澳洲Australia property Possible to constantly accumulate propert


在澳大利亚 The pool at of an IP needs to be resurfaced (or so the pool doctor says), the cost was estimated to be $10K ($10,000), after recoverying from my impresssion of a cat coughing up a fur ball, it just seems far too much. Its just a standard poo I need some advice regarding a property purchase. Property - semi-detached house Bedrooms - 2 Condition - average needs internal reno to modernise Street - one of the best in suburb Location - excellent Close to schools - yes Transport - 50m


Hi SS'ers,

Do you think it's possible to constantly accumulate property, say by buying an IP every year? Can the process be continued indefinitely?

I was thinking about this because I'm formulating a long term plan for buying IPs. I had a vague goal of buying about $300k-$500k of IP's every 1 - 1.5 years.

I didn't actually know whether I'd be able to achieve that, however. So I made a spreadsheet to see if I could fund my next few IP purchases. Say I wanted to buy a $300k IP every year for the next few years. At 80% LVR I would need $60k for a deposit every year.

Assumptions:
- PPOR worth $600k at 80% LVR (bought 1 year ago)
- a cf neutral IP worth $600k at 80% LVR (recently bought)
- capital growth of 4% pa
- save $2k per month ($24k per year).
- all future properties bought at 80% LVR.

You could easily modify these assumptions for your own situation to see if you come up with the same result.

Based on the assumptions:
* next year (let's call this year 1) we could buy a cf neutral IP using our savings
* the following year (year 2) we could buy another one using the equity from the PPOR (which we'd have owned for 3 years by now)
* the following year (year 3) we could buy another one using the equity from IP1 (which we'd also have owned for 3 years by now).

(I've assumed that in 3 years, a $600k property will appreciate to $675k (4% pa compounded). At 80% LVR the loan could be extended from $480k to $540k with a $60k release of equity)

Then the cycle repeats all over again...
year 4 - buy an IP using our savings
year 5 - buy an IP using equity from PPOR
year 6 - buy an IP using equity from IP1

Repeat ad infinitum!

Not to mention that the process speeds up the more properties one has.

Sooo, my question is, what am I missing here?

Obviously I need to factor in the buying power of $300k over the next decade (eg. if property doubles every 10 years then $300k can buy less and less each time).

However, wages also increase over time so I would be able to save more. Similarly equity would grow faster in dollar value, due to the effect of compound growth over time.

Also, the properties need to be CF neutral for this to work - higher yield properties generally tend to have lower growth (??)

Also, the banks will probably stop lending after a while.

So how does one continue to extract money from the bank and keep buying IPs indefinitely??

Is anyone here in the process of constantly accumulating?  

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tess85 said: ↑
Do you think it's possible to constantly accumulate property, say by buying an IP every year? Can the process be continued indefinitely?Click to expand...

I can confirm quite categorically that absolutely no-one here, or anyone else for that matter, has ever achieved this. It is simply impossible. I've spoken to the lot. It cannot be done. Sorry.

tess85 said: ↑
I made a spreadsheet....Based on assumptions

Sooo, my question is, what am I missing here?Click to expand...
You forgot to add a few columns to that lil' ol' XLS....

Insert a column for wife's shoes.

Insert another column for keeping up with the Jones' children's wish-lists.

Insert a column for upgrading PPoR every 5 years


Add up summation of three columns, and deduct from free cashflow column. Immediately re-apply for old job, suck up to old boss and then if you are lucky, carry on for the next 40 years like most other investors feeding the consumption machine. :)  

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I believe i can do this, i have failed in the past and tried other things,
but after this year i will be attempting (according to dazz) to be the first to do this.on SS.

My approach is to value add to every property, in the canberra region.
I now have staff, i now have income , and i am a licenced builder.
these three things are my magic key to buying 1-2 every year for the next 10 at least.
:D  

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Even if it were possible, property prices move in cycles, so buying a property a year is the wrong thing to do.  

