Everyone who has been caught up in this housing boom think they have become property tycoons. All the people who have previously been in the rental market have used the 7k grant and are building / buying houses therefore your rental vacancies rise. All I hear now a days are people spruiking about how many units they have bought. What they don’t realise though is that they have’nt done there sums. What happens to you guys when interest rates go to 10 maybe 15% – I can hear you laughing now saying “you idiot” remember though 10 years ago interest rates were at 18%. People have short memories – generally about 8 to 10 years as research shows. Please don’t be fooled by this false economy. I have just sold my properties and made huge profits – the reason – I got out at the top. I am currently seeking alternative investment options, but I know property won’t be a part of my portfolio for some time.
Remember folks
“Be greedy when everyone else is fearful and fearful when everyone else is greedy”
Yours Faithfully
Your Investment Angel
Hi ireland,
What about a 6.45% fixed interest for 5 years starting from now.
Interest rates will probably remain the same or go down during the year. When they start going up again, lock yourself into a fixed rate.
Just something to think about… I know it all really depends what your strategy is etc… but the thought I can’t get away from is that unlike shares people need a roof over their heads…
*************
APIM coming soon …*************
Hi ireland
What about instead of selling extending the loans as lines of credit and accessing the equity.
Your way of ‘cashing in’ you’re up for capital gain tax and selling costs which will come to more than 30% of you profits.
Based on 80% lend you will be 10% ahead money wise and still see any future capital gain come your way.
Off course if you want to go of and blow your dough rather than invest then you need cash in as per your actions.
Cheers and good luck with your investments
Ireland,
You seem to come across as a person who is a “doom and gloom” promoter rather than a problem solver …. In answer to your question if interest rates went to 15% what would I do ….
Opinion:
[1] Interest rates will be reative to the current market. If the average homebuyer is paying 15% then my buyers (credit impaired) would be paying 17%. Everyone is feeling the pinch.
[2] I will be out their trying to acquire control over as much property as I can get my handes on.
Acction:
[Contingency 1] I would have approached my buyers and get them to lock in the interest at a point in time where the payments would be managable.
[Contingency 2] Get the homebuyer to refinance into a cheaper loan.
[Contingency 3] For a period of time (2 years) removed the 2% interest premium.
[Contingency 4] Extent their loan out from 25 to 30 years to reduce their repayment.
[Contingency 5] Takeback the property and rent it out.
Managing the down side and being a problem solver is the key.
That my 10 cents worth.
Regards,
Jason Moore
[email protected]Property Trader | Boston West Pty Ltd
http://bostonwest.com.au
Email Me | Phone MePrivate money lending opportunities available paying upto 12%, secured by bricks and mortar!
‘Rental properties are for poor investors’.
Frank Loewy has been wrong all these years?Interest rates IMHO:
money is a commodity and costs more when it’s scarce, less when it’s not.
Interest rates of 15-18%, and I paid them, were due to baby boomers all wanting housing and consumer finance in the same decade. Now these same people are essentially cashed up, houses paid off, super topped up and looking for investments. We are awash with money! Hence stable interest rates and the tech and housing booms. Rates will go up when the money supply from this age cohort dries up.
Any contrary ideas?Terry
FinanceWell I really dont think you got out at the top Ireland but time will tell. With interest rates it is quite a complex arena. What is worth looking at in more depth is housing affordability indexes. Housing was more affordable with higher interest rates in the late 80’s where as now affordability is lower along with lower interest rates. If you have a look at some of the situations people were in in the late 80’s they were probably better off when you look at the proportions of income needed to service a loan.
It is not as simple as just saying Interest rates are going to rise I am getting out!
Hi Ireland.
I think ‘the property trader’ sumed it up best, you are way too much all ‘doom and gloom’!!! I think you pose a very valid point in that interest rates won’t stay the same for ever, after all Steve points out that the long term average interest rate is 10.31%. I don’t know if this figure accounts for the period of high inflatation seen in the 1970/80’s, but nonetheless i have still read articles quoting the long term interest rate at around 9.5%.
My point is this, if interest rates go up this high, and no doubt they will, it will make it a heck of a lot harder for people to purchase homes, in some cases impossible. Invariably this will strengthen the rental market and keep those of us with positive cash flow property still in the game looking pretty. Remember just as ‘Apim’ says, “people need roofs over their heads”, shelter is one of lifes necessaties.
The only problem i see with rising interest rates is people who have over extended themselves with first homes and (as Steve says) “Pretty House” investors with negatively geared property. Think about it logically, interest rates go up and people will no longer be able to afford the outrageous prices that houses are fetching these days. What does this mean? PRICES WILL FALL and negatively geared investors will lose, while positivally geared investors will find themselves in a situation of power, as they will be cashed up and ready to snap up property that has bottomed out. This then puts them in a position to ride the next the real estate cycle (remember history tends to repeat itself).
The key word here is CYCLE, property goes up and down and ultimately trends up, the share market goes up and down and yep you guessed it, trends up. If your only strategy is to buy, hold and sell how do you know whether you have bought at the peak or at the trough?
I am of the opinion that it is best to buy positivally geared property and enjoy the potential of having what a friend of mine terms as “THE DOUBLE WHAMY”, Positive cash flow and capital growth.
Ireland i think you are missing the benefits of this forum, which is to netwrok with people and gain creative ideas. If your only strategy is to profit in an ‘UP’ market, then that is not lending you to being very creative. As an investor you should be able to make money whether the market goes up or goes down.
As i said before, if interest rates go up ownership of property becomes a big stretch for many people, this means finance becomes a lot harder to come by. This is where those that are creative step in, what better position to be in than to be a financier for those who don’t qualify for a normal conforming loan. Enter the WRAP.
Thank you
PS i leave you with a thought for the day, this is from Rich Dad Poor Dad.
“The reason so many talented people are poor is because they focus on building a better hamburger and know little to nothing about business systems”
GET CREATIVE!
Hi Ireland
You really must be out of it,I have just bought two more properties in the last couple of weeks,and I can’t see myself losing on either of them.
I tend to make a tidy sum when I resell them.Also if you listened to the news lately there is a shortage of rental properties Australia wide.
ausken[?]
The topic ‘Why rental properties are for the poor investors’ is closed to new replies.
