First post intro/questions/opinions

Big A · 6 January 2016

Hi all,

New to the forum and was looking for some info / opinions on investment options.
Recently just sold off some investment properties and have some capital laying around collecting a measly 3% return in the bank. i want to look at investing outside of the property market but I'm not familiar with the stock market and to be honest it scares me. I'm not much of a gambler not one to put my money into something I don't understand.
I am starting to research and do my home work but in the mean time I want to use to capital to make a reasonable return. I'm not looking at for high returns high risk, I'm looking medium to long term as I'm only in my mid 30s but feel like there should be better than 3% returns without going high risk.
Something that caught my attention is a-reits. I'm familiar and comfortable with property and feel like I'm investing in something that's value is real and not just on paper.
After doing a little homework on A-Reits non traded a-reits look more appealing to me than listed ones. I was after opinions on a-reits and listed vs non traded. I understand non traded are illiquid and are a longer term investment, which is fine by me as I don't need the funds short term and I like the fact that the unit price of non traded is less volatile than listed. The idea of a regular stable income with small potential of capital growth is more appealing to me than low dividend and potential high capital growth which could just as quickly disappear as it appeared.

Appreciate any info / opinions.
Cheers

luutzu · 6 January 2016

Big A said:
Hi all,

New to the forum and was looking for some info / opinions on investment options.
Recently just sold off some investment properties and have some capital laying around collecting a measly 3% return in the bank. i want to look at investing outside of the property market but I'm not familiar with the stock market and to be honest it scares me. I'm not much of a gambler not one to put my money into something I don't understand.
I am starting to research and do my home work but in the mean time I want to use to capital to make a reasonable return. I'm not looking at for high returns high risk, I'm looking medium to long term as I'm only in my mid 30s but feel like there should be better than 3% returns without going high risk.
Something that caught my attention is a-reits. I'm familiar and comfortable with property and feel like I'm investing in something that's value is real and not just on paper.
After doing a little homework on A-Reits non traded a-reits look more appealing to me than listed ones. I was after opinions on a-reits and listed vs non traded. I understand non traded are illiquid and are a longer term investment, which is fine by me as I don't need the funds short term and I like the fact that the unit price of non traded is less volatile than listed. The idea of a regular stable income with small potential of capital growth is more appealing to me than low dividend and potential high capital growth which could just as quickly disappear as it appeared.

Appreciate any info / opinions.
Cheers

With property trusts, probably best to wait until after the property crash that's coming. So when interest rate hike up a bit, housing will cool and soon after property stocks and the likes of Stockland won't be going for much.

Buy it then, get good yield and within two or so years should double your money.

You welcome.

Klogg · 7 January 2016

luutzu said:
With property trusts, probably best to wait until after the property crash that's coming. So when interest rate hike up a bit, housing will cool and soon after property stocks and the likes of Stockland won't be going for much.

Buy it then, get good yield and within two or so years should double your money.

You welcome.

Odd question, but how can you be so sure of a property crash?
I share a view with some that residential property is overvalued, but does that mean a crash is coming soon?

@Big A - I would suggest a little more learning before buying anything. On the one hand, you've stated that you're looking for low risk, but then mentioned you'd like to buy an REIT. I won't go too deep into it, but with gross yields on residential property less than 4% and commercial property not doing much better, I would suggest the risks are to the downside. (That's without mentioning the USD/AUD yields converging and how that potentially plays out for the RBA, cash-rate and inflation)

You've also said that:

I'm familiar and comfortable with property and feel like I'm investing in something that's value is real and not just on paper.

Generally, a value investment doesn't align with what's comfortable. The fact is, most are comfortable with residential investment because there's safety in numbers.

Obviously you could ignore this, but really all I'm saying is just tread carefully.

Big A · 7 January 2016

Do you really think the property market is going to crash and even if so will it affect commercial property like it affects residential property?
I am swaying towards no traded A-Reits such as Sentinel Property Group who have funds that invest in retail property. I feel that retail property is a safer bet with locked in tenants and rental returns. With income distributed monthly at about a 10% P/A return it looks like a good return and fairly low risk.

Thoughts.

Klogg · 7 January 2016

Big A said:
Do you really think the property market is going to crash and even if so will it affect commercial property like it affects residential property?
I am swaying towards no traded A-Reits such as Sentinel Property Group who have funds that invest in retail property. I feel that retail property is a safer bet with locked in tenants and rental returns. With income distributed monthly at about a 10% P/A return it looks like a good return and fairly low risk.

Thoughts.

Well, I can't say I've looked at property crashes in a lot of detail, but a reverse of the 'wealth effect' that would result from a potential residential property crash would almost certainly impact retail and the related leases.

