Forum Replies Created
Interesting question Allan. I am not an economist but here’s my simplistic take on it.
Interest rate is basically the “price” of money.
If the “price of money” goes up, the price of everything else goes up respectively – but isn’t that what we call “inflation”? So, raising interest rates has the effect of raising inflation in the immediate term. However, economics tells us that there is a close relationship between supply/demand and price. So as inflation (or prices in general) rise, demand falls and there is an excess supply. To counter the excess supply, sellers have to drop the prices – hence you get deflation (or reduction in inflation).
The price of petrol is just one part in the bigger mix. Hope this makes sense![specool]Cheers
PyramidHB
Fully agree with your last post re: diversifying and taking the blinkers off. But I think one needs to be in a specific financial position to be able to do so.
There may be an opportunity for “forumites” to learn from your experience and case history. [grad]
How did you get into property 15 years ago? Did you have the money or did you borrow it? Would you have been able to do the same for shares (ie achieve assets of $4m worth in shares) if you had limited spare cash for investment 15 years ago?Cheers
PyramidFully agree with Paul, Redwing, et al. There is no right or wrong answer to CF+ or CF-. The strategy should depend on your circumstance. About 8 or so years ago, I had the cash flow but not the equity. So I invested in negatively geared properties.
Today, the negatively geared properties have appreciated in value. I have the equity but my cash flow is tied up in the negatively geared properties.
So, now my strategy is to use the equity to secure funding and invest in CF+ properties (WRAPs, lease options, etc).Cheers
PyramidOriginally posted by hb:sorry guys
i couldn’t believe 420k invested 2 yrs ago would make so much.
had to check again
and again….and yes here the FINAL figures
cba 2 years ago $30.59 today $43.88 420K invested today $602k
bhp 2 years ago $11.10 today $25.53 420k invested today $966KIt’s always easy to talk about share market successes, but what about Enron, HIH, Ansett, OneTel, WorldCom, Harris Scarfe, Burns Philp, Arthur Andersen, Esso at Longford, etc, etc.
I am not against investing in shares. In fact I hold some very good share investments. Shares are good as long as you have the money to invest. But the thing to appreciate is that property allows leverage.
It is worth remembering that investing is about long-term returns, not short-term gains. If I wanted short-term gains I would trade, not invest.
Say, I have $200k to invest. I would have 2 options:
1) A financier may give me another $200k so that I could buy total shares worth $400k. At a net 12% annual return I would profit by about $435k after 5 years
2) On the other hand, a financier would be happy to lend me $800k to buy a property worth $1m. At a net 10% annual return i would profit by about $530k after 5 years. About $95k better off than option 1.
You of course need to be mindful of your own perticular financial circumstances from a taxation, cash-flow, etc, etc position.Cheers
PyramidI have been keeping an eye on DHA opportunities for the past 6-8 months or so. In theory they seem attractive with guranteed rent for xxxx peroid, etc,etc. But I agree with Adam, they have a ridiculous PM fee. I think a close parallel would be “time share properties” where you get caught up with owning the property but have little control on anything else – “Pay up or lose it”!! Additionally, even with a guranteed rent they are negatively geared investments in most cases. This means you are relying on future capital growth for any gain.
So, to sum up – Unless these DHA properties are in a location where you expect good capital appreciation, they are not worth investing in. That’s my opinion!Cheers
PyramidI have heard about the following strategy but have not yet done it myself.
Charge a slightly higher rent but the tenant gets to keep the furniture if he/she signs a 3 year lease and pays rent on time everytime.Cheers
PyramidI have heard (may be true, may be a rumour) that it is impossible to get tenants out of a property because the legislation in India is very landlord unfriendly. Even if they default![wha]
Cheers
PyramidOriginally posted by hb:OK lets try that same money…something different….
2. buy some plant and equipment $100K
HB
You make some very good arguments for starting a business with much higher returns. However, the old adage still applies “rewards are directly proportional to the risks”. Start-up businesses present a higher risk, therefore there are few lenders who would provide the $100k with little security for a new business. However, it is relatively easy to borrow the $100k for bricks and mortar.Cheers
PyramidOriginally posted by Terryw:I wouldn’t do anymore. I have foudn the profit is too small for the hassle. It ties up your funds, and so you must take into account the opportunity costs.
