Forum Replies Created
- L.A Aussie wrote:
Tyson;
we are getting off the track of what my post was about. My post was about the risk of property reducing to zero in the event of a crash, as shares can.The point I am trying to get at marc is that your investment can reduce to zero and below zero, If you invest 10% deposit and your property drops in value by 10% then your investment of $20,000 is now worth nothing you may still be able to sell that property for $180,000 but you owe $180,000 to the bank, infact your investment has actually droped below zero when you factor in buying and selling costs, holding costs and all that jazz,
Another thing you said was that losses in property were often operater error, and you don't think losses in the share market aren't,…. offcoarse they are.
Trust me I am not Bagging property investing, I love investing in property, I am just trying to point out alot of the flaws in people's thinking, If you can Take the time to learn about investing in the stock market your investment portfoilio growth will accelerate beyond belief,….
shares are the missing link that so many people focused on property miss when structuring there investments, shares and property go hand in hand, An astute investor using both classes will always out perform, Don't be afaid of risk it is not a bad thing,…. when people talk of risk it is not an all or nothing game like black jack.
G'day Marc,
Yes in a down turn your property would still be worth something but your investment wont, The piont I was trying to get at is that when you invest in property,… say you use $20,000 of your own money or equity for a $200,000 house ,… after two years of neg cash flow, stamp duty on purchase if your property is still only worth $200,000, your investment of the $20,000 deposit may have been eroded to nothing,
For example I found a house that I was looking at buying a few months ago, The person bought it in 2003 for $212,000,… for them to break even on the deal they would mave to sell it for over $250,000 to make back the interest they have paid, stamp duty, maintance, neg cash flow during that time and the 3% sales commission, and the amount that they have to sell it at to break even is growing every day as they incurr cash flow losses, this property is only valued at $230,000 at the most so their investment of the $30,000 deposit has decreased by over $20,000 thats a negative 66% return.
L.A you keep mentioning that you will always be able to sell your property for somthing so you will never lose money,. but that is untrue you have to work out your profit and loss on the total amount returned minus the total amount you put in,
Capital gains are not happening at a steady rate they come and go, so your property investment could have been sold for $200k last week, this week $210K next month $195K, you won't know offcoarse because your property values aren't listed in the paper,
you also said that you don't buy unless all your capital growth factors are covered, Impossible you can not garantee that a property will have capital growth from day one, If you make an investment and their is no capital growth for 12 months then you have made a loss, simply as that, you might say that you havn't sold it so you havn't lost anything but that is flawed thinking, you have incurred a loss year, just as I explained share investors accept the risk of 1 loss year in 5.
there
L.A Aussie wrote:
If you a buy a standard, well positioned, good quality average family house in an average established suburb, make sure it is properly insured, using a standard P&I, fixed rate or I.O loan, you will never wake up in the morning and find out it is worth zero.I am sorry to disagree but you can, if you buy a property for $200,000 with a 10% deposit and six months latter it is valued at $180,000 then your investment of $20,000 is now worth nothing and not to mention the $600/month neg cashflow you may have been losing + rates + management fees+ Vacancy period,……. then add any legal fees and stamp duty you incurred during the sale,….. and your going to lose 3% of your sale price to agents commisson…… offcoarse people will say the market will eventually correct itself and you will make back these losses, but this is true with the sharemarket also, If you really want to talk about horror stories what if there was a high profile gruesome murder in your property, what would it be worth then, what would the rent be like after that, would it have a tenant in it next week,
With property you are also open to alot of risks that are out of your control, such as goverment rulings, tax rulings(what if the ato canned neg gearing benefits), council planning, interest rates.
People might mention horror share market stories,… but if you hold 15 well picked stocks in strong companies you are not going to wake up in the morning with nothing any more so than you will with property investments. yes your investments will move with the tide of the market, but so do all investments, even property and Bonds.
Remember when professials talk about risk ,.. they are not talking about the possiabilty of losing it all or making a million( we are investing not playing black jack),.. they are talking about the possiblty of having a nil or negative return in that particular year,
most share investors accept that their portfoilio as a whole May have a nil return or negative return 1 out of 5 years,…. Most property investors accept that they will have a Garanteed negative return in the first few years,… then a nil or negative return every 4 out of 7 years after that, think of the property clock, during the down and flat periods ( which is two thirds of the time) most property investors are taking losses.G'day Bird and Beanie,
I read my first Share market book when I was 15, It was called "How the share market really Works" By Martin Roth, It is basically a nuts and bolts book about everything you need to know before you start,
Another Book that I recommend for everybody that wants to learn more about different companies comes out every year and is called "TOP STOCKS 2007" Its also by Martin Roth he picks about 100 shares each year to put in the book and writes a page on each one which includes a discription of the company, latest business results, outlook, risks, a 5 year graph and a table of data.
these two books pretty much got me started in investing, after I read these books and learned what all the ratio's and stuff meant I pretty much just read the business section of the paper and the financel reveiw, and reseached companies I thought were interesting on the internet and downloaded annual reports and company announcments and stuff,
remember you don't have to be an active trader buying and selling all the time to make money, you can use similar stratergies to that of property investing, such as buy and hold companies that are paying good dividends or have good growth, I like to have about 10 companies that I think will perform in the long term, and I put aside a certain $$$ amount each month and regularly buy shares in which ever company out of my 10 that I feel is the best value at that time, and if the share market does drop and you know that your companies are good companies then use it as an opportunity to build up your holdings.