As for Sentinel Property Group - I know nothing about them. A few basic questions come to mind:
- Where are their retail properties?
- Who are their tenants and how long are their leases?
- Does this group have a history of successful returns? How did it perform against a commercial property index (if available)?
- How much leverage is involved?

I could go on, but there's a lot of detail required.

May I ask - is it really "fairly low risk" or just perceived to be so because everyone else sees it that way?

So_Cynical · 7 January 2016

Big A said:
After doing a little homework on A-Reits non traded a-reits look more appealing to me than listed ones. I was after opinions on a-reits and listed vs non traded. I understand non traded are illiquid and are a longer term investment, which is fine by me as I don't need the funds short term and I like the fact that the unit price of non traded is less volatile than listed. The idea of a regular stable income with small potential of capital growth is more appealing to me than low dividend and potential high capital growth which could just as quickly disappear as it appeared.

Appreciate any info / opinions.
Cheers

If things get ugly like they did in the GFC some of those non listed funds may well freeze distributions and or withdraws as did happen, at least with the traded funds you can see what happening as the price moves, most of the REITs are in much better shape financially - lower debt than they were in the GFC.

There is a reason why you're getting 3% at the bank = it's safe, money in the market or in a fund is money AT RISK, not much risk in many cases but still at risk.

skc · 7 January 2016

So_Cynical said:
If things get ugly like they did in the GFC some of those non listed funds may well freeze distributions and or withdraws as did happen, at least with the traded funds you can see what happening as the price moves, most of the REITs are in much better shape financially - lower debt than they were in the GFC.

Big A said:
Something that caught my attention is a-reits. I'm familiar and comfortable with property and feel like I'm investing in something that's value is real and not just on paper.
After doing a little homework on A-Reits non traded a-reits look more appealing to me than listed ones. I was after opinions on a-reits and listed vs non traded. I understand non traded are illiquid and are a longer term investment, which is fine by me as I don't need the funds short term and I like the fact that the unit price of non traded is less volatile than listed. The idea of a regular stable income with small potential of capital growth is more appealing to me than low dividend and potential high capital growth which could just as quickly disappear as it appeared.

Appreciate any info / opinions.
Cheers

I also think that the "lower volatility" of the non-traded property trust sector is just a mirage providing false sense of security. You can achieve the same by not looking at the share price of the listed REITs or unplug your internet connection. The underlying premise of REITs are exactly the same, whether they are listed or not.

Unless there's far superior returns in the unlisted sector... I'd paid a little bit for much better disclosure, regulatory oversight, analyst research and liquidity on the listed arena.

Big A · 7 January 2016

Klogg said:
Well, I can't say I've looked at property crashes in a lot of detail, but a reverse of the 'wealth effect' that would result from a potential residential property crash would almost certainly impact retail and the related leases.

As for Sentinel Property Group - I know nothing about them. A few basic questions come to mind:
- Where are their retail properties?
- Who are their tenants and how long are their leases?
- Does this group have a history of successful returns? How did it perform against a commercial property index (if available)?
- How much leverage is involved?

I could go on, but there's a lot of detail required.

May I ask - is it really "fairly low risk" or just perceived to be so because everyone else sees it that way?

Appreciate the feedback guys.
I guess when I say low risk that is my perception and I have to admit I am a rookie in this field.
Sentinel property group got my attention. They work on a individual funds being based on a single property purchase located mainly on the eastern seaboard with a set amount of unit holders to purchase the asset. There portfolio to date of something close to 50 purchases shows returns between 9% - 15% and nothing to date has been below 9%. In saying that they have only been around since 2010. My thinking was that if they purchase a retail mall for say 20-30mill which is well tenanted and the rental returns are there, then you have a reasonably safe and steady return and even in a market down turn its unlikely the asset will drop in value drastically. And if by chance the markets are hit with another GFC like event then really regardless of your investment you will be hit.
Again I am really just thinking out loud and trying to rationalise my thinking as I have minimal experience in this area.

In saying that I have access to funds and I would really like to earn more than a 3% bank deposit return. I would be happy with anything above 5% as long as it wasn't high risk.
If not A-Reits what would be your opinions for a rookie? I qualify as a wholesale investor. Does that give me any advantages?
Is looking for a managed fund with a good track record the way to go for someone with little experience?

Cheers.

So_Cynical · 7 January 2016

Big A said:
I would be happy with anything above 5% as long as it wasn't high risk.
If not A-Reits what would be your opinions for a rookie? I qualify as a wholesale investor. Does that give me any advantages?
Is looking for a managed fund with a good track record the way to go for someone with little experience?

Cheers.

