[AMA] I'm a Property Investor. Ask me about Property Investing

RubenM on 06/12/2018 - 08:04
Last edited 06/12/2018 - 08:59 by 1 other user

I’m a property investor with 10 (mainly very low value) investment properties with a total of 13 tenancies (one granny flat and two duplexes).
I’ve been investing since 2010 and much of my income in that time has gone into either saving deposits or paying for property related expenses.

Along the way, I’ve made plenty of mistakes and I’m not even close to being able to retire on my investments, as the bank ones far more of the properties than I do.

Currently I’m 36, have a one year old son and a wife that works part time.

Ask away, but I probably won't answer questions that don't have to do with property investing or are too detailed.

Standard disclaimer: None of what I'm writing constitutes financial advice, they're my experience and opinions only.

Introduce Yourself

closed Comments

stirlo on 06/12/2018 - 08:09

You have "very low value" properties, how did you find these cheap properties?

Are they positively geared?

How do you deal with tenants who don't pay rent?

Also whats income to loan ratio (ie yearly income/total mortgage amount)?

How exposed are you to an interest rate rise?
- RubenM on 06/12/2018 - 08:20
  
  +6
  
  1) I looked for areas with fairly high yield. I needed this in order to keep buying and get to 10 IPs. Finding areas of high yield is easy, there are published tables of this. Sorting the wheat from the chaff isn't and I haven't always succeeded in that.
  2) Some are positively geared but as a whole the portfolio is negatively geared, especially if you take depreciation into account.
  3) If you have good property managers (extremely hard to find!) they'll take care of that problem for you. I've had maybe 5 tenants evicted. I do self manage two properties, if the tenants don't pay, it's text messages, phone calls and if they're two weeks behind a letter saying that they'll be evicted in two weeks if they don't get back up to date. Usually works, but I've had to contact a tenant's dad (tenant has a mental disability and the dad said I could contact him) to sort it out before.
  4) Rental income? It's a bit more than the repayments, but all repayments are now principal and interest (a change which is hurting). So all the other costs come out of my salary/savings. Rental income and repayments are very roughly both $150k.
  5) Very exposed. If we're going up to 18%, I'm bankrupt. I can hang on up to 7%, I'd say. But the exit strategy is to sell up if rates shoot up.
  - stirlo on 06/12/2018 - 08:34
    
    +12
    
    Thanks for the informative answers. Pretty much what I expected, way to risky for me, but hey I bought crypto in January so my track record is worse than yours :P
    
    the exit strategy is to sell up if rates shoot up.
    
    As is everyone else's… :P
    - RubenM on 06/12/2018 - 08:40
      
      +1
      
      True, and that might push down prices (though increasing interest rates generally mean increasing prices), but even if property goes down 20% before I sell, I'll still be okay. Doesn't mean I'll like it, but it means that I'm out without having to declare bankruptcy.
      - dcep on 06/12/2018 - 12:38
        
        +3
        
        @RubenM: "increasing interest rates generally mean increasing prices"
        
        what do you mean?
        
        i think it's the other way round ?
        
        RubenM on 06/12/2018 - 17:29
        
        -4
        
        @dcep: Rates are changed by the RBA depending on how the economy is going. Housing has a sizable impact on inflation figures, for example.
      - Tyrx on 07/12/2018 - 21:05
        
        +7
        
        @RubenM:
        
        (though increasing interest rates generally mean increasing prices)
        
        Where did you hear that rubbish? The basics of MMT will show you that when interest rates are low, asset prices are inflated. Low interest rates reinforces economic hegemony… Interest rates climbing will have the opposite impact of what you're hoping for and will actually wipe out chunks of wealth out of the economy. You should be especially concerned about that because you hold poor quality assets, which are always the first to go under in such an event.
        
        RubenM on 08/12/2018 - 07:49
        
        @Tyrx: Listen to the RBA narrative.
        
        Ultramup on 08/12/2018 - 08:55
        
        @RubenM: It’s the other way around. When interest rates decrease there are more people who can afford to buy thus more demand therefore house prices go up … however the rba will increase interest rates to slow down this demand when house prices rise too much (amongst the various other reasons they can also choose to increase the rates)
        
        Wallyt99 on 09/12/2018 - 23:26
        
        @Tyrx: Im worried there are two people attempting to correct the op here - who are both obviously very wrong.
        
        Obviously higher rates are a disincentive to borrow and can lessen demand for property - but who sets rates and why? RBA - to control inflation.
        
