bacchu,

If you’re buying for the views only… it’s probably a mistake- as others have said, you can’t guarantee your own view. Check out the local Council papers going back a year (you can do this online) and see if there are any developments going on around you. Many views get blocked out by other properties going up aroudn them, or (God forbid) trees! That’s progress!

kay henry

Heya Leigh- long time, no see

I’d be looking for a 10% property now. My current properties have yields ranging from 6%-9% rental yield (gross but not including depreciation which would raise their yields by a few percentage marks) and have had significant capital growth since purchase, but I figure now, with capital growth pretty much at a standstill for many properties in the next few years, i’ll be seeking yields in the double figures… and then, in the years after that, if growth remains semi-dormant, I’ll be happy to reduce my expectations on yield again- for the promise of growth.

I have identified properties that do have >10% yield, by the way. They are out there still.

Welcome back, Leigh!

Del, how are your CD sales going? Looks interesting

kay henry

heya Scotty- and welcome

Be wary of always assuming property doubles every 10 years- it depends on where. There is a story on Jenman’s webpage (jenman.com.au) about a guy who flogged off property he bought for something like 18k in 1994 and sold it for 55k or something in 2004- problem was that the land is still only worth 18k in 2004. Capital gain? Nothing- except that he was trying to two-tier sell it. Lesson to be learned? Not ALL property will double each 7-10 years, and if it doesn’t, perhaps it is better to invest in something else. As with all things, research will be they key – whilst past performance doesn’t indicate future performance, it can still be a guide.

There’s been some good articles around lately warning people against overcapitalising on reno’s- in a flatter market, reno’s need to be done cautiously, I reckon.

I had lunch this week with a friend of a friend. She bought a 700k unit in camperdown (decent inner-west suburb of sydney). She hasn’t had a tenant for a short while, and the lack of cashflow is hurting her, so she’s selling up. The most she has been offered is 600k- meaning, basically, that she’s lost 100k on her investment. People seldom talk about how much they have LOST, but are happy to discuss their CG’s.

Sorry for sounding doom and gloomish here… I know people might still be rakinhg in money on RE, but just be cautious in this bearish market.

If regional house prices go down, it might be a bet to invest in these… still cheaper prices, but rents are often quite poor. Many of us would have started out in a flat market, buying cheap places, which have escalated in price over the recent boom. The “never sell” guideline is a bit passe- in my book. Sell at a high, before prices sink, if CG has been good. That’s what Steve has practiced also. I sold a property towards theend of the boom and bought anoher for the same price- but which yielded double the rent and has achieved very good CG, whereas the one I sold has only maintained the value I sold it for- there’s no brain surgeon economics in that- it’s pretty fundamental.

Also, I’d be cautious of getting a 105% loan… these were popular for 5 minutes.. but only really work in a rising market- where everyone wanted to but into RE… but now they may owe much moire than their speculative properties are worth- exuberance can be good in a flat market- but it seems more like a manic spending spree at peaks.

Hope you don’t mind the “don’t do” tips- they can be as valuable as the “do do” tips [baaa]

kay henry

Well, I was certainly NOT pleased interest rates went up, but we all have a different psychology and approach to these things.

resiwealth, I think you’re a bit harsh on people, in suggesting that 95% of people on here are “doomed to fail” (pullease) and that 5% are the “truely” successful. There is not one way of doing things (as you’ve pointed out- we should not be following the flock…) and it’s not a big competition. Everyone has their own aims, thanks- yours is merely one of the many ideas floating around- not all of us have “vulture” mentality.

kay henry

Terry,

Thank you for your contributions. You’re a star (maybe Steve will give you red ones??) [goatee]

kay henry

roessler,

Westan hit the nail on the head about why to sell. I remember the days of the “never sell” ideology. But I sold a property at the near end of the boom, and that allowed me to buy much higher yielders in better locations, based on the CG. Now that the market has dulled, I would never have got the price I did then, now.