Here is a list of ASX listed funds etc, click the tabs along the top to see all the different types.

http://www.asx.com.au/products/etf/managed-funds-etp-product-list.htm

I would suggest an index ETF or perhaps a market neutral fund.

luutzu · 7 January 2016

Klogg said:
Odd question, but how can you be so sure of a property crash?
I share a view with some that residential property is overvalued, but does that mean a crash is coming soon?
...

I've seen it before.

Our RBA tend to be much more alert than the US Feds so they might be able to bring the property market down to a soft landing - like they have the last two three times.

But even with a soft landing, property developers and trusts will still get smacked. You're going to see their share price halved from the boom years.

I had my money in Australand a couple times... Bought them after the market softlanded for something like 60 to 70 cents on a dollar book value. The dividend yield were, from memory about 7 or 8%p.a. and after a little over two years cap gain and dividends double the investment. Missed out a further 20% last time just before it was taken over.

----

Haven't kept up to date with property prices but I know people who own a few properties and they can only afford to pay just the interests; a working couple I know could barely afford a flat and have to borrow their aunt for the deposit and startup; I know young people who earn around $150k and they can't really afford a house in Western Sydney - only a flat a single-bedroom apartment close to the city or a rundown house on the wrong side of the track.

Bring interest rate up a couple degree, free trade and general "competitive" policies kicking in and kciking down wage increases; and a global economy that's not going anywhere...

Anyway, a decent sized home now goes for $1M or more... Don't think that's sustainable.

Klogg · 8 January 2016

luutzu said:
...best to wait until after the property crash that's coming

I've seen it before.

When? The Australian property market has not exactly crashed in recent years...

Our RBA tend to be much more alert than the US Feds so they might be able to bring the property market down to a soft landing - like they have the last two three times.

The saying "to the man with a hammer..." seems appropriate here. They really only have 1 tool, how can they possibly deal with their primary target (maintaining full employment, a stable payments system, contain inflation, etc.) and then worry about one factor that would feed into this?
For example, if there was a lessened demand for AUD (USD/AUD yield spread anyone?), exchange rate drops and inflation spikes, they'd be forced to raise rates - housing takes a back seat.

I would only be looking at the RBA to maintain house prices in the interest of their primary objectives, no more than that.

Anyway, a decent sized home now goes for $1M or more... Don't think that's sustainable.

Given where this sits in relation to the average household income, I completely agree.

@Big A - I would suggest learning more about each of the options you have before diving in. So_Cynical's index ETF suggestion is a good place to start learning, but buying something blindly is asking for trouble.

Big A · 8 January 2016

Thank Guys or Gals.

I appreciate the feedback. Ill keep doing my homework and leave the capital in the bank at the moment collecting a safe 3% return till it all starts to make a little more sense to me.

Cheers.

luutzu · 8 January 2016

Klogg said:
When? The Australian property market has not exactly crashed in recent years...

The saying "to the man with a hammer..." seems appropriate here. They really only have 1 tool, how can they possibly deal with their primary target (maintaining full employment, a stable payments system, contain inflation, etc.) and then worry about one factor that would feed into this?
For example, if there was a lessened demand for AUD (USD/AUD yield spread anyone?), exchange rate drops and inflation spikes, they'd be forced to raise rates - housing takes a back seat.

I would only be looking at the RBA to maintain house prices in the interest of their primary objectives, no more than that.

Given where this sits in relation to the average household income, I completely agree.

@Big A - I would suggest learning more about each of the options you have before diving in. So_Cynical's index ETF suggestion is a good place to start learning, but buying something blindly is asking for trouble.

I've been saying it for two years now and it's not happening, so I have no deep insight or stuff. Just anecdotal.

The property crashes... maybe it's not a general definition of a crash, but it did decline about 20% from experience. I went house hunting with my parents around the GFC, it crashed but the folks didn't buy because of personal reasons; then about 3 years later it dropped again while we were house hunting, again. Soon after they bought it went up pretty quickly then just stay around the same until recently when it went through the roof.

Depends but I wouldn't buy things that went through the roof.

I bought Australand around 2004 or 5, got out 06 or 07 at a good profit and soon after noticed its share price crashed and it have to raise equity - I was just lucky. Bought again around 2012 when it was low and sold out a few months before it was really taken over - use the proceeds to buy MND so

Anyway, just personal opinions. Best people read the reports and see if it's the thing to get into now.

First post intro/questions/opinions

Big A

luutzu

Klogg

Big A

Klogg

So_Cynical

The Contrarian Averager

skc

Goldmember

Big A

So_Cynical

The Contrarian Averager

luutzu

Klogg

Big A

luutzu

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