Forum Replies Created
- foundation wrote:
And no, even if mortgage rates fell to 5%, I would not be borrowing money to buy real estate…
If the property was pos geared, and you were looking to buy and hold long term, why wouldn't you?
If you could snare 5 properties that return a nett rent after all expenses of even a pathetic $25 per week RIGHT NOW that's a pretty good head start before things start to improve.
The market will only go back up sooner or later, so will rents.
The economic climate may be bad, and property (and shares) markets are down (could go down more), but I don't believe Aus property markets are going to drop too far or too fast – that's only reserved for the penguins in the share market.
That doesn't mean it's not a good time to buy a good opportunity now – shares or property.
If I can 5% mortgages, I'll be borrowing loads, and locking them in for as long as possible. Even if they go down more from there, 5% is below historical averages, so I'll be happy with that.
What are you investing in F?
And please don't say cash. That's for the level 2 investors.
Yeah; if I give you $1000 will you do it please?
That's about all the work an agent does is worth, given their quals and training.
For example; a nurses' aid (PSA) earns about $20 per hour. It's a 3 month course. Easy course, easy work. I did it for 3 years when my son was little. great benefits and penalty rates, salary packaging as well.
I also did the agent reps course. Easy course; done in a month part time. Worked as an agent for about 3 months. Crap job.
Average amount of work to sell one house by an agent would be 50 hours (mostly less)? A few opens, a few private viewings, a few phone calls back and forward to the Vendor and buyers etc.
$1000.
And; you've only got 30 days to sell it – no probs if you're any good.
wian wrote:Scamp wrote:yep , me too, positive about the sharemarkets in the future. Much more money to be made on shares than on property. Renting and investing is a much better option than buying a property.
Why lose 50K a year and even more on capital losses, if you can make 100K a year with the same investment ?
Doesn't make a lot of sense to me. I'd rather invest my cash in shares ( the right ones ) and make money instead.Plenty of opportunity is there, just not in property.
hindsight is a wonderfiul thing isnt it… Yes, there is plenty of money to be made now the share market has shit itself, but what about all the thousands and thousands of people who have blown their money over the last 3 months or so? everyoe is clever in hindsight, but the reality is, if you play with the stock market and dont know what your doing, and you dont sell at the right time, you can lose big time ..
cheers
Imagine also if you are one of the zillions who are only invested in super.
OOPS.
Scamp wrote:god_of_money wrote:I am confused…. interest rates on the way down.. with prediction of some economist predict further cut next year…
Used to be lots lots of bullish comments about investment when the interest rates reaching its peak…bla bla bla long term value…dividend yield 10% and rental price still on the way up (better than 3-4 years ago)…. I can't understand why people shunned away from investing…. recession.. yes….. but is this time to buy… lots of preaching…buy low sell high???? I am not sure I got it wrong from invesment philosophy. Correct me if i m wrong
You cannot invest what you don't have. Banks will not give you money as easily as they did.
And that means 0.0% of the FHB's will get mortgages. This means noone will buy the starter homes, which means noone will buy anything else either. It's bound to crash, there's no question about it.It will crash until wage * 4 = houseprices = median houseprices of 250.000.
That's 250.000 less than now ( 500.000 ) which means a 50% drop.Just because FHB's aren't buying doesn't mean no-one else is. FHB's have just had another free gift from Lapdance Kev, so there'll be a few who can still buy due to that.
There will be far less buyer activity for sure, but there are always people with funds who want to buy a house to live in – at every price level.
The rest of the people who already own will either have to sell if they are cashflow poor, or if they are ok they will simply not try to sell their home in this climate. less buyers, less sellers. Nothing new.
A good quality property in a good location will still sell all day long. Maybe not for top dollar, but not a 50% drop. Even in places fo higher-end properties where there is much more fluctuation there is usually only around a 10-15% drop when things go pear shaped, and they are always the desperate sellers, of which there are few. It's not across the board; never has been – onlty the media talk in generalisations of that magnitude.
We also have far fewer "marginal" borrowers in Aus than the Yanks had, so I'm tipping a longer period of little growth and stagnating prices, and increasing yields, and dropping interest rates.
