Forums / Community / Opinionated! / A tough lesson in property investing…

Viewing 13 posts - 1 through 13 (of 13 total)
  • Profile photo of chefspopchefspop
    Participant
    @chefspop
    Join Date: 2004
    Post Count: 7

    A few years ago in London I was walking along Oxford Street and I passed this shop front where they seemed to be selling electronic equipment really cheap. I went in there and along with about 40 other people I watched as they appeared to be giving away this stuff really cheap. They explained that the stuff was fully working and had just been opened and then returned to major shops. It was super cheap as the packaging had been damaged. Anyway it’s a long story but after about 45 minutes I, along with pretty much everybody there got fleeced out of £5.

    That was one of my first lessons in being conned but for £5 it was worth it as this operation was a work of art . Anyway today I feel a bit this way but I wouldn’t say I was so much conned as just stupid. Also this time it cost me about $50,000

    Probably around that same time in London I visited a property seminar on buying property in Melbourne. It was quite an event and at the end and after a few days I had put a 10% deposit down on a Central Equity apartment in Melbourne tower. At the time I remember thinking that it seemed a pretty good investment. 6% rental guarantee for 6 months after completion. Huge savings (in bold letters of course) off stamp duty. CBD location, low vacancy rate and all the trimmings. I also had an elderly woman called Dora or Veera or something like that telling me how great it was, honestly. Dora was probably late 50’s and telling me how if she had a son like me she would want him to buy the apartment. She already owned 2 and if she had more money she would buy a third.

    Looking back I was absolutely blinded. They would only hold the apartment for me for 24 hours while I did some research. The apartments seemed to be flying out the door so to speak. Get in while you can. They wouldn’t (or couldn’t as they told me) give me a copy of the contract to take home to look over but of course I could take a look right here in the same room the seminar was being held.

    Fast forward two years and I am looking at a serious over supply of apartments around Southbank, higher vacancy rates and very low yields. Attempting to get a loan has been difficult and the lender has valued the apartment at 10% less than what I am paying for it. Actually from what I hear I am one of the lucky ones. Some people’s apartments are valued at up to 30% less.

    Central Equity has been pretty unsympathetic. Any phone calls to them are met with pretty harsh tones and swift reminders of the penalties of not meeting settlement. I was lucky in that I was able to delay settlement somewhat but not for reasons of gaining finance as they have a group of ‘lenders’ that they know will lend you the money.

    I know the risks of investing and never did Central Equity give me any guarantee that values would go up and not drop. They only ever gave me estimates of rental return and vacancy rates. I am not blaming them as if there was such a thing as a sure thing in this world we would all be rich wouldn’t we.

    I am telling my story today as I have made what I consider to be a major mistake and unfortunately for me my first foray into property investing has been an expensive and disheartening one. I stupidly didn’t do the research and I got conned into a marketing spiel when I should have stepped back and taken my time.

    The property market has changed in Melbourne and also a lot of other places from where it was when I put that deposit down two years ago. If it had gone the other way I would probably be having a glass of champagne but instead I learnt an expensive and valuable lesson so I hope other people like me can come to sites like this and not make such a stupid mistake as I have made.

    Profile photo of richmondrichmond
    Participant
    @richmond
    Join Date: 2003
    Post Count: 831

    thanks for sharing the story chefspop.

    underlines the importance of due diligence and extensive research… hope your next experience is much better…

    cheers
    r

    Profile photo of Andrew_AAndrew_A
    Participant
    @andrew_a
    Join Date: 2003
    Post Count: 392

    Thanks for sharing Chefspop. Hopefully the experience you have gained will compensate for the lost dollars. Why is experience so expensive in life?

    Since 2000 The Beattie government in QLD has gotten serious on cracking down on two-tier marketeers. The rats have subsequently fled the ship so to speak and have been popping up in Sydney and Melbourne.

    Melbourne hi-rise projects have been a warm hideout for some of these rats unfortunately.

    WaySolid.

    “Write the wrongs that are done to you in sand, but write the good things that happen to you on marble.” Arab proverb

    Profile photo of SuperTedSuperTed
    Member
    @superted
    Join Date: 2003
    Post Count: 205

    Hey Chefspop, I was in London on holidays (nearly 2.5 yrs ago) and my wife was going for a job interview in an Intercon Hotel, so I popped into the seminar on the next floor.

    I kept thinking if this is so good why are these Aussies coming to London to flog it to the pommies ;-) Anyway I drunk their Coke, ate thier nibblys/sandwhiches (food is expensive in London), got a parker pen and killed an hr waiting for my wife to finish.

    I was happy with my short term deal ;-) Thanks for bringing back the memories (sorry about yrs though)

    Profile photo of Brenda IrwinBrenda Irwin
    Participant
    @brenda-irwin
    Join Date: 2003
    Post Count: 119

    Not only new apartment values can go down.

    I bought my own PPOR and thought I’d gotten a bargain at 17% below asking price. This was for an older established house in a country town.

    Unfortunately, shortly after, there had been a few mortgagee in possessions being processed in the area. The lenders were being extremely cautious in revaluing properties in the area.

    As a consequence, my ppor was revalued one year later at 14% below what I had originally paid for it.[blink]

    To my way of thinking, those apartments in your area, would have really appealed to high income earners who have a buy and forget about for about 10yrs or more attitude. They would then reassess things and figure out if it is worth hanging on to, or they have bought a crook investment and should sell it off. Investors like this would buy a few such investments, as well as other types of investing to spread out their risks. While their shares or managed funds are not rising, they may expect their realestate holdings to be doing better.

