Passive,

Looking online isn’t necessarily the best way to find deals – our last three were not advertised online.

I suggest you get a bit Active and talk to agents directly in your chosen areas.

Cheers,

Aceyducey

Oh my god – woke up this morning and one bedroom has fallen off all my properties….that’s a 25-50% crash in their actual market value!

Who cares if property values fall – the property remains the same asset, it’s simply the perceived fair price that has shifted. There are a number of ways to add value back onto property & based on current population growth & building there’s not likely to be any systematic and realistic reason for a long-term fall in property prices in this country in the next 50+ years.

Of course an asteroid could strike Sydney, a nuclear war could break out, a virus kill every 3rd person as happened in Europe several times in the middle ages (following their property prices in the period during and between Black Death plagues is quite enlightening) or a device that allows us to each own a home in a different dimension could be invented.

However if there was some fundamental change in the value of property like these, the entire economy is likely to collapse anyway, so frankly owing money will be the least of an investor’s worries

Don’t second guess the market – just look at the realistic range of possibilities and assess your own exposure. If it’s too high, adjust it. If it isn’t don’t.

Don’t waste time worrying about the 90% of people who WILL lose if the economy shifts drastically.

Your worry will not stop them being affected, no matter how compassionate you feel you are!

Cheers,

Aceyducey

Look frankly if the tenant can’t afford to pay market rent they are better off renting in a cheaper location.

Why not tell the tenant you’re increasing the rent in line with market prices but like them so much you’re willing to buy a place in their rental bracket & rent it to them – they get to pick the house they want (within certain defined limits).

We’re looking at doing that with one tenant later this year. She’s a a fantastic tenant but needs to change areas cause of kids’ schooling.

Cheers,

Aceyducey

THanks Wrappack glad you enjoyed them

I saw the first bit you quoted in a US site about buying decreased property….may see if I can find the URL again.

The second bit is all mine.

Personally I dislike the fervour with which some people chase deceased property. If you’re going to do it, do it professionally and sensitively. Ensure everyone is satisfied in the deal & ensure it’s repeatable (so whoever sold to you calls you when other old people in their family die).

Personally I find all the deals I want using other mechanisms & have generally over the years found that those who are interested in the deceased estates option have spent a lot of time reading US books & sites and not enough researching the Australian market. We are different!

Cheers,

Aceyducey

fjficm,

There are ways to negotiate a fast settlement in most states.

Why buy outright however – why not buy at, say, 60% LVR. Most properties will still be nicely positively geared, there’s no mortgage insurance & you’ll increase the size of your portfolio significantly.

Remember – if you only put 40% of the money down, 100% of the rent & 100% of the capital growth are still yours.

Cheers,

Aceyducey

Well if you got what you wanted why not sit on it and reval again in 6 month…you know you’ve got some extra up your sleeve even if the bank doesn’t agree

Perhaps you will next reval with a different lender.

Cheers,

Aceyducey

Hi Drew,

Hold on a sec – you’ve bought all four properties in the last 9 months at the top of a boom.

Well I’m not surprised you’ve seen limited CG!

Give the market some time to recover, recouperate & move forward – say 5-8 years.

If you can’t wait for this timeframe I suggest you consider a different type of asset class – sell all your investment properties & go buy shares.

Property is NOT a short-term proposition & we are not likely to see the huge short-term CG increases of recent years for some time.

I will also say that it doesn’t sound as if you’ve bought all that well either – personally the last property we bought was 9 months ago & we’ve seen it’s value increase by 25% BEFORE taking into account the reno we’re still completing on it (we moved in and got sidetracked )

I suggest you do a LOT more research before buying in future – your first four were learning experiences, learn from them.

You have identified one of the key problems with negative gearing, there’s a limit to how many properties you can buy

In case you need to resolve the -7K on your income in the short-term, I suggest you look into buying a few CG positive properties to balance them. If this involves selling one of the ones you bought – so be it…but expect to lose money on the sale and for it to take some time to sell – in many places in Australia it’s a buyers’ market right now.

If you can borrow more (particularly if you can do so overseas – say NZ), I recommend that you buy a few CG positive places to balance your portfolio.

However always keep in mind, if you did nothing for awhile where are you likely to be in 10 years, in twenty years. If you can sit on what you have, you might find that your portfolio ends up satisfying your wealth creation plans….just not in the first year

Cheers,

Aceyducey

watchful,

Let’s see…

Using some very rough figures (drawn mostly from the ABS)

Australia has 20 Million people (actually about 20,090,000 last time I looked at the population clock). This equates to about 9 million households (2.1 people per household).

From the book, 5,000 people decide to invest in property (you said CG+, but leave that for now)…..and you count another 5,000 investors. These figures are actually about 1% of the actual total, but we’ll get to that.

70% of residential property (we’ll ignore commercial property at this stage) is owner-occupied therefore 30% of market rentals are available realistically to be purchased and rented out by investors. This is about 2.7 million residences.

Divided by the 10,000 investor figure, that allows each investor to own 270 properties.

Now, say 10% of these properties are CG+, therefore of the 270 properties you can reasonably buy as rentals, 27 or so are CG+

Is that enough properties for you to start with?

Now looking at more actuals on the number of investors….
According to the ABS, the number of households that own an IP besides their residence is up around the 12% mark….it was 6% only about 10 years ago. (I expect it to fall once more)

That means that there are about 1 million landlords. At 2.7 million rental properties that’s only 2.7 properties each. Bugger!

BUT of those landlords about 90% only own one property….therefore 900,000 households own 900,000 of the rental properties…

That leaves 1.8 million for the other 100,000 investors…or 18 a piece.

Of that 10%, most (let’s say 70%) only own 2-4 properties. Let’s be pessimistic and say that those 70,000 households each own 4 properties, equalling 280,000 properties.

So realistically you have 30,000 investors owning the bulk of rental properties, the remaining 1,520,000 rental properties. That leaves each of these investors with an average 50.6 properties each. If 10% are CG+, that’s 5 of them.

Does that make you feel any better?

Cheers,

Aceyducey