        Inflation happens when the economy starts to run too hot. If the economy is running hot - chances are real estate is running hot too. Lessening demand does not mean prices would fall.
        
        Increasing interest rates and a stagnating economy - known as stagflation - is a rare but not impossible combination.
      - Other on 08/12/2018 - 14:57
        
        +1
        
        @RubenM: You could sell one to create a buffer. And then just ride it out.
    - HighAndDry on 06/12/2018 - 18:34
      
      I bought crypto in January
      
      Ouch.
  - brendanm on 08/12/2018 - 09:04
    
    +1
    
    If rates shoot up, noone can afford to buy property and prices will plummet. Everyone who is overexposed will be trying to sell and so in addition to people not being able to get money to buy, the glut of houses coming onto the market at once will drop prices as well. Supply will be far higher than demand.
    - RubenM on 08/12/2018 - 09:24
      
      In crash scenario I'm screwed if I'm forced to sell, I've conceded that.
      - VTS160 on 08/12/2018 - 11:49
        
        @RubenM: Was this ever a scenario (interest rates going up, restricted foreign investment or tighter lending affecting prices) on your plan when you started? If there was a plan, was it always to sell off in a falling market?
  - garetz on 10/12/2018 - 02:48
    
    What happens when everyone has that attitude, to sell up as an exit strategy, basically the market is flooded with negatively geared investments, and the market crashes even further, thats a very poor exist strategy to have.
    
    You are not a property investor, you are an interest rate speculator.
    - RubenM on 10/12/2018 - 06:40
      
      +1
      
      I'll bite, what's a better exit strategy? Or is the alternative not to invest?
      - garetz on 12/12/2018 - 03:29
        
        @RubenM: Look into risk management, and how to mitigate risk vs reward.
        
        RubenM on 12/12/2018 - 06:52
        
        +1
        
        @garetz: Sorry, but does your cryptic reply mean that you don't know of a better exit strategy either, or that I should sell up now and forget about investing?
        
        I'm putting my cards on the table and I'm more than happy to take constructive criticism on board, but I feel that's not the case in this instance.
        
        garetz on 12/12/2018 - 10:41
        
        @RubenM: Why do you think i am being critical of you, its your life, you do what you want with it, the final decision is yours, im just trying to push you in the right direction, dont take my word for it, do your own research.
MrHyde on 06/12/2018 - 08:09

Are you positive geared or negative?

How are you getting enough cash flow to keep getting loans from the banks?
- RubenM on 06/12/2018 - 08:21
  
  +1
  
  1) Negatively as a portfolio
  2) I don't. All my loans are from before my son was born, when my wife was working full time and before the APRA changes. There's no way I would get a new mortgage now.
  - ColonialBoy on 07/12/2018 - 09:30
    
    +7
    
    So you are highly geared in a sinking market.
    
    Just keep hoping that a bank does not call in a loan.
    
    Why did you not buy a portfolio of stocks instead?
    - RubenM on 07/12/2018 - 09:50
      
      Highly geared, yes. Sinking market, sure true for the Central Coast properties, but I've got a lot of equity in those. The others, I don't really see the market dropping.
      I have not heard of residential loans being called in as long as the borrower kept up with repayments.
      There's no cheap, easy credit for the share market. And those loans do get called in when your lvr drops. Not only that but the share market is much more volatile than the housing market.
      Investing without leverage is not something that I would consider, as it's just too slow.
      - ColonialBoy on 07/12/2018 - 13:29
        
        +3
        
        @RubenM: As Warren Buffet says, you can get Mr Market to value your property and get a different price every day.
        
        You can use property as collateral for share purchases. Say you have a property with a mortgage with a 4% line of credit. Just that money to buy shares, which means they are leveraged. The interest is tax deductible because you are using the money for income-producing assets, and the interest rate is low.
        
        You need to think about how you structure your finance. I gave up on property long ago. I invest in boring stocks like Reece Plumbing or Nick Scali Furniture.
        
        Other on 08/12/2018 - 15:01
        
        @ColonialBoy: Go look at how many millionaires are created by property vs shares in Australia and worldwide.
        
        Its like the blind leading someone who probably will make it.
        
        ColonialBoy on 10/12/2018 - 22:28
        
        @Other: Most non-PPOR wealth in Australia is superannuation.
        
        Other on 11/12/2018 - 12:39
        
        @ColonialBoy: I'm not sure what your point is. The average balance of super at retirement is less than $300k.
        
        If you own 1 investment property and paid it off you will probably have more money than the average person.
        
