- foundation wrote:
Keep an eye out for the sucker. If you can't work out who it is, it's you.
A gem.
foundation wrote:dreaming wrote:for my technical advise I'll read books by well educated people like Ed Chan, Micheal Yardney and Steve for foresight into the future.
That's a real knee slapper!Oh wait, you're not serious about Ed Chan and Michael Yardney are you? If so, apologies; it might look as though I'm mocking you. I'm not, I really thought you were joking.
Cheers,
F. [cowboy2]Your comments show your immaturity or arrogance , these very experienced property investors who are incredibly successful in their own right and have earned great wealth investing in property, a great deal more than yourself I would imagine.
I choose to spend time educating my self and learning from their experiences, I also read Warren Buffet and Donald Trump books to expand my knowledge but you probably discard them also.
By the way I'm not mocking you, just expressing my opinion.You see I have been investing in property since 1981 and continue to learn from others and educate myself. The greatest success I have had are the properties I brought and held onto. My 1st investment property was a beach side shack in Seaford SA that cost me 41K, today it is worth 290K and I still own it. I hold other properties and have also brought and sold properties, each of those properties are worth more today than when I sold them. So your buy low and sell high doesnt hold water to me. I believe in buying low but I no longer sell. Instead I redraw surplus equity from my properties and invest in shares.
Great discussion guys but are you seriously falling into a BLACK HOLE with this one.(Fill My crack in).LOL
Dom
regina wrote:Hi foundation,
share dividends, even with a large portfolio, don't really give you enough income to live on, unless you are heavily leveraged with installment warrants.What do you mean you can't live of share dividends,….. there are alot of share's that return good dividends, and you can also slowly sell small parcels of your capital to live off.
well, what size of portfolio do you need to earn say $50,000 per year in dividends?
regina wrote:well, what size of portfolio do you need to earn say $50,000 per year in dividends?as with property it really depends what yout investing in,….. you could earn $50,000 / year with as little as $625,000 if you invested in some high yeilding stocks,…. and remember alot of stocks come with franked dividends so the tax has already been paid on them, there is also no vacacy or maintaince or tenant problems.
so from an income perspective stocks can be more attractive than property,
"Not sure I'm following you Russ. You and your wife are living of $600pw, right? And the only reason you're able to do this while your investments are costing you $300pw to $400pw (more? Much more?) is by taking out extra loans to pay the ongoing losses on your investments?"
Russ, (and F)'
I'd like to know how Russ can keep on taking out extra loans to keep funding the shortfall.
Thr word SERVICABILITY comes to mind here. Banks don't just give you another loan to prop up your cashflow shortage if your income and rent don't measure up,
There's a big hole in this strategy/statement,
Rus is this a case of 'who diess with the most toys wins' regardless of the fact that you will also be the one with the most debe (ie net asset value = $0)?
As Foundation points out, there may be some long term capital growth (positive thinking), however as you continue to increase your leaverage (way ahead of capital growth) you are dramatically increasing your risk profile. If you aren't repaying your interest on your facility, the financier does have a right to foreclose and take suffient assets to cover its debt – mortgage insurance doesn't cover you – it is your lender & the insurers who are protected (twofold). The bank/financier will review your portfolio annually (if prudent) or every 3 years at the worst, at this time they can call your accounts into question if they are dissatisfied with the return to the investor (ie the financier). They can reduce your loan, or call in your loans – tread wearily!
You sound like you are falling into the sub-primes category here (but unlike in the US aren't subject to a resetting loan portfolio, just rising inflation, rising interest rates, falling AUD, tightening liquidity market etc).
SNM
Scott No Mates wrote:As Foundation points out, there may be some long term capital growth (positive thinking), however as you continue to increase your leaverage (way ahead of capital growth) you are dramatically increasing your risk profile. If you aren't repaying your interest on your facility, the financier does have a right to foreclose and take suffient assets to cover its debt – mortgage insurance doesn't cover you – it is your lender & the insurers who are protected (twofold). The bank/financier will review your portfolio annually (if prudent) or every 3 years at the worst, at this time they can call your accounts into question if they are dissatisfied with the return to the investor (ie the financier). They can reduce your loan, or call in your loans – tread wearily!You sound like you are falling into the sub-primes category here (but unlike in the US aren't subject to a resetting loan portfolio, just rising inflation, rising interest rates, falling AUD, tightening liquidity market etc).
