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Monopoly
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May 7, 2004 - 7:56 am
Originally posted by kay henry:
That’s a bit harsh Jo.
Is it??????
If you were a new player in the property investment scene, and decided to take a look at this forum, the heading crash > crash > crash is really going to instill positive feelings in someone who perhaps feels that those in here are negative about the market at the moment. Sorry, but the heading doesn’t make me feel all warm and fuzzy; it is not threatening to me (as an experienced prop investor) but still an unnecessary message to convey to newcomers!!
How about setting a good example, by posting (at least in the headings) with a bit more thought???
Still too harsh?? oh well, that is your opinion and I will accept you wrapping me across the knuckles, but I am not the one implying “doom and gloom” even in the post headings.
Jo
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May 7, 2004 - 7:34 am
Loser > Loser > Loser > Loser > Loser
I hope that as an investor, you have more confidence in your transactions that you do in judging the market!!!
There’s one in every crowd, and it is usually that one, who knows the least, yet manages to speak the loudest!!!
Jo
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May 7, 2004 - 7:29 am
Thanks Sizzling_duck,
I guess if he could read english he might. I daresay I am safe on that note.
Jo
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May 7, 2004 - 5:40 am
Hi Westan,
Glad to see you held up okay against my outrage…I didn’t mean to lash out at you the way I did, but I do get quite agitated over “one-eyed” views, and I assumed that that was what you were doing.
As I said when I sent you the PM, I do admire what you have achieved; I don’t necessarily agree with every aspect of how you have done business, nor would I expect you to agree with my way either.
As for being a novice, true I have had lots of experience, but there are so many (even in here) that IMO, I believe would make me look like an infant, yourself included.
Yes, you’re right, even prices returning to their actual worth is definitely a drop. I stand corrected. Although, I do agree with you, that as Melb did back in 1990, these drops may only be significant.
Again, thanks for your comments…..and as I said, in my PM, I did not take it personally; I felt you were attacking anyone who supports the neg gearing way of investing.
Regards,
Jo
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May 7, 2004 - 1:55 am
Just a quick update on my last post…..
Although I had decided not to purchase, the neighbour had (as stated in my original post) “cornered me” (literally) into thinking about buying his house. He said he wanted to save himself the commission and do ME a favour. So I came home, thought about it, posted the question….
Only to find out this morning, that he had signed the papers with the agent last night after I left!!!! What the……
Ah well, who cares!
Jo
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May 7, 2004 - 1:15 am
Hi Smenkhare,
Another point to consider, is that many fibro homes were constructed by Ministry of Housing because of the cheap cost of materials. It may be that these homes are ex-housing commission homes or may still be so, and if they still are, their re-sale value will not increase too much over the years.
Look into it closely first, and if it all checks out okay, by all means, take Brenda’s suggestion, try to reduce the amount further, and re-cladd.
Jo
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May 7, 2004 - 12:51 am
Thank you all again, for your inspiring comments.
I have, as a result of reading same, re-considered the venture. I didn’t go back for a second look at all, but rang the local council instead to enquire about re-development options.
While the prospects were favourable, the sums didn’t add up. Basically, to pay so much for a property, only to drop it to rebuild, would be foolish, and not very profitable in the short term, and even in the long term, it is still not feasible, as the rental return is not substantial enough to justify its purchase.
I can get a better return, and equal growth, in a cheaper property, in the same street….yes, the one around the corner for 260 (which I could probably negotiate down to 240). But I would prefer to shop around a bit more, maybe sit a little longer, and wait for a better bargain.
Many thanks again,
Jo
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May 7, 2004 - 12:41 am
Originally posted by westan:
i feel that the question comes from a faulty view of buying cash positive properties.
When you buy cash positive why not buy cash positive that will appreciate in value. That is what i do and advise other to do also. i see this types of deals every day.
Here is another question what if the market dropped 10% which would you rather own a property worth 80k returning 10% or a property worth 160k returning 5%? See thats where the question is also faulty we just can’t predict what prices will do. In fact my portfolio was appreciating by $1,000 per day last year and all the homes were cash positive. I don’t want to appear a show off but you can buy cash positive and get capital growth.