As for passive income… well, I see passive income can be more easily got doing some of the things the “gurus” in all walks of life have done- you work for a bit and then achieve the profit- writing books, getting patents.. that kind of thing.

But with RE… well, one can’t just buy one or two properties and then live passively on the incomes. Even CF+ properties need to be paid off! So even if people get an extra $50 a week on a passive income, that is hardlt an income to live off. You’d need 20 of those properties to be on a fairly sub-standard income.

As you can see with westan, really the income he is utilising is derived from CG and then reinvesting- a formula he has been using over and over in different (or emerging) RE markets.

As for just living off a passive income… well, I reckon it’s not entirely reliable by just buying cheap CF+ properties- unless you can buy dozens of them, and that might take many years after this RE boom. The old rules don’t necessarily apply, so people have to be more flexible, look at emerging markets, developing, or some other method that will increase income. Interest rate rises can make previous CF+ properties into neutral or negative ones, and a flatter market might lose people some capital gain. Certainly, notions of flipping etc, are pretty passe, to my mind.

Sometimes, investing is about the boring old “pay it down” practice- not sexy, but it’s necessary if one is doing vanilla buy and hold deals. Then you can buy using more equity that you’ve built.

Certainly, if people are thinking about passive get-rich-quick schemes at this stage of 2005, another industry might be a better bet.

kay henry

Crusader,

You might think about getting a Property Manager to manage the property next time- the few bucks you have “saved” in managing the property yourself, seems to have costed you greatly. You might also think about getting some landlord protection insurance in the future, so you can still earn from your IP even in the tenant is a non-payer.

I’d be very careful if I were you about taking matters into your own hands. As others have said, check out a copy if the RTA, but when emotions are high… people can sometimes err in their judgement. You might wanna still see if you can get a PM- pay him or her- and let them deal with it.

kay henry

Dan,

There’s a “Caveat Emptor” section on somersoft.com where you can advertise properties. Many users of this Forum also visit the Somersoft Forum and vice versa. Check it out.

Personally, I reckon there’s plenty of spam to deal with on this forum, with people advertising their wares and services anyhoo. I like seeing it as a discussion place, without people utilising it as a place to profit. I think it encourages people to actually contribute for its own sake if people aren’t flogging something off. I’ve seen a lot of people come in here, use the Forum as a launchpad, advertise their book or seminar, then disappear when their book/seminar sells enough- that’s not “community” to me.

You can always add a signature link at the bottom of your posts with an email link to your service or url for properties.

kay henry

hihopes, just a couple of points….

The only way you can know reliable rental returns is to check out currently available *comparable* properties. Check out the rent section on realestate.com.au It’s harder to do this reliably qith houses than units- because houses have different featuresw, size of land etc. With units, it’s easier to see the “generic” price for similar properties.

Also, a RE agent who you BUY from may give you an oversetimate of rental returns to get you to buy the place. It would be best for you to ring other RE agents in the area- they’ll give you a more realistic figure. Online is great, but won’t tell you if a smelter is just about to be built on the block next door.

Regarding yoursecond post in this thread… if you are htinking of selling due to a vacancy of 1 month… then you may be too highly leveraged. Vacancies can be a part of life with IP’s. Indeed, most people calculate rental returns on 48 instead of 52 week tenancies, so they cut slack for 4 weeks off.

You may wanna try for a 1-year lease. If the property is worth its return, and the area is not over-supplied, you should be able to get a one-year lease. Most people don’t wanna move in and out for the rest of their lives.

I don’t really rely on rental return for my properties, as I am into growth properties. But if you eed rents to pay the property back- and have no other source of income- then you may need to rethink how much you’re paying for properties- and only buy positively geared ones- and ones that are tenanted.

Speaking of the last point- I like to buy tenanted properties- the income stream is there from the beginning, and you get to speak to the tenant about what the property is like- can save you a heap and not have you buying a dud.

kay henry