Forum Replies Created
Michael
Following on from where I suggested you can cash up when the market has peaked, my aim is to start buying in at a point where I see absolute bargains.
Now if I keep buying whenever I can afford to ( as suggested by some ) and maintaining a higher LVR , when the market comes to a point where I want to start buying again , the odds are that interest rates will be higher, values will have come down, and the banks may have tightened up their lending criteria. As a result I may not be able to borrow the money that I want to in order to buy the bargains, or if interest rates are higher, I may not have the cash flow to maintain the loans and maintain a nice life style .
What would I class as a Bargains ? Well as I believe the next cycle , like all others before it will start near the centre of Sydney , in order to gain maximum benifit , that’s where I’ll be looking. I know people who have bought well positioned properties at 50 % of their peak price in the preceeding cycle. In 94 I saw ( without know much about investing ) well positioned properties ( mid north shore , east side walk station ) that were selling around 60 – 70 % of the value they had sold for in the previous boom in the late 80’s. Those properties have more than trippled from that price now , though they’re on the way down now…
At that stage I would even toy with getting a cash bond inorder to improve my servicability if I could by more in comfort.
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Michael
For me the problem with Living of Equity is what happens if the unexpected happen ( well maybe not unexpected by some )
To draw down equity you are assuming that the way the banking system will allow you access to you equity in terms of increasing the equity you can access . I would hate to be at 70 when there’s a recession, prices gone down for a few years ( that does happen
) and the banks decide that the latest fade of Living of equity has got them nervous , so they not only decide to revalue all my properties down, but decrease the LVR that they’re prepared to lend me. Interest rates go up so I’m caught in a personal perfect finacial storm.I can’t sell because the markets gone to the crapper , and even if I could sell , because I’ve drawn down my available equity , It’s got to the point where all of the funds I’d have available after sale are going to pay for the CGT , which now no longer has a 50 % rebate.
Also because I’ve been claiming depreciation off all my properties ( and the depreciation you claim is taken of the capital base cost when working out CGT ) , the capital base cost of my properties is lower , so my capital gains tax is even higher.
I’m stuffed.
I think there is a place for living off equity , but to use it as a plan for retirement ( unless you’re loaded with a very low LVR ) is too risky.
To talk about doing it with LVR’s of around 80 % which is suggested by some , leaves no margin for error if there’s a prolonged downturn or change in the playing field. After all we’ve just had the longest boom for a long term , who’s to say we won’t have a prolonged down turn.Change in banking practice ? I can remember as a young Doctor a few years ago ( around 1984… sheese …) being knocked back for a loan on an entry level unit in Homebush west , because I hadn’t had the required deposit save up for the preceeding 2 years ( or something like that ). Rolf / Simon where were you then ….
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Havn’t talked to our PM’s recently , but the only one’s we’ve had problems renting out in the past have been a couple of earlier buys which in retrospect had problems. Since off load at nice capital gain..
All of our other properties have rented easily when vacant.
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Originally posted by Yasmina:I have been driving around Woodridge area for couple days now, but because i never crossed my foot this way before, it is so hard to tell what is a good deal and what isn’t. Can anybody tell me something about Woodrigde? Woodrigde v Logan?
Anything would help.Yasmina
It gets confusing as the council area is logan , and some people talk about logan when they’re really talking about Kingston / Woodridge / Logan central etc. ( at least that’s what I think about )
Different people will give you different opinions as to which are better, but I think you need to have a look around the area and see which streets look ok , and which ones look ratty .
One of the attractions of logan is that it’s relatively central for a cheap area in Brisbane , and it has train stations and access to freeways.
It’s also been the target of some urban renewal , though I didn’t see it before
We went for houses in preference to units as the strata fees eat into the rent.
You should be able to pick up an entry level house in reasonable condition for under 170.
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Originally posted by dmichie:No, the way the Australian Property market works has already changed. The bubble is deflating and we are very unlikely to see much real capital growth (i.e. above inflation) for the next 10 years. So your strategy of buying and holding property may have worked brilliantly for the past 10 years, but its not going to work for the next 10.
dmichie
You’re making an assumption that I’m a buy and hold investor. I’m not.
I had my own particular approach to the market over the last three years.
I’ve worked in Sydneys west for the last 17 years, so I saw first hand what happend during the long down period. I also saw what was happening when prices doubled in places like Mt Duitt over a fraily short period. We were busy doing a subdivision at the other end of the market ( stumbled on to that more by accident ) on our Pymble PPOR but when we finshed that I quickly realised that “cash flow positive ” was the latest buzz word, and those areas were subsequently experiencing very nice capital growth.
So as a result we bought a moderate number of cash flow positive properties ( some weren’t actually cash flow positive – more neutral ) and in the last six months we have sold a bit over half our portfolio. After Capital Gains tax we will potentially own several IP’s outright (we’re puting the money into offest accounts while we work out our next moves ) . These are enough to fund a basic retirement if that’s what we wanted to do. That’s not bad for three years investing. The one’s we’ve kept are returning over 10 %
Because like you I don’t expect significant growth in the property market in the near future we’re looking at investing our money in other areas prior to the property market moving again though I do have my eye on one particular suburb in Sydney
and if I can pick up a couple of real bargains I may buy there in the next 2-3 years.See Change