This is a green light for longer term buy and holders in the next 6-12 months.
You're way too emotional Scamp.
Sounds too good to be true.
No doubt it is.
There's no purchase price, no completion dates and I'm tipping the purchase price has already got the rental guarantee built into the price.
Buyer beware.
If this is so good, why are they selling it to us? They should buy the whole joint themselves.
My guess is the real money is made by the developer on this one.
I'd have a look at it about 2 or 3 years after it is completed when one of the apartments comes back on the market and see what the comparables are locally before I do anything.
That offer to move back in with the parents and rent out the unit is a good one, as you can then claim all your holding costs from your unit on your tax return.
Beware of the "cost" of doing this – moving into a house with your family AND your parents at the same time. This is to say the least; interesting. It may save you lots of money, but may be a large emotional cost.
Financial advisors generally will only steer you towards a plan that involves you buying some sort of financial product that they will make money from. It won't necessarily be the best plan for you, but it will be good for them.
You will get all the knowledge you need from reading several books, which are listed on various posts somewhere here – do some searches to find them, and hanging around on this forum and over at the Somersoft forum.
Ignore the friends – are they rich and retired? No, so don't listen to anyone who is at your level now, or below it. The fact that you are here and they are not shows you have already moved ahead of them. Let them follow you from now on.
Just bypass the agent and contact the Vendor directly.
The agent will get pissed off, but who cares? He's not acting in the best interest of the Vendor.
He might think he is by not passing on your low offer, but if no-one else is making offers, then yours is the best one they have got.
In my State of Victoria, by Law the agent must pass on every offer to the Vendor .
Make sure you have got a copy of the Section 32 before you sign any contracts.
wealthyjvd wrote:thanks,i just read something about a lady who had only 1 house at the age of 35 and now owns over 50, and shes nearly 40.
how, with all teh debt… i wanted to know more about equity to fund these shortfalls.
She's probably bought a few blocks of cheap flats, and counts every flat as one property.
Otherwise, I'd seriously doubt the story.
50 properties in 5 years? Yeah, right.
You can only claim the percentage of the expenses that relate to the holiday letting.
So, if you let it for 48 weeks a year, you can claim 48 weeks worth.
The other way to do it would be to treat yourselves as a normal guest, pay all the proper rental rates for the time you use it, and then claim the whole year's expenses.
Management fees for these types of lettings are hefty – 20% is not uncommon, and then you have all the cleaning fees etc unless you do it all yourself.
We looked at doing this with our house when we moved overseas foir the last 3 years, but the "season" for letting was short, and the income was not that great compared to permanent tenants after you got the place into a decent shape for holiday rentals.
In a nutshell; not worth it for the return.
We went permanent tenants instead.
The agents will leave it on the website as long as possible to get exposure, and try to sell other properties off it.
ummester wrote:johk – have you heard about all those people that are using their credit cards to pay increased interest rates? The banks solution is to give them more credit… gotta wonder exactly what the banks agenda is in all that. My point is that I would hate to see another Australian end up in that position.As someone suggested, why not try and sell the townhouse for as much as you can get and then upsize with the profits?
This is only a small %of the people with loans. It's nothing new either for people to have financial stress. It's self inflicted unfortunately (in most cases). But you're right; maybe we can save one more from it here now.
To answer the original question,
The USABLE equity you have in your existing PPoR is 80% of it's value ($550k), so you can access $440k, minus any existing loans ($350k). Current USEABLE equity is $90k.
This means you can access $90k for use towards a deposit on a new townhouse.
If you buy a townhouse worth $500k, there will purchase costs of approx 6% to add on – $30k, so your all-up cost will be around $530k.
Now, you can only access $90k – which will have to be used towards the deposit and the purchase costs, so after the purchase costs are considered, you can only use $60k of your equity towards the deposit.
In the current climate, getting loans of 80% LVR or higher is very difficult. If you do, there will be Loan Mortgage Insurance (LMI) added on of a couple of grand as well. Work on an 80% loan for the moment.
80% of $500k is: $400k.
You need to come up with $100k for the deposit, PLUS the LMI (say; $2k) PLUS the purchase costs of $30k = $132k.