        Property creates more millionaires (both PPOR & IP) than super (or stock investing) does.
- dcep on 06/12/2018 - 12:40
  
  now you know what the banks are exposed to
Meho2026 on 06/12/2018 - 08:22

+3

Do you have landlords insurance and if so what insurance company do you use?
Do you pay interest only on your loans and what is your average interest rate?
Are all your properties owned in your individual names or have you set up a trust and/or company and/or SMSF?
How much do you pay your accountant each year for your tax returns including your personal income and investment income?
What is your total LVR for your whole property portfolio?
What piece of property investment advice would you give yourself 10 years ago that would have saved you the most cash or pain?
If you had to speculate and pick a suburb anywhere in Australia, where do you think has the potential to have the greatest capital growth in 10 years time?
What is the worst property investment you have made and whats the best?
- RubenM on 06/12/2018 - 08:39
  
  +3
  
  1) There are two types of insurance, one that is basically the same as a home and contents insurance you'd have at home and one for things like rental defaults. I only have the first type. I have used a whole bunch of providers, but I mainly use EBM (a QBE broker) and Terri Scheer.
  2) All have now reverted to P&I which costs me nearly an extra $50k a year. Average interest rate is maybe 4%.
  3) All in my and my wife's name, due to it being cheaper and easier, even if you don't have the asset protection.
  4) Around $600, but I actually do most of the work, filling in her spreadsheet and everything before we go there. So for her it's really just a couple of hours of work, for me it's days.
  5) A bit over 70%
  6) Buy as much as you can on the Central Coast and whatever you do, don't buy a house with an asbestos roof! Also, stay away from Rockhampton!
  7) Sorry, I won't answer that one. I haven't bought in the last two years and haven't looked at the market closely since then. More broadly, Brisbane is looking good (I like Logan), but I also think that the Perth slump will come to an end soon, so I'd consider looking there.
  8) Worst, a property in Rockhampton that has dropped in value 30% since I bought it and rent is down at least that much as well. I spent $40k on replacing an asbestos roof and $10k on minor renos and other maintenance over the past two years. Money pit that one.
  Best is the second property I ever bought, house and granny flat on the Central Coast NSW that I bought seven years ago. Has more than doubled in value and is paying a decent amount of rent. It's also lower cost as I manage it myself and it's zoned medium density, so has future development potential for townhouses.
  - MtnMama001 on 07/12/2018 - 14:06
    
    +2
    
    Another vote here for staying away from Rockhampton!! I have properties there and the market has gone through the floor and kept on plummeting. Plus the extra charges council puts on investors… not worth it.
  - nikey2k27 on 09/12/2018 - 06:01
    
    Rockhampton about to pick up again soon Townsville much the same. i got my new home super cheap after mining boom now head into mining boom 2.0
  - CheapSticks on 09/12/2018 - 14:25
    
    where in central coast?
bargainhunter87 on 06/12/2018 - 09:45

Would you buy in Sydney right now?

I am thinking of areas where there is good development happening e.g. Parramatta westmead.
- RubenM on 06/12/2018 - 10:01
  
  +9
  
  A home, sure. An investment property, no way. I think prices will fall a little bit further (5% would be my guess) and this will likely be followed by a period of stagnation which could last years.
  Given that any pretty much any Sydney property would have negative cash flow, I think you'd be much better off buying in other markets.
  - bargainhunter87 on 06/12/2018 - 11:00
    
    Thanks
- Stimps on 06/12/2018 - 10:29
  
  +3
  
  Sydney property has fallen 8.1% in the the last 12 months, 2.8% in the November quarter (11.2% annualized), and 1.43 percent in November (17.2% annualized). See a trend there?
  - HighAndDry on 06/12/2018 - 10:32
    
    +2
    
    Also, just basic supply and demand. If you're buying in a place where supply is going to increase astronomically because of new developments, you're just asking to lose money.
  - RubenM on 06/12/2018 - 11:12
    
    +2
    
    True, but I wouldn't necessarily use this as a doom and gloom forecast. How does it compare to previous years? I know that the markets grinds to a halt in the lead up to Christmas.
    I'm still expecting the market to continue dropping, but I really don't think those 50% drops that you read about will occur.
    - Stimps on 06/12/2018 - 11:58
      
      +1
      
      How does it compare to previous years?
      
      Sydneys fall of 9.5% since its last peak is its largest fall since 1982 and the numbers indicate the falls are accelerating.
    - dcep on 06/12/2018 - 12:49
      
      +2
      
      You need to live long enough to see the complete cycle,
      else you would think property always goes up.
      
