Forum Replies Created
quote:
Originally posted by BEAR1964Thanks Richmond
…My experience many years ago when interest rates got as hi as 18%…Many people lost alot of money in these areas…but if ya can’t service the loan u have to get out.
Regards Bear
And this was my original point – whether you convince yourself that because X happened in area Y means it’s going to take off – is not worth worring about if you are living on the edge, financially.
+ve cashflow is fine for some, as is -ve cashflow. Rural, regional, urban IP’s – it’s all a matter of what your attitude is to the risk associated with each and every buy. But underpinning each and every purchase also must be the realisation that you must be able to service the debt – in bad times as well as good.
How many of you have looked on with envy at those people who coolly advise that they have $120,000 income from rent per annum. Did they also tell you how much the interest bill on the debt was and how much higher that debt grows when interest rates rise and they don’t/can’t adjust their rental yields more than once a year?[?]
By the way Bear, locals telling you how good the area is, is a bit like the cabbie giving you a red hot share tip [
]Be careful out there – study the market, make a plan, and stick to it!
Cheers,
RowanYack/Andrew,
It looks like we are in complete violent agreement here []!!
Mind you, I’m not saying that the sky’s falling or we’re all going to lose our portfolios etc, but if you don’t have the cashflow and/or earnings to service your debt or anticipated debt, then that is reason enough to stay out of the buyers market. Many people I have spoken to have bought property out of the fear of missing out on the boom cycle – that’s an emotionally naive non-strategy IMHO!This market never ceases to amaze me – there are so many bullish investors here. What is market resilience? I suspect that it’s another term invented by the industry to describe the herd mentality – we all feel safe because we are all feeling safe! That’s ok, as long as the RBA, the banks, the buyers and the sellers are all rumbling down the same path. But for those of you property guru’s who’ve joined the game during the last few golden years, be careful – the real investors are those who can survive the down times as well as the good times. If and when that occurs…
The hardest decision is NOT “shall I sign the contract on this property”…it’s having the discipline to say “I’m not yet ready to sign any contract”. Any fool can rush off and pick up a property – heck, even the real estate agents on this forum will readily admit to having signed up more than one or two buyers in a hurry.
The key is to invest comfortably and have a “buffer” in your portfolio so you don’t lay in bed each night sweating over the overnight cash rates and worring about blowing your wealth plan if interest rates creep up another 25 basis points – they will, one day, and you should factor that into your fiscal planning, just as one expects to have to do some repairs on any property you own, yes, even those nice shiny new ones that you can buy off the plan!
Whether the buffer is a chunk of excess capital or +ve cashflow in your PPOR offset loan or even the expectation of a payrise, is up to you.
Sorry about the rave, but there are a lot of bullet proof people trotting out can’t lose strategies who are heading for receivership, not ownership. I applaud common sense strategies that include studying the market and acknowledging your financial limitations as cornerstone tactics.
Regards,
Rowan
Jellybabes,
I have been informally involved with the Investors Club for a few years – I attended one of their seminars and knew a few people who have bought property through the club. I get their regular newsletter.
The issues that they currently have with ASIC are largely to do with the legalities of some of their club features and options, such as the club’s optional No Tenant No Pay (NTNP) plan. If you want cashflow protection you can pay a yearly fee equal to 1.5 week’s rent and the club pays you 80% of your rent if the place is unoccupied.
ASIC argue that they do not hold a particular licence to provide this service and have asked the club to stop the service, in the courts – which they have.
Kevin Young advocates a rather aggressive property investment strategy that many people may baulk at. Others have applied his strategy with quite successfull results – a friend of mine was a long term club member, bought 7 properties and left the club since she figured out how to buy IP’s without any further assistance from the club. She’s happy and had an enjoyable experience with the club.
If Kevin has copped 15 formal complaints from the public, that’s not too bad a track record – his membership is some 80,000 strong and it includes people overseas as well as those throughout Australia.
I have found them to be a happy, motivated and an aboveboard club – they have property on the stocklist that may not be everyone’s cup of tea, but I have never heard of anyone being ripped off by them. They have a large membership base and the support they provide is pretty good.
They can organise a property inspection, finance, legals and even get the tenant in for you – if you want to sit back and do nothing.
My only concern is the validity of the property valuations and rental returns. I would get my own independant valuation to protect yourself and I would also get independant agents to do a rental projection on any property you considered buying. The basic rule is – if it looks too expensive, then don’t buy it!!
I think Kevin is a tall poppy that some people would like to see get kicked out of the market, because he does make money and people are happy to join his group and take advantage of discounted property prices that he can obtain through the power of numbers in his club.
Go to one of their seminars and make up your own mind. Unlike other sharks in the market, his seminars are free! [
]Cheers,
Rowan
Hi M,
Rowan – everyone scoffs at us lawyers when we tell them to get releases from open-ended contracts. But I think your example clearly highlights the need. Even a letter from the real estate agent confirming that your contract with them is terminated may be good enough. But you needed to extract that when they were still trying to get you to sign up with the other agency, because that was when you had the upper hand. <snip>Quite true…With 20/20 hindsight, I should not have assumed that the agent would honour the terms of the contract of sale and release all parties concerned at the end of 90 days. As you suggest, I should have got that in writing.
