Forum Replies Created
I agree Hallg,
and another thing; people need to live somewhere.
So while there is a basic demand for housing from a necessity standpoint by average people, for the average house, in the average street, housing will never go down in value by much (if at all).
The biggest fluctuations in house prices seems to be after an hysterical buying spree/boom when silly people buy anything at any price simply because they can afford it and they wqant it before someone else with a hot cheque book gets it.
But, many of those people don't ever need to sell afterwards; it's just that small group of people who get into financial trouble for one reason or another, then are forced to sell at a loss to escape their trap.
This is only ever a minority of the sales cycle, but of course; it makes great press and ratings when the individual disasters are displayed in the papers and on tv.
In reality, what happens is that the boom ends, prices stay flat for a time until affordability improves, then they start to go up again.
I suspect this will happen now for a time, especially in the middle price range, while the cheaper end will continue to do well as this is all there is left that the millions of average people can afford.
There will be pockets of higher end which will still do well, as there are a number of people who are immune to interest rates and high prices due to their wealth/income, but these pockets will be the better parts of the higher end.
Very interesting point raised there Jon;
I agree with you that there are more buyers at the bottom end than there are at the top, so it is more likely that a lower end property will have more interest, and probably a quicker sale than something more expensive.
This is also an important thing to consider when selecting properties for investment; the majority of people who rent, and who buy properties are either middle class or less well off.
We have had both types of properties; expensive townhouse and elcheapo units. So far, the cheaper properties have been the star performers from an investment perspective, but I also feel comfortable that if we ever did have to sell any of them we would have no problems due to their rental return, their price point (affordability).
So, as a hedge against buying properties that are hard to rent, or have less rent return, or are harder to sell, it is a good idea to look at properties below the median price point.
Many investors get lured into the glamour and glitz of the new, sexy, designer, off-the-plan townhouse or apartment etc which are usually up there in price. From my observation they don't rent well from a return aspect, and they are not always the great cap gain producers that people would like to think, especially when bought off-the-plan.
It's a price point and strategy that carries more risk in my opinion. I know there can be good money in this niche, but it is more gambling than investing in that niche.
As for the advertising; I believe that humans are inherintly lazy and will take the path of least resistence if possible, which means that if they can do a quick internet search to find properties and agents then they probably will do that first, then look in the newspaper, then get in the car and go for a look – in that order.
I remember not all that long ago when there was only the phone, the newspaper and the driving wheel to find a place for sale.
No surprises there Millions; it is encumbent on everyone to monitor their financial health constantly.
The best run companies in the world do it monthly, and have quarterly reports on their financial position, so we should all follow their example.
Keep a very close eye on the LVR's people and get them down as soon as possible.
PPoR – Principle Place of Residence (your home that you live in).
Is not liable for any cap gains tax if you sell it, unless you use it as an Investment Property (I.P) for longer than 6 years before you sell.
After 6 years as an I.P it then becomes liable for cap gains tax (CGT) but is pro-rated; you only pay CGT on the amount of years as an I.P after 6 years.
First, establish your budget, your investment strategy (buy and hold, wrap etc), whether you want cap gain or cashflow, or both.
Then, start studying investing, read lots of books, read this forum and the Jan Somers one, study real estate markets to get feel for jargon, prices, trends in an area, values.
I want to get all the factors maximised in every investment; I want cap gain, cap growth, rental demand and return, depreciation and ability to add value all in one. Therefore, I have a number of criteria to satisfy to make the investment work for me.
Some people are only concerned with cap growth, and don't care about neg gearing. These people may invest only in areas like inner-city properties for example. Some people can't afford any cashflow drain, so they need to have pos cashflow from day one, so they may look more to regional areas for cashflow. Neither is markedly better than the other in the long run, but it has to be right for your situation now.
I started a new topic called 'what's your criteria?' on this forum a few months ago and listed all the things I look for. That's a good place to start to help you establish your criteria.
