Forum Replies Created
True. Apples are apples, oranges are oranges. Apples at $100 per kg would be overpriced. On the other hand oranges at $100 per kg would be overpriced.
Cheers, F.[cowboy2]Originally posted by astraltao:
when do I know is the right time to step in and buy?When the numbers add up – when renting is not cheaper than buying. Incidentally that’s also a good time to be buying RE investments, as defined by the 11 Second Rule ™, Rental Reality ™, CF+ etc.
Cheers, F.[cowboy2]Originally posted by AUSPROP:I can’t see why you “fail to see how falling demand for investment properties… would push up rent”.
I can only imagine the falling demand would have the opposite effect to what the rising demand had… ie. very little whatsoever!
What did rent do upon the abolition of negative gearing in the late 80’s out of interest? My guess is they went thru the roof?No, certainly not through the roof. During the time of which you speak, I concede that rents did exceed the rate of wage inflation, but not by more than 3 to 4 percent pa. While this is hardly insignificant, nor was the fundamental change in the RE investment environment.
Here you can find on page 4 a graph of rent inflation vs price inflation. I think the relationship is very clear.
Cheers, F.[cowboy2]On the supply/demand issue,
Oil prices are factored into CPI, and can therefore influence wages. However, the price of oil is set by the market – higher demand = higher price.I don’t see that demand for rental properties has significantly increased of late, or why it will in the near term. Demand for investment properties caused house prices to inflate much faster than wages, but that demand has largely expired. Rents have been unnaffected during this time, so I fail to see how falling demand for investment properties or falling house prices would push up rent.
On interest rates – I personally wouldn’t fix interest rates beyond 2 years, although if I was in the 22% of high income earners ($80k+) who feel they will have trouble paying the mortgage (AAP 01.03.05) if rates increase by 0.5%, it might save some stress.[blink]
Cheers, F.[cowboy2]
Type of easements?
Originally posted by Troy Boy:as an investment class, property has not changed per se; it is only the buyers that have changed their understanding (or lack or it moreso).
Property as an investment class has changed a great deal! It has gone to being reasonably valued based on p/e and historically significant fundamentals to being grossly overpriced by these same measures! This should be even more significant to investors such as yourself who aim for capital gains rather than income.
Following your logic, tech stocks in 2001 were a good CG prospect because to paraphrase you, “as an investment class, (tech stocks have) not changed per se; it is only the buyers that have changed their understanding (or lack or it moreso).”
Cheers, F.[cowboy2]Hi WayneL,
I missed this one, however it is repeated late tomorrow night, so I’ll record it. I have never understood the whole ‘credit card’ (I prefer the term ‘Debt Card’) addiction. It seems everybody needs one, and everybody claims to pay the balance at the end of every month. If that were truly the way cards are being used, it would be easier, safer and cheaper to simply save one months’ worth of essential & discretional expenditure (perhaps in a separate account) and draw down on that via a debit card. It’s worked well for me through the lean times and the not so lean times, so I really can’t comprehend why it is considered essential for every man, woman and tweenager to have a card or three!
Cheers, F. [cowboy2]Originally posted by AUSPROP:inevitable fall…… sounds like a good reason to sell the house and rent it back at a fraction of the cost. I can’t see many people doing that.
Perhaps not many people, but it is happening! Although I would not personally feel comfortable doing this (I value the secure feeling of my home too much), I do know two people who have done just this very thing. One bought a 2 br unit for $80k in about 1992 and sold it for $260k in 2003. He is absolutely convinced he will be able to buy a 3 br house with a very small mortgage this decade.
I suppose time will tell…cheers, F.[cowboy2]
Hi Norma,
I don’t see how selling the $370k unit will reverse a $530k debt![eh]
‘Is it now time to sell the unit,so we can have equity to work with…’
This would leave you with negative equity, would it not? Perhaps I have misunderstood your question and information.
Cheers, F.[cowboy2]Hi DD, I was just making the point that First Class was making innaccurate assumptions (‘I think ,like Steve and a lot of people’) about somebody else’s strategy and passing them on as fact.
