Thankyou Damon
Thankyou Asabove……..Have just read 9 pages of a forum, & appreciate what you both have to say.
Surely Interset Rates will rise, with the cost of housing & living, not to mention fuel…..So to me it makes sense? to buy property close to urban centres & cities…. & capilatise…as rental properties will become more scarce, & lending criterias become more stringentKim
Hi All,
Lots of negativity in this thread so I am going to put a positive spin on things.
Going back to the 6 properties over 10 years mentioned way back, if anyone can achieve this in growth areas (within 25km of Brisbane and within 20km of Perth and other growth areas and sea change areas around the country) then they are on a good wicket. The fact is it is more than likely that properties will double in value again. Firstly Melbourne, followed by Sydney & Adelaide, then Brisbane and finally Perth & Darwin. I know it is tough out there particularly in Sydney. Melbourne has had its slump and is flat but will start slow moving in the next couple of years.
My point is that someone with 6 well positioned properties or more if they can ride out the current slumps and interest rate rises (nobody knows how far they will go so speculation is pretty useless) then they will be sitting pretty. Lets assume (Yes, I know – ass out of u and me) that the 6 properties are valued at approx $350k to $400k with a total valuation of $2.25 M then at the top of the next cycle in say 5-7 years depending where these properties are located they will valued at approx $4.5 M. If they aren’t all positively geared then all you need to do is sell one or two to pay the mortgages of the remaining 4 or 5 down so they are paying a very healthy income. Then just sit back and have a great retirement. If money is needed for medical or going on long vacations then you could sell another one and still have plenty of wealth left for the kids and grandkids.
Ideally one should start this by age 40 or earlier as it may take 10 years to achieve. Starting this at age 50 may be a hard task. But even at 50 it is better to start and achieve 3 or 4 than to sit on ones ass and not do anything.
This is exactly what we have done but have gone beyond 6 properties. All we need to do is manage our cashflow and if interest rates increase by more than another 1-2% then we will just have to find more cashflow perhaps with a couple of wraps or LO’s or start a business or 2nd job or whatever to ride out the trough.
Stay positive and the world is your oyster. Where there is a will there is definately a way.
Cheers
James[suave2]Hi James,
Yes, positive thinking is very underrated. That said, there is positive thinking and there is foolish thinking. Positive thinking goes hands in hand with good research, go into every deal with your eyes wide open.
In every cycle, shares or property, there is an upside and a downside. Insure your downside by fixing rates, drawing equity using LOC or selling then, focus on the upside, cheaper houses, increased yields.
Im not saying thats whats going to happen but there is always an downside and an upside, you just need to identify them. Note: They maybe different for me than they for to you as it always depends on what you want to achieve.
Cheers,
Damon
In theory, there is no difference between practice and theory, in practice, there is….
Hi all,
I posted this thread not to be negative but to be more informative. Many times i see or hear about people wanting to get instant results in property.
We have just come through a massive boom and a some what correction. With that said Perth is defying all odds and QLD is still very strong in selected areas around Ipswich and Logan. Also a company we provide research for is doing a 1200 lot subdivision in Mackay “Blacks Beach” and have sold over 600 so far with strong enquirey to complete the remainder lots.
so it’s not all gloom as markets are moving strongly, it is being in the right place at the right time to take advantage of growth and capitol gains.
The question for many savy new and experienced investors with another interest rate rise coming is “when is the right time to pounce?”
D
Gday
Love reading these forums and opinions. Everybody keep up the great work. We need the balance of positive and negative to attract each other. I’m starting of as a novice having to do alot of self education but with PPOR under control, a small share portfolio, and capital city IP positively geared I’m ready for the next step and I appreciate the wealth of information you guys and girls are giving
I love it[evil4]
Steve,
Have you got any comments on what is happening?
I would love to hear from a few more experts on things.To be honest im tired of reading these “the sky is falling” threads.
RJ
Dear RJ – this is not a sky is falling post,
Property investing is NOT a get rich quick strategy as any expert or long term investor will tell you. Unfortunately there have been so many GURUS who sprout how to do it but the truth is there are no NEW ways to get rich quick in property and in fact if you stuff up you could lose everything you have.
Yes from time to time we hear some one who got lucky but i BET YOU that Steve Mcknight got it wrong plenty of times on his way to becoming a successful and savy investor that he is today.
I believe it is important to let all the newcomers and the people who want to know how to get started to be careful when investing, don’t you?
The truth is 11,000 people per year are losing their homes in NSW along because they got caught – Australia has a 36billion dollar credit card problem and the list goes on JB and yes IMHO the market has not bottomed yet.
In saying that i believe there are some unbelievable deals out there IF YOU KNOW how to find them, thats the secret!! – how to find them.
In my job as a property researcher i analyse many potential deals and we take into account the “chicken little principle” because we don’t want to lose.
