Blogs very nicely put. Re. the bubble the government seems to be doing just that. It may be better if they let it come down slowly instead of it bursting and leaving the @#$% on the walls. I did hear about the banks and the 12 month thing. Yes, I agree, they know what the out come will be if they don't do it.  As I said the smoke is clearing and it seems we can get a better idea of what s going to happen. Any thoughts on the 30June with the Boost for the FHOG. It seems to have been a bit of a spruking tactic by the government to put a bit more air in to the bubble. Maybe they will drop it off to keep young & not so young people from getting in debit. Your right about interest rates they wont stay down for ever, but I can see them back to 10 or 8% in the next 5 years.

Inflation, Inflation, Inflation. Just go to the supermarket and compare to 8 month ago. Even the cheap Chinese import goods are up by 10-15%. So we are getting less for our money and no more pay from our job (if you still have one). You are making me think twice about buying next week.

So Blogs, you always have good posts with factual info. What do you see the down side of buying now? I don't need to borrow much, very little. So the low rate from a repayment side does not worry me. I would like to build new as a PPOR. I can get the 29k FHOG, lucky. I feel inflation is my enemy, building cost may go up, but if demand is down builders may cut their margins to keep working and reduce there prices to remain competitive. Whats your thoughts?

Cheers
T……………

Good point but they are still first home buyers. I think the case for an extention is good say for another 6 months. We also had a drop in intrestes last Tues. Soulding a bit like the USA ????? There was a program on TV sergesting the FHO Boost is stimilating a sub prime crash. Bank  et al are still lending up to 90% but as bad as 110% but with unenployment on the way up, could spell trouble. We may follow the USA into the s-it. 

Maybe I'll be waiting longer (I'm always waiting longer and longer).

SHales
Dont wait forever mate, I mean why, what have you to gain?  Waiting for a bargain of a life time usually takes a life time to find. If its a PPOR go for it. Depending on your age, I personally feel houses will cool off a bit but not drop 20 -30% over all, in some over priced areas maybe but not across the board.

Unemployment is the real concern here. I can see this getting worse. So, if you can make your payment great. If you cant your  @#$%&d. Then you will see that place for the 20 % less. I think we will see a retune of the 80s high rental return and low captial gain. We are also cutting Imagration at last. The Govenment waited till people lossed there job first & then decided to reduce it.

We can guess all we like only time will tell us what the right move was. I say dont be gready and go with your gut & be happy.

Cheers to all
T…………………..

Joe

You are asking all the right questions. But  nobody has the 100% correct answer for you. If it was that easy I would be asking for next weeks tattslotto numbers and forget about housing. I'm sure someone will give them to you if you ask but as I said they may not be correct.  It really is up to you and why you are buying. Is it a PPOR or Investment?

Do you think its a FANTASTIC time to buy now, Or do you think prices will continue to fall?

Look at it this way its not a FANTASTIC time to sell, if that helps ya. Does it have to be a FANTASTIC time before you will buy a home to live in. Joe,  you may be better off moving back in with family or renting for a long time before it will be a FANTASTIC time to buy.

You are considering the facts, and that's the right thing to do. These facts may also impact on you & your ability to pay the home off. Job loss, falling prices, higher interest rates etc. Its an OK time to by if you get the FHOG need to borrow at record low rates and need a place to live. It also helps if ya can find someone who has to sell. So say you get it for 20k less that they needed (or than it will cost you to build it)+ FHOG + current  low interest rates = an OK time to buy the right place at the right price.

As to the big question will the FHOG boost drop off in July, well K Rudd seems to like spending our money and handing it out to stimulate the economy and it needs a shit load of stimulation now & in the future because its not at its worst yet, not by a long shot. If it does drop off it will put alot of FHB out of the market. Make the sub 300k place sell slower and the 300k & above sit or come down. You may also see builders offering to build for less, special deals, products made to suit the economic climate.

