slowly putting together my investing strategy and I’ve come to the stage where I need to determine hold/sell criteria.
At this stage I’m thinking of having both a capital growth target and a % yield threshold that I’d need to exceed. Falling below these numbers and I’d know that I should think about selling. The problem lies in what actual values to choose! Now I know this is a totally subjective measure which will vary depending on area/personal risk tolerance/investment strategy etc and I’m effectively asking you how long a piece of string is, but does anybody else have similar criteria, would you mind sharing what you guys use and your reasoning behind choosing what you did?
Any books/websites/anything at all that you could recommend would also be a massive help. I’ve scoured the internet and there isn’t much at all on this topic.
As for buying criteria, I’m trying to find something which is cashflow positive up to 9-10% interest rates along with a whole other host of checks etc.
I really don’t know if this is enough info to work off. I know that I should be seeing an accountant/financial planner etc for this, but I want to have a crack at planning the entire thing myself, having a few goes at selecting properties to see if I can find something that matches my criteria, then taking the plan to a professional. At that point I’ll have a better understanding of the advice that I’ll be paying lots of money to receive :P
Thanks in advance!BennyModerator@bennyJoin Date: 2002Post Count: 1,325
An interesting set of questions there !! I for one, cannot think of a quick answer to many of them. Mainly because many of the answers will depend on you and your goals in the first place. Like you said, “How long is a piece of string”.
Steve has some interesting thoughts in his various books – one that stays with me is his “Multiplication by division” tenet. In short, once the yield on a place drops markedly (usually as its value increases) it is time to re-consider whether the equity within it should be released by selling, and the equity then parlayed into the purchase of two more properties with better yields. And, a corresponding increase in equity too.
Investing is such a complex area though, that simple answers are often hard to come by – but read on…..
It sounds to me like you are wanting to take a seriously good long hard look at investing – in which case, perhaps my very best tip would be to consider just what a Property Apprentice course would do for you. You are seeking wide-ranging answers to many questions, and I can’t think of a better resource to set you up for your future. Talk with Jason re what it can provide for you – Steve refers you to Jason in the link below.
Take note that the following link to the Property Apprentice course has Steve talking for about 3 mins (along with many pages of info). Have your speaker volume at mid-range prior to clicking on the link (there is a few seconds delay before he speaks….).
BennyTony FlemingParticipant@the-dark-knightJoin Date: 2008Post Count: 396
Something cash flow positive at 9% to 10% interest rates in residential property will be difficult to find unless you are putting down large deposits. Might be able to pull it off if your buying unit blocks in regional areas. I think it will be a very long time before interest rates get that high though.
If you are looking for easy on sell options in case things go belly up. The basics just make sure you have a unique property, there is demand for that property, good condition etc
Hey Benny, would you happen to recall which of Steve’s books refers to that rule of thumb? I’ve just finished reading 0-260+ and I’m thinking I might grab a couple more of his books if they’ve got any additional useful insights. It was a great read (albeit slightly depressing considering I was liking the idea of a buy and hold strategy).
Thank you for the link to the course by the way. I’ve taken a look and although it looks awesome, a 2 year course isn’t really going to fit into my timeline. I like getting my hands dirty and doing things myself :)
I’m not sure whether 9-10% is attainable at this stage Tony, however that’s my initial benchmark. Once I start drilling down on particular areas I’ll refine that number if I can see that it’s unreasonable – I do still want some degree of capital growth after all. Not sure what number to set as my annual capital growth target though :\ But I definitely agree on those last few tips, they’re definitely part of my selection criteria when buying!BennyModerator@bennyJoin Date: 2002Post Count: 1,325
Hey Benny, would you happen to recall which of Steve’s books refers to that rule of thumb?
It is in “0 to 130 properties” in the middle of Chapter 3 “Ramping It Up”. In the 2009 edition, it is on page 49 – earlier editions might be on a different page number. Whoops – seems like Chapter 3 is a NEW chapter – but I KNOW the phrase was in use in the original book – just where is that needle in the haystack? It should be an earlier chapter….
a 2 year course isn’t really going to fit into my timeline.
I hope you didn’t think you would put your investing “on hold” for two years? :o
Quite the contrary – and imagine how much better you will run with the knowledge that grows in leaps and bounds…. all the while being mentored. But hey, it is there when it is right for you, eh?
All good, I’ll just grab the latest revision of that particular book, I’ll have to come across it at one point or another when I read it. Thanks for the heads up :)
Good point. I was thinking from the point of view of saving every cent possible to save for deposits, but that’s a bit short sighted of me. I’ll suss it out, thanks for the prod in the right direction Benny!
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