Hello and welcome to my July 2021 portfolio update. If you want to check out my portfolio update from last month click here.
July has been quite a challenging month for many as lockdowns across the country have been employed to battle the resurgence of Covid. Currently, the majority of NSW has been in lockdown for 4 weeks and it doesn’t look like it is going to end anytime soon. From a positive perspective, it has given me the time to sit down and think about my goals and plan over the coming years. Having downtime can be a great opportunity to reassess where you are and where you want to be. I have employed this approach in my own life to provide greater clarity around not only my investing but numerous facets of life.
Portfolio update
Since last month the snowball on my portfolio has really begun to accelerate. I am seeing a clear price distinction between sold properties and listed properties. Being conservative I have opted to use sold sales data in order to inform the property valuations of my portfolio. This is likely the most accurate way to determine a property’s value. However, due to the propelling market, listed properties can be vastly different from sold properties within the past couple of months. Therefore, when speaking with agents I am receiving higher valuations for my properties than I would if I simply used past comparables sales. This is great news for myself and many other investors or homeowners.
You may be wondering why is there a discrepancy? because property data has what we refer to as “lag”. That is to say, the market records prices at settlement, though, these prices were agreed upon at the start of the settlement period. Given settlement is usually around 6 weeks it means sold properties may not be reflective of the current market if the market is moving quickly. This is why it can be difficult to determine a property’s price and simply using an online calculator is not always accurate. Extensive research needs to be completed in order to accurately value a property.
Market update
Looking at the data provided by SQM research we can see that the rolling month change nationally (for houses) was actually down 0.6%. This is quite interesting because as illustrated in the table all capital cities were showing positive price growth over the month. Moreover, the capital city average over the past month was up by 1.3%. This would suggest that the decrease in detached dwelling values is being driven by regional properties.
Another takeaway is that over the past 12 months every metro city market has grown (both houses and units) except Sydney and Melbourne units. In fact, Sydney units stood still while Melbourne units actually went backward! That would seem quite difficult to do given the current market conditions. This could be attributed to an oversupply of units in these cities and the lockdowns which have taken place. Hence why many investors steer clear of units as it is easy to oversupply this stock.
Best performer
The best performing asset over the past 12 months has been Sydney houses followed closely by Hobart units. It is crazy to think how high Sydney home values can go as they continue to break records. Over the past month, the best performer was Hobart units. Despite being in one of the smaller metro markets they have delivered the investor and homeowner an exceptional return. While the median value of this product is a mere $433k. This goes to show that property price does not determine property performance. Moreover, it also proves you don’t have to be in the top two markets to make money. Many smart investors could have taken this opportunity 12 months ago and seen a handsome return on investment.
Finally, one distinction I wanted to make regarding property price growth was that the market is not reflective of your individual assets. These statistics paint a picture of what is happening on a macro level across the country. They don’t identify individual suburbs or individual property’s performance. Therefore, you could have seen even more exceptional growth within your own investment as the data only demonstrates averages.
July 2021 portfolio update: Property breakdown
Yet again there has been strong price growth across my portfolio over the past month. The portfolio moves much closer to the 1.7 million dollar mark as price growth continues to surge! Each property has seen some level of growth and the market doesn’t look to be slowing down. Subsequently, I have decided to release more details surrounding each property in order to give greater clarification about the purchase and performance of each asset. Like last month I am still waiting to sort out finance for my next investment. Moving forward, the plan will be to have finance sorted in the next two weeks and begin my search immediately after that. I hope to have more news in a month’s time regarding this.
I received my tax depreciation schedules for each of my properties. The total depreciation for the four properties is approximately 7-8k per annum. With this, I will recoup my money from my 20/21 tax return, and moving forward it will just put more money into my pocket. I was surprised to see that even my older properties still have approx. 1-1.5k per annum worth of deductions. This means despite being built quite some time ago the properties still have tax depreciation I can utilise. As mentioned last month, the trade-off is that if I go to sell a property I need to deduct the taxable amount from my purchase price and pay more capital gains tax (CGT). So the use of one of these reports needs to be considered on a case-by-case scenario. Though, I believe the money in my pocket now will be more beneficial than down the track.
The Numbers
|
Strathpine, Qld. |
Woodridge, Qld. | Bethania, Qld. |
Loganholme, Qld. |
|
| Purchase price | $390k | $250k | $317k | $331k |
| Current value | $520k | $350k | $410k | $410k |
| Loan | $393k | 198k | $288k | $268k |
| Rent | $400 pw | $335 pw | $400 pw | $400 pw |
Property one- Strathpine, Qld.
