It's been several years since I've been on PT and back then I said I wouldn't come back again because of the small mindedness of just a few people on here. I'm not sure if they are still on here or not but thought I would share with those interested a strategy I'm going to use which is different to the others I've used in the past.
The last few years I have traded a few properties, sold quite a few through because of a separation in 2010 and now have 40 rentals left which are all going along well. This year I have been doing more trading and have bought 6 in the last four months with good margins in them to sell on, so all is going along very well.
This strategy I'm going to do over the next 3 years is a variation of buy and hold, and is one I have not used before or thought was that wise. However I'm doing it as an experiment. If it works out well, I will teach my son who has just turned 9 the same thing in another 10 years or so, and he may want to do the same thing to get himself started. I've always been (with buy and hold) of the opinion it's best to put down a 20% deposit on each rental (buy and hold) and never refinance it, the object being to have the tenants pay it off over time, usually 20 years or so. For those of you that get the Property Investing magazine, I did an article in there a couple of years ago which was a lot to do with that, which I may put on here after this.
So this experiment is to buy 10 rental properties over the next 3 years, so approx one every 4 months using just the one initial deposit of 20%. The idea is to buy something about 15 - 20% below market value and if it needs work, reno it and revalue it borrowing 80% of the new value - which should give me back the initial deposit. If it is however just a good buy with nothing needing done to it, I will use two banks - one to buy it, then the other to finance at 80% of market value therefore giving back my initial deposit. The rent needs to cover the mortgage (based on 6.5% p.a. on a 20yr P & I loan) insurance, rates, maintenance and property management (7% + GST).
Once the first one is underway and refinanced, I will look for a second one and repeat the process until I've got 10 of them, with the hope of having this completed within 3 years. I'm going to set up a separate Trust for these properties and track to see how it goes for the next 10 years or so. It should give me approx $500k equity in the properties after 10 years if property prices are fairly static over that time.
I will also take into account any extra money needed to fund it - such as major repairs, vacancies etc and if interest rates go up substantially more. Hopefully if rents do increase over that time this will cover some of that.
If anyone is interested to know how it is going, I can put an update on here at the end of each year.
Graeme Fowler
The last few years I have traded a few properties, sold quite a few through because of a separation in 2010 and now have 40 rentals left which are all going along well. This year I have been doing more trading and have bought 6 in the last four months with good margins in them to sell on, so all is going along very well.
This strategy I'm going to do over the next 3 years is a variation of buy and hold, and is one I have not used before or thought was that wise. However I'm doing it as an experiment. If it works out well, I will teach my son who has just turned 9 the same thing in another 10 years or so, and he may want to do the same thing to get himself started. I've always been (with buy and hold) of the opinion it's best to put down a 20% deposit on each rental (buy and hold) and never refinance it, the object being to have the tenants pay it off over time, usually 20 years or so. For those of you that get the Property Investing magazine, I did an article in there a couple of years ago which was a lot to do with that, which I may put on here after this.
So this experiment is to buy 10 rental properties over the next 3 years, so approx one every 4 months using just the one initial deposit of 20%. The idea is to buy something about 15 - 20% below market value and if it needs work, reno it and revalue it borrowing 80% of the new value - which should give me back the initial deposit. If it is however just a good buy with nothing needing done to it, I will use two banks - one to buy it, then the other to finance at 80% of market value therefore giving back my initial deposit. The rent needs to cover the mortgage (based on 6.5% p.a. on a 20yr P & I loan) insurance, rates, maintenance and property management (7% + GST).
Once the first one is underway and refinanced, I will look for a second one and repeat the process until I've got 10 of them, with the hope of having this completed within 3 years. I'm going to set up a separate Trust for these properties and track to see how it goes for the next 10 years or so. It should give me approx $500k equity in the properties after 10 years if property prices are fairly static over that time.
I will also take into account any extra money needed to fund it - such as major repairs, vacancies etc and if interest rates go up substantially more. Hopefully if rents do increase over that time this will cover some of that.
If anyone is interested to know how it is going, I can put an update on here at the end of each year.
Graeme Fowler
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