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Paul Do said: ↑
Even if it were possible, property prices move in cycles, so buying a property a year is the wrong thing to do.Click to expand...
why do you say this paul?  

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I think it depends on your strategy. Are you talking + or - geared? Or a misture of both? Where are you buying? Don't want all your eggs in one basket.

Have a look at Nathan, I think he is a pretty inspirational person, who appears to be able to just 'keep on buying'.  

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Paul Do said: ↑
Even if it were possible, property prices move in cycles, so buying a property a year is the wrong thing to do.Click to expand...
What about dollar cost averaging when it comes to share investments? My approach is just an extension of that, really.


Thanks for all the comments so far, it's a hypothetical situation and the numbers seem to add up so far, very curious as to the holes that people can pick in it. Dazz makes a good point re: upgrading PPOR. As for wife's shoes... I'm the wife in question... I buy my shoes from Kmart :D  

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ok then, hubbies toys. They can be even more expensive  

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tess85 said: ↑
I buy my shoes from Kmart :DClick to expand...
That's even worse - more variety of shoes to purchase.  

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tess85 said: ↑
Hi SS'ers,

Do you think it's possible to constantly accumulate property, say by buying an IP every year? Can the process be continued indefinitely?Click to expand...
Unless you are a very high income earner who does not spend freely on doodads to the limit of their stratosphere income (which is usually not the case), and only buy pos - or at best - neutrally geared property.......

no.

Why? because there is this little thing called DSR that Banks like to include in their assessments of you and your ability to repay their loans to you.

You can have as little LVR and nett worth as you like, but without the DSR you are toast.  

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Dazz said: ↑
I can confirm quite categorically that absolutely no-one here, or anyone else for that matter, has ever achieved this. It is simply impossible. I've spoken to the lot. It cannot be done. Sorry.Click to expand...
Steve McKNIGHT is pretty confident on his ability to do this and recently discussed the use of appropriate structures to achieve this feat, as well as his USofA ventures?

[​IMG]  

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My friend and her husband have 9 resi investment properties + own their own property outright. My friends husband is very disciplined and passionate about investing in resi properties. He does heaps of research and buys in a lots of lower priced areas around Aus in capital cites that I'd feel uncomfortable buying in. He often refinances to help keep on top of expenses. Once I visited and his wife said she wanted to buy donuts to have with our coffee but her husband wouldn't let her spend the few dollars. :eek: He's chilled out now though - thank goodness!  

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tess85 said: ↑
Hi SS'ers,

Do you think it's possible to constantly accumulate property, say by buying an IP every year?Click to expand...
It depends on a whole range of factors:

- the type of property an investor buys ie something that is +ve, or something that they've been able to add value to, and in the process gain immediate equity and a positive cashflow.

- the investor's income from businesses, investments and possibly wages.

- whether an investor has been able to time the market, resulting in immediate equity for future purchases.

- whether an investor can buy at a discount (eg through the circumstances of the vendor - divorce, death, financial problems etc, etc).

I think Nathan has demonstrated that it is possible - for sure.

tess85 said: ↑
Can the process be continued indefinitely?Click to expand...
I'd say it depends on the situation and probably skill of the investor (as per the points above).

Regards Jason.  

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Definitely possible....

My aquistions are a follows:

1994 - 1
1999 -1
2000 - 1
2002 - 1
2003 - 1
2005 - 1
2006 - 2
2007 - 3
2009 - 3
2010 -1

The key is to manage your CF...buy lower end with good CG....and have a reasonable income.:D

tess85 said: ↑
Hi SS'ers,

Do you think it's possible to constantly accumulate property, say by buying an IP every year? Can the process be continued indefinitely?

I was thinking about this because I'm formulating a long term plan for buying IPs. I had a vague goal of buying about $300k-$500k of IP's every 1 - 1.5 years.