I wish that more of our more experienced forumites would post on it, but that hasn't happened unfortunately. Go figure.
Plenty of posts about favourite cars though.
If it is a rental property, and you have around $5k to spend (or even less) you can get a perfectly ok brand-new kitchen from IKEA or Bunnings.
It is a deprecaible item and they look great, and are very customised.Hey Jon,
good to see you back on the 'firing line'.
Just have a thick skin buddy and keep on offering that great help.
We know you're a good guy; the bad guys can't be bothered giving good advice on forums.On the subject of advertising, I can say from experience (expensive and el cheapo) that a photo in the agent's window, an ad on the internet and a sign on the front fence is all you need. Maybe a very small ad in the r/e section of the big newspaper r/e section on a saturday as well, but nothing fancy.
The buyers are already out there looking and will be on the internet and behind the wheel, scouring the streets in your neighborhood and peering in the agent's windows.
what sort of info do you want?
Make sure you compare the O.T.P to recent sales of similar EXISTING townhouses in the immediate area to verify that you are paying the right price. Look at townhouses around 5 years old or newer to get a good idea.
Many O.T.P properties are price-loaded to cover the developer's margin, thus they are over-priced compared to the market.
Many people say; "but how can you compare it if it hasn't been built yet?"
Well, if your place was built, and you had to sell straight away for whatever reason, then you will only be able to sell it for the same price as the existing comparables.
Make sure you are not paying tomorrow's prices today.I keep an eye on the markets that are relevent to my properties – every month or so.
I do this so I can keep a ball-park idea of how we are travelling as far as LVR.
I look at recent sales of similar properties, say; the last 1-3 months, which is pretty much how the valuers do it anyway.
I only get an actual valuation when it's time to buy, and that's on the new purchase, which is because the Bank requests it.Kristine wrote:no way dont agree at all you will never pay the house off if you do that ……….just my opinionI think I.O, with the option to pay down debt as the opportunity arises.
This way, you get the benefit of better cashflow now, and I think that everyone should be thinking consciously of regular debt reduction and keeping the LVR nice and low; less than 70%.House prices dropping by 30-40% is a massive generalisation and should be ignored, as there are a million micro-markets which have their own economic and demographic factors driving the prices.
The USA disaster we are all hearing about is across the country, but only affects those who were border-line borrowers and those silly enough to over-extend on their LVR and repayments anyway, and as Nigel said, many places are still doing well. The same will apply to Aus. The percentage of people in this category is small thankfully; the majority of people are safe as long as they are not forced to sell.
There will always be examples of someone doing their dough on a property deal, but if you do your due diligence and select well located property with features that will see long-term cap growth and strong rental demand, and make sure the numbers are such that you won't ever need to make a distressed sale, then the state of the market is basically irrelevent.
As for houses dropping enough to make returns pos again, I don't think so.
millions wrote:So what have you been buying;
houses?, units?, subdivs? – neg geared, pos geared?
What has happened to those investments in 12 months and what was your plan when you bought them?
If they are neg geared, has the cap growth kept pace or outpaced the shortfall?Cheers,
Marc.
[email protected]How have your investments been performing Marc? Linda
Hey Linda,
We haven't bought anything recently; our last purchase was a block of land across the road from our existing PPoR in Dromana(better views than ours) just before we left to come over here in '05, which will be for new PPoR in a couple of years. It was on an 18 month settlement (happened 2 weeks ago); the block cost $300k and the Bank valued it at $330k for finance, so 10% in 18 months on that. We have just been in debt consolidation phase since then leading up to the block settlement.
Our PPoR has seen a 15% rent increase over the same period, and has doubled in value since '01. Owned outright.
Other I.P's –
one in Frankston bought 3 years ago has gone up 30-40%, and rent gone up 15%. This was neg geared, but we new the area was about to go so bit the bullet.
