Am feeling a bit panicked and need some advice to steady my nerves

Nat,

You said it yourself, the financials on this property don't seem to make it a great investment property, but before you rush off to sell consider the following:

– how do you see the long term outlook of the area the property is in? does the area have a solid historical population growth and capital growth? If you held on to the property for 10 years what would you investment return look like (i.e. how much cash did you have to put in vs a realistic capital gain)?

– is you rent at market, remember rents are going very fast, have you increased your rent as far as you can? Can you do something to increase rent e.g. improvements, furnishing.

– can you move back into this property as your PPOR and rent our the property you are now living in?

Whatever you do, don't panic because then you're likely to make a bad decision. I agree that the outlook going forward is far from rosy, but we all know the market move in cycles and the key question is if you can hold on to the property through the next cycle would it be worth it, i.e. will the property perform well enough in the next upswing to make good the current cashflow issues? If so look at creative ways of solving the cashflow problem, if not then indeed look at selling. Think of a rent-to-own solution.

GMH454,

Did you notice I wrote one main thing, not the only thing.  Australia will always benefit from immigration and could benefit a lot more if the rules were relaxed in certain areas.  Australia is still seen as a mecca for many overseas people wanting to migrate to a new country.  Even during hard times what we experience in OZ is nothing in reality to what others experience and why it doesn't matter how bleak some may say our economy is there will always be people wanting to come.  Where jobs may be lost in some areas during hard economic times increased immigration creates others.

Don't understand why certain people love the phrase ' property doesn't go down'  when trying to prove their point.  Are these people really so out of touch that they think investors don't understand about property cycles?  There are times when values do drop and these critics love to sprout this but why do they always fail to mention that values also rebound and in most cases just as quickly as they had dropped and then proceed to go higher.  A key factor to investing is knowing what timing the market is in and invest accordingly not trying to time the market.  A good example of above is a property in mid 80s worth 75K went up to 90K late 80's and then back down to 80K late 80's early 90s.  The same property slowly rose to 180-200K around mid to late 90's and stayed in this range until early 2000 era when prices started to move and now in 2008 over 300K.  For this property to go down in has to go below the original price of 75K.  Can't really see this happening but it is debt free so not a problem if it does.  would love to know what investments these same critics have that they can get 75K from at the worst possible scenario after having it for 20 years.  Did I forget to mention 20 years of positive cash flow and better returns than any bank investment would have done.  Maybe not as good as some shares, stocks commodities etc but that's not my forte.

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Ehm…

Let's look at the facts as we've been given them:

• Nat herself said "the values in the area have dropped by about 15% in the last 18 months".
• Nat herself said "we could expect between between 550 000 and 570 000 to sell" and "at the height of the boom the value was 700 000". That's a drop of between 18% and 21%.
• Nat herself indicated that she expects prices to fall further: "…as well as capital losses".
• From Nat's figures it looks like this house was renting for around $15k per year and valued at peak at $700k. A gross yield of around 2.1%.
• At $550k, assuming the $15k rent is about right (plus NG & depreciation bringing it up to $25k) the gross yield is 2.7%

Considering all these "other factors for this one particular house" as you put it, it's pretty easy to draw the obvious conclusion that the property is fundamentally waaaay over-valued (ditto for every other dwelling in Perth IMNSHO). If there's any positive in all this, it looks like there's a chance that Nat might still sell it to a greater fool for more than its fundamental value (I'm not going to personally disclose here what I think the fundamental value of a $15k gross yielding asset is… trust me, you'd heave up your lunch).

Cheers,

F. [cowboy2]

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I know she said it has gone done in the past and has the FEELING that it will continue to go down.  Knowing the other information, especially the suburb will allow people to comment in a different way.  Even though Nat says she feels it will continue to decrease, another member might say that that particular suburb will be a good one to hold due to some particular reason.  For example, if it was Ellenbrook the prices there would be effected by the extension of the railway.  If its another suburb a forum member might be able to give information on a new business, estate, planning changes, etc that may give a positive light to that suburb.  My whole point is alot of people are basing their decision on whats happening worldwide and in their own parts of the world.  In some suburbs tonight 90% of the poplation of that suburb may think that their housing prices will decrease in the next 12 months, the other 10% may be more optimistic – some of them may know some information that will help increase prices in that suburb. 

Other countries in the world are on a totally different economic cycle to America. America sent itself broke on needless wars and ridiculous lending to sub primers.

Russia is booming
Asia is booming
Australia is booming
Everybody shed a tear for the yanks and move on. It's their mess, let them worry about it

That is a different point to your first post, written and presented in a totally different manner. I re-read it, they do not mean the same thing. Your first post was about the ups and downs, showing some times as bad and some as good, taking niether a bull or bear side. This post is much more positively in favour of investing and eludes to all times having the potential to be good. 

Anyways, I was paraphrasing the whole thread, not just your comment. If I was paraphrasing you I would have quoted as such.

He's doing well…
http://www.news.com.au/business/story/0,27753,24467228-31037,00.html

At the moment everything is up and down like a hard working whore. It is turmoil and confusion, like 1929…

http://www.news.com.au/business/story/0,27753,24466538-31037,00.html

You watch, tommorrow they'll both be up:)