- francisl wrote:Therefore, rate will rise until people cannot spend more or recession hits home.
Cheers,
FrancisI agree enrtirely-people will keep getting debt untila recession hits home-may well be another year or so before it hits?
For what it's worth – not much probably, economics isn't my strong point
– I think we're near the top. One or two more 0.25% increases should do the trick. We're already seeing some mortgage stress talk in the media – hopefully that will be sufficient to cool things a bit. I base this not on my own analysis – I'm not capable of that! – but on my assessment of the logic of the various opinions put forward in the media and by competent forumites elsewhere.It doesn't much matter to me, though – I can ride out quite a few more percent. And it's prudent to count on interest rates from purchase going up 50%, IMHO. So if you buy at 8%, you need to be able to stretch to 12%. (Not by the lender's criteria; by your own.) Interest rates may go up more than 50%, but by the time they've done that, you should also have a lower LVR due to capital growth, and thus have the ability to redraw equity.
But how high do you think interest rates will go?
Some investors have more than two ip's so if they sell one and put the funds back into other ip's and reduce payments to offset the climbing interest rates with minimal costs and tax payments.This would increase rental return and serviceability.And then can borrow for the turnaround.Their are more than one way to skin a cat!Dom
salacious wrote:But how high do you think interest rates will go?As per my last post, I think another 0.5 or 0.75% will be about it. The 1, 3, 5, 7, and 10 year fixed rates on offer with most banks are all within 0.1%; suggesting that they're predicting very stable interest rates in the coming years.
salacious wrote:Some investors have more than two ip's so if they sell one and put the funds back into other ip's and reduce payments to offset the climbing interest rates with minimal costs and tax payments.This would increase rental return and serviceability.And then can borrow for the turnaround.Their are more than one way to skin a cat!Absolutely, there is more than one way to skin a cat. My strategy is based upon my assessment that:
1) stamp duty and CGT are far from minimal, and
2) property prices are not going to fall significantly (except in some overheated markets, which I'm not in), and therefore I'm exceedingly unlikely to pick up a replacement property at a good enough price to offset the above transaction costs.If you were confident that property prices would fall sufficiently to offset transaction costs, you'd sell the whole lot now and buy in again later! I think the risk is, though, that you'd never be sure when the bottom was, and you'd not buy in again for fear that you hadn't yet hit bottom. By the time you're sure that the market has bottomed, it's rising again and you can't get in at a good enough price to justify the transaction costs you've incurred.
So I'm just planning to ride it out. But if you think you're better off liquidating and re-entering, that's fine – I'm not trying to change your mind!
Good luck,
Tracey in Brisbane
francisl wrote:Hello, all.I am not an experience investor and may not be qualified to advise. However, when I start investing in property, I know price will go up and down in a cycle. Therefore, I am ready to ride the cycle and let time do it ticks on properties.
It is good to hear price growing. But, when downturns come, people start to question their believe and understanding. That may be the reason why so many people considering selling their portfolio. I think Steve suggested in his book that we should take profits when the property is not performing or there is better opportunity.
I am going to get myself ready for the coming storms. If succeed, I may even grow my portfolio with some bargains in the next few years.
Cheers,
FrancisWell done F.
I like to buy when the market is in a lull, or before a boom, or at the start of one, then sit back and consolidate with some serious debt reduction. This improves the LVR rate much fast as you have your debt reducing and your capital growth working for you.
Some people advocate never paying down the debt, but I like to keep the LVR's low, and getting lower so there is more servicability and more equity to use when the buying season begins again.
The herd mentality is to sell when the news is bad, but the cashed up experienced investors will be getting out the cheque book and dusting it off.
Now, where did I put it?
L.A Aussie wrote:
The herd mentality is to sell when the news is bad, but the cashed up experienced investors will be getting out the cheque book and dusting it off.Now, where did I put it?
LA, are you of the opinion that prices wont fall but mearly stagnate for a few years?
blogs wrote:L.A Aussie wrote:The herd mentality is to sell when the news is bad, but the cashed up experienced investors will be getting out the cheque book and dusting it off.Now, where did I put it?
LA, are you of the opinion that prices wont fall but mearly stagnate for a few years?