Terry
So how are you investing in property instead?Cheers
PyramidOriginally posted by Jenny1:Just go back to your PM and ask them to clarify your statement, he will either have a logical response and give you a breakdown of this figure or squirm like hell!
I reckon this is the best advice. So have you contacted the PM Nathan? What was the response?[evo]
Cheers
PyramidOriginally posted by Jaffasoft:So it’s just a transportable rectangular building 6 by 3 meters, with shower bay, kitchenette, sink, hot water service, all electric with power points and safety switch, guttering, flat roof. Doesn’t say it has got a toilet.
Did I miss something? What’s the difference between this and a caravan park cabin? Are caravan parks giving these kind of returns?
Originally posted by hb:look
WOOLLOOMOOLOO $2,500,000 apartment 2 bedroom
NO LANDST KILDA ROAD MELBOURNE $4,000,000 apartment 3 bedroom
NO LANDSURFERS PARADISE $4,840,000 apartment 3 bedrooms
NO LANDwhen your paying those sort of prices , i wouldn’t have thought the thing your sitting on was irrelevant
I think you are ignoring one of the basic rules in property investment – “location, location, location”. These examples are fine as long as the apartment, bungalow, unit, studio, flat, or whatever you want to call it is located in the right place
Cheers
PyramidOriginally posted by blogs:Whats even funnier was when I was saying this was going to happen a few months ago all the so called ‘experts’ on this bored laughed at me[hmm] I can remember quite distinctly some were even belittling me saying property prices were going to keep going up bwahahahahahah
No matter how you look at it, property prices generally go north in the long term. As with everything, there may be short term ups an downs – but like a good surfer, a good property investor should learn to ride the waves.[chill]
Cheers
PyramidOriginally posted by minidaz:The question i have is that now we will have to seperate loans 1 for our current property and a second for the deposit’s then a third for the other 80% how do investors cover the interest on the second loan for the deposit’s? In other words if we have to use the profit’s we make it seems pointless to borrow the money for deposit’s.
Hi Darren
We have long used equity to build a property portfolio. 3 separate loans to fund an investment property and your own residence make perfect sense. It’s all about “good” debts and “bad” debts.
1) Your home mortgage is a “bad” debt. There are no direct tax incentives except CGT exemption. So pay it off ASAP.
2) Use the equity in your home to negotiate a Line of Credit. Could be interest only. This is a “good” debt as long as you spend it on an appreciating asset. Use this to fund your 20% deposit plus any closing costs to purchase your IP. Interest on this loan is claimable as an expense on the rental income.
3) Get a new mortgage for the balance 80% on the IP. Again, this is a “good” debt and could be interest only as you can claim the expense.The trick then is to negatively gear the IP and pay off your home as quickly as you can. Once the home is paid off you can start either to reduce the principle on the IP or invest in another as your cash flow improves.
Of course it is even more viable if you can get a positively geared property.
Hope this helpsCheers
PyramidWe recently engaged two RE agents in Sydney to find a tenant for our vacant property. The first one to sign up a suitable tenant at an acceptable rental was appoined as the property manager.
[thumbsup2]
Cheers
PyramidRichard
The problen in Sydney is that the lower end properties (houses) are already at $250-280k. After closing costs (stamp duty, conveyencing, wrapee mark up, etc) they come close to the $300k range.
[glum2]I too am getting many queries in Sydney but do not seem to get people to commit. Perhaps my prices are too high. I am looking at a$30k markup on the closing property price (a $300k property offered to the wrapee at $330k) and a 2% premium on the interest rate. Is this unreasonable? What margins are successful wrapers charging?
Cheers
PyramidCarlin
Click on the tab marked “Investor HQ” next to the “Forums” tab at the top of the page. It’s all explained there.
I don’t know of the legalities in SA.Cheers
PyramidInteresting hypothetical. But what’s the point?
Cheers
PyramidThanks Paul. I have just joined up.
Cheers
PyramidMichael
You haven’t looked hard enough. Look under the “Getting Creative” section of the ForumsCheers
Pyramid