Australia still has a lot of money around. It just means you don't or will not get as much for it as you used to, but real estate, housing is a must have item so there will always be a market for it. The main thing now is to get the right place at the right price & now is the time to bargain the price. You cant afford to over pay in this market Joe.
Look at it this this way Joe we all know they are not going to go up 20 % pa.  Most likey a price reduction but not a 40% fall in 12 months, lets be real. If you are buying for an investment you should be asking if they are going to go up not down.

Anyway hope that has helped a bit, if not made it harder to make a desishion. Good luck and I hope you find a bargain.

Cheers
T…………..

Kell
I have no idea what to tell the RE agent.

Try telling them exactly what you want, its your offer. It sounds like they have accepted your offer, and its money that get it across the line. So, they will agree to what you want for sure, why not. Im not a legal practitioner but in the special conditions you what in writing;   The Vendor is to allow the purchaser or there representative access to the property prior to settlement for the purpose of showing potential future tenants the interior and exterior of the property.

They will have there own wording but make sure you are happy with it. Also have it checked by you solicitor first. Remember if you are in Victoria if you get pre contract advise you loose your 3 day cooling off.   Im sure they will agree.

Cheers
T……………

Jimmy

When negotiating a contract for an IP, how much holding deposit would you offer.

A holding deposit is just that, it puts a place on hold. Please be aware that it is not legally binding to the vendor, agent or purchaser. It is a show of good faith. It is not the official deposit offered in the contract. Which in Victoria cant be anymore than 10%.  That does not mean it cant be $2.00. I like 5% just in-case you enter the contract and need to pull out, and its accepted by most agents as OK.  You don't have to give them the deposit immediately, you can put in the contract deposit to be paid by say 14 days.

How much to offer was you question. This is my opinion. Use it as a bargaining tool. If you are sure you want the place make your offer with confidence with a low price, then hit them with a firm 20% deposit today and have the cheque book with you. If they say no and want more only offer a bit more but then  OK its 5 % deposit in 14days. This works best with unconditional offers. The more tools you have in your pocket to bargain with the better. Most vendors are not concerned with the deposit its the price they want. But if they see you are for real it helps.

Cheers
T………

Skuz

I think you may be a Melbourne person and one who can see the value of researching growth areas.  Not just using the old mentality of worst house in the best area. Well done. I think you are on the money, with this concept just by definition alone.

Gentrification:  the buying and renovation of houses and stores in deteriorated urban neighborhoods by upper- or middle-income families or individuals, thus improving property values but often displacing low-income families and small businesses.

Ive live in the inner West and spend a bit of time there, even now. Have a look at Footscray. I went to an auction 2 month ago near Barkly St. Old W. Board 550 2m block, just livable. on a corner. Now we all know what Footscray was like 7 years ago and to a lesser degree now. I thought it may go for 350,000 it went for 550,000. The old people next door lived there all there life some 50 years, nearly had a heart attack. They paid some thing like 28,000.  Now tell me why would I pay 550k just to pull it down, or what rent would the new owner want min $550 pw.

At rent like this it wont stay a "unsavoury" for to long. The "unsavoury" move out further west. I wont go into the history of the Melb. West suburbs & its demographics. I think you know what I mean.  Yarraville is also a good example. My concerns are investing in these areas if it does not take of as planed you have an old house in a bad area. Now if it was your PPOR you have to live with it. Yarraville was a good one now its trendy and livable. Be careful of like minded investors and the high density housing. I nearly got done. Found a nice block in one of the west areas, good price. Then a few doors down some smart ass decided to buy up big time and do a high density development. I did not want to live next to that.

Don't go too far out. Or you will be in Lego Land, FHB, all the same type homes, and too far to slip into the city for a latte. And future out you go the C.G. will be less, more land to develop in the future.
All the best with it, what area are you looking at, if I can ask.
Cheers
T………………

Pipelinebuilder

An excellent post mate. Makes people stop and think out side of the box.  A few comments on A, B ,C.

A:   "The one comment that didn't come through was, how many people do you personally know that are financially free  from        property investment?, lets be honest about it!!!!, or is i have a friend that made so and so during the boom time!!!"