SNM
Thats right,… Just because your stratergy has worked in the past doesn't mean it will work in the future,…
If you are still doing now what you did in the past and expecting the same results you may be in for a bit of a shock,…
It might make sense to pile on coats, scarves and beanies as winter gets colder and colder but if you are still doing it when summer hits you might be in for a hard time.
thanks thysonboss, yes I am working on my share portfolio and understand all that.
A little trepidation, with the volatility at present in the market.
This has been an excellent topic and really highlights the pitfalls of "exuberant' property investing and going in without an exit strategy or safety stop.
I believe we are in for a rough time, rampant inflation is starting to happen and will accelerate due to numerous issues.
Unionism is already rearing it's head, interest rates can easily go back to double digit figures.
If that's not enough, deflation is also a significant risk and already happening in the Us.regina wrote:thanks thysonboss, yes I am working on my share portfolio and understand all that.
I believe we are in for a rough time, rampant inflation is starting to happen and will accelerate due to numerous issues.
Unionism is already rearing it's head, interest rates can easily go back to double digit figures.I'm a little uncertain how this might play out. I agree that I'm already seeing increased pressure on wages here in Vic (the teacher's demands of 30% are evidence enough), and I imagine it must be worse in areas where mining wages are far above other incomes. But the RBA has to keep inflation below 3%. If it's not, they'll just have to keep raising interest rates, surely? This is different to the situation in the late 80s/ early 90s where the intention was similar but the target was not fixed. This gave the RBA more flexibility.
I guess there's also the possibility that international factors such as a slowdown in US demand might lead to an easing of pressures locally. It's hard to know where we're headed, but I doubt that 5% inflation is an option.
I'd be interested to hear others' thoughts. Might the Treasurer and the RBA raise the target rate? Are wages heading up or not?
Cheers, F. [cowboy2]
Hi All.
It is definitely a great subject. When it comes to investing strategies, there is no one way. What I have learnt is our perception of risk and how much of it we think we can take on. There are countless books to read and research. Depending who you read and likes is the one that you are most likely to side on. Robert Kiyosaki, Peter Span, Margaret Lomas, Warren Buffet are all great skilled people who have cut out a niche that they are good at and went forward to achieve great wealth.
I am by all means financial free yet. However, I think to help those who are not sure yet whether properties or share is the way to create wealth, we simply need to change our mind set. Mind set does not mean just about investing, it is about how we live our lives as a whole. For example, My fiance and I have a plan with investing and formulating strategies to become financial free in five years time. We have a wedding next year that cost <$10k. Speaking to some of our work colleagues, their wedding cost have been >$20k-100k. We are back packing in our honey moon whereas others are living in the best hotels in the most expensive city. They call it once in the life time opportunity. I guess that different people have different objective as we believe once we are financial free, all the options suddenly open to us for the rest of our lives ahead. We will be more confident not having to rely on those less than optimal bosses in a job.
My advice to those starting out, is to find an area that you think you will be good at. Then concentrate on it. I know a couple, who did everything they can to be successful in properties. There are plenty of money to be made when we are more creative.
well by the sounds of this I might just pack my bags, sell the two IP's and crawl into a hole. In my late 20's and my partner and I own two IP's and live rent free in the NT on combined wages of $140,000 before tax. We pay $600 more than minimum monthly on interest/principle loan and have no children or other expenses… both properties have been tenanted every day of the year (purchased both early this year) at between 4-5% return… could we possibly be safe with all the doom and gloom forcast for the next little while? I bloody hope so…..
cheerskokjhoonwong wrote:Hi All.It is definitely a great subject. When it comes to investing strategies, there is no one way. What I have learnt is our perception of risk and how much of it we think we can take on. There are countless books to read and research. Depending who you read and likes is the one that you are most likely to side on. Robert Kiyosaki, Peter Span, Margaret Lomas, Warren Buffet are all great skilled people who have cut out a niche that they are good at and went forward to achieve great wealth.
I am by all means financial free yet. However, I think to help those who are not sure yet whether properties or share is the way to create wealth, we simply need to change our mind set. Mind set does not mean just about investing, it is about how we live our lives as a whole. For example, My fiance and I have a plan with investing and formulating strategies to become financial free in five years time. We have a wedding next year that cost <$10k. Speaking to some of our work colleagues, their wedding cost have been >$20k-100k. We are back packing in our honey moon whereas others are living in the best hotels in the most expensive city. They call it once in the life time opportunity. I guess that different people have different objective as we believe once we are financial free, all the options suddenly open to us for the rest of our lives ahead. We will be more confident not having to rely on those less than optimal bosses in a job.