After you have been investing for a while in some solid companies and have a growing portfiolio you might even like to invest a little in a couple of speculative investments, such as small companies that have a lot of growth potential, it can be quite fun to research some of these companies although they do carry more risk the reward can be massive, never hold more than 10% of my portfolio in speculative investments though,
One of the speculative investments I have been building up at the moment is a company called "Agri Energy"( do not buy into this company on my recomendation alone, do your own research) Its is currently valued at $0.27 / share, watch this one grow over the next 3 months, keeping in mind it only has to rise 3cents to acheive over 10% growth, i think by xmas it should be trading at nearly 50cents / share.
Handy Andy wrote:You're wrong…sorry.About what,….. share your opinion.
L.A Aussie wrote:Some people invested in Macquarie Bank for low risk. And…" Australia's Macquarie Bank (MQBKY, news, msgs) said investors in one of its mutual funds would lose up to 25% of their money thanks to losses in the subprime sector." (Jim Jubak, msn money).
The problem with these sorts of investments is, when they start to fall; there is no bottom. There is no low risk in that.
G'day Marc,
I am not trying to knock you, but alot of your posts tend to paint alot of other assets classes as risky investments while making out property is solid as a rock.
I believe the property market is just as risky as the stock market, for many different reasons and that the perception of security is a bit of a myth,
MYTH 1- "property prices don't drop in value like the stock market",
Fact- yes they do, you may not notice it because your property value is not updated every 20mins or quoted in the daily paper and it takes months for the infomation on sales to be correlated and reported, and even if you do get bad news on house prices nobody believes it relates to their investment,…. also the share market may drop quickly but it also can recover quickly, when property drops it is down for the count for some months or years add to this the holding costs of you investment on an 80% lend and the loss is ballooned, so your actual return on your investment of 20% deposit might be a 200% loss.
MYTH 2- "I Haven't really lost any money because I am not planning on selling"
Fact- yes you have, If your property is neg geared you are loseing money every week, And if this statement is really how you feel well you haven't lost money if you weren't planning on selling your shares either,
MYTH 3- "property Is safe because people will always need some where to live"
Fact- well it's true, but they won't always need to live in your house or suburb and they will also need to buy milk, electricity, Petrol, and a million other goods and services provided by companies listed on the stock market, just because shares prices drop doesn't mean that the factories, shops, gas piplines, power plants, trucks etc etc etc stop making money it's just that the prices investors are willing to pay for them on that particular day has droped as long as the company keeps producing income and growing the share price will always recover.
MYTH 4- "The company I invest in could go broke and I would lose every thing"
Fact- Possibly, But what if no tenant wanted to move into your house, atleast with the stock market you have the ability to spead even a small amount of investment dollars accross many different companies, and sectors, with property you have to lump hundreds of thousands of dollars on one street address,
And finally remember an investor makes his choices based on risk and reward, property only doubles once in 7 – 10 years companies can double many many times in 7-10 years, so if you held a portfiolio of 15 companies over 7-10 years 1 might drop in value 3-4 may only move slighlty but the rest would probally have big gains some may even be star performers doubling 20 or 30 times.
I'm pretty confident with the property market in Brisbane, I invest myself in the north side Pine rivers shire and Redcliffe.
I don't know about a boom, but brisbane definatly has alot of factors going for it that should bring strong rental demand into the future, and steady growth,
Moosehead wrote:A few people have mentioned giving books to a partner to get them inspired/converted
What about for the parter that doesn't read much? I would love to have my girlfriend on board but unless theres a version of 'Rich Dad' that is presented by Tyra Banks (she loves Next Top Model) then I don't see it happening… So True,…. shoot me a copy of that tyra banks book so I can give it to my "ball and chain", If only we can get them to do Feature on robert kyosaki on "E News"
Yeah I like crunulla, I have never done any research into the property market there but I have spent alot of time there, I haven't ever found it to be a rough spot after dark, atleast no worse than any other club or pub spot around sydney,
Devo if you job will have you moving round evvery few years, maybe you should consider renting, especially if you can find better investments else where,
Yeah, crazy times at the moment, no one seems to be able to agree where things are headed,
Inflation is up, so are interest rates, global sharemarkets have dropped like dominoes, lots of boom or bust theories going round.
We have some local pressures on the invest market as well as global pressures,
For now I am just taking it as it comes, I am still looking for property deals and will buy if I find the right property.
I am also still investing in the stock market, I have a long term share portfoilio which I add a certain $ amount of shares every month no matter what the market is doing so I buy more when the market is down and less when it is high. I also have a few speculative holdings in small startup companies that should see some results by christmas.
as far as debt goes, I am retaining cash in my business to put off my company loans as they have the highest interest and build up my reserve if disaster does strike,
Boshy wrote:L.A. Aussie – Do you think a Depreciation schedule be worth doing for a property that was built approx 24 years ago?
