Forum Replies Created
I know a young couple who bought a house that was very affordable and eventually used the equity that developed to buy somthing better. More equity came out of the new house so they thought an IP would be the answer. It was “all happening” and there was a lot of encouragement to move ahead.
They had a tenant who paid on time and things looked rosey. Eventually the tenant had to move on and to their surprise, they could not find a replacement. The budget couldn’t cope with the short fall so they decided to sell. Guess what? They could not find a buyer. Even at a very reduced rent they could not place a tenant. The property was eventually sold at a massive loss to them. They had to sell their PPOR to cover the loss only to discover they did not have the equity they imagined. They are renting again and saving for a deposit.
It’s a bit of a horror story but very true. The moral I guess hints at the first question of”how do they live”. As long as the market is growing you have opportunities but you have to be pretty shrewd to be able to know the future.Regards Marsden
Dear CRJ,
This may be prices returning to reasonable levels after being heavily inflated during the boom period. I see prices dropping but some of the starting prices were just not realistic. I guess we will be back to normal when we see the 1% rental theory apply again. When you pay 300k for a property and will expect to get $300/week rent.I’m looking forward to buying good sound properties and being able to rent them out for a good return. Searching the corners of the world for a good yield is not my idea of sensible ,long term property investing.
However, we don’t want prices to drop too far because we have that capital gain in existing IPs to protect.
Regards Marsden
Dear Yack,
Your interest rate theory is soon to get a very big test. The baby boomers have been driving house prices from the 60s and, it is very true, they have been ‘manipulated’ by interest rate changes. However, the BBs are going to try cashing up and prices will drop despite any interest rate movements. The only way prices will not drop and that is if someone arrives to buy their properties. Migrants may but it appears that we may see property fail to some extent.Regards Marsden
The Bis Schrapnel report, while I haven’t read the report, is probably hinting at the start of the Baby Boomers retirement episode. It has been calculated that the oldest BBs reached 55 in 2001. If retirement age is 65 this group will be reaching retirement in the year 2006. As “empty nesters” it is thought this will herald a period of asset dumping or at least selling down to smaller homes. A good guess is that the property market will not be booming and one should not expect capital gains. A wise move might be to consider where a lot of retired people would like to live. When that is worked out, then that maybe a good place to invest.
This is a world wide phenomenon and many people may want to move to Australia from overseas and you may find a lot of city dwellers anxious for a move to the coast. There is a lot to consider.
A serious investor would be foolish to overlook the opportunities that will occur as a result of this event.Regards Marsden
To some extent, I have to go along with KP because smaller towns do have a good supply of properties that are better valued than in the city and city suburbs. There are enough renters to keep rental properties at reasonable occupancy rates. I include rural properties, those little farms just outside these towns, as being part of the area I consider.
My research also shows a trend up in the demand for these small rural properties. It is possible for a retiree to sell a house in the city and buy one of these country properties and still have heaps to fund retirement.They are very hard to find because there are restrictions on land subdivision in the country ares. You are not able to break up the large farms and properties to sell off smaller blocks. It appears that a considerable number of retirees look to these small holdins for their future. Beachfront is too expensive!
These properties are very sought after in rural areas by local tenants. The country looks quiet and peaceful but a lot of things are happening.
In general, you will find cash flow positive or at least in a creative way by renovation and rent increase.Best Regards Marsden
Usually very solid – especially well built housing commision houses.
However, if there is any evidence of cracking it may indicate a serious problem. Have a building inspection done.
They are a bit unattractive but “bagging” or rendering will improve the look. Even a new coat of paint.
Regards Marsden
I follow Petebell’s routine and pay my CC each month. The annual fee for the card is paid from the accumulated points. I try to buy everything on the card because I get a statement each month lsiting my spendings. I also download all these things to my computers MYOB and keep track of things that way.
I think its great.
Regards Marsden
Another aspect of my previous reply….. rentals seem to be on the up. Combine the two, that is, the prices are settling and rents are rising and we are growing closer to cash flow positive. We are not there yet! Even with deductions for depreciation and considering tax gearing there is a way to go.
There is a need for some gloom. We are facing a market of falling prices,rising interest rates and asset release by Baby Boomers. Surely people have these things on their mind and perhaps will share their ideas on these things.
To DD…My area is generally 3 hours from Sydney.
Regards Marsden
Dear JB,
No you are not wrong in fact your comments make a lot of sense. I find that prices seem to be dropping in my country NSW area of operation and I see good possibilities just around the corner. This area’s expectations seem to be inflated after the recent boom but vendors are realising that these prices are not sustainable and are reducing prices accordingly. Soon to cash positive levels?Regards Marsden
My 10 day rule is really a touch of sarcasm. I feel somewhat concerned at the lack of debate on a topic that is having its effect on property investment now. The oil crisis will, if it continues, obviously cause increased inflation- which, in turn, will likely cause interest rates to rise. The baby boomer phenomenon is a special “one off” episode with no prior occurance to study. The BB generation are notorious for their lack of savings attitude, they are a spend generation and many are without a retirement contingency fund. Many hope to sell off the family home in order to cash in on their equity for retirement. However, in about year 2010, when this “asset dumping” occurs their may not be the buyers to allow them to cash in on their windfall.
I am sure that land will always be a safe investment. I feel that the near future will bring many opportunities for sensible investment. I do not think that sensible investing includes leveraging the family home for 3 to 4 years in the face of this asset dumping situation, all the while battling increased interest rates.
Regards Marsden
Dear Jaffa,
Many thanks for the calculator, very slick!
Marsden