My advice to those starting out, is to find an area that you think you will be good at. Then concentrate on it. I know a couple, who did everything they can to be successful in properties. There are plenty of money to be made when we are more creative.
all reasonable re frugality for a future outcome, just dont forget life has a habit of not running to your plan. We have had a couple friends who defered once in a life time experiences , only to find they ran out of lifetime when they least expected it.
quote=Scott No Mates]Rus is this a case of 'who diess with the most toys wins' regardless of the fact that you will also be the one with the most debe (ie net asset value = $0)?
SNM[/quote]I don't know where you get that idea from. I've never been interested in "toys". My motto is more to do with having quality of life.
I have a very relaxed lifestyle and I like to travel and socialise. My wife and I participate in charity work, sing in a community choir and we visit our friends and relatives more often than most people do.
We use property investing as a vehicle to financial freedom and my strategy involves building a large portfolio, which means having a large amount of debt.
I guess it looks like I'm taking risks, but I've always made sure I have a decent cash buffer available.
When it comes to helping others with IPs, I talk about what I've learned and then I refer them to experts in finance and property for good advice.
I'm using the Kevin Young system and following in the footsteps of the many Investors Club millionaires, because I know they will never steer me wrong. They have a lot more to lose than I do, so I keep in touch with them and learn from what they learn.
I'm not really qualified to enter the debate on this subject, comparing shares to property. I just really believe in property. I'm glad there are others here who do their homework and crunch the numbers.
By the way, I'm able to borrow another $200,000, which means that with a LVR of 80% I could get a $1M property if I wanted. How can I borrow so much? It's because some lenders will look at the value and type of property owned and count a percentage of capital growth as income. That's how confident the lenders are that property is a good investment.
Thanks for your other comments. I'm aware of how LMI works and I've done the calculations on my capitalising interest, but I'll make sure I know what the lenders will let me can get away with.
Cheers,
Rusdreaming wrote:We might be headed for a rates cut depending on what pans out?http://www.compareshares.com.au/woods4.phpThanks for the link. They're a bit blinded by popular rhetoric:
The Resources Boom is said to be the stimulus to spending that is driving the RBA into raising interest rates. But as that stimulus wanes that spur to spending will keep fading and the RBA's rates excuse will teeter..
I'd 'blame' borrowing as much as the resources boom. We've had as more money flow into Australia since the turn of the century to fund our insatiable desire to buy the same houses from eachother at higher cost than we have from the resources boom. Sure, without the resources boom, we'd have recession. Ditto absent the credit boom. Either outcome would result in declining interest rates, but one is plausible, the other assured.Russ D – I don't have a problem with what you're doing. I just have a problem with the way you were promoting to young people as a sure-fire way to become 'financially independent'. It's not. It's very, very risky.
I'd also like to know which lender would lend you another million dollars on your $30k income when your expenses (holding costs) are already above $30k per year? Or would you have to 'bend the truth' a little on your loan application? I really don't see any other way that any lender would extend further finance. Look into it. You'll probably hit the same problem when you max out your LOC too unless you can increase your income before then. By my estimations, lending standards will have tightened (they already are) much further in a couple of years, so I wouldn't consider somebody as overleveraged as you to be guaranteed to get any loan at that point. When credit gets tight, it's not LVR that matters, but repayment ability. You've already indicated that you have no ability or intention to repay your million dollars* in debt.
Cheers, F. [cowboy2]
* Vent: Holy heck. If anybody doesn't think we're near the peak of the biggest credit-finance-fuelled speculative bubble the world has ever experienced, let me emphasise this point. One Million Dollars in Debt!!!!! (Lots of money). Six Hundred Dollars in Income!!!!! (not so much). And this is insignificant compared to some other investors… I mean speculators (I'm reading Ben Graham's book which pulls no punches over the difference).
Rus D wrote:How can I borrow so much? It's because some lenders will look at the value and type of property owned and count a percentage of capital growth as income. That's how confident the lenders are that property is a good investment.
Hi Russ,
Care to name the lender that counts potential capital growth as "income"?
Yossarian
Holy crud.
Anybody want a giggle? Read the links here:
http://www.tic.com.au/interest+rates.aspxHe doesn't have the foggiest idea of what he's talking about. And 'Kevin's Blog' here:
http://www.tic.com.au/kevin's+blog.aspx
is full of 'Kevin's thoughts' (curiously posted by one Derek Jones) that are just as inane and… well, wrong!Far out. It's slick alright, but slick and stupid, not slick and useful. It's so bad it's embarrassing!
What's it cost?Cheers, F. [cowboy2]
Clearly the comments on Kevin's Blog remind us what happens when you leave your password around for your 11 year old to find.
Yossarian
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