2 in Kalgoorlie; a unit and a house. Both were pos cashflowed at purchase (bought in '03). Unit has doubled in value, with rent increase of 30%, the house has gone up by 50-70% (can't find many comparables) and has just had a new 4 year GEHA lease signed; rent increase of 10% now, with yearly rent reviews.
So, overall, the cap growth has been nice, and the rents are going up; pos geared; we are happy.What did r/e.com turn up?
You mentioned Mornington; what about Frankston? This is still a cheap suburb and will boom (already started), with houses with yards for under $200k. Maybe not the best area of Frankston, but your price range limits you a bit.
What's the catch??
There has to be one.I just did a 30 sec search on r/e.com.
Here's one I saw in Dandenong, Victoria. It is going to be a growth suburb in the next few years due to price (affordability), proximity to CBD and transport, amenities.
Don't know how old it is, but based on appearance it would be in the age range you need, and you may get it for close to
$200k. Don't know the rent return either, but if you call the agent and say you are interested and can you show me others based on your criteria, I'm sure one will turn up.I have had the 'chip on the shoulder' treatment from both sides of the trades – private and the Big Company employed sub-contractor. It makes no difference, sadly.
As a footnote, I have had good treatment from tradies and woeful treatment. I always expect good treatment and scratch my head at the bad; why are they being so self-destructive; don't they know they will never earn another dollar off me or my friends??
Contrarily; I have had to deal with self employed people in the computer repair service industry a few times in recent years, and have never had nothing else but exemplary service and treatment. The tradies should take a leaf out of their book.
Car repair shops; now there's an industry!
Drop the rent, and don't dismiss people with bad credit history. They sometimes need a second chance.
If you feel nervous about their ability to pay, put them on a month-to-month lease and assess them each month. Let them know that they are under observation; sort of like a probation period, and if they do well then offer them a more permanent lease after say, a 6 month period.
If you can't carry neg cashflow, and still want to invest, you need to look more to cashflow properties first, with cap gains second.
There is nothing wrong with that, and if you can maximise the return with 'add-value' and depreciation, and practice regular debt reduction and re-invest the profits (tax returns) into the property, then you can still do very well.
It has been shown in numerous comparisons between cap growth v cashflow properties that at the end of the day you will still be quite wealthy after a few years whichever you choose.
Keep your mind open to all the factors and possibilities and you will start to see the type of properties that will fit the criteria I mentioned.
Investing should be fun; if you are carrying a heavy burden in the form of neg cashflow, you will get sick of it very soon and may drop out alltogether.
MasterREL wrote:L.A Aussie wrote:Are we back on the customer's attitude AGAIN? I thought we had a gutful of that a few weeks ago with you and crashy.
Customer attitude is an external factor and should not have an influence on your professionalism in your job.
I worked in retail for 30 years, and if I had let the customers' crappy attitudes dictate how well I worked, I would have had a very unsuccessful business.No it dicates how much tradies will charge you.If it looks like you are going to be a pain in the butt ,then the price will be high.
Sometimes the customer is nice at the start, but is a pain after the tradie starts work, and a lot of times the tradie will quote a high price if:
a) he is really busy and doesn't want the job, but will do it for a premium price
b) he thinks the customer is a bunny and he can get away with an over-quote
c) all of the above.I'm not talking about the price they charge; it's up to the customer to accept it or reject it. I do realise this thread is more on the price issue, but my post was about the thread a few weeks ago.
I'm talking about the reaction by the tradie to the difficult customer, whereby they take on the attitude; "this guy's a pain, so I'm not gunna do a decent job; that'll show him".
This attitude is wrong, but according to many who have commented on this issue, it seems to be all too common. Cowboy tradies with unprofessional work practices and ethics.
You have no control over the customer's behavior, and it has no bearing on how well you do your job (at least; it shouldn't). The tradie should be able to do his job professionally and to a high standard, no matter how much of a pr**ck the customer is.