Westan,
You are an amazing individual, one with incredible insight obviously into the trends of the property market. I am obviously still a novice according to the size of my portfolio in comparison to yours. I can however (like you) boast of a healthy portfolio, a net worth of $1.5 million (debt-free) on properties that are continually growing at a rate of approx. 10% and NEVER in all my years, have I EVER seen the property market DROP. Instead, what I have seen, is a reduction is property prices which have occurred as a reflection of their “actual” worth and not that of the market’s inflated ego!!!! I, as many like-minded investors, have seen hundreds of properties being sold way beyond their worth because of ignorance and short-sightedness (i.e. driven by the desire to make a “quick buck”).
I resent your implication that my (or those who share the) view that positive gearing is “faulty”, quite the contrary!!!! I have never looked down at anyone who operates with option (b) and if they are successful, then that is great. In my view, there is no right, or wrong way, but my way…is a more cautious one, and if that is (in your opinion) foolish, so be it, but I am living a comfortable life, and can look to my retirement with confidence!!!!
I don’t have a crystal ball, and cannot PREDICT what the market will do, bearing in mind, that it is made up of “people” and as such, are fickle and erradic in their patterns of behaviour. Yet, the property and other markets have CYCLES, which indeed have an element of predictablility. These cycles may vary in length, however, they are generally predictable in nature.
To answer your question, I would prefer a property worth 160K returning 5% instead of the 80K returning 10%…..why, because money is good while you have it, but with only a small level of growth, it is only a TEMPORARY fix. I plan to live longer than the positive cashflow return can guarantee…LOL I have NEVER indicated that I thought it impossible for positive geared properties to appreciate in value, I am fully aware that this is certainly achievable depending on location, condition etc.
Now, that you have all, read my “faulty” view and lengthy essay, I gladly welcome your criticism (as a learning tool in my development) and am not concerned with any insult which may accompany same. In other words, hit me with your best shot!!!!
Jo
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May 6, 2004 - 11:49 pm
Originally posted by Lucifer_au:
Because without debt instruments I wouldn’t control a portfolio of this size, without debt. Yes credit is dangerous when used unwisely, but in the end I wouldn’t be where I am today without it.
I know what you meant, I guess I thought you were arguing that it was a good thing. I know now, that that is not what you were saying, but that you appreciate the fact that it has helped put you in the position you are in today. I cannot (and would not) dispute this, as I too, have a healthy portfolio as a result of such debt instruments.
Cheers,
JO
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May 6, 2004 - 9:49 am
Thanks for the reponses everyone.
I will be going to take a second look at the property tomorrow. It’s a lovely house, in fact, probably too nice to consider pulling down in later years. Had it been an older home, I may not have had my doubts, but it is in such good condition that it would be a huge waste. I paid $212 for mine almost 2 years ago, and now to pay $285 so that I can re-build say units later may be a costly exercise. ($407,000 for land????) Mind you I have made money on mine over the last 2 years in good rental return.
I will have a clearer idea tomorrow.
Thanks again,
Jo
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May 6, 2004 - 5:11 am
Karina,
Whatever you decide to do; remember that if this property is not your PPOR, and you sell before you have owned it 12 months (not a day less), you will be liable for 100% Capital Gains Tax.
Jo
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May 6, 2004 - 4:19 am
You’re a wise woman Kay,
Caution is a good thing, and I am glad to hear that you pulled out before you got yourself into any situation that was not positive for you.
I guess what I am asking is …. would you rather spend 80K with a 10% return (minimal CG) or 160K with only a 5% return AND a 7% CG rate expectancy.
At the end of the day, it is a matter of choice. IMO there is no right, or wrong way….only different ways for different people.
Thank for your answer (direct or otherwise) I appreciate your participation, and respect your views.
Jo
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May 6, 2004 - 3:48 am
Hi McWong,
These areas, as with most Melbourne metropolitan areas are all experiencing slight price reductions, and I would imagine this to continue well into the end of the year.
Check out websites such as http://www.realestate.com.au and http://www.property.com.au, whereby you can look at the suburb snapshots to see how these (and other areas) are faring.
