All you city investors are pushing prices up!!!

boy, .!!!! *cracks knuckles and sets out to answer this most challenging post*

” the humble local just cant buy a property nowdays”

Look, I’m a humble local from Paddington, Sydney, where the cheapest houses in the street cost 800K. and i can’t afford to buy where i live. So I agree with you! There will always be people in any given suburb or town that couldn’t afford the repayments on the median priced property. Or any property!! However, those people *could* continue to rent while buying a property *not* where they live. (hey, it worked for me!)
But doing that is something that just doesn’t occur to most people – that they *can* not only do it, but that it could be a good idea for their long term finances! Figures show that the average australian spends 105 percent of what they earn. Credit cards are the biggest growing sector….blah blah….that’s what most people that ‘think they can’t afford to invest’ are really doing with their money.

I have been buying in places where the properties are way cheap. Like under 20k. And the average wage in that area is only 13.5 K. i.e. equivalent to a benefit. Those cheap houses reap me a 20 percent return. If local tenants borrowed 100 percent from the bank at current interest rates, they *could* buy the a house for 65 percent less than what they pay in rent. !!!!!!!!! So why don’t they? it IS affordable. If they can afford to rent, they can afford to buy!!

Now convert that into Sydney $$$. The average wage is 100K per year. yeah right!!! It’s not even half that, surely. If that. But let’s talk it up for the benefit of this argument. Can you buy a house for two year’s wages here? No way. Maybe a dilapidated unit and if so, then wayyyyy wayyyyy out of town.
Nah, not even!!

So actually the low income people in the small country towns have access to properties *where they live* that are way way more affordable than us city folk, proportionately, even on their wages. And most of them don’t realise that it would be cheaper for them to buy than to rent.

Meanwhile, Mr local yokel wants to sell his house. And none of the locals are buying. Well, who’s he gonna sell to? Someone who’s going to take over the ownership liabilities of repairs, maintenance, rates, tax. etc. If there is a buyer who is willing to pay the price he wants, that’s good isn’t it? It’s the market. Would he judge that person’s money on colour of skin, gender, place of origin, accent, or other? No! A buyer is a buyer.

So what drives house prices up? Booming areas….time…prices of houses just go up over time anyway!

>so then you all pull the wool over there eyes and wrapp a >place to him at over inflated prices, once again pushing >prices up.

If the purchaser (like the country town dude earning 13.5 K per annum in a town where you can get a 3 bdr house for 20K) – can’t afford to buy at market rates, (20K, at 7 percent) they won’t be able to afford to buy at ‘wrapped’ rates. (24 K at 9 percent.) However if the bank thinks they’re a bad credit risk and turns them down, then their option is either to rent for the rest of their lives, or get into their own house. 24K at 9 percent is still gonna be cheaper than renting. Plus, as they build up equity they can cash out the wrap and refinance with a ‘normal’ lender, then the wrapper only made their markup. Fair enough, for the risk they took??? (The markup is to cover the investor for the risk that the purchaser might default, as well as cash out. And the interest rate increase is to make it worthwhile for the wrapper to offer it in the first place. )

Nobody is forcing anyone into a wrap if they don’t want to.

>How can a working class family out bid an investor
easily!! especially when you factor emotional attachment into the equation. Also if you compare something which has been a ‘rental property’ for years to a house that has been a private home for years they’re a really different thing, as you’ll know if you’ve looked at a few houses for sale!!

>or for that matter a small local investor…
I’d say most investors are local investors. Most investors are small investors. Only 0.5 percent of investors have more than three properties believe it or not.

i think it is way unusual and out of most people’s comfort zones to invest elsewhere despite the fact that we’re on a propertyinvesting forum and feels like ‘we are the world’ – we’re not. Did you know what drives the property market? Owner occupiers buy 92 percent of properties.

>Its seems you have an endless supply of money, and its >driving the prices up….

I personally don’t. In fact I had less than the price of a house in Bathurst, NSW to start with. And even that market was too expensive for me!! The whole thing is you don’t have to have money to be an investor OR a home owner – you can borrow it!! read robert allen for more on how to buy property with no money down!

>SO HOW IN THIS MARKET CAN YOU BUY A +IVE CASH >FLOW INVESTMENT….

save a deposit (in fact not even – banks are lending the whole lot plus a bit more!!) – have a good credit rating, find a deal, and go see the bank.

>GO AWAY AND BUY IN YOUR OWN TOWN
ewwww, that sounds rather redneck….
“we don’t want your kind around herrrre”

>And also thinking outside of the square does jack to me, lol…
ah well, running around in circles might work for you then.
You won’t get rich that way, but maybe you wouldn’t be comfortable with yourself if you were, by the sounds of it.

seriously though, read books such as ‘real estate riches’ by dolf de roos to give you an idea of what thinking outside the square actually means in property terms.

for example. I read DDR book and one of the things he said to look out for was something that I actually have seen many examples of since. For example. I saw in the paper “80k rented for 140 per week , 3 br house, 2200 m section with subdividable section. “

not CF+ve/11 sec solution. but Let’s say you could subdivide the section and sell off the back chunk for 20K. Then it becomes CF+ve. That’s just one example of what some might call thinking outside the square but i would just call it part of being a savvy investor who can always find deals in any market.