Generally, this is what I have observed to be the case from my experience.
We bought a property right at the end of the boom in Melb in 2003. We didn't care that the market was about to slow down; it was when we could afford to buy. But even after that, when the papers, tv and radio were saying there was a slump and prices were dropping, the property still had growth; just not great growth.
We will always here the stories of people doing their nuts on a property deal. It's the same as those stories on ACA about the horror renters who trash the properties.
It's a small percentage, and is usually a case of the investor not doing the correct research about the purchase.
Anyone can rush out and buy a property in a boom, and many people do, without doing solid research first. They pay too much, buy at the wrong time, their LVR's are dangerously high etc. This is when the disasters occur.
If you are a serious investor and have knowledge about how to research an area for factors that will ensure a long term cap growth, rent demand, amenities, position, your buying price, ability to add value, how you finance your deals, then it isn't hard to buy a property that will pretty much always be in demand, and therefore will always have a good value.
The majority of investers may be just like a herd of sheep. But its this action that to me will be the start of the next boom.Prices soon may stagnate due to rates etc.Many mum and dad investers get spooked and jump ship dragging prices down or stagnating them. Then after a period of time rates come down, good times return as people forget the gloom from the past years( This tennds to be a short period).Housing sales increase and as the population see this more people buy Ip,s in a fear of missing out and up go prices again.I am not as concerned of any impending slump like i once was.My circumstances have not changed.Build a portfolio,Have a exit stratagy,Be prepared for a bargain,Think long term.
There seem to be so many people using this site who think contrarian investing is oh-so-clever. Funny thing is that EVERYONE now knows (and I mean those Mum and Dad investors too) to buy in gloom and sell (if you wish) in boom. It's hardly rocket science.
The irony is, though, that it's because everyone knows this age-old adage that house prices keep going up. The first tinsy winsy sign of house prices stabilising (usually thanks to some well-timed newspaper article, no doubt responding to a request from the real estate industry to give business a boost) and – boom – everyone's off on a spending spree again.
Sure, there are those who've mortgaged themselves to the hilt and can't go shopping. But I bet there's many many more who are just waiting, like so many on this site, for the first hint of blood in the streets, and off into the stratosphere will prices go again. There's still so much hype around property investing, fuelled by a real-estate-industry- friendly media (who make squillions from real estate ads) that the excitement from this latest boom is going to take quite a few more rate rises before reality hits home for many people.
Anyone who questions my views just need look at the latest subscription figures for API mag – yet another publication that's helping to fuel a boom that should have died down long ago. Now, shares in that mag would definitely be a good buy.
CarlinSelling before property stagnates for years was my option and then with the spare cash earning 10% buy back in when it turns.
This is my strategy and its worked well over the years.
More interest rate rises predicted.Why hold when you can put money elsewhere achieving higher growth i would rather diversify.Dom
I am not licensed to give financial advice
but what some investors do when they have a large portfolio in properties
is to sell a couple of their properties that have large capital gains and low debt and pay out the capital gains tax and selling expenses.
With what amount is left over they reduce their outstanding investment mortgages.
This has the effect of increasing their borrowings in the future through having reduced the Loan to Value Ratio (LVR) of their outstanding loans and decreased their interest bill. However a downside is they lose an income stream from the sold properties.Hi Duckster,
Great strategy.
trakka wrote:But how high do you think interest rates will go?You need to look at our terms of trade. The price of our key exports, thermal coal, coking coal and iron ore have doubled or tripled. Thats the mining boom.
But also we are looking down the barrel of an agriculture boom as well. Price of rice has tripled in China last year. Meanwhile the US is grain production to ethanol production. Australia is about to get another massive influx of foreign currency. That will result in significant supply side shocks to the economy.
Im calling for 12% interest rates by 2010 with inflation holding steady at 4 – 5%. Lock now. Given the rosy economic outlook there is about a 0% chance of an interest rate fall in the next 24 months.
– I think we're near the top. One or two more 0.25% increases should do the trick. We're already seeing some mortgage stress talk in the media – hopefully that will be sufficient to cool things a bit. I base this not on my own analysis – I'm not capable of that! – but on my assessment of the logic of the various opinions put forward in the media and by competent forumites elsewhere.
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