I have been very concerned about the impending “Doom” in property, if & when it “may” occur. This topic has been discussed a lot on this forum recently.
I really don’t know at this stage what will happen to RE prices.
3 things may happen: they may still go up (but at a lower rate); flatten out; or, fall.
But rather than protect my IP activities using hearsay or opinions, I would like to base it on fact.
What I intend to do is look back at property prices over the last 3 decades or so. Preferably by city & regional areas – most likely concentrating on Adelaide & SA country towns. The best I can do would be using median & average property prices for houses, land & units.
What I will determine is what prices have done historically during a bust after a big boom period. And use that information to predict what “may” happen in the future.
So lets say, house prices in a regional country centre dropped 20% over a 12 month period until flattening out & going back up again, in a bust scenario in the past.
My current plan of attack would be to determine the current market value of a potential +ve cashflow property. Then assume it will be anywhere around 20% below that value in 12 to 24 months (this will depend when the bust may occur). Then offer at least 20% less than the market value. So I can still, at best, earn a steady rate of capital growth, or at least, preserve my capital base – while still earning +ve cashflow – & protecting my capital in case I have to sell & pay off my debt (which may be as high as 100% to 120% of purchase price because of reno & purchase costs).
MY TWO QUESTIONS ARE:
Do you know of any sources for examining these long term trends?
What are your thoughts of this strategy?
Everyday I DO NOTHING I am LOSING opportunities.
Cheers,
David Paxton
“You Only Live Twice”Hi,
I can’t really offer you any thoughts apart from the question on how do you think you will go on buying IP’s if you offer 20% less than the market value – unless your aiming at the mortgagee sales that are suppose to occur when the interest rates go up.
Best Regards
Firstly, the asking price may not reflect market value. Eg. Market value for an IP in a particular condition maybe $60,000, but th evendor or agent could be asking $50K, $70k or whatever.
Secondly, the “Good Book” says “ask & ye shall receive”. This applies to PI as well. So I put my offer on the above example at no more than $48K ($60k less 20%). Note here I am ignoring the asking price as the banks valuation will be based on true market value anyway. In fact I may offer only $45k or $40K to get me a bit of room in case of a counter offer.
BTW the 20% is only an arbritary figure – it could be 10%, 15% or 40%…
And a Steve says on his “Tales from the Trenches” tapes – the worst that can happen is they say “No, you insulted us, don’t you ever ever put an offer to us again” (Highly unlikely hey?).
What most likely would happen is that the vendor will submit a counter offer, or say no the asking price remains.
Or even better still, say yes “it’s a deal”!!!
Anyway we’re getting off track here….
Anybody help with my two questions?
Cheers,
David Paxton
“You Only Live Twice”Hi,
I can only suggest looking at a few of the following.
1. The Housing Affordability Index produced by the Housing Industry Association.
2. The number of Building approved in selected area. You can obtain that through the ABS
3. and previous At Call Loan Rates not sure of possible source.I think this is an excellent idea. As the saying goes “history repeats itself”. I would like to hear more of your examination. drop me a line [email protected]
Anyways, I hope that could gets things rolling for you.Regards
Ed
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