      "The last time Sydney property prices fell this much, mortgage rates were around 17 per cent, unemployment was 6 per cent (on its way to 11) and Australia was heading into the recession we had to have."
      
      https://www.abc.net.au/news/2018-12-05/two-very-different-ho…
jaseredpanda on 06/12/2018 - 10:00
Hey thanks for sharing OP

What's your LVR looking like? curious to know how leveraged you are right now

What do you do for work?
- RubenM on 06/12/2018 - 10:18
  
  +2
  
  1) ~70%, as above
  2) I'm an engineer, but at the lower end of the pay scale for engineers (though my job has other non-financial perks, such as flexibility)
kati on 06/12/2018 - 10:37

+1

Do you regret buying low value properties and missing out on the higher CG?

We started investing in 2010 in Sydney/Central coast too.

I bought 2 properties on the central coast in 2010 (house + granny flat sub $300k), unit sub $200k. Followed by a Sydney unit in the west in 2011 for sub $200k.

I can't help but think that if I had invested that $700k in a blue chip high CG property, we'd be laughing now. Admittedly it has been nice to have CF neutral property from day 1.

After these properties we then bought more blue chip properties so we have nowhere near your number of properties. I've had much less hassle from these ones… less tenant turnover etc.
- RubenM on 06/12/2018 - 11:08
  
  +6
  
  Hindsight is 20/20. I've made my fair share of mistakes, but all in all, no I don't regret it. I could not have bought this much if I had concentrated on blue chip. I also think that as a percentage, my Central Coast ones went up nearly as much as Sydney ones as a percentage, plus cash flow as much better.
  So all in all, no regrets about those at all.
dasher86 on 06/12/2018 - 11:38

if you were to sell up right now what would be your overall estimated capital gain (don't need to answer $) and has it been worth it?
- RubenM on 06/12/2018 - 11:43
  
  +2
  
  Very much so! Good capital gains all up, even if a couple have dropped in value.
  - afoveht on 06/12/2018 - 12:09
    
    -2
    
    Do you consider that, apart from your risk - which conceivably could have been put to "better" use investing in improvements - you did nothing to earn those gains? And that therefore they might more rightfully belong to the society that has helped jack up prices, and should therefore perhaps be distributed to society through higher capital gains taxes?
    - HighAndDry on 06/12/2018 - 13:35
      
      +10
      
      HAHAHAHAHAHAHA. Classic thevofa. I was just going to say - I'm pleased to see noone had asked something asinine like this yet. Alas.
      
      Here's how economics work: Without people like OP who're willing to pay those prices to buy property, there's less incentive for developers and builders to build property. You want more housing stock? You need the prices and demand to be worth it to developers to build that extra housing stock.
      
      And that therefore they might more rightfully belong to the society that has helped jack up prices
      
      You know what drives prices up? Demand - aka people like OP who're buying for those higher prices.
    - TheBilly on 06/12/2018 - 15:10
      
      +1
      
      And that therefore they might more rightfully belong to the society that has helped jack up prices
      
      Well anybody helping jack up the prices also did nothing to earn those gains?
      - RubenM on 06/12/2018 - 17:26
        
        @TheBilly: Risk and reward. Plus being a property investor is actually a lot of work.
        Again, I'm not trying to convince you, I'm just trying to show you how I see things.
      - afoveht on 06/12/2018 - 19:30
        
        @TheBilly: Not true. Perhaps my phrasing was inconsiderate, but all market forces will be subject to various conditions, conditions which are generated not only by those directly interested in the market but also by those disinterested.
        
        For example, I may buy a plot of land in a new, bare estate for $100000. While I sit on that land and do nothing there may be development around me, and the increase in my land's value will be proportional to that. (There is a chance of decrease in value too - hence the risk). So all these other people have spent money on their own houses, etc., the state and other private investors on roads, hospitals and other services, and it is exactly these which add value to my land, not anything of my own doing. I have essentially ridden the work of those around me, in the process keeping a plot of land unavailable to others who may have considered making their own improvements while the price was "reasonable."
        
        TheBilly on 06/12/2018 - 22:06
        
        +1
        
        @afoveht: But everyone else got value aswell. Not like only you did by holding your land. It's not like everything else around you stayed stagnant while your land value went up. Everyone benefits, except those who arent participating at all. Similarly the wider society benefits as well, as you paid both stamp duty to participate and sit at the table even capital gains to cash out - both taxes which would generally be greater than alot of peoples income tax and hence a greater contribution to society than alot of those who didnt purchase.
        
        afoveht on 06/12/2018 - 22:41
        
        @TheBilly:
        
        But everyone else got value as well.
        