You can only use $90k, so you are $42k short.
Unless you can get a loan of over 90% LVR (doubtful), you cannot get a loan for the new townhouse.
Also, assume you could get finance for this, you will have a new loan of $532k as the whole thing is made up of borrowed funds – the PPoR equity, new loan and LMI.
The interest on this is $920 p/week (9% interest).
With your existing property, assuming you could get the rent you mentioned ($490 p/week), allow for approx 20% of this to disappear in holding cost such as rates, insurance etc. Your nett rent is likely to be $392 p/week. Say $390 p/week.
Now, add this all up –
existing loan of $350k = $605 p/week interest (9%)
new loan of $532k = $920 p/week interest
Total weekly interest = $1,525
Less nett rent of $390Total weekly loan interest commitment after rent included = $1,135. With a tax refund this may get down to around $1k per week out of your pocket to service both properties.
You would also want to keep around $20k of funds available as a reserve for un-planned life events and repairs to the properties.
At this stage, if you want to buy another property and begin the investing career, you would probably need to be lowering the sights to a property of around $200k or so to have a chance of getting finance, and without putting yourself in danger.
So, do you want to give up the nice PPoR to live in a $200k cheapie? Most people won't.
longterminvestor wrote:Well said Scamp. (your reasoning on why RBA should not decrease interest rates)Lets see if the RBA does what it needs to do or bows to political pressure.
Lets see if the RBA further destroys the long term health of the nation by bowing to political pressure and reducing rates.
I'll bet they go the wrong way, reduce rates in September for short term gain and compound and prolong the problems.
It is well known that the RBA repsond primarily to the inflation rates. They don't bow to political pressure. If they did, John Howard would still be in office.
If inflation rises, so do the interest rates as a rule. I don't agree with this personally, as not all of society are mortgage holders. Why should they alone be punished for price rises?
I think they are caught between a rock and a hard place now. If they drop the rates, the sheeple will just start spending again, and if they don't, we'll go into a recession, job losses will emerge.
Meanwhile, the price of oil and associated products could continue tom rise – out of our control, causing inflation anyway.
It's a no-win for the RBA, and in my view, if they are to take action, it would need to be down with rates so that the economy keeps moving forward, albeit with an unfavourable inflation level.
Scamp wrote:Paul22M wrote:I reckon we bring Scamp over to Australia and make him head of the RBA, or even prime ministerWho would want to be prime minister in Australia ? It's like wanting to be the president of the USA.
Anyway, first thing any REAL prime minister does is cut the tax benefits on property investment as a whole.
I know, it's been tried before, but the chickens reverted it. Bad choice, look at what's coming now.About political pressure, I quote Rudd : "I will fight inflation AT ALL COSTS"
There's rampant inflation. So what do you think he will do ? What do you think he CAN do ?
No no.. this is one of those recessions that Australia just needs to have.The "chickens reverted it" because there were no rental properties available and rents were going through the roof. People were being forced out into the street because investors were selling their houses and they were not being bought by other investors to replace them. Rental shortage was the result.
Rampant inflation? Calm down.
Yeah, we'll have a recession. So what? It happens ever other decade and always will. Get over it – you can't change it; just try to profit from the climate.
You keep wanting to save the world – commendable. But there's no use whining about it here – this is a forum for property investing.
We are trying to get rich from property investing, and if you get rich from it, then you may be able to actually do something real towards saving the world with the wealth you've made.
Answers in red below.
ummester wrote:L.A. Aussie – owner occupiers are not 70% of the market. In an RBA report form 2003, which I have linked to elsewhere on this forum, owner occupiers were put between 40 & 45%. I doubt the figure has changed that much over the last 5 years. Oh you think? Ask every single person you know in your life if they own an investment property. I'll bet it is less than 1%. This is certainly the case in my circle of acquaintances, friends and relatives.The financial institutions are a problem, I do not disagree with you on this. I agree with the 20% deposit thing but that is only really achievable for the average worker in the country if prices are lowered.There are loads of houses in the bottom of the price range that are affordable to everyone. The problem is, most FHB's don't want them. They want the 4 x 2 house with double remote garage and pool as their first digs. They think all the baby boomers started off in the u-beaut house, whereas they started off in the 3 x 1, 10 square w'board, no curtains, carpet or furniture, no garden, no car, no carport, out on the edge of civilisation. Show me a FHB who's willing to live like that these days. Oh, and take away their mobile phone while you're at it. pffft.
