Forum Replies Created
I wouldn’t write off a two pub town either. There must be a reason for the place to keep ticking along.
These country towns can be deceptive in a lot of ways. An old trick is to get a tenant in for a short term at a high rent to make the place look a better proposition and enhance the sale. However, if the accomodation has the extras then it may well deserve the extra rent. Three bedrooms better than two, dishwasher etc. but check it out first. There is no easy answer.
Small town infrastructure may also be deceptive. The ‘business’ end of town may not be in town but out in the paddocks working the land. Shearers especially need a place to live while they travel to their work around the country. Again, this needs to be checked out by a thorough investigation.
My rule of thumb is to count the number of pubs and whether they are a going concern or not. This is an easier form of investigation because you can spend the evening over a beer and learn a lot from the patrons. Three pubs with patrons is a good chance.
You could be on to a good thing and ‘your small town’ may be your golden opp just do a lot of checking. Do not try to use city rules for country properties.
Take as much time as necessary, property investing at the moment could be described as a buyer’s market. You will have all the time it takes to do a thorough job.
Dear Dave78,
You don’t give us a lot to go on! I have a couple of small town IPs that are doing OK. I bought these some time ago and did a lot of reno. They rent well and it is surprising how tenants seem to appear out of ‘thin air’. I wonder about your 11% on properties so overpriced. Are you sure?
More help with a bit more detail but obviously do not disclose your own research.Whoops! There may a big error in this line of thinking. The ‘Boomers’ are going to fund their retirement and nursing home life with these funds.
If you are waiting for an inheritance,don’t hold your breath, you had best try to tap into the funds directly. Buy a nursing home or life style properties. You may also find a willingness to rent properties so that funds can be retained for investment purposes or just day to day’living.A list of very good points that contributed to our recent property boom. The last 60 years have also been dominated by the Baby Boomer ‘surge’ influence. The next and ,probably the last, will be their selling of assets and downsizing. I get the impression that this last boom was also subscribed to by many ‘BB’ investors who will now want to sell their investment properties to support their retirement. Anecdotal evidence suggests that some of these properties are on the market at the desireable boom time prices and vendors very reluctant to let go at market prices.
I also here forumites saying “I don’t have any IPs now” which suggests they saw good reason to get out of the market.
I guess there are some good buys out there and I would like to hear some good reasons for optimism.
My optimistic drive is for the sort of property that people would like to retire to!Wait at least 3 months, research the area to determine the ‘Current’ value, make an offer based on your research. My guess is that there will be many more good buys available in 2005.
It would be interesting to hear the research that puts the next boom at 2010 or thereabouts! There are many factors to the contrary; baby boomers retiring, birth rate low, shifting world economy, migration factor and Australian’s very low retirement savings. The NSW govt has placed a land tax on property other than a PPOR and we are all aware of the constant threat of a interest rate increase.
I am unable to support the property cycle theory blindly and suggest there must be a reason for it to trigger if, in fact, we are ever likely to experience another boom.
We all hope that things will go well but with many thousands of dollars involved there must be a reason for the optimism.It appears to me that it is your labour that will add value during the renos. If you buy a place to renovate make sure it is the sort of work you can handle in a short period so that you can get the property back on the rental market. Major work will delay things and may introduce outside ‘labour’ which will cost! I look for properties built after 1985 to include some depreciation into the scheme of things. It is easy to be overconfident and to underestimate the time neede to renovate. Time will be stretched out over different periods of the year, like xmas, and you will not be able to spend time ‘on the job’. The number of times I have said ‘never again’ only to be back at it for the next property. In answer to your question….make sure the renos reqd on a property are somthing you can handle in the short term.
Apparently most Australians retire with no more than $90,000 in super, according to Money Magazine Dec2004. The Institute of Chartered Accountants estimate that at age 65, the average retiree will need 125% of their pre-retirement income for the first 5 years and 75% thereafter until admission to a care facility. As a male expected to live to 81 you will need $760.000 if your salary was $60,000. More for females who have a slightly longer life expectancy.
There are a lot of ‘ifs’ and ‘buts’ in this concept but it does suggest that assets will be sold in order to downsize and realize more capital by many retirees. I continue to sound as if I am predicting doom and gloom but it seems clear that property prices will stagnate and even continue to drop in urban areas.
I would love to hear some research that contradicts mine so I can see my way clear to continue investing in property.
Some baby boomers are preparing for retirement and, in some cases, actually taking early retirement now. It is apparent in the market that preparation is being made by those with the funds and foresight to be ‘set up’ for their retirement.
Try buying on the coast or in prime rural areas and you will see the effect of this preparation.
In 2006 boomers will be approx 60 and this trend will probably evolve even more. As they get closer to age 65 the boomers that plan to use their PPOR equity to help fund their retirement will probably start looking for buyers.