I didn't actually know whether I'd be able to achieve that, however. So I made a spreadsheet to see if I could fund my next few IP purchases. Say I wanted to buy a $300k IP every year for the next few years. At 80% LVR I would need $60k for a deposit every year.


year 6 - buy an IP using equity from IP1

Repeat ad infinitum!

Also, the properties need to be CF neutral for this to work - higher yield properties generally tend to have lower growth (??)

Also, the banks will probably stop lending after a while.

So how does one continue to extract money from the bank and keep buying IPs indefinitely??

Is anyone here in the process of constantly accumulating?Click to expand...
 

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BayView said: ↑
Unless you are a very high income earner who does not spend freely on doodads to the limit of their stratosphere income (which is usually not the case), and only buy pos - or at best - neutrally geared property.......

no.

Why? because there is this little thing called DSR that Banks like to include in their assessments of you and your ability to repay their loans to you.

You can have as little LVR and nett worth as you like, but without the DSR you are toast.Click to expand...

You hit the nail on the head. I've run into "serviceability" limits with the bank even though I only want to borrow 80% LVR and my two IPs are 1 x cashflow positive and 1 x neutral.

This is because the bank (Which Bank) will only recognise 80% of my rental income, and assume that I'm paying principal and interest on my IPs on a 20 year term (even though I'm actually paying interest only on a 30 year termn) and because they assume I'll be paying interest on the next IP at 1.6% higher than the actual current rate.:(  

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Africandaisy said: ↑
(Which Bank) will only recognise 80% of my rental income, and assume that I'm paying principal and interest on my IPs on a 20 year term (even though I'm actually paying interest only on a 30 year termn) and because they assume I'll be paying interest on the next IP at 1.6% higher than the actual current rate.:(Click to expand...

.....to judiciously ensure that the folk who paid $ 5.40 per share back in '91 continue to receive their big fat $ 2.35 fully franked dividend per share every year. A gross yield of 62% p.a.

Of course, if one is displeased with one's side of the mortgage contract, one always has the option of joining the other side of the contract.  

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Africandaisy said: ↑
You hit the nail on the head. I've run into "serviceability" limits with the bank even though I only want to borrow 80% LVR and my two IPs are 1 x cashflow positive and 1 x neutral.

This is because the bank (Which Bank) will only recognise 80% of my rental income, and assume that I'm paying principal and interest on my IPs on a 20 year term (even though I'm actually paying interest only on a 30 year termn) and because they assume I'll be paying interest on the next IP at 1.6% higher than the actual current rate.:(Click to expand...
Chat to a broker.  

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Hi Tess,

I certainly think it is possible.

Keys are diversifying portfolio across lots of areas, use lots of different finance options and lenders and learn a few other tricks of the trade along the way.;)

Also suggest buying at 90% -95% while you can in early part of process as you won't be able to later and builds portfolio value earlier

Good luck:)  

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BayView said: ↑
You can have as little LVR and nett worth as you like, but without the DSR you are toast.Click to expand...

Can't agree with that Bayview the lower the LVR the easier it is get finance, at 60% LVR and no payg income you could still get millions and millions of dollars easily,  

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Fergus and Judith Wilson built up a portfolio of around 900 properties (at peak) in the UK, but I suspect they benefited from starting the process when prices were extremely cheap and low interest rates for much of the past decade.

My guess is that they ramped up their portfolio by using equity withdrawal as prices rose. The numbers of properties they could buy would have exponentially risen as they controlled more, which is what tess85 was hinting at.

They're selling up now, and rumoured to be struggling.

Still, if you're curious, there are a number of articles in the media. Here are a couple to get you started.

http://www.guardian.co.uk/money/2008/oct/04/buyingtolet.property
http://www.guardian.co.uk/money/2010/mar/06/buy-to-let-fergus-judith-wilson

Nathan's strategy appears to be to target very cheap properties in a distressed state which he can renovate to get an immediate uplift in value, and can be rented out on a cashflow positive basis. (And please correct me if I've read it wrong.)

It seems to be working for him too. :)  

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