Just to clarify, what square are you thinking outside of? From the information in this forum, I don`t see too much about `screwing people over to make a dollar`.

I can understand your concern about other people buying up the good investment properties in your area, but maybe you should try to turn your dreams of investing into a reality. Sure it mightn`t match your ideal world, but if you want to invest, maybe you need to compromise a little.

Sounds like that you had an opportunity to invest, but pulled out, so is investing what you really want to do? Is it really for you? Just my opinion.

Scott

I read this thread with great interest and I can see both sides.

Six months ago I was looking at possible IP’s close to home, that I could almost afford. Looking back, and adding what I have learnt recently, I probably could have bought one after all.

Now they really have skyrocketed out of range, so my first IP is going to be somewhere else and probably quite a long way off.

I guess most people find the first time they do anything new a little nerve racking. Personally, I found the notion of buying something that was close to home conforting. I could be “on hand” within half an hour if necessary. I could do most repairs and maintenance items myself. I could keep “an eye” on things.

These aren’t things I can do with a property that is a long way away. I guess in reality these are small points, but emotionally for a first timer, it makes the first jump a little higher. What can I really do when I get there anyway? lol

I expect by the third time I won’t even think about it. But it’s all about what we’re comfortable with and what we believe we should be doing with our lives.

I don’t suppose property investment is for everyone. I think caution when inexperienced is a good thing. I learnt that when doing all my doe on shares a few years ago. It’s taken this long to recover to where we were then.

Even so I have nothing against shares (even though putting the same amount in to property fours years ago would have seen us in a very different situation today!).

It’s about being sensible, researchign what you’re doing before doing it, and when confident – going out there and doing it right.

Good point Battz. I guess it may depend on actual localties as to who is pushing prices up, but I certainly agree at pointing the bone at the negative gearers .

MiniMogul,

Very well said. How many times do we here people tell us how cheap houses were 20 years ago, and “if only we had of bought 2 or 3”. But they forget that at the time (20 years ago) the houses seemed expensive, that is why they didnt buy 2 or 3.

Again, in 20 years time we will look back at a house, say Paradise Point or Runaway Bay on the Gold Coast and say, “So bloody expensive at 2 – 3 million, I can remember the days when you could buy one for $400k to $500k, if only I’d bought 2 or 3″……

Thats life..

Battz

Too true slatzagain, in relation to prices moving up in spurts, thats why a mentioned a 20 years period, there will be a boom somewhere in a 20yr cycle.

My uncle built in Paradise point in 1980 (a good 1km from the water) Cost about $100k all up. Valued at around $400k now.

Battz

I live in a large rural center.

10 years ago, metropolitan investors “discovered” our town and drove prices up (20-40% increase in 18 months).[]

Shortly after, investment dried up. Metropolitan investors still came, and still payed above market prices. The reality was though, some asking prices stayed high, but sales prices to locals, who knew the true value, dropped.

I bought a house last year from an “out of towner”, which was less than the price he had payed for it twelve months previously, and which was less than the price the previous owner had paid seven years before that.

Today, I read with interest that prices in town have increased 20% due to out of town purchasers. My property is now worth at least minimum $35,000 more than I paid for it. Big deal. I live there. It is perfect for me and my family, and I will not be selling it (at least until I become a property tycoon and can retire to a better lifestyle).

I’ve been interested to read in this forum how travelling to IP’s becomes such a grind (Can’t see it myself. Long distance travel is a part of rural life). I’m sure that most of the metropolitan investors will get sick of the travel. In a couple of years these investors will leave again, prices will settle down, and rents will catch up with prices that were overdue to rise anyway.

I’ll buy positive cash flow properties then, and wait for the next wave of my savvy city cousins to come and take advantage of us poor country boys[].

hi again kasey,

thanks kasey for the compliment, but let me tell you I’m only about 1 year beyond totally clueless…that’s when I started learning about all this stuff!!!!

> some risk’s are too risky and therefore I will back out.
well I agree with you, and I guess the reason I am attracted to property is that almost everyone seems to make money with it – even if they do it ‘wrong’. Sure there is the odd story of people who lost, but nearly everyone I know who has bought a home either as an investment or residence has done well out of it or would do if they sold.

>But down here the out of town investors have brought more >than 50% of the property here, I would say mostly -ive >geared.

I guess that if you bought _ve geared, you’d want to have a job. Jobs are more common in cities. but you might not have enough to afford a -ve geared property in the city. I know people who have bought in Tasmania just so they can have a patch of earth to call their own in the future, because it’s beautiful, and as a weekender.

>Mini some of the info on these boards is some what hard to >read, and you would need to think out of the square to get it!!!
I guess so, but once you know the jargon (LOC, PPOR, etc) it all starts to make sense!