From the Section 32s (Vendors Statements) I look at not many people own their PPOR or Investment property out right. I understand most people are still paying interest on them till they retire and hope to pay it out with their super, hey, what super. I meet people that stick out their chest and say " we made 100,000k on that place" brought in 1999 sold in 2006. I call them the bogan rich. Sure they made money but it was all luck due to timing and the bank lending money to anyone with a head that could write their name. It was not skill or smart investment knowledge. This was the boom time. Now its over. Also you only hear about the money makers not the money loosers. Why do they have mortgagee auctions, its not because the vendor is financially free.

B:     "My wife used to work for one of the largest property companys here in aus, from what we have seen most people dont make it, the professionals will and do because they have cashflow, the rest just hope and speculate based upon the opinions of others. Thats the truth and bottom line."

Agree, If you have to borrow 70 -80% of the value even at 5% you are behind the 8 ball. If historically property rises at 7-10% and you are paying 5% interest, net profit is too small for me. Yes "Cash is King"  this means being debit fee. eg Not borrowing a cent.

C:      "My personal opinion is this, you need to decide how you want to live, ie how much do you need and what would you like to do with your time then go after it, maybe it  is property, shares, business, they seem to be the main three that people follow."

Its my opinon life style is a choice and a big part of an investment strategy. You are a long time dead and you don't want to be the richest man in the cemetery.  Eg. open a cafe, be there 7 days a week, lock up at 11.00pm each night and be back at 10.00am the next day for lunch service. Shares, buy ANZ at $17.00 then see them drop to $12.00 (have not looked lately) You have no control over the directors or the running of the business. Business, Imports buy with US dollars at .80 cents Aust. OK  great, but try it at .65 cents, your down .15 cents in the dollar before you start. Then no one has the expendable income to buy the stuff off you anyway. Retail is down shops are desperate to sell you something.  Then you have to compete with the big guys anyway.

Any one can make money in the good, Boom times. But it takes allot more guts, determination and self confidence in the hard times. Getting over the fear you mentioned. Lets not be too hard on our selves we are in one of the most uncertain, unpredictable economic  times in history and its global.

This is only MPO as we are exchanging ideas & brainstorming. I don't believe you will get rich in the next 5 years on property. In fact more chance of loosing money or breaking even. Some late comers are still hoping to catch some of the wave of 2 years ago and get the high returns. If you buy well and I mean really well, location, price, type and have some luck & allot of cash as well then you can still make better than bank interest after tax.  

Just one more thought for tonight, some of the most happiest people I know don't even own their own home, they rent. They are not under financial stress or going grey with worry about interest rates or falling share prices. They Spend quality time with their kids & wife and live with in their means. They are certainly not worried about "missing out" on a bloody FHOG of 17,000 to end up with a 25 year bank loan. Conversely some of the biggest pretentious assholes I know have 2 or 3 investment properties and a 2 story McMansion with pool and the RV. They work 2 or 3 jobs and are the meanest, penny pinching so and so,s I know. What Im saying is its not all about making money its about enjoying it also.

Cheers & regards to all.

T……………

Pipelinebuilder
   
"Just a thought – is property the answer or is just a method to get wealthy that happens for a few?"

This is more than just a thought its a reality, a trueism. Ive only met 3 people that will always tell you that you will make money on property, the Vendor, the Agent and the Mortgage broker. There is no consistent correlation between the prices of houses going up and making money or more importantly a net profit after tax on them.  Granted we have seen some great gains from 2000 to 2006 the old "double your money " days are gone.  However, currently most Vendors are still are under the old "double your money " mentality in particular those that brought say 2 years ago. Yesterday I called on an agent.  I told him it was my opinion that houses purchased 18 month ago would not bring any more that what they paid for them, he agree totally. Very happy to take  my offers. So, 18 months of no growth, plus loan interest, stamp duty, rates, maintenance, selling costs. Even if you where renting it out and it was naturally geared, you still loose.  On  $350,000 you would be out of pocket by say $15,000 stamp plus the selling costs about $9,000. Some people call that an investment.