        Sure. But they put something into it. OTOH those who just sit on real estate put nothing (except the bare minimum of maintenance required to collect rent / hold their title) into it.
        
        Similarly the wider society benefits as well, as you paid both stamp duty to participate and sit at the table even capital gains to cash out
        
        Investors will account for these costs and the prices for real estate will be increased accordingly. Ultimately the next buyer will pay for these - if it's an investor then that buck just keeps being passed, else if it's an occupier it unfortunately stops with them and they foot the bill. This "contribution to society" in the form of taxes is ultimately payed for by an occupier.
        
        HighAndDry on 07/12/2018 - 13:50
        
        @afoveht:
        
        OTOH those who just sit on real estate put nothing (except the bare minimum of maintenance required to collect rent / hold their title) into it.
        
        Other than the purchase price, right?
        
        MtnMama001 on 07/12/2018 - 15:09
        
        @afoveht: I'm not sure aware of this, but it's not actually free to own a house. There are lots of costs that you have to continually pay whether you live in the house or not after you buy it.
        -mortgage and bank fees
        -rates
        -insurance
        -land tax
        -maintenance
        -repairs if something breaks (or, if you're an investor, when a tenant breaks/steals it)
        -any special levies that local / state govt decide to charge ratepayers (e.g. natural disaster relief / local flood levy charge)
        An investor also gets to pay tax
        on any income earned from that property. It's not a free ride.
        
        afoveht on 07/12/2018 - 15:17
        
        -1
        
        @MtnMama001: I know. I addressed all that here. It's still money for jam, else why would anyone do it?
        
        MtnMama001 on 08/12/2018 - 17:56
        
        +2
        
        @afoveht: Because it makes more sense than frittering away your money on booze and trips to Bali? Because you have something to show for your hard work other than a beer gut and stories about who you banged on holiday, or having a flashier car than your neighbour. My husband and I had less income than all of our friends, but we managed to buy several houses, while they spent their earnings on entertainment and having the newest and best of everything. When they are 70 and taking a pension from the state and eating Pal, we will be those smug self funded retiree bastards taking cruises and buying the grandkids presents. That's why. It's insurance for the future. It's making small sacrifices for now to ensure you can take care of yourself later. My hubby & I were in our early 20s and renting when we bought our first investment house. By the time we had kids we had 5 houses and a duplex. Bloody good thing, as our first kid was born with a disability. I was able to stop working to care for him. That's why people do it.
        
        MtnMama001 on 08/12/2018 - 18:00
        
        @afoveht: And all the maintenance and improvements an owner occupier puts in aren't passed on??
        
        afoveht on 08/12/2018 - 22:00
        
        @MtnMama001: Yes they are. I've all along spoken of improvements as positive contributions.
        
        HighAndDry on 07/12/2018 - 13:49
        
        @afoveht:
        
        I may buy a plot of land in a new, bare estate for $100000.
        
        You would've spent $100,000. You seem to make some arbitrary distinction between money and work, when the most common way of gaining money is by doing work.
        
        That $100k you spent? That is work.
    - RubenM on 06/12/2018 - 17:22
      
      +7
      
      I've paid more taxes than I would have otherwise and I'm giving maybe 30 people a place to live.
      I personally don't make much of a difference, but if there weren't any investors, who would provide them with housing? The government? Many of these people would not be able to afford a house, even if housing prices were lower.
      Plus all up, investors are improving the economy.
      If you don't think I'm adding anything, that's totally fine, but I've got no problems sleeping at night.
      - afoveht on 06/12/2018 - 19:31
        
        -1
        
        @RubenM:
        
        If you don't think I'm adding anything, that's totally fine, but I've got no problems sleeping at night.
        
        Thank you for answering the question!
        
        HighAndDry on 07/12/2018 - 14:03
        
        +3
        
        @afoveht: Can I ask if you've taken any economics studies? Even just in high school?
        