BTW…I am in Melbourne too.
Jo
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May 6, 2004 - 3:16 am
Lucifer_au,
Excuse my ignorance here, but are you saying then, that in the name of healthy economic growth, people should continue to spend BIG, even beyond their means, just so that we can all benefit from them putting themselves deeper into the poo poos????
Haven’t your heard, the average credit card debt alone in this country is enough to cripple an entire nation!!!!
I understand the effect reduced spending will have on our economy, but what other choices do people have when rises squeeze them into having to make budget cuts?????
Jo
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May 6, 2004 - 3:06 am
Hi Alandon21452,
I am correct in thinking you are living in the house in question at the moment?????????
If so, you are not going to be subject to any CGT and the person who advised you to sell it to yourself/put it in a trust is a moron !!!!
Jo
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May 6, 2004 - 1:45 am
Hi Bid,
Girlfriend I hear you loud and clear on this one….I am having to cough up a 77K CGT bill, and it hurts!!![crying][crying].
However, as your income tax bracket is lower than that of hubby’s may I suggest, that any money made from the sale is put into an account in your name as you will pay a lesser rate of tax on the interest earnt on same (that is if you plan to have it sit in the bank for a while).
There are ways in reducing the bill, and an experienced CGT accountant should be able to find all the loopholes, but ultimately, it can only be reduced, not avoided!!! [glum][glum] Don’t forget the sale costs (i.e. REA commission, advertising costs etc etc) are deductible as well.
All the best with it,
Jo
Monopoly
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May 6, 2004 - 1:33 am
Hi Krazystyler,
I remember some time ago when your first posted this date, I said I would love to attend….I now realise that it is Mother’s Day. And as a “mother” my kids have decided to take me out for the day!! [inlove]
So sadly I must decline, but I look forward to the next one, please keep me posted.
Regards,
Jo
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May 5, 2004 - 10:18 pm
Wallflower,
I agree with Mortgagehunter, maybe you could look to a third lender that meets all the criteria you are seeking.
My concern is that to save yourself 1% you are willing to access loans from both banks (which is fine, but…) you are doubling your establishment fees and other bank charges, which may in fact negate any saving.
Jo
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May 5, 2004 - 10:12 pm
Harrow,
Sorry about the delay, just to jump of PC last night otherwise would have replied earlier.
As I said that is a huge debt to start off with (not even taking into account the extra 5 properties, thus totalling 2.5 mill), however, if that is what you are comfortable with then who am I to judge?
I can’t help feeling that you overlooking something, and that maybe I am missing some crucial information. Have you spoken to anyone in the lending business? or some kind of financial advisor i.e. accountant?
Jo
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May 5, 2004 - 7:48 am
Originally posted by kay henry:
I am not hugely phased by any of the taxation or IR rate changes we all have to face. It’s just all part of the landscape of being an investor.
Having said that- who only owes 100k? If you imagine a 1% IR increase (we’ve just had that) and your mortgage is 300k, then that’s $60 a week rise in repayments. It does all add up
kay henry
Kay Henry,
I was not specifically referring to you being nervous, rather making a sweeping/generalised statement across the board. As an investor, every dollar counts, however a confident investor (one of which I believe you are, judging my the type of comments you post) is not normally bothered too much in an increase of this size; although I am sure any increase is not welcomed with open arms…hey, money is money, and even one dollar more is a dollar less to spend on the next property!!! LOL
Having said that, not too many people only owe 100K (unless you are buying cheapies i.e. 20, 30K properties as are some people in here) then maybe they will only have this amount owing. However, on the average 300K mortgage – 60pcm is not a huge change, and if anyone says it is, THEY need to adjust their lifestyles.
I myself, are continually overwhelmed by people’s horror when the mention of a rise is even hinted at….for heaven’s sake….surely this is something that one would expect when borrowing large sums of money!!! If people borrow large sums when mortgaging, and they calculate so tightly as to be fearful of a 0.25% rise, they need to re-evaluate before they put pen to paper!!!!
BTW on 300K the 0.25% is $60 per month, not per week (I figured it was just a typo) LOL
Jo