The best money is made when you buy for the lowest price and sell with precission and timing, mixed in with a little luck.
the crytical point here is to ask youself one question today when buying property – is this property investment an ASSET or will it become a LIABALITY
D
D
I’d have to agree, worse to come, but the economy moves in cycles and you have to move with it. Good management is key!
It is unfortunate some people are getting themselves caught up in difficult situations. Working in credit and risk myself I question the banks generosity, and then realise its a business to them. If you do not pay they will be ruthless, and in some cases if they are nervous they will pull back credit as they can.
Perth has to be a high risk now and towards the end of a great run. Again their will be pockets and strategies where there will be value to extract. Its there and finding it will be harder, but not impossible.
I think any investment where you can see an opporunity to profit and can see you can realise that profit when you need to. You also need to change your strategies i.e. what worked yesterday will not work tomorrow. Let me explain with some real examples.
In 1994 bought a property on a buy and hold strategy for capital gain. In 1999 I bought again, some strategy, but much higher yield (7.5%) using equity and cash to keep my LVR below 80%
In 2002 sold to realise capital gain of 1994 property (52% gain). Paid down loan on 1999 property, and gained line of credit up to 80% LVR (now my PPOR since 2002 and up 62% in value).
In 2004 bought another higher yielding property (5.9%) where I identified an opportunity to make capital gain in the long term (up 23% in less than 22 months)
In 2005 I bought 3 CF+ investments, with yields of 10.8%, 10.4% and 72.2% (not a misprint) Why? Many markets were either stagnant or going backwards or like Perth, had bolted. Why have I done this? The markert in not going to give me a retun by just being in it, so I have to be active in it not passive.
On the 10.8% yielder I spent 10k on a reno, increased yield to 12% on current value and value of purcash by 27%.
On the 10.4% yielder, when bought (vacant now) looking to funrish (cost $5k) and rent on a 13.4% yield, and sell on yield of 10.4%. This would be an increased value on purchase of of 35%.
The 72.2% yielder is purely for cash return. It returned 22% last year (needed some work), and is projected to return 35% this year.
The lastest , it yeilds only 4.9%, but is a sub-dividable corner block with street frontage. Will add 60% to UCV by sub-dividing. Approval already in place. Options are three fold, sell subdivided block to reduceto LVR of approx 80 %, OR relocate home to subdivided block and rent out. LVR reduced to approx 50% and become cash flow neutral, OR sell one of the homes for an approximate conservative net profit of 60k. I like the middle one.
I think there good investment opportunites existing if you change your strategy to meet those changes going on around us.
Cheers
SCThanksSimon great post,
For all the people who r reading this post i want to ask you a question which i hope u r brave enough to answer,now don’t be shy.
Forget about how many properties u want to own i want to ask this one question – what is your target.
Think for just one moment b4 u answer, and remember it takes 4millionto generate 2,000 a weekin income.
what or how much are you targeting for – lets see how many respond now ,or how many don’t.
D
D
Like the question. Easy one for me to answer. The way I’ll do this is not with a number of any sort. As you point out property numbers are not important. In my scheme of things, they are not even relevant.
My first target is intially to “equal my current gross salary by using low and/or no cash down techniques to drive diversified property investment” This is my investment plan is a sentance.
This will provide me with the option of becoming a full time property investor. My target date for this is Nov 2007. I am making reasonable progress, and the next six month I will have the opportunity to get close to this goal. It will be hard work, but I love a challenge
As I reach that stage I will start to set some new goals. There are dreams I have, and by setting some new investment goals it will allow me to turn my dreams into reality.
Cheers
SChello All,
very good stuff in this post. this is my first post on this site and i am very new to this property investing caper. in fact i do not have any investment properties but am looking to get good info and ideas and maybe start to invest in the next few years.
my story is that i bought a unit in lane cove,sydney nsw ,in august 2005 for the median price. it is my home and i was glad to get out of the renting game. i actively follow the lane cove property scene and was surprised to find that the exact same unit but 2 floors down sold for around $25,000 more than what we bought for.
needless to say my partner and i were very pleased.
we are hoping that the new lane cove tunnel which is due to open early next year will again raise the prices a littlemore and then we can look at other things.
my ultimate goal is to buy a house.
my question is, should i, when the time comes, sell this property or would i be better of keeping it, remortgaging and buying a house to live in thus placing my current unit up for rent?
this would mean that i would have 2 properties, one for investment and one to live in.
any ideas. thanx
Dear Doublek,
I think buying your first property and living in a unit is very smart.
I take it you are married or are planning to.
How far away do you want to start a family?
Houses are very expensive to maintain. If you live in a unit the both of you could work an extra job on Saturday and that equates to 2 extra income days per week or 8 per month or 96 extra income days per year or 19.2 extra income weeks per year = $xxxxxx = very smart.