        You're obviously entitled to your opinion, and you're also obviously entitled to vote. But what concerns me is that if enough people share your views and votes accordingly, the country will end up like Venezuela. Again - democracy being what it is, that's perfectly well within your rights, but I wouldn't want to be here if it ever happens.
    - drfuzzy on 07/12/2018 - 21:37
      
      +1
      
      @thevofa:
      Wow. Just wow.
      You articulated that beautifully on your computer purchased from your Universal Basic Income paycheck.
    - brendanm on 08/12/2018 - 09:08
      
      +1
      
      Op has taken a massive risk, and is providing people with a home they might not otherwise have had. He deserves any money he makes, comrade.
GangGang on 06/12/2018 - 12:21

What was your income when you first started? How did you continue to get loans and get approved?
- RubenM on 06/12/2018 - 17:24
  
  +1
  
  Somewhere in the 50s, I know it was between $52k and $58k.
  I bought high yield properties, credit was much easier to get back then and I kept my living expenses relatively low.
  - spedohero on 08/12/2018 - 09:21
    
    Did you get any monetary help from your wife or family members or relatives?
    - RubenM on 08/12/2018 - 09:29
      
      +2
      
      I had about $20k from my grandmother's will that I used as a deposit.
      To be completely transparent, I did also get some money from my parents for a deposit to buy my home, but that was after I had already bought the majority of the IPs.
      So I believe that if it wasn't for that, I'd likely not live in as nice a house, but still have the investment properties.
      My mother's moral support was instrumental early on though.
      - spedohero on 10/12/2018 - 15:44
        
        @RubenM: Did you use your super for investment?
        
        RubenM on 10/12/2018 - 17:34
        
        @spedohero: No, too difficult, especially given my balance is below $100k.
        It's just in the most aggressive option with Australian Ethical Super.
elgrande on 06/12/2018 - 19:11
How many houses in your portfolio are ex department of housing?

Any regional NSW areas?
- RubenM on 06/12/2018 - 19:26
  
  +1
  
  1) I'm not aware of any. Or at least I'm sure that I didn't buy any directly from the department.
  2) 2x Central Coast NSW
  1x Logan (Brisbane) Qld
  2x Rockhampton Qld
  5x Elizabeth (Adelaide) SA
  - elgrande on 06/12/2018 - 22:12
    
    +1
    
    Thanks for sharing.
  - ribze1 on 07/12/2018 - 16:50
    
    +1
    
    Some 'poorer' areas of various cities, if a recession were to hit you'd be in a spot of bother.
    - Other on 08/12/2018 - 15:10
      
      +3
      
      Why? - poorer areas tend to do better in recessions. Why does Walmart and consumer staples go up in recessions?
      
      What really goes down? High end consumer goods/services and "assets" that don't throw off cashflow.
      - ribze1 on 08/12/2018 - 15:13
        
        @Other: People will lose their jobs therefore the rental income disappears. Less people with jobs also means less people can buy houses and get a loan, house prices will fall even more so.
        
        Other on 08/12/2018 - 15:26
        
        @ribze1: Even during recessions there are people with jobs and their are jobs that do come up (people die, retire, etc), the main issue is how companies cut the fat. Do they try and get rid of lots of little people (initially its the casuals) or do they get rid of a few big ones (also the more little people you get rid of the more capex you probably will need to spend.
        
        Jugganautx on 10/12/2018 - 11:20
        
        @ribze1: everyone in elizabeth is on centrelink so recession wont have much impact lmao
        
        RubenM on 10/12/2018 - 17:38
        
        @Jugganautx: About half my tenants in Elizabeth are on Centrelink, that I know of. Not that I think less of them because of it. In most cases people on Centrelink aren't the dole blushers that we know from ACA, but people that have been dealt a bad hand in life.
  - amsaini15 on 07/12/2018 - 17:05
    
    Would it be still worth buying in central coast area? Any particular suburb?
bobwokeup on 06/12/2018 - 20:04

I have 2 investment properties (1 low and other mid value) and paying a mortgage on our current house. Our kids are 5 and 7 so my wife started part time work this year. I’ve spoken to the bank earlier in the year and they said we’d struggle to get another investment loan due to serviceability. Both properties are positively geared but nothing substantial and we have enough money in savings that I wouldn’t be worried about not working for a year or 2.

So my question is with all the new rules around lending do you have any suggestions for me?
- RubenM on 06/12/2018 - 21:03
  
  Get a good mortgage broker. If you don't of one, message me and I'll pass on the details of mine.
  There's always non bank lenders, but I wouldn't be surprised if a bank would still lend you money. Especially if your wife has been back at work for over three months now.
caramellokoala on 06/12/2018 - 22:37

-6

Unless you're a Nostradamus or bought right on 2010 some of your properties are already underwater(there has been no capital appreciation in QLD for a long time especially Rockhampton). Also due to low income I'm assuming you're on a IO loans. Good luck refinancing that after your IO period expires cause it isn't happening. The bank manager will shit himself when he sees your outstanding balances.

