Feel like failure in property investing

[House Hunter]

I’ve been ‘investing’ in property since 2014 but feel like a bit of a failure with how much I know about the whole process now.

In my prior relationship my partner and I owned our own place in Auckland. Owned it for 1.5 years before she and her parents bought out my half share. After buying it emotionally and being a bit conservative going with the registered valuation I came out with about 75k.

In 2015 I plonked 15k on a ronovationz mentoring course shortly after and bought a retrospectively market or above market price for a central Auckland unit. I did it up and converted it to three bedrooms. Yield was crap so have lost 10-15k or so before tax refunds each year.

When I met my now wife in 2016 she wanted to buy a rental, so we drove down to Tauranga for 3 months in a row every weekend and bought a market/above market value 2 bed unit. Bought for 380k in 2016 and worth the same today. This breaks even on principal and interest. Have around 100k equity now and we want to keep this place long term.

We just sold the Auckland rental and after all said and done have walked away with 130k. Including the top ups and tax refunds I came out about break even.

Since 2014 in property I’ve basically made no money at all. I’m trying to look at it positively and think it’s a free 5 year degree in property investments (I’ve learnt a lot along the way).

We are going to use the 130k to buy our family home so we are excited at that prospect for us and our daughters, but lingering I just feel like I’ve failed thus far.

How do we make sure we don’t make the same mistakes again? I see others in the property investor magazine buying properties with great yields but searching myself I can’t find much that comes close.

[Nick G]

Howdy

Looking through all that I would say that you've done OK, $200K in your back pocket over a couple of sales is better than many and it sounds like you have a happy life to look forward to... worth a lot more than money, that is :-)

Where I think you could have perhaps built something that was more set up for the long haul is investing for cashflow. I'm not sure why everyone flocks to that Ronovationz strategy that seems to (in this market) lose you cashflow. As you found, you can make a 6 figure gain and break even.

Because you bought for gains, market timing matters and while you got some in Tauranga you were a year or two late. If you'd bought something at 7-8% yield instead you'd have all those gains + a passive income ticking along for you.

What all the gurus don't tell you is that cashflow positive property goes up in value also.

There's still time, years and years in fact. It only takes one good deal to turn things around... something I'm presenting on at a bunch of PIA meetings this year :-) I fluffed around for the first few years of my investing but the switch clicked and now I have 150K passive and counting. Give me a shout if you want someone to bounce ideas off.

Cheers mate

[Keys]

You have not, nor will you ever, fail.

Procrastination is the thief of time.

Well done.

[Chris W]

Let's take a look at the underlying cause for the Auckland property ...

1) When you bought your property in Auckland in 2014, what was your expected capital gain in percentage terms?
2) what was your actual capital gain appreciation in percentage terms (i.e the percentage change in house price between your purchase price and actual selling price)?

[DaveW]

I agree with Nick, I wouldn't say you're a failure.
You obviously have the capability, you just need to step up your game.
Befriend agrnts, get to the deals before others do.

[Don't believe the Hype]

I think you've already identified where you went wrong (other than paying ronovations $15k). You mention a number of times that you bought at or above market...

How would you say your negotiation skills are? Do you know how to structure a negotiation? Have you ever done any negotiations training?

Based on your self assessment, I would spend some time understanding the art of negotiation. You can practice it with some low cost purchases and if you don't get the deal you want in that situation you can walk away without outlaying a cent.

Good practice and you'll learn the right questions to ask to uncover the motivations of sellers which will allow you to structure a deal that gets you the right price and meets the vendors motivations.

[donna]

Interesting I thought that's what those experts did for their students - they helped negotiate great deals e.g. Ron, and the now defunct PropertyTutors etc. I know Sean Wood (RIP) did help with the negotiation and as you say that's the missing link especially with most newbie investors.

cheers,

Donna

[flyernzl]

I would say that you have not thought thru exactly what you are trying to achieve.
Without a set goal you are rudderless.

[House Hunter]

Howdy

Looking through all that I would say that you've done OK, $200K in your back pocket over a couple of sales is better than many and it sounds like you have a happy life to look forward to... worth a lot more than money, that is :-)

Where I think you could have perhaps built something that was more set up for the long haul is investing for cashflow. I'm not sure why everyone flocks to that Ronovationz strategy that seems to (in this market) lose you cashflow. As you found, you can make a 6 figure gain and break even.

Because you bought for gains, market timing matters and while you got some in Tauranga you were a year or two late. If you'd bought something at 7-8% yield instead you'd have all those gains + a passive income ticking along for you.

What all the gurus don't tell you is that cashflow positive property goes up in value also.

There's still time, years and years in fact. It only takes one good deal to turn things around... something I'm presenting on at a bunch of PIA meetings this year :-) I fluffed around for the first few years of my investing but the switch clicked and now I have 150K passive and counting. Give me a shout if you want someone to bounce ideas off.

Cheers mate

Thanks Nick for your reply. Yes buying for cashflow is the next big priority for my wife and I on our next purchases will look to get this by being a bit more patient and looking for properties with a bit of a twist.

I’m not a member of our local property association anymore with young children finding the time amongst that and sleep I’m finding a bit hard going!

[House Hunter]

Let's take a look at the underlying cause for the Auckland property ...

1) When you bought your property in Auckland in 2014, what was your expected capital gain in percentage terms?
2) what was your actual capital gain appreciation in percentage terms (i.e the percentage change in house price between your purchase price and actual selling price)?

I was a bit naive and thought I’d earn a couple of hundred thousand on my purchase after renovations and the natural market rising. I hadn’t really learnt that markets flatline before buying. Caught up in Rons euphoria for central Auckland capital gains I suppose.

I bought for $630 and sold for $750k however $15k for Ron, $35k selling costs (agents, lawyers, break fees, staging, etc) and a 45k renovation plus negative top ups of 20k roughly I’ve walked away break even basically

[House Hunter]

I agree with Nick, I wouldn't say you're a failure.
You obviously have the capability, you just need to step up your game.
Befriend agrnts, get to the deals before others do.

Yes I’ve learnt a lot the last 4-5 years will put it to good use next time round

[House Hunter]

I think you've already identified where you went wrong (other than paying ronovations $15k). You mention a number of times that you bought at or above market...

How would you say your negotiation skills are? Do you know how to structure a negotiation? Have you ever done any negotiations training?

Based on your self assessment, I would spend some time understanding the art of negotiation. You can practice it with some low cost purchases and if you don't get the deal you want in that situation you can walk away without outlaying a cent.

Good practice and you'll learn the right questions to ask to uncover the motivations of sellers which will allow you to structure a deal that gets you the right price and meets the vendors motivations.

Back when I purchased these properties my negotiating skills were terrible. I’ve done buying and selling of sporting equipment over the past year or so to work on negotiating and also earn a bit of pocket money so I’d say I’m getting much better. Plus I’m far more patient and think things through more. My wife has helped me a lot in this regard as I can be a bit impetuous at times.

[House Hunter]

I would say that you have not thought thru exactly what you are trying to achieve.
Without a set goal you are rudderless.

You mean a long term plan for investments?

Ideally I’d would be to have a mortgage free house to live in and rentals at say 40-50% gearing on them and by the age of 50-55 would like them to throw off enough income to cover my wages $75k. Figure this could be achieved by buying properties with higher 8+% gross yields. We have a preference for solid brick and tile units or stand alone so would need to have six of these netting us $15k per property or so.