Many other factors come into buying property, if its your PPOR, Opportunity costs, if you have the cash or you need to borrow, your expectations, cash flow, socio economic changes in your live and the market, etc etc.  Its like the couple who open a cafe with the mentality of  "people always have to eat"  believe me you have to pour a lot of coffee before you cover the rent. "People will always need some where to live." This is true, but not a guarantee for an investment. Just have a look at whats happening in our great country, people 55 to 60 are now returning to the work force, why, because they have no money to retire on. Mum chucks the 2 kids in a child minding centre at 7.00am to 5.00pm so she can go to work because if she does not work, they cant pay.   More older people retuning to work less jobs for the young 25s to pay that 400,000 back to the bank. Unemployment on the way up. If you want a good investment for the future make it an Education a Degree.

The growth we have seen is not sustainable and most times is followed by a correction its those that brought 2 or 3 years back that have to sell that will loose big time.  As mentioned property is a long term thing, you will make some money long term. I think of it this way average house say $330,000 + stamp & other $350,00 (only an average house) interest only pa. @ 5% = 17,500 / 52 = $336 per week, living costs food, petrol, utilities $350 minimum. Total  $686. Principal & Interest is $471.80 per week. and this if over 25 years. So you start out with an investment idea at 25 you get to 50 and have paid $263,326 in interest. Total cost of your 25 year old plus home is $613,326 with no maintenance. If it was to double every 7 years you would have to sell it for $2,146,641.  Now this is not profit its gross and not likely, forget about historical figures. Providing you can keep 2 wages coming in, a job, not get pregnant, get ill, or need to shift for work, interest rates stay at 5% over 25 years (not likely)  Think about it.  This is a slog, a struggle, a real sacrifice, a near impossibility that will take its toll on owners & disillusioned investors. This is provided you do it at 25yo not 35 or 40.

WJ
"However, I do not have the answer and probably no one else has it either, things will change much quicker into the future, countries will crash, the weather will get worse, diseases will increase, wars will increase, I think I will just shoot myself…….bang………….."

WJ the world is indeed a changing place and I'm afraid its not for the better. I like you, and all others inc. K Rudd & Co. don't have the answer. People are becoming desperate. However, I would not shoot myself just yet. If you have a few bucks left hang on to it for a while.  A lot more sh – t will indeed hit the fan in the next few years as our Government has no idea what to do, except throw money at people, until its all gone then run us into a debt (this is their answer) .  There goes my old age pension.  The market has softened and prices have come down, I would say from the above example must come down, as a buyer of a PPOR, there still may be hope. As an investor I would look at other limited options in a recessed economy. As the Government is so keen on immigration "people smuggling" may be the a growth market, invest in hydroponic equipment and grow dope to sell to depressed investors to cheer them up or we could print our own money, to stimulate the economy. lol……..

Cheers
T…………………

Mia   et al

I think this highlights the importance and necessity of the legal profession. Having someone in your corner to throw a punch and be able to back it up is a great feeling when things go pair shaped.  Sometime things don't go as planned and people get emotional, stressed & frustrated. All normal stuff. However, as mentioned you are spending your money so you are the boss, not the broker, vendor or agent.  When I get a contract Im interested in I go to the solicitor (poor basted I know his is sick of me by now) and I do my best to make sure it 100%.  If there is something I want in the term & conditions we put it in. That's what the T & Cs is for your money your offer your conditions. 

I in the passed used to go unconditional & 30 days, but the vendor is more concerned with the price not the terms.  The agents bully tactics and other poor behavior are sad don't take it personally its the nature of the beast.  Rule number one protect yourself.   Good luck to you,when it comes to money noone is your friend.Play hard-ball.

Mia I dont know what state your in but in Vic. if you make a second offer (new contract) for the same place you dont get a cooling off period.
All the best hope thing go your way and you come out better off.

Cheers
T……………….