It is land, more than housing itself, that is overvalued. The state governments aren't releasing enough and land investors are snatching everything up to control the demmand and hence price of new suburbs. The average Mom and Pop investor cannot hold vacant land as an investment. There is no income or tax advantages from it. They are mainly going to buy it to build a dream hoe on if they buy it all. Most of the development land is owned by the big developers, who will do as you suggest.
Close to where I live you can get an established 3×1 on a 500m2 block for 315K. Land of the same size, with no house, is advertised at 300K. The house is obviously worth more than 15K but the person selling the land can sit on their price with more ease than the home seller. Land is where the supply and demmand factor really comes into play, not housing. Land release and sale is what the government has to control. And what condition is the house? Crap, I'll bet. The Land is advertised for that much; but hasn't sold for that much – right? It's the same where I live. Knock-overs all around the place. From a financial perspective, this is good for both o/o's and investors, as you are getting virtually the house for free on your land. I can get an income while I wait for my DA to go through. There are also properties in the same area for more than double this price – the house is top end and brand new.
Some contextual advice that will help people.
Buying a 400K house will have first year interest payments alone of around 40K. That is rent at around $800 PW, most rent is half that. Do the maths. Your point being? No need to do the maths. I wouldn't buy an investment like that. The only people buying investments with those numbers are dumb investors, or on a high income – often both. They buy them because they can afford to hold them, and are hoping for a big cap gain. It is quite possible to buy sub-$200k properties with 7% yields right now, AND with considerable "on-paper" depreciation deductions. You will find that these investment properties will be of the minority as most people can't afford the neg cashflow.
ummester wrote:L.A AussieI am not slagging off your ideals, just presenting an alternate POV. Property Investment can be more than financial and I feel that in forgetting that investors have gotten the country into a dangerous financial state.
Besides, I am learning things by being here. The obvious, but overlooked by me, buyers insurance that Harb just pointed out.
And finally, if but one potential buyer that is going to overleverage themselves doesn't because of posts by the likes of me, then that could be one upcoming family that is saved from financial heartache.
Everyone of your mindset keeps blaming investors for all these high prices.
The reality is, investors make up 30% of the total resi housing market. Our influence on price is minimal at best, and investors are trying to talk the prices down – not up.
If you want to blame someone, blame;
1. the FHB's for a start; they get $14k free money from Lapdance Kev.
2. owner/occupiers who make up 70% of the market. They buy on emotion, and are more likely to pay full asking price for the property – or more.
3. the financial institutions for providing all the marginal loan products that enable people with shaky financials to get loans. If everyone had to come up with the traditional 20% or more deposit, there would be way less activity in the market.Property for most of the population is about buying their own little castle. There is enormous emotion attached to it, therefore they will pay a premium for it.
Most o/o's will buy the most house they can afford. When was the last time you saw a 40 year old doctor on $500k move into a 2 x 1 10 square house out in Doveton? No; he's gunna buy a $3 mill knock down in Kew because he can afford it.
If you want to save over-leveraged buyers from disaster, add some advice that will actually help them, rather than keep saying we're in a bad position, the world is gunna end etc.
That's contextual, where's the content?
ummester wrote:For overall social balance being as rich as Gates or Norman is meant to be the privillage of a few. In all society, of course there will be rich and poor, but the majority should be in the middle. What the Boomers have done over the last decade isn't become rich (not like Gates or Norman) they have just seperated the middle class.
The trouble with capitalistic ideals is that more aspire to them then what can possibly achieve them. What is happenning now, which as as natural as people in capitalistic societies aspiring to wealth, is the redistribution of that wealth.