I really don't understand people coming on to the internet to gloat they're loaded up on IP's in a falling market. It's like "Hey everyone I'm loaded to the hilt with debt that amplify's my loses on a falling market look at me!". Most housing investors truly are morons.

Anyway check back in after a year of a falling market I bet you won't be so chatty then.
- RubenM on 07/12/2018 - 06:30
  
  +7
  
  Both Rockhampton properties have fallen in value, that's true. Elizabeth is virtually unchanged from when I bought, the Logan property is up 25% and the Central Coast ones have doubled.
  All my loans are on P&I, as stated above.
  
  Whether the market goes up, down or sideways is actually pretty irrelevant to whether I can afford to make my repayments or not. If interest rates don't increase significantly (and rents don't decrease significantly), I'll be able to make the repayments.
  
  I'm not going to lie, it's been tough at times since my wife stopped working full time and I'm sure that there'll be tough periods over the next five years or so. But slowly rents will creep up and repayments will get easier. I'm in it for the long run, so as long as it doesn't break me, I'm not that concerned about where in the cycle we currently are.
  
  PS: I'm not on a low income. I'm on a low income for an engineer, but I'm on an above average pay if you look across all industries. The salaries I posted above are from 8 years ago.
  - caramellokoala on 07/12/2018 - 09:46
    
    -4
    
    Whether the market goes up, down or sideways is actually pretty irrelevant to whether I can afford to make my repayments or not. If interest rates don't increase significantly (and rents don't decrease significantly), I'll be able to make the repayments.
    
    So you have 10 properties 3 up 5 unchanged and 2 down and you're not worried about where the market "goes". I'll tell you who does care where the market "goes". It's called the idiots who loaned you all that money, the banks. The issue is your risk profile to them is off the charts. You yourself said your on a single income on "above average" pay. So how much buffer do you have if you can't rent out one of your properties for a period of time or you lose your job? What happens if housing drops another 10% which most economists are talking about? Do you have an extra house worth of money in a bank account somewhere your going to kick in to your loans? Because if not the banks are going to force you to sell. The banks are very risk off in a falling market.
    
    I understand it might be cool to brag to your mates about how your some sort of property mogul but some people on here can you for what you are, a person who is on a tight rope balancing act which under the slighted breeze could have you fall flat on your face.
    
    I wouldn't be sleeping at night if I was you.
    - RubenM on 07/12/2018 - 10:17
      
      +12
      
      As I said, you're free to disagree with me and think my approach is stupid. That's fine.
      And I do concede that there's a small risk that this investing is going to financially ruin me. No matter what the safeguards, there is an element of risk in it.
      
      I've got vacancies all the time, they're part of the reality of being a landlord. If I was to lose my job, I've got enough of a buffer to last a year (plus my wife could increase the amount she works). But I'd still have the option of selling up and still being financially ahead.
      
      As long as you don't sell (or your loan gets called, which is extremely unlikely), property prices are irrelevant in the short term. It's all about rents coming in and repayments going out. As long as they can be kept withing acceptable levels, you won't lose any properties. I'm in it for the long term and don't really have a plan to sell any properties, at least not until retirement. So if they drop 10% or 20% in the next five year, yes, I'm definitely not going to like it, but it won't make any difference to my account balance. If they then go up 10 years after that, I'm all good. Plus by that time I would have paid off a significant amount of the principal.
      
      I never claimed to be a property mogul, I know that there's more things about property investing that I don't know than what I do know.
      It all comes back to risk appetite in the end. I've entered into this knowing that there's a risk but also a potentially high reward. If you want to invest in government bonds, that's fine, but they're just not giving me the kinds of returns that I want.
    - Pentanol on 08/12/2018 - 22:30
      
      +1
      
      @caramellokoala You've really shown that you have no idea about banks, loans or finance. Given that you have no experience at all in the matter, I would refrain from speaking. Even most companies have debt and still able to operate indefinitely. It's not exactly hard to keep maintaining repayments and/or sell off any property if needs be.
dust on 07/12/2018 - 09:24

You mentioned above a bit but what are your thoughts on property managers? Would you recommend them? How much (%) do you pay them? And was there a particular reason you're managing two properties yourself?
- RubenM on 07/12/2018 - 10:20
  
  Good property managers are great, bad property managers are worse than not having a property manager at all.
  I like my approach of not having PMs for my two local properties but having them for the interstate ones. Not only has it saved money, but I've also learned a bit along the way. I have done a bit of stuff that I'd have to pay tradies for otherwise, so over the years, I've saved thousands. Sure, it took a little bit of my time, but my parents live close by, so I dropped in whenever I drove up.
  
