Forum Replies Created
Yack
It all depends on whether the economy is strong or weak. If it is strong then I predict interest rates to increase to about a max. of 9-10%. If it is weak then the RBA will have to stimulate it and in those circumstances the rates will only get to about 8% before again reducing down to where they are now. All of this is dependent on the world economies doing exactly what they are now which is unlikely – so I guess it is anyone’s guess.All booms are always followed by a bust. This has never not happened in history. To think that property will suddenly defy this rule is totally naive. The extent of the bust and the timing are the only things up for debate really.
+ve IP will also be affected by the cycle and prices will decline when there is a bust. Too many factors affect rent prices to discuss in this thread, suffice is to say, I think they will not increase or decrease much. If the bust is not just in the property market but also in the job market, then +ve IP will be seriously affected as people move from rural to urban areas in search of work. If the job market stays strong then +ve IP will be even better than now imo. This is however the million dollar question!
8 years of 15-20% CG’s p.a. which are 10-15% above the long-term trend should mean a very large correction is required. The above translates into 160% increase in prices over this period or 120% higher than the long-term trend. In order to return to a normal CG situation, prices would need to at least halve. I dont expect price to halve though but rather expect a 20-30% downward adjustment. I think this will occur during late 04 or early 05. Whatever the correction, many people will not be prepared to hold onto properties which cannot delivery CG’s as well as declining rental returns due to oversupply.
I will be looking carefully during 05 for good value (50% lower prices than now).
A word of caution, dont think that if prices drop by say 20% that you are in for a bargain as these properties will still need to drop a further 30-40% to represent values near the long-term trend line.The way I see it, as an investor I am out there to do the best for myself not others. In a real estate boom (like now), you are likely to always pay too much when buying. I always ensure that I pay a low enough price to ensure that if I need to get out of the property quickly then I will not suffer too much of a knock. This practice mandates the use of “low-balling”. There are however some people out there who are more concerned that they dont offend others than protecting their own financial position. These people are responsible for prices being higher than they should. These are the people who do not understand that the asking price is not always a fair price and therefore are willing to pay close to the asking price so that they dont cause the seller any misery. Just do yourself a favour, check the last price at which the property you are wanting to buy was transacted at and that will give you a good idea of how much profit the seller is looking to make. In only very few cases will the asking price not be much over the last transaction price. This is often due to silly people paying too much in the first place or a declining market. Neither of these 2 reasons should be good enough motivation for any investor to buy poorly. I just cannot understand how some people think they can get ahead of the pack and become financial independent without doing it at the expense of the pack. Do they really think that communist ideologies and capitalism can be blended harmoniously. I think they are kidding themselves.
Hi Sharon and welcome
You are too right about business being a bigger jail than being an employee. Doing either does to some extent mean you are diversifying and not totally relying on +ve CF IP which is what most on this forum do.I would suggest you start your search for a +ve CF IP as a starting point. You can do this like so many others by using realestate.com.au or get out there and do some leg work (probably better).
Get a few RE agents to do some of the running around for you as well.
Cheers and good luckIf your PPOR has a mortgage with redraw facility (not much chance it doesnt) then I would wack the $150K into that and wait for the right deal whenever that was to come up. That way you are saving 6%pa after tax and have cash on hand to buy whenever you want to. I personally prefer to buy IP near where I live (Bris.) and thus cannot find too many +ve CF IP’s worth buying right now. I dont like the idea of buying these dumps which often have problematic tenants and poor CG even if they are yielding 8-10%pa. I would prefer to go for a better location and aim for neutrally geared or even slighty -ve, but not much.
darrylsgirl
-ve CF properties can only be bought up to a point where your bank feels you can afford to subsidise these properties whereas +ve CF properties can in effect be purchased ad infinitum.
The deal you mention above sounds like one which you should hold onto as it will assist your equity position and you will not have any problem financing future +ve geared IP’s. To take the $50K now and pay 48.5% tax on it (inside one year) would not be my choice. I would hang onto it. If the rents have increased (unlikely but possible) along the same lines as the CG then it may not be as heavily CF -ve as at first. If however the rent is nowhere near the mortgage payments you may want to consider walking away altogether as you may not get to actually realise the $50K you currently think you can as the market has stalled a bit in the last few weeks.kay
If someone is stupid enough to pay $400K for a place that is only worth $300K then why should a fair price not be $300K? These idiots must pay for their greed!
I personally am prepared to buy whatever is good value and do not consider other peoples misery at all. One must remove all emotion from the deal! You may want to call me a capitalist pig for this but I tend to believe it is just good business. I dont believe in doing bad business just because someone else is suffering because of their greed!
Hi Alwayslearning
I tend to agree in part with you about QLD growing whilst Syd, Melb go through a correction. I do however not totally believe that people are swarming to QLD and that the rate of Baby Boomer migration will increase much more strongly than in the past. Lets face it, are people able to stop working sooner these days? Probably not, inflation and moving job markets are not allowing people to retire early unless they are into property or shares in a big way, and that is the minority of people. I actually think that more Baby Boomers than ever before are retiring later and with less money. Certainly, some boomers from Syd. & Melb. are forced to downgrade their lifestyles and move to cheaper environments like QLD. I still think that this is not as marked as some people are saying. I also think that there are not enough jobs in QLD to support the population and the more working age people that migrate here the more unemployed people will be in the state. To compound the problem, salaries in QLD are very low compared to Syd. & Melb. This to me means that the migration cannot continue at an increased rate but will in fact decrease.