BTW – I am over 30 and am well funded enough to enter the housing market. However, I refuse to buy something for more than I think it is worth. I also believe that by not buying I am doing a small bit to assist with a needed market correction, if I did buy I would be adding to the problem. I will buy when I believe the market has sufficiently corrected. If it doesn't, it is no skin of my back, I will just continue to rent and save. I am happy with my financial situation, I am just not happy with Australia's.
Gates and Norman are only two examples as I said. But yes, the middle class can contribute as well – and do in various ways to help out the less fortunate.
That's one of the nice things about having the position to be able to help.
So, you think that no-one should aspire to get rich, to help society, to get ahead and improve the world? Why? Would you prefer it that we all sit around and give up and leave it to K.Rudd and his idiot mates to take care of us?
And, everyone can achieve capitalistic ideals. The problem is, people are inherently lazy, and want the path of least resistance. Only 5% of humans do what it takes to get to the top – in any life endeavour.
If you are against capitalism per se, then you are wasting your time and ours by being here, as the very practice of acquiring wealth through property is one of those capitalism practices. We are all here to get rich through property investing. What are you here for – just to have an academic argument I'm tipping. How about sharing with us some secrets about how to get rich through property investing for once>
That's fine that you refuse to buy a property that you think is too expensive. Don't buy one. Believe it or not, that is how the property market already works, and has done for centuries.
So, don't buy. Maybe the prices will correct soon and you will be happy, and then you can buy.
But don't slag off our choice to buy property if we can afford it. If I can't afford it, I don't buy. When I can afford it; I buy. Simple.
If it's too overpriced then that's my problem; not yours.
ummester wrote:See how selfish your dreams are compared to mine? I want something for the country – you want something for yourself…
Basically you are aware that property resources are finite and that BBs got to entre the market first. Pretend there are only 2 people in the market. Logically, any property more than 1 that a BB owns is 1 the other person can't. And if the BB and the other person own a house then there is 1 house more than what is needed. See how that works?
Honestly, the BB generation had an ease of life that has never existed before and never will again. As long as you settle your debts with the bank before you die Harb, then nothing else about you matters.
I agree that the BBs spoit their offspring too much, only slightly less then what they spoil themselves.
This is the typical view of someone relatively young – less than 30 I'm guessing?
We have had this whole argument before on this forum some months ago:
https://www.propertyinvesting.com/forums/property-investing/help-needed/25921The reality is, every generation before you has had it tough in various ways, and every generation after you will be seen to be "getting it easy" compared to you.
Think about this; people who are extremely rich can do more for society through their wealth than someone who is poor.
And, they often do.
Here's just 2 examples;
1. Bill Gates – gives away over $1 mill to charity EVERY DAY.
2. Greg Norman – is one THE biggest contributors to the McDonalds Foundation.Now, which group of people would you rather be in?
Keep in kind that many of these types of people are Baby Boomers.
You can do far more for your country by becoming the "greedy rich" (which is a myth by the way) than you can do by being the socialist poor.
Scamp, if Aus is so bad (as you keep describing to us) then why are you coming out here?
Why don't you simply stay where you are in your wonderful country – whatever it is.
It can't be too bad if you've done so well that you can come pout here and pay cash for one of our exhorbitantly priced houses.
blaze wrote:L.A Aussie wrote:crashy wrote:I agree that there are those who walk the walk and those who only talk the talk. you have to admire those who have built a large portfolio and dont mind sharing how they did it.making money is easy. keeping it is the hard part.
I talked to a guy who had $3m worth of property leading into the early 90's recession. he explained how things slowly got worse for him, cashflow drying up day by day even though he sold property (in a falling market) quickly, finally ending up $500k in debt with no properties left.
I wonder how many people here realise just how easy it can happen? There is only one number that matters……..how long can I survive when (not IF) everything goes wrong?
Why was his cashflow drying up?
Were the properties he owned tenanted?
Maybe like say he owned a building in normal market worth $15m, put $3m as deposit and $12m is loan. On falling market he forced to sell the property for $11.5m. That would leave him with (500K)?
This still doesn't explain a reason to sell.
He could lose value on the building, but still have a good paying tenant in place and have good cashflow.
My guess there is a debt serviceability issue here based on what crashy said, which is a totally separate thing from falling/rising values.
