I agree with many of the comments below and also agree with the vigorous extent to which they have been stated. I feel that too many of the people in this forum are still talking up the property market and some talking up the share market too. The bottom line in every investment is that they all have a downside risk. Saying that share are more liquid doesn’t help you too much if you wake up in the morning and see “$250,000 investments crash to about $110,000 within an hour of the market opening”! No matter how quick you are you are likely to incur a massive hit in those type of circumstances.
When an investment drops it is obvious that investors will look at moving their money into something else. The big question for everyone now is what are the alternatives to riding out the downturn? I believe that cash at call is a good option when there is so much uncertainty. The is nothing more liquid than a Cash Management Account and sure the return is only 4 and a bit % pa but you can sleep easy at night. And when the market does drop you will be really well positioned to snap up some bargains from the bloodbath in either property or shares!

Arty
Well if the stimulus for the bursting of this bubble is a slowing of economic activity fuelled by a downturn in global economic activity or an increase in interest rates (later more likely) then this will probably have a flow-on effect to things like general domestic business activity and expansion as well as employment levels which could result in higher vacancy rates (read Steve’s new free chapter!), slower finding tenants, more defaults on rents, lower rent growth etc. This along with higher interest costs is not good news for investors. The double-whammy is poor capital growth as well!

It is said that there are still some areas of Brisbane that are CF +ve such as Inala, Woodridge, Beenleigh and the outskirts of Logan on the south as well as Narangba, Caboolture and a few others on the north although these are hardly suburbs of Brisbane. It is becoming quite difficult even in these areas but apparently still possible. I avoid these areas because of the higher degree of bad tenants and so have to attempt to find IP’s that are neutrally geared at best but in most cases slightly -ve geared. These are normally within 20km of the Brisbane CBD. Hopefully if the IP’s are newer then there will be very little maintenance and larger deductions for depreciation which bring them close to being neutrally geared. This along with the better capital growth associated with these IP’s means a much better long term picture for my circumstances. But it does however mean that I cannot amass hundreds of IP’s and retire from my job! It also takes much longer to get there using my strategy. But I feel that the risk is lower than rural areas. I will have to be content and patient until the next property bust until I can acquire many more IP’s using this strategy and hope that the bust doesn’t wipe out the equity I have in my current portfolio too much as well.

It seems that if anyone (Jenman) makes an accusation against you on ACA or Today Tonight then the public automatically presume guilt rather than innocence. Nobody can argue that HK has made many of his clients wealthy and even millionaires but there will be some people who will not succeed through his methods. These people are the ones that are too afraid to take each step and make it happen. All those interviewed that wanted a refund from HK had not bought any properties or just bought one property. In other words they did not want to complete the process.

On the other hand I do believe that a certain hype is generated and used in a very crafty manner by HK and his team. This along with the scare tactics used to point out peoples lack of retirement provision does make for a fear driven process. The fact of the matter is that these people will retire poor if they do not act and act fast but they also need to take some risks along the way because they need to fast track their wealth building. HK promotes safety and low risk but there is always risk and there are a lot of people that just are not prepared to take any risks at all. These people can hardly blame HK for their lack of action and thus success. I am not a HK advocate, quite the opposite but I dont think that this public flaming is fair. I do like many of the things that Jenman says (like Dummy Bidding is unethical) but think that he is taking it a bit far with his very critical public criticism of HK.

Hi All
I think that many people are being fooled into believing that +ve geared IP’s are not risky. I think that both +ve and -ve geared IP are risky and that the level of risk although similar in some respects can be quite different. -ve IP is very much more likely to always have tenants through highs and lows in the cycle but +ve IP are much more susceptible to the cycle in my opinion. Since +ve IP’s became so popular we have not had a property cycle downturn. When we do experience one it may be accompanied by a jobs downturn. A jobs downturn is likely to be more pronounced in rural areas and there could well be a large move out of these towns into the cities to find employment, I call it “ghost town syndrome”. If this happens then I would think that vacancy rate would increase and make life a little more uncomfortable for the investor. If it became too uncomfortable then one might be forced to sell and with a net population outflow from these towns that may be difficult. In conclusion, I think that a balance is good. Some -ve and some +ve IP’s, not just one or the other. We all know that -ve IP will more than likely produce a bigger profit on sale and that +ve IP generates a stream of income which can be used to finance other IP’s but dont forget the risks of a downturn. Anyone who back just one horse (i.e +ve or -ve IP) is open to much greater risk.

“Credit and other paper ‘promises to pay’ now exceed levels of real income (GDP) by ten times”
This seems to be a sign that the debt bubble is about to burst.

The biggest problem I have with debt as it is now is that the debt that a person is up for must be backed by something of real value. To say that properties (which have risen by over 150% over the last 5 years) have real value now is not true in my opinion. RE agents will argue that if someone is prepared to pay the asking price for a property (as is the case now) then that represents real value. This is true when mortgages are easy to obtain. But when they are extremely difficult to obtain and expensive (high rates), then that is another matter.

I would argue that real value is only supported by cash and not the book value of assets or other intangibles.

Hi All
I would agree that becoming a MB for the purposes of only saving the comm. on one property is not a worthwhile proposition. But becoming your own MB if you were in the process of acquiring many properties and/or refinancing some existing properties would make a lot of sense. If you only acted as MB for your own properties you would not need PI insurance and may not need to join an aggregator. Some investors in this forum have 10 or 20 IP’s some have 130. I would be very surprised if Steve wasn’t his own MB.
I must concede that MB’s do provide a valuable service for some clients especially those who have less than perfect records and those that are time poor. But for the professional/semi-professional property investor it could well make sense to do the 3 week course and join the MIAA and sit their tests.

mcdeyess has summed it up very well-Interest Rates hold the key. If one looks at the banks and the fact that one can still obtain a fixed rate of 6.5% for 5 years on a mortgage, that gives us an idea that the banks dont really foresee any major movement in interest rates for some time. I would suspect that the US economy will take another 2 years to start growing at a rate that allows interest rates to increase. That is if there are no other wars, stock market crashes etc which unsettle the world economy. That also means that interest rates in Aus. should remain reasonably low for a while. The other big factors are the increasing oversupply of units and the affordability crisis in major cities. The reality that prices are not really backed by any true value because they are artificially high (like the tech bubble) seems to have little influence on buyers paying too much for their properties at the moment. To state it another way, the fundamentals of property values are not sound (in general). This will change in the longer term.

So in summary, it appear that the market is likely to go into a holding pattern for now (or maybe another year or two) with moderate to low growth but no major drop for now. When interest rates increase by 2 or more percent that will be the signal that a correction is on the cards. This correction is predicted to be anywhere between -5% and -30% and will depend on the quality of your properties.

ShaneB
If you are a MB then of course you would have to disagree. Furthermore, the system was setup to make money for MB companies and brokers not purely to assist customers find the best deal. I dont have any problem with a MB or Insurance Broker for that matter earning a one off commission for introducing me to a lender or insurer. I do however have a massive problem with never ending trailing commissions of $20000+.[!]
The reward must be commensurate with the input.