Thanks
yes the depreciation schedule will run over 40 years and will also iclude things like minor renovations, Your tax accountant should also be able to back date the amount you claim to when you first purchased the property.
I saw I large poster on the wall of a CBA bank manager's office showing a 100 year graph of the stock market pionting out that despite all the booms and busts, over the long term the share market always headed in a constant up trend.
For this I would recommend you look into a "Unit Trust", the property would be owned by the unit trust and each of you would hold a certain number of shares, that way your risk is limited to the amount that you invest, and when some one wishes to leave the trust their shares can be purchased by other members, if someone new wishes to join you can issue more shares.
With a company you won't get the 50% capital gain tax discount, and with a partnership even if you only own 1% of the partnership if every thing goes bad you can end up responsible for 100% of the debt, because there is no limit to your liability
Hi Mate, welcome to the forum,
Don't be disappionted in your investments they have performed well for you by the looks of it, Atleast now you are in the market and your portfoilo is exposed to some capital growth potential.
I think the best thing to do from here is to keep increasing your rent on your perth property trying to get a better than market rental return, when you settle on the off the plan assess whether it would be best to take your profit by selling or hold onto to it longer.
work on your loan structure a bit, If your loans are P/I consider putting them on Interest only with an offset account,
keep reading as many books as you can and learn as much as you can
I don't think that the tenant is the RE's client, you are ther RE's client you can fire the property manager at any stage and they will not take the tenant with them.
If you decide to sell your property to the tenant that is your business, you hired the RE as a property manger, not a sales agent.
If you wanted to add another layer of profit to the deal you could perhaps sell it under a wrap arrangement.
A healthy investment portfolio needs Property and paper assets such as shares,
As you develop your investing knowleadge and learn the ins and outs of both asset classes you'll see that you don't have to pick a side use both to your advantage,
at the moment I hold
-3 Investment properties delivering +cashflow,
-A small development project,
-A longterm share portfiolo
-2 parcels of speculative shares
-a holding in an unlisted company
-and a holding in an unlisted property trust.
-and my own company that provides the cashflow that funds my life style,By speading your investment funds accross different investment sectors and assest classes you will get the best growth vs risk out come,
neither shares or property are better than the other, they are just different, it's up to you how you structure your portfiolo that will provide the good or bad results.
One thing that I will say though is property is more "stable" than companies in the long term, but in the long term a good company will grow much, much faster than property, that is why you need both in your portfolio.
would you rather have been gifted $1000 of westfield shares in 1965 or $100,000 of sydney property, I would take the $1000 of westfield shares as they would be valued at close to $200 million today.
Have you got a interest offset account linked to your home loan, if not consider getting one to hold the $15,000 in so as to offset your interest, after all you said you were in a high tax braket so if you have that $15,000 "earning" interest it will be highly taxed however if you have it "saving" interest then the benefit from it is tax free, ( my personal opinon is that your ppor should always be P/I)
if you do go ahead and buy an IP make sure it is interst only, so that you can put extra money of your home loan, which is not tax deductable,
Some factors to take into consideration,
1. The size of the apartment my affect your borrowing capicity from your lender, some lenders will not lend as much for units under a certain size
2. how is rent distributed, Is it a guranteed weekly rental amount, or is it based on the average occupacy level of the entire complex or is it based on the occupacy rate of your room.
3. find out how the outgoing's are calculated, there will probally be management fees, lauandry fees and house keeping etc.
again are they based on occupancy or a flat rate,4. you will have to form an opinion of the future of this style of investment, can you handle the repayments if there is a down turn in occupacy due to econimic factors, less tourism etc.
5. what are the likely effects if the company manageing hotel goes broke and ceases trading,
6. Are you comfortable taking on an invesment where earnings swing from one extreme to the other,
7. can that style of property be rented out as full time accomadation, if is no longer viable for some reason to rent it as a hotel.
I Agree with Jon,
Every investment that you make should be taken on it's merits, and what it will bring to your portfoilio,
As cities grow Land does become scarce, But remember not all land is equal,
The value of the land sitting under a 3 storey block of units, that has coucil approval for a ten storey development will be increasing more rapidly than the land under a hertitage listed home on a back street 6km's from the city,
deadcat wrote:Boshy, it's all good I'm not worried.Interest rates are going up, and are likely to keep going up. That will put pressure on existing mortgage owners. Combined with the economic problems in the US, with possible flow on effects to China (and then us!), I'm quite content to just sit back, save money, and see where the economy goes.
As a side point, I'm actually considering leaving Brisbane, as I feel house prices have completely disconnected from fundamental values. The only question is where to go? Auckland perhaps? somewhere in Europe?
I think the fundamentals of the brisbane property market are good, property is certainly not overpriced up there, brisbane as a city has alot going for it,
There is no piont waiting for the perfect property market, once all the statics, facts and figures are correlated they are months old and the good times have passed.
What about for the parter that doesn't read much? I would love to have my girlfriend on board but unless theres a version of 'Rich Dad' that is presented by Tyra Banks (she loves Next Top Model) then I don't see it happening… 
