Hi Tony,
I don't know if any of us are quite that stupid. I certainly know that my investment strategies have very little to do with what the media say.  It is really very hard to find any objective or useful information in today's media.  My hesitiancy to purchase at the moment is based on a combination of factors, which is summarised by the idea that rental return is generally insufficient given the current climate and risks associated.  Moves by the government and the banks are artificially holding the market up.  I'm expecting a market correction, for all sorts of reasons, but no one will let it happen yet.  I'm certainly not eligible for the FHOG, so it's only a pain in the bum because it is causing further inflation of the market.  If anything, I might be swayed to sell at the moment as I have property that suits that FHO market and I think I could sell it quite well at the moment (if it weren't for the recently signed 12 month lease).

So, generally I beleive that property value growth (at least in my target market) is going to be very unexciting over the short to medium term.  It may even be negative, depending upon what happens with interest rates and fhog and unemployment rate.  Yet, prices are still generally too dear, compared to rent, for the property to return a satisfactory ROI based on the rental income.  So, if the value is going to fall or at least be quite stagnant for a while, and the rent is not enough to satisfy my requirement of ROI, why would I buy?

At the moment the numbers are just not good enough to justify the risk.  I'd rather stay close to debt free and be ready to buy something when the numbers start to make more sense.  At the moment I can get better returns out of other investments.
Sara

Interesting post Linar.  I agree, there are good and bad in every profession.  People shouldn't condemn all Property advisors just because of a bad experience with one. 

Playa,
In your opinion, how would you compare the advantages and disadvantages of property advisory with bird dogging from both the perspective of the buyer and the advisor / bird dogger?
Do you think bird dogging would be a good way to get a bit of experience on the way to becoming a buyers agent?

S

Yeah, well it is a given that capital gains will be taxed.  However, I think it is important to consider the reduction in income tax offered by negative gearing, if you choose to negative gear.  Depending upon your total taxable income and the amount of your tax loss, it could be a significant saving in tax and it is appropriate to consider that when deciding how your investment is performing. If your taxable income is reasonably static, then it is fairly easy to predict, however, if like me, you work for yourself and your taxable income could be $200K one year and a loss the next, then it is certainly difficult to obtain comparable information.

Personally, I'd rather just make money than lose it to save tax.

One important tax concept is the idea of Pay as you go withholding instalments.  This is the system where the ATO taxes a business in instalments  in the current year based on the previous years taxable income.  In the first year that it happens to a business, it can see the business being required to meet two years worth of income tax in the one year as the business moves from being taxed in arrears to being taxed an estimated amount in advance, to be reconciled when the businesses income tax return is lodged (much like it works for an employee).  If you do strucuture yourself as a business, and you do make a profit, then you can expect the ATO to ask you to pay PAYG Instalment tax the following tax year.  This can be quite hard on the cash flow, so it is worth being aware of and planning for.

S

I was just wondering because I was considering it for myself.  I'd need to learn from someone, though, I think.  I love RE, love the game.  I'm a strong and shameless negotiator, but I don't take things personally – everyone is just doing their little part of the dance.  Don't get to play as much as I'd like cause I don't have the money (working on that one, though).  I've considered becoming a RE agent, but they have to work Saturday's too much (like every Saturday), and people ring them up too much and annoy them ( I know I'm always annoying them).  Perhaps being a buyers agent might satisfy my love of RE, my desire to operate my own business (as I do now), my enjoyment of professional services, and not be too insane on the weekends and evenings for me to enjoy a normal family life with my young family.  If I could work for a really good buyers agent, I could learn an awful lot that would help me with my own investment portfolio.  It's just an idea.  If they have a life like a RE agent, then I'll think of something else, thanks.  That's not what I want.  But I could do that research, I understand numbers and statistics well.  I have an accounting qualification and investment experience of my own. 

The other thing I'm thinking about is a business broker.

Just ideas.
S

Vicky,
How does a person become a Buyers Agent?  Is there a qualification?
S

Karen.
Good call,  well done.  They may come back to you.  Let them contact you though.  Go off the boil.
Very unlikely that the house will be worth 300K in a few years time.  Possible, unlikely.  All you can ever do is make the best decision TODAY.  You don't have a crystal ball.  If the investment is outside your comfort zone, then it's not for you.  You did the right thing for you TODAY.  You are not in a position to gamble with your $150K, you need a little more security.  Time will come soon enough for risky, speculative investments.  Even if they do sell this house to someone else, don't feel like you've missed out, feel like the vendor finally found the sucker that you weren't prepared to be.  Walking away from a deal is hard, but sometimes it is just the best idea.
S

Miike,
You could do a degree in accounting, then some post grad study on this subject, and still  not have an answer.  There are a great deal of ways to measure profit, and the more long term and complex the investment gets, the harder it is to measure profit.  What you can achieve, is comparable measures of profit.  If you measure it the same way, each time, then you can compare the profit from different projects and accross different period of time.
One definition of profit might be the net increase in future economic benefits under the control of an entity over a period of time.  Ie, how much you have today (as a net figure), less how much you had on this day last year (as a net figure), will give you the change in your wealth over that period of time.  This is perhaps more objective, though harder to measure than the usual income less expenditure, because the income less expenditure throws up difficulties with depreciation and other types of income and expenditure which from a cash flow perspective occur outside the period of time which you are calculating profit for, but in reality are related to the income generated in that period.  The difference in wealth is harder to measure because it requires accurate valuations to be carried out on assets. 

I'm afraid profit measurement is not a simple matter, it is a real can of worms.  The more you study it, the more disillusioned you become with the possibility of measuring profit at all, and the probability that everyone else who is measuring and reporting profit are doing so to their own advantage, rather than in order to provide accurate and usable information.

S

I thought it might have been different.  Whatever you call it, we were lucky to get a good agent, who listened carefully to what we wanted and delivered.  I don't know if they were mates.  I remember the original asking price was well above what we paid for it, and our agent scoffed at the little local agency that was always overpricing stuff and having it sit on the market for months on end.  I think when he presented a qualified buyer, and made an offer well below what the other fella wanted, and threatened to go direct to the owner with it, any vestige of friendship was gone!

I do realise that this strategy could go wrong with mates deals happening etc etc.  We got lucky.

I'm not sure if it is the same thing, but I asked a RE agent to find a property for me once.
It worked a treat and didn't cost me a cent.  He split commission with the selling agent.

I was travelleing to where IP1 was and only had about 2 days there, during which we had to do the obligatory family visit too.  We wanted to purchase another IP, so gave the agent a list of what we were looking for and asked him to find what we wanted.  He had a list of about 4 properties to look at.  He said that he thought the first one best suited what we were after, and after looking at it we were thrilled and didn't bother looking any further.  We bought that property and profited well from it before we sold it a couple of years later when we bought a PPOR.  I used the same agent to sell the property, and if I were to do any other business in his area, I would use him again.  He was just a good, experienced and knoweldgeable agent who was willing to do the work, and didn't bother with all the usual bull.

Maybe, but it's correct, they didn't ask for our opinion, just advice on the mathematics.

That did occur to me before I posted my last, and I thought before I posted.

I decided that sometimes I lose sight of the whole picture getting so focussed on details like interest and legal liability, and sometimes it is helpful if someone else reminds me of a more wholistic perspective.  Sorry if I offended, I didn't mean to, I only meant to offer a gentle reminder of the broader picture.  Good luck resolving the dispute, and following those terrific equations you were given earlier.
S