Dreaming, it's not necessarily about being negative, it's about being smart and picking the right time in the market to get in, or out if need be. 

I think that the current property boom will end with some potentially catastrophic results. Many Australian investors are geared up to the hilt (particularly the mums and dads players with the one property, representing a high proportion of investors) and the clouds are gathering for these and many thousands of home owners with large amounts of debt.

Much of the individual wealth created today is on the back of asset booms. Unprecedented consumer spending (and debt) has been driven by borrowings against equity in property. As we move into a relatively precarious situation with a US recession looming we are going to see consumer spending drop leading to a drop in demand for product. The likelihood of a US recession impacting on the rest of the world is very strong, particularly in Australia where lower global consumer demand for goods will result in a slowdown in the Chinese and Indian economies (although interestingly Japan is out biggest trading partner) impacting on our resource-driven economic boom.

How will this affect us? A slowdown in the economy, coupled with an increase in the cost of borrowing, will result in fewer jobs, higher interest rates and a rise in defaults (this includes business bankruptcies since business borrowing is at an all-time high also). With the glut of property and a potentially sustained period of recession it’s unlikely that the market will recover for some years.

So what to do? I have a problem with the notion that the market will keep on rising as required by most property investment strategies. They say time is the essence, and so long as you can afford to stick it out for at least 7 – 10 years (the usual property cycle) you’ll be fine. This has 2 pitfalls: 1) it assumes that you can afford to see the cycle through and 2) a cycle is going to be like any other cycle.

The only thing that is hard to predict is how bad the recession will be. If it’s only a mild cold we all catch from the US, then you may be able to ride it out. If we catch pneumonia then the smart money will sell up now in a market that is still reaping silly prices, sit on your cash and buy when there are a ton of houses up for mortgagee sales in about 2-3 years time.

I know this is very pessimistic but there are predictions of a “perfect storm” on the horizon. Whilst a recession is very hard to predict I would not be betting on a winning horse if the vet is telling me his heart could go at any time.

But I could be wrong! 

I’m not a full-time investor; I have my own company and generally use that as a vehicle for investment opportunities. Our Core business is in the IT space, but we diversify and use funds for other business ventures.

I have two IPs and am always on the look out. Trouble is with me I don’t like high stakes ventures, so I am inclined to only go for properties that are low risk. Low risk properties tend to be more difficult to find if you want to positively gear. My current IPs are very low risk – blue chip, period homes, close to transport and all the features that make them desirable, but they tend to be expensive and the returns are not as good, unless you get good capital growth.

I think you have to be a little more game to go for positively geared properties. It’s a bit of an art form in that there is some science, but you still need a good sense of the potential and you also need to do all the due diligence that lowers the risk of getting such purchases wrong, and I don’t have the time.

So what’s my philosophy, as with any financial advice, the fundamental is to live within your means and I’d say the same is true for inverting. Fine to gamble, but only gamble what you can afford to lose.

I’m sure there are people out there that will advocate a daring-do kind of approach, but that’ll only come from hindsight. I’m sure there are a lot of daring-do investors (probably ex investors) that would say something different. That’s why I think sites like this need to have a balanced discussion and keep the hype in check. This ain’t peanuts here. This is about peoples lives.

My car is a customised Pontiac Trans Am called KITT. My name is David Hassle-a-lot. A lone crusader in the dangerous world of property gurus. I am McKnight Rider.

Simon,

Those are fine sentiments so long as you treat people with an even hand. And despite what you say, I think you really do have your head in the sand if you think you and the other moderators are impartial. Take a recent post I made as a typical example. I raised an issue about the Today Tonight controversy. I felt it was relevant in light of recent discussions and issues raised on this site surrounding the Mentoring Program.

Within minutes there was a response telling me how tired and old this was, why was I dragging this up and telling me how out of touch I was because this was old hat, and telling me to go elsewhere if I didn’t like it etc etc. I was quite an aggressive tirade You’ve heard it all before because it’s the same MO for the handful of people who dominate this site. Now I don’t care about getting stick. If you post this kind of thing you can pretty much guarantee you’ll get some flack. But I’m not satisfied with the ducking and weaving that goes on when these questions are raised, so I enjoy pushing the point.

Back to my TT post – Naturally I responded in a manner befitting the level of flack I’d received. Yet I was the only one that was pilloried by the moderator and it was my responses that were deemed inappropriate and the thread removed. Yet if you analyse the thread, my topic was perfectly legitimate and worthy of discussion, perhaps not in everyone’s mind but it was not particularly offensive. Yet the responses to my post were highly critical and some were pretty agro. The only time the moderators stepped in and deemed responses as inappropriate is when I defended my position and came back with countering remarks.

It always follows the same pattern; I put up a post that goes against the grain of the general sentiments of the dominant group, it’s knocked about all over the place (often with a high degree of venom and aggression) by the usual suspects (including moderators), I post a response that is appropriate and at a level that is in keeping within the spirit of the blasting I’ve been given, and before you know it I’m the bad boy! Moderators seem to turn a blind eye to the vitriol in the posts that provoke such responses and hone in on the ones they don’t agree with.

And that’s fine if you want to have a club exclusively for mates of Steve (And yes Munjy, I know it’s Steve’s site and he can do what he likes with it. I had the same argument from my niece when she would not let anyone play with her unless they played by her rules. She ended up playing on her own), but don’t kid yourself that this site and the way it is moderated is in any way impartial. You can’t see it because all you get is a bunch of people agreeing with you (just look at the sycophantic responses that followed your post and then just watch the blasting I’ll get from this one).

I bet Neil Armstong hoped Albert was wrong!