I do not suggest “a big bang theory” but prices should plateau and stay that way for some considerable time.Thanks Michael, I would like to think that you are right. We have to factor in the concept that BBs are a global phenomenon and that there will considerable competition for migrants by other countries. I do not suggest that our cities will become ghost towns, rather my thinking is that property prices will, at least, be affected for the next 10 to 15 years.
On another point, there must be different retirement villages on the market. I have recently looked at a 600k house within a ‘security complex’. It is strata title and all property services are provided. You manage your own affairs and are therefore free to travel,golf and live a contented retirement. These homes were being snapped up by lawyers and accountants so I doubt that anyone was being taken advantage of. You can, of course, buy and sell as you please within the title limitations.
I hear a hint that the Genx people are suspecting a babyboomer problem. People born between 1946 & 1965 are starting their retirements now. Over the next 10 years this will grow in intensity. I personally have always been just ahead of the boomers and they made property investing easy for me. I have the feeling that we are going to see the property market change.
What do think the changes will be? With the Oz$ at .75 and climbing, our huge trade deficit and an unstable world economy, who would want to be heavily in debt.
What are your ideas on property investing in this atmosphere?Dear ‘princess
I guess I don’t understand the point you are trying to make. These retirement villages are surely trying to take advantage of the people about to retire and want to enjoy the comfort of this sort of living. My guess is they may sell their family home now that the family have moved out and retire to a retirement village or some other accomodation. Some will find these villas attractive others will have teir own ideas.The presence of these retirement villages indicates that sombody has researched the matter and has concluded that soon many people will retire and will want to buy places such as this. I guess this confirms the predicted surge of people retiring and attempting to unload their assets.
There is a lot of evidence to suggest that property prices have dropped or at least ‘reached a plateau’. Activety in real estate appears to be low. Combine these things with the Baby Boomer event we will soon experience and I feel we have to consider real estate to be, at the very least, an investment for the long term. Rentals are down, yield is low and basically people are still looking for ‘boom’ prices on their properties.
Every investor has to do their own research and make their own decisions. My conclusion is that the retirement of the BBs is going to seriously discourage an increase in the value of urban property in favour of life style property. An oversupply of urban property will keep yield on urban property low because of low demand.
There is a positive here, you just have to be nimble enough to make the right choice. At the moment a bank’s 5-6% term deposit looks very appealing.
I expect my investments to return a certain “yield”. As far as property is concerned, the easiest way to adjust this yield for unexpected changes is to adjust rents. I expect all my properties to experience an increase in rents.
Having a few years experience has taught me to never accumulate too many things, including property, so that it can be targeted by the govt or banks etc. It is often best to explore legal avenues such as trusts, companies and partnerships. This has.fortunately, avoided some of the exponential effect of the land tax.This land tax really gives me the…… Just wait for the new valuations to be developed by the “valuer general”. When more money is needed the govt will only need to adjust valuations a percentage point or two. The perception is that only people with money will be affected & not the so called battler. Raise rents so that the cost is passed on to those that voted for this govt.
While I have few inner city IPs, I plan to generally increase rents on the anniversary of my rentals. So far no tenants have moved or complained. Most of my IPs are “middle of the road” type so we avoid the low wage earners etc.
This doesn’t answer the original question but perhaps others will say what their plans are and we may be able to form a sort of consensus.
Regards Marsden
The trend, as Rogue originally pointed out, is definitely down. My guess is that it is more than a “price correction” and we will see prices drop considerably more. I also see a trend towards higher rents but these increases seem to be incrimental and will only really have an impact over a few years.
My guess is that we are starting to feel the surge of the baby boomer retirement episode. They may now be ‘cashing up’ and on the move towards their life style retirement dream.
The first baby boomers are timed to retire in 2006 but obviously there isn’t a time table and some will close up shop earlier.
There is money to be made in property but I think we need to think very, very differently.
Anybody agree?Regards Marsden
Dear Rogue,
Nope, not a dig. I was just saying it would be nice to get back to operating in our own backyard. I was also hinting (or hoping ) that rents would get better and property prices a bit more in line with rentals.
My response to the original query suggested that the concern had to do with the baby boomers retiring and selling to fund their retirement. It appears that this may happen and we will experience some property downturn. This suggests that good solid properties will endure where less sound purchases may not. Don’t be caught out!
Regards Marsden
Dear Rogue,
I try to avoid using a cliche’ unless it is appropriate. I checked my last post and I am unable to see that I had.
I have properties in 4 different countries and I feel I was sensible when I bought these.
I prefer to operate in familiar teritory for obvious reasons. I also try very hard not to lose money. I guess I don’t understand your response and hope you will elaborate.
Regards Marsden
