Quote Originally Posted by voltage View Post
fp, i find your thoughts on LPTs very interesting and will be selling a rental soon and need to put the money somewhere. They are fully priced and when interest rates rise will LPTs drop in value? Also as you mentioned they already have gearing so they are not really suitable to use borrowed money to gear further. Would you recommend to buy a parcel in each of the LPTs.
Yes, LPTs could drop as interest rates rise, they will rise as rents are reviewed. They could rise further as bank depositors look for income sources. They are subject to the pitfalls of commercial property and the ups and downs of the share market, which is also subject to interest rate changes. A lot of these risks apply also to the property you are considering selling and the real estate market and other investments in general. If you do consider buying some, why not a few in each of five or six of them indeed. If you get a spread of PFI, STR, KIP, ARG, PCT and GMT you will have a good spread of office, retail, industrial, light industrial (service industries and warehousing) and a small number of development projects. There are a few others but those ones seem to be well managed with prime properties. You might also consider rym, sum or vhp who are in the retirement sector. As far as borrowing to buy I can't see any real problem as long as you are getting a return over borrowing costs and are happy that interest rates will stay low for some time. You wouldn't want your mortgage costing more as your investment weakened. I did what you are thinking of after selling a building. I plonked a large sum in and just consider it as another building. Comparing the risks - I think a spread of lpts is far safer than owning a commercial property because of the spread of buildings. And far less hassle and a higher return than residential. I think though it's all about what you are trying to achieve. In my case I had enough income without the LPTs - been retired for years - but like you needed a home for some money. Real estate is all I know, but couldn't be bothered with hands on any more. I chose LPTs (after a couple of bad experiences with proportional title schemes). I couldn't be happier. Steady income, nothing to think about, not even any need to keep records, reasonable capital growth and instantly liquidated. As far as being fully priced - they are in terms of the NTA as they all sell above their NTAs. In other words if the buildings were sold and cash distributed you would lose capital, but perhaps it just shows that buyers for shares in the trust are far more plentiful than buyers for multi-million dollar buildings. In other words they may always hold a premium over the NTA, they have for the last few years since I started watching them. I hope that is a bit of a help - if anything else, sing out. Good luck.