The market is still red hot and this is leading to significant price growth. The property was recently valued between $500-550k by a real estate agent and there are numerous similar properties for sale to support this. Fortunately for me, this property has development potential and is quite close to the infrastructure around this suburb which would demand a premium in contrast to similar 3/1/1. Though a conservative 520k is still 35k higher than last month and I would not be surprised if it pushes 600k by the end of the year! The new property management agency has now taken over the role of looking after the property. As discussed previously, I was slightly unsatisfied with the previous PM and have decided to employ another agency. Outside of this, there hasn’t been any news regarding this property as it continues to tick along.
Property Two- Woodridge, Qld.
Finally, this property is starting to see some price movement. The property was valued last month at 320k and I am now seeing similar properties within one less bedroom being listed for 350k. This is close to a 10% increase and it is important to note the property hasn’t grown by 10% in a month. Rather, I have probably left the 320k valuation for a couple of months too long but we are really starting to see price movement now. Moving forward, I am interested to see where this property will be valued by the end of the year. Moreover, I would like to renovate this property in the future but this will likely take place next year sometime.
Over the past month, I contemplated the idea of building a granny flat on this property. I contacted numerous construction companies in order to obtain quotes for a granny flat build. This time last year you would have been able to build a flat for approx. 120k and rent it for $300 per week. Not a bad return for your investment. However, as many people will be well aware there is a shortage of building materials across the country making it harder to build. This not only increases build time but has put the cost of construction through the roof. The cost of building a flat as quoted by two companies is now 175k! almost a 50% increase since around a year ago. Due to this, I opted not to go through with this approach and rather continue my search for my next investment.
Property Three- Bethania, Qld.
all the news surrounding this property appeared to wrap up last month. There has been nothing significant as of this month as the property is now renovated and tenanted. It has been difficult to value this property due to its configuration. A stock standard 3/1/1 is looking around the 390k mark while many 4/2/2 have been pushing close to 500k! Though this property is likely a blend of both, conservatively I have put this property at 410k! Though as more properties come to market and further sales are recorded I could easily see this push towards the 450k mark.
Property Four- Loganholme, Qld.
From a price point of view, it has been quite interesting to follow this property. As mentioned last month, four very similar properties sold for 400, 400, 415, and 430k. Some of these properties were 3/1/1 and others were 4/2/2. Though, this month a 4/2/2 in this suburb was recorded sold at 382k! This was a property I expected to achieve around 420k. The rationale behind this low purchase price was likely to do with the vendor looking for a quick sale. If willing to wait the vendor could have achieved 420k as seen in other similar sold properties. There is currently a similar property on the market which does look to be in better condition asking for closer to 450k. So despite the 382k anomaly, I believe we are going to see a strong back end of the year for this property.
July 2021 portfolio update: Portfolio breakdown
The portfolio has grown by approximately 85k! This is likely due to the growing market and the valuations derived from agents and currently listed properties. There has been no change in rent or any additional maintenance costs from each of the four properties.
Breaking down the numbers
I decided this month to increase my additional expenses buffer for each property from $3500 to $4500. This is because after collecting data for my tax return I was able to more accurately reflect property expenses over the course of a financial year. Therefore, my cash flow per annum shows it is less positive than originally thought. This does not concern me too much as long as the portfolio remains close to neutral. We can also see a much smaller LVR as the portfolio has grown and additional monies have been placed in the offset.
|
The Numbers |
Change since last month | |
|
Portfolio value |
$1,690,000 | + $0 |
| Loan | $1,135,000 |
+ $0 |
|
LVR |
67.1% | -4.4% |
| Rent | $1535 |
+ $0 |
|
Repayments (loans, rates, maintenance, agent fees & insurance). |
$1398 | – $42 |
| Cash-flow (p.a) | +$734 |
-$4184 |
July 2021 portfolio update: Race to $5 Million Portfolio
This month I have officially gone past the one-third mark by recording a percentage of 33.8% towards my goal. I am extremely excited to see how far I can push this number come the end of the year!
Portfolio growth
Month on Month change June 2021 portfolio update
|
Date |
Portfolio ($) | Change (+/-) | notes |
|
July 2021 |
1.69m | +85 | |
| June 2021 | 1.605m | +30 |
|
|
May 2021 |
1.575m | +45k | |
| April 2021 | 1.53m | +0 |
|
|
March 2021 |
1.53m | +390k | IP4 bought |
| February 2021 | 1.14m | +35k |
|
|
January 2021 |
1.105m | +370k | IP3 bought |
| 2020 | 740k | +320k |
IP2 bought |
|
2019 |
420k | +30k | |
| 2018 | 390k |
IP1 bought |
|
|
2017 |
50k | Cash savings | |
| 2016 | 25k |
Cash savings |
|
| 2015 | $50 |
The journey begins |
Until next month. July 2021 portfolio update
Cheers,