  But you'd really struggle not to have a property manager for 10 properties, it's too much work.
chuderino on 07/12/2018 - 09:54

Good on you for having a go.
If you ever sell, CGT will take a bit chunk as the government doesn't miss out.
How will you go about minimising that?
- RubenM on 07/12/2018 - 10:23
  
  CGT isn't THAT bad. It's 50% of your marginal rate on the capital gains. So worst case 22.5% of the capital gains. Other than staggering sales and waiting until after I'm retired, I don't have a minimisation strategy. But I'm operating on the "never sell" strategy currently anyway.
pahuang on 07/12/2018 - 14:58

+1

Your properties are across the country. How do you research to find the place to buy if it's interstate? Do you just look at it online or do you flight to the place and inspect yourself? I know some people from Sydney/Mel will flight over and inspect a whole lot of properties in one day and then back. But not sure if this is actually useful. How do you pick the place/suburb if you don't know the place well?
- RubenM on 07/12/2018 - 15:53
  
  +6
  
  The best repository of information is other people, so reading forums like propertychat.com.au is invaluable. I used to also read property investing magazines, which have tables of all sorts of stats in them. Then you can have a look at what sort o investment is planned for the area and what population growth forecasts are.
  Or for example with Logan, one of the reasons I picked that one was that ultimately Brisbane and the Gold Coast will merge into a big city. Might not happen for a few decades, but I believe it will happen. So Logan is actually very well placed for that as well.
  For individual properties though, you have to check zoning, flood maps, etc.
  
  I did fly to the places to look at the properties, one time I had 18 property inspections scheduled for a single day. It's very full on and you've got to take notes about the properties while you're there.
  Though I did pay a property inspector on my behalf once for the duplex in Elizabeth, so I have not set foot inside that building, though I have seen a lot of photos prior to making an offer (focusing on the issues) and then I had a thorough B&P inspection done as well. I much prefer to have a look at it myself though, but I'm not regretting that purchase either. Early on, you should definitely inspect each property yourself and take someone that's a builder or knows property with you.
idonotknowwhy on 07/12/2018 - 16:22

+1
Hi spludgey,

Thanks for doing this AMA. I have quite a few questions but I'll stick with these 3:

On average, how many hours per month do you spend on your investments?
(This includes taxes, looking at the market, dealing with tenants, property managers, maintenance, etc.)

What made you choose property as your investment vehicle over stocks?

What are some of the mistakes which you've made in the past (other than crypto lol)?

P.S. It's nice of you to be patient and accommodate the mentally ill person who has trouble paying rent on time sometimes.
- RubenM on 07/12/2018 - 19:30
  
  1) Average is very hard, because it changes so much. Could be anywhere from 10 hours to 100 hours a month. Average is closer to the lower end though, so very roughly, 20 hours a month?
  2) Sort of answered above, but ease and affordability of leverage is the key. Only 25% or less of the money that I'm investing is mine.
  3) I'm guessing that we're keeping this to investing? ;)
  Lots! If you give anything a real go, you'll make lots of mistakes though. Having to fork out $40k to replace an asbestos roof was a good one, as was buying in Rockhampton in the first place. Or getting a tradie off Gumtree to build a deck. But one of the biggest was not worrying about the quality of property manager too much initially.
  Plus, perhaps (and I'm speculating here) because my initial investments went well, I was a bit complacent when I bought the Rockhampton ones and that's why I made all of those mistakes in the first place.
  
  About the tenant, while I would hate to kick him out, as I know that he'd have a hard time finding a new place, I'm not doing it all out of the goodness of my own heart. I'm also doing it for the rental return.
  Having said that though, I've given him way more chances than I normally would.
pdperth on 07/12/2018 - 19:41

Thanks for your post. Good on you for trying to improve your life. Does land tax restrict you, it seems to go up the more properties you have. A pathetic money grab that cannot be justified in my view, seems quite arbitrary? Is it a major concern. Cheers
- RubenM on 07/12/2018 - 20:18
  
  +1
  
  Thank you!
  Land tax is a bit stupid in my opinion. Not that it exists or whatever, but that it's done state by state and that you can start different entities (trusts) to restart it (in some states).
  Why isn't federal or part of CGT or something?
  I don't think it's up to me so say whether it's warranted or a money grab or not, them's the rules and I have to play by them, whether I like it or not.

[AMA] I'm a Property Investor. Ask me about Property Investing

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