My problem was that the Victorian Land Act which covered and to some extent defined the contract of sale was not definitive and thus open to legal interpretation (like most Acts I suspect). According to the contract of sale, my obligation to honour the sole agency provisions of the first agent had concluded without a sale and I assumed that the contract would expire on the date that we both signed to, which was clearly stated on the contract letter.
I figured that the second contract of sale with the sister agent would assume the sole rights to manage the sale of the property and not simply extend the rights of the original agent to include some benefit at actual sale time. What happened if the second agent was a totally separate entity, ie, an agent from somewhere else in town or another company? Would the original agent still try to hit me up for the commission? The answer is probably yes, given the track record of this agent…
I agree with you in that you can take nothing for granted, and I had wrongly assumed that all parties would play in accordance with the contracts of sale – otherwise, why have them??
The easy answer to all this is…never sell [
]Cheers,
Rowan
Hi Peter,
I know it is an old story by now Rowan but I am just curious whether you signed an agreement with the second real estate office or whether they merely got a conjunction. <snip>We signed a contract for sale for 90 days, during which time the first agents did not sell the property. They got a deposit for the house, (from a mate of the real estate agent) who subsequently folded and ran.
After the 90 days, they offered to move the property to the nearby sister agent. I suggested that we needed to draw up a new contract of sale, but the original agent baulked at that saying that “we all work under the one company logo!”.
Yeah, I know, alarm bells were ringing at the time. [
]I persisted and got a fresh contract of sale drawn up with the new agent, who managed to sell the property about a week after signing the new sale contract. Yippee, I thought…job done [8D]
Then, after the deposit was paid and we were rapidly closing in on settlement, the original shyster politely asked me for the commission. I told him that I would be paying it, in full, to the agent who sold the property (and not him!).
This clown argued that he had effectively introduced the buyer to the seller (?!?) and was expecting to be paid for services rendered [?]
I told him that he could take that to the sister agency and see if they will pay him half the commission. After all “they all work under the one company logo…”!! [
]He threatened to take it to court, had a court summons issued at me ?! and then kept ringing me and my wife. We are talking about a commission of about $1500 here – not exactly earth shattering stuff, but the agency was on it’s knees and was not afraid to stoop to any measure to get cashflow.
A friend of my late father (QC) offered to advise me pro bono and said my chances at best were 50/50. I talked to the REIV who knew of them and said they had a track record of doing this in Melbourne and had been run out of town accordingly. Oh, and they couldn’t do anything either (sounds familiar, eh Arty? [
] )To avoid a possible loss and court costs, I paid 2 lots of $1500, cursed all the agents on the Mornington Peninsula and moved on with my life.
Cheers,
Rowan
Arty,
Good luck in your dealings with the agents.Are you going to hit them up for a breach of contract or malpractice?
I’ve had a run in with a Real Estate Agent in Victoria who tried to double dip on the agents commission – it was plain robbery but I was forced to pay it or go to court and lose.
The agent in the property’s suburb couldn’t sell the place so they gave it to their sister agency in the adjacent suburb who sold it in a week – then both argued that they had a role in the sale and wanted the full commission…each! [xx(]
I had a big wig on my side and was told that with this mob, they are reknown for ripping off their clients and they had moved one particular agent from the City down to the Mornington Peninsula so he could hook into all the retirees…[
!]I learned a big lesson from that nasty experience (about 10 years ago).
All the best.
Cheers,
Rowan
Sach,
Get a jumper[
]!!True, it can get cold, but the air’s fresh, the water’s good for homebrew and it’s not too crowded in the pubs and clubs!
Oh, and tenants are still paying high rents![8D]
Cheers,
Rowan
Kavita,
I agree with you regarding the virtual impossibility to find positive cashflow in Canberra, right now.I just think that the market is too high and people who a buying IPs to avoid being left behind are the ones who will be burnt at this time.
P.S. Im an ex-Melbourneite and have lived here for about 12 years – yes, it is a great city to live in[
]Cheers,
Rowan
I have a package with one of the big four banks. We have IO equity lines of credit for our investment properties and a P&I loan for the family home.
I want to minimise the loan payments on my IP’s and maximise the payments on my non tax-effective home mortgage (so I can get more equity, etc). We have all our IO LOCs at just under 6% and we have no monthly account keeping fees for any of the loans. Once I have paid off the home mortgage, I will redirect the cashflow towards my investment properties (if prices are bad and it’s not worth buying), or if the market is good for buyers, look for another IP to buy.
I have no intention of selling any of my properties and our lines of credit are good for some 25 years. So, when I have to “payout” the LOC’s, I will be paying out the same dollar amount that I was originally charged way back in 1999, using today’s dollars! Not bad when you think about it – plus I claimed tax relief on all that interest.
I am reasonably confident that the properties would have appreciated in value over that 25 year period and I am comfortable with my current LVR’s.[
]Cheers,
Rowan
Designer,
I have invested in the inner south area of Canberra. 2 hour’s drive from Canberra covers a pretty wide chunk of land, including Wagga, the snowfields and Sydney [
]Are you after rural investments or do you want to know what’s good in the Canberra suburbs and surrounding districts such as Murrumbateman and Yass?
Rowan
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