Now if you used this extra income to pay into your mortage two things will happen; 1 you will save bucket loads of interest and reduce your debt very quickly and 2 use the extra equity to purchase more property.
I think young people starting off with a house are CRAZY because they will be working on the house on Saturday mowing grass and gardening, keeping up appearences while the both of you will be twice the distance in front of them because while they are working and spending on the house you are working and earning an income to become financially independant.
Poor people work hard – smart people work smarter …
D
thanx for the reply.
So at the moment the best thing for us to do would be to make as many repayments on the unit and then start looking. good advice.
we are planning on getting married next march.
if when the time comes as you say to use the equity in the unit, do you think that we should sell it and buy, or should we keep it and buy?
what would be the best method for the long term.
any suggestions.
also you mentioned young people, we are not that young, I am 33 and my partner is 35 so we started a little late.
we are also planning to have a few kids in the next few years so this will make it harder again.
I will answer wealth4life’s question first with regards to what our long term goal is in property (though it is probably better suited to a post of it’s own)
I am in my late 20’s (partner early 30’s) and have a long term goal of being semi-retired by 2020. For us this would require approximatley a 1.5 – 2 million dollar property portfolio (approx 40% LVR) so long as we had our PPOR paid off. We would both work part-time to suppliment our income. We would also like to have about 250,000 in shares/other investments.
Beyond that we would see how that lifestyle suits us, I can’t see us really ever “retiring” we would get too bored. working part time would give us the flexibiltiy to purse our own hobbies and other investment opportunities. When our Super becomes available is another chance to re-evaluate.
back to the topic at hand
We are novice investors with 1 investment property and a share in another (family trust). We are based in QLD and now is a reasonably good time to buy going on the stage in the property cycle we are in. Other area’s of Aust i.e Perth are not such good opportunites at the moment.
Personally I see another 2 rate rises at least and am currently saving my $$$ with belief in Steve’s “cash is king” theory. I am currently researching as much as I can as to where I will buy in 6 – 9 months time in QLD. I believe I could get a pretty good deal now but feel if I wait that little bit longer that I will;a) avoid mortgage insurance (something I hate so much… why do I pay the banks insurance !!!!!)
b) be able to buy 2 property’s in quick succession
c) the deals that are around today will still be there, but there will be more of them.Is this procrastination…….. perhaps, I don’t know. I tend to be very impatient and want to do something for fear of being stagnant and missing out. Fortunatley my partner is the gently yin to my yang, she points out that although we could buy now. Signs point to the market being more favourable and us in a better position in 6 months.
Keep in mind i am talking specifically about QLD, the different states are in different stages in the property cycle and my research is only based on parts of QLD and I wouldn’t pretent to know even all of this state yet alone any others.
My thoughts,
Firstly – Doublek,
I think with the both of you working as hard as possible now and reducing debt which increases equity you will be surprised just how quickly you will go.
Look for bargins even in your own area where you should know the cost per square meter of every property, ie; become an expert in your area first then use the same techniques in other suburbs.
Yes why not keep your own and buy another, even when you and your partner decide to have a family in a few years you still have another two years before the little people start walking and you need a house or town house.
It doesn’t matter when you start but it does matter that you have started, congratulations you are on the way.
Dear mcdeyess – yep i’m with you.
Also keen to know where in QLD you think is on the move in the future, is Toowoomba a risk because of the water problems or is this a buy signal for positive cash flow???
thanx for that wealth4life.
good info there.
this is a v.good forum by the way.
keep up the good work.
one more queastion, if we buy another property with the equity say of $40,000 worth, how does this work?
you borrow the equity and the home loan goes up again and if you invest in a IP you are borrowing 40,000 plus what the house is worth so you are paying off what the house is worth plus the equity. is this right. and why is this a good thing.
thanx
Originally posted by wealth4life.com:Houses are very expensive to maintain. If you live in a unit the both of you could work an extra job on Saturday and that equates to 2 extra income days per week or 8 per month or 96 extra income days per year or 19.2 extra income weeks per year = $xxxxxx = very smart.
….
Poor people work hard – smart people work smarter …
I like the idea of working smarter, however I think that working saturdays for money is the very definition of working harder!
I like my evenings and weekends. I only want to work a 40 hour week and I earn a (relatively) high hourly rate. I don’t think a weekend job exists that would pay enough to make me sacrifice 8-10 hours (inc. travel time) from my lesiure time each week.
Great concept, but wrong application I think.
Dear srobins –
Theories and opinions can only be check over time – lets see who is right or wrong at age 60, good luck with yours.
Doublek – IMHO and in our formular we never borrow more than 50% LVR – as many experts say cash is king andif the market changes which it is now you don’t want to be in a position of high borrowings,
so i suggest work and get that debt down on your existing property first before you take the leap …
First the pain then the gain …
D
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