From the ‘horse’s mouth’:Although we (my business partner and I) have purchased over 180 properties, we
currently (at September 2004) own around 100 income producing dwellings as we have recently sold to take profits under the belief that the real estate market is likely to fall and hence now is a good time to hold cash.But as you have questioned my point, I would say it is a very bad time for somebody to buy their first IP in a distant country town when property prices are either falling or about to fall pretty well across the board. The chance of a first time investor falling into negative equity and being unable to take advantage of lower prices in the future is very high, even if they buy a property ‘well below CMV’.
Waiting for the market to move is silly because unless you have your finger on the pulse you will miss the initial changes and loose those deals that may not be repeated once the wave of change moves on.1) If you do have your finger on the pulse, the market is very easy to read, and can make you very wealthy. Trust me, it’s not that hard to do.
2) In a falling market, those ‘initial deals’ will soon look like yesterday’s folly.
I’d bet a fiver against your reading of the Logan futures. The fact that a developer is making a quick buck flogging $250k apartments to southerners for ‘investment’ does not change the fundamental value of the surrounding $120k houses.
And finally, I agree with this:
those thinking of selling will start to panic a bitBut it will be just the beginning. The way I read it this has already started in many areas. Check numbers of properties for sale vs mortgage approvals. One is rising and the other falling.
The areas still inflating (mostly QLD & WA) are primarily being driven by amateur investors. Most of the big guns have consolidated a cash position in preparation buy in again for (much) cheaper prices as is Steve.Cheers, F.[cowboy2]
With all due respect, I still disagree. The recent increases in rent have at best been in line with wage / broad inflation. If rents adjusted in line with house price inflation even in a delayed fashion, they would have to increase by 50-150 percent (depending on location) over the next couple of years. That is clearly not going to happen.
Cheers, F.[cowboy2]Sorry, I can’t help. Out of curiosity, is this the same guy that charges $10,000 for a five day course then charges another $100 for an unscheduled toilet stop? I remember seeing a tv show about one of the gurus and I think his name was Brad S.. omething.
Cheers, F.[cowboy2][whistle]
I disagree. Rents are closely linked to wages, not house prices.
Cheers, F.[cowboy2]Originally posted by first class:I say tomorrow’s gone ,today is almost over so what are you doing tomorrow?.I think ,like Steve and a lot of people on the forum,the only way to make it is to go for it.I thought Steve had made it clear that he was largely waiting for the market to fall before making significant further property purchases?
Cheers, F.[cowboy2]I agree, Brenda’s strategy is pretty sound regardless of market movements, and will position her well should house prices drop. Anyone planning to buy into a fallen market needs to ensure they will be in a positive equity position, which is obviously best achieved by lowering the LVR on their portfolio before or at the peak of a boom.
Brenda, I wonder if you would be willing to share your thoughts on selling IPs at this time?
The media have been reporting average time on the market growing to 4-6 months and vendors taking offers 15-20% below real estate agent quotes – how does this compare with your current experience(s)?Cheers, F.[cowboy2]
Hi Johnny1, I sold up 2 IPs leaving me with just a PPOR & beach shack in late 03. I pumped most of my profits into shares until early this month which did rather well. Now I am dabbling in speculative investments (only with what I can afford to lose) and holding cash and hard investments. I think this ‘storm’ is going to be far bigger than just property being a (largely / generally speaking / on average) losing proposition, and am positioning myself to make the most of any and all falls in currently overpriced investments.
Cheers, F. [cowboy2]
Wow, our mainstream media are finally catching onto the idea that something might not be right with the state of the world…
Details hereOriginally posted by easymoney:Depending on how much money you can finance with 20% deposits you could end up with 4 – 6 cashflow postive properties by the end of the year.
easymoney,
Could you explain this theory in a little more detail? I imagine your plan would rely on some serious capital gains in order to purchase a PPOR @ $350k and 4 to 6 IPs (plus all associated expenses) with $120k?
What sort of gearing level would be required to make this work and what level of risk would be involved?
Cheers, F.[cowboy2]Hi Feast,
I would very strongly suggest you see an accountant who does not so clearly have a vested interest. One who gives accurate and sensible advice might also be worth considering.
Cheers, F.[cowboy2]