Stoph
I have used O’REILLY LILLICRAP in Brisbane with good success. They charge a bit more than the cheap conveyancers but I had no problem with them and in fact found them to be proactive and very professional.I am interested in the $295 + costs offer from Conveyancing Works. Has anyone used them?
Some markets (like Melbourne) have an “Auction Culture” and this is bread by the RE industry. I agree with u9026a that it is not always the best way to sell as it often excludes many buyers which cannot be a good thing for the price. In general agents will recommend an auction where they are not able to easily arrive at a realistic value for the property (maybe because it is too unique) and secondly when they anticipate that there will be many people wanting to compete for the property. Auctions have in the past caused some people to spend more than they should have or wanted to but this tends to change when there are more properties to choose from.
As with most on this forum, I am always looking but have not found very much in the last 2 years that deserves to be bought. Right now must be the worst time to buy. Rates should rise again in December and if rates continue to increase next year by about 2% then there will be some people who will have to sell and they will probably have fierce competition from other sellers. This will cause them to drop their price and that is when prices should start getting back to where they should be and I will be there to buy at that time.
Talking of how the Tax System does little to encourage people to save for their own retirement. This is also true of the current talk about taking away -gearing by the RB. Many people now prefer to invest in property for their retirement instead of equity markets. Take away -gearing and suddenly you have a whole lot of people who wont have enough to retire on! This along with the aging population would be a disaster and that is why it just must not be allowed to happen.
key henry – Re your statement “Let the infidels leave, I say”
It sounds like you need to be the one leaving. Try a stint in Afghanistan, Iran, Cuba or North Korea where there are a lot fewer “infidels” and let us know how you like it!
Just remember, Australia is a free, capitalist (infidel) and democratic society. I would put it to you that it is the best place in the world to live for many reasons but not because it has a business friendly tax system
!The only fair tax system is one which charges people exactly the same rate no matter how much they earn or what gender they are or if they are single, married etc. If the tax rate was the same for all people then every person would pay the same proportion of their income as someone who earned less. Earn more pay more…The incentive to earn more would be greater and people would work harder. The current Australian tax system is biased in favour of the poor and discriminates against the wealthy (over $63500).
And if you think that your tax contribution stops at the tax you pay on your salary then forget it. GST, Excise, Duty, Ansett Levy, Tax on Alcohol, Fuel etc etc all go on top. The real total amount of tax that we pay is probably in the region of 60-70% of what we earn!
Oh whats the point of complaining!
kay henry-lol, i do have IP and will still continue to invest in property and agree with your process and being fair. I just dont think that now is a great time to buy in general as those properties with good locations are overpriced. Having said that, there are always going to be good buys in any market conditions, just less right now. When the blood starts to flow through the streets next year after a few rate rises I will be back in buying mode.
On the subject of names, if “kay henry” is your username, might your real name be “henry kay”?-lolWell here we go again!
Of course the cycle has to have a downturn and of course you know you shouldn’t have bought that last place at such a ridiculous price. You did your sums and worked out it was really worth 25-30% less than they were asking, but you still couldn’t help yourself! Oh well, that is called greed and fear. You feared that you would loss out and that someone else would beat you to it. You felt that there was still another 6-12 months of steam left in the bubble and wanted to make a fast buck!
What more can I say, only that some of us have been warning of this for some time but whenever we put out warnings, the industry (RE, MB, Developers, etc) as represented on this site have criticised us and called us doomsayers. Keep talking up the bubble fellas!
Anyone have the name of a good QS or Dep. Specialist in Brisbane that will do as mentioned above?
I fully agree with Bill, what you are suggesting is totally dishonest and should not be encouraged or entertained on this forum.
Do your homework and when you are absolutely sure that the deal is good for you then make an offer that you are comfortable with. If you do this then it is unlikely that a better deal will come along in 7 days! Buying at the peak of the property cycle (like now) is not a great strategy to start with and one should wait until it is again a buyers market. That way you will not be burnt by paying too much. But if you are not patient enough then just be rational and evaluate properties based on facts and numbers not emotion. And resist the temptation to think that there wont be another good deal around the corner.
There are too many people that make offers before doing the proper due diligence especially at auctions. Some people are even foolish enough to make offers sight unseen.
The culture that has been allowed to grow in Australia such that tenants rights are being protected at the expense of landlord’s rights is very unhealthy.
It is also very wrong to look to the government to regulate things like blacklists. By and large these blacklists do a job and do it fairly well. Sure there are cases where agents are unfair, but does this need government to step in and spend more tax dollars in order to regulate. I think not! Do you really want another department of bureaucrats sucking more tax dollars from us?
The bottom line is that you cannot get onto a blacklist without an incident occurring. So the issue is not a matter of whether the tenant erred but rather to what extent they did. If a tenant feels that strongly that they have been unfairly treated they can take it up with the agent and the listing agency and if not addressed to their satisfaction they can, like any other situation use the legal system.