    The property market is open for ‘anyone’ to invest into and ordinary Joes who want to invest in spekkie apartments are not dissuaded from it. It is left for ‘Joe’ to work out if it is best for him or if he really should be looking elsewhere to invest.

    In my investing, if I am not sure about an investment, I pray about it and ask for the wisdom to make a good decision. It seems to work out well for me and if things aren’t going smoothly with a purchase, I take it as a sign and back off.[biggrin]

    If you want to get out of a hole, first stop digging.

    Profile photo of kay henrykay henry
    Member
    @kay-henry
    Join Date: 2003
    Post Count: 2,737

    Brenda, yep, properties can go down in value, too. I think people tend to hold onto a figure of how much properties have risen- even when times change. So a bank valuation on a sydney property- last done in June 2003, will probably look quite different if people get one done now. Or in fact, the REAL market value of a property is what it sells for. Many properties are now sitting on the market for longer, and no doubt, vendors are holding on to old values, and some will have to be more “realistic” to sell.

    chefspop, it isn’t surprising that your property went down 10%- it’s a changed market for many properties. I think even the marketeers have now changed their approach- they realise it is useless to say to people “when built, this property will have gone up by blah %”- because they know it isn’t true- actually, they know that people won’t believe it.

    It seems there are a few disgruntled Central Equity people on the forum- or at least one- hehe :)

    kay henry

    Profile photo of chefspopchefspop
    Participant
    @chefspop
    Join Date: 2004
    Post Count: 7

    Hi guys,

    Thanks for your responses. I guess it makes me feel a bit better to know that I haven’t been that stupid. I absolutely understand that property can fall as well as rise. I know a few disgruntled people who actually believed it when CE said the apartments would rise by x% amount by the time we needed to settle. I never bought that cause with any investment there is never a guarantee.

    I guess I just feel stupid because I bought into the hype and at the end of the day I feel I have got a bit of a lemon because of the reputation these apartments have. I hear from people in Australia ‘Oh I’d never by anything from CE. They have such a bad rep’. So by hearing people say that now I feel like the idiot that bought in.

    My intention was always to hold the property for sometime as I have lived in a few capital cities over the world and I have never really known there to be ‘too many’ apartments to live so long term I still believe it will work out. Still it doesn’t make it any easier to deal with the situation as it is now.

    CP.

    Profile photo of PurpleKissPurpleKiss
    Participant
    @purplekiss
    Join Date: 2003
    Post Count: 580

    Chefspop,

    $50,000 is a hard lesson but the experience will most likely make your future investments so much better that you may come out ahead in the long run. Don’t lose heart, but do learn from it.

    I bought my first property at 19, supposedly doing the right thing, but experience is definitley lacking at that age. Unforutanatley my finance was a Keystart loan that the governement promote as “getting low income earners into their own home”. Sounded good so I signed up, the catch was that the keystart loans at that stage, set the reapyment at 27% of your wage, when interest rates rose in the late 80’s, it meant I wasn’t paying all the interest when I made a repayment so the extra was added to the principle and I was charged interest on it all over again. I watched my loan rise from $54,000 to $61,000 and being on a low income at that stage, there wasn’t a thing I could do about it. To add insult to injury the property market then went down and the unit value dropped from $57,000 to $43,000. The loan was desgined that way as it expected properties to appreciate and therefore the value of the porperty would be more than the loan in time. Sounded good in theory, but it was my first lesson in not relying totally on capital gains!

    Good Luck for the future, I’m sure you’ll find a porperty niche that suits you and then you’ll do well.
    PK

    Profile photo of elika7264elika7264
    Member
    @elika7264
    Join Date: 2003
    Post Count: 160

    Hi Chefspop,

    read your post with interest. At the moment your situation looks rather gloomy.[8] But I feel there is a silver lining — provided the current demographic shift continues into the CBD and immediate surrounding area. At the moment there is over supply — no one doubts that fact. But as the population increases in size and people elect to live near or in the city, then the supply/demand ratio will shift and I believe that in the medium to long term some of these apartments (Southbank, Docklands, St. Kilda Road) might represent a good investment. So hang in there.[biggrin]

    Regards,[cap]
    Helen

    Profile photo of JoeCoolJoeCool
    Member
    @joecool
    Join Date: 2004
    Post Count: 9

    Chefpop,

    just to make you feel better i tell you my story with RE.

    I bought my first prop as a Devine package in 94 in Logan (sounth of Brisbane) because they were the only guys who did an LVR of 95% and since I didn’t have much deposit and wanted a place I signed up.
    I bought it for $115k then and probably paid a good $10 more then if I had bought the land myself and build the house. To make matter worse a few years later houses in the treet were selling for $80k etc. I still got that place today now of course its worth around $230k and is +ve….
    An even worse experience and loss of money happened to me second purchase. I bought it I think around 99 for $186k in Brisbane and due to long term unemployment was froced to sell it a year later for $202k. We all know hat happened in 2000 and beyond.
    Yep, you got it I just sold the damn thing when the RE took off, and I saw it today on the market for $430k….OUCH !!
    Hope this makes you feel better, because now that I relived it all for you I feel rotten.

    Cheers

    Profile photo of kay henrykay henry
    Member
    @kay-henry
    Join Date: 2003
    Post Count: 2,737

    hehe Joe @ “Hope this makes you feel better, because now that I relived it all for you I feel rotten.” Yer funny :)

    Chefspop, it’s a good point Joe made… in a few years time, you might be back on the Forum telling us what incredible capital gains you got. RE is a waiting game… not everyone makes their fortune in 5 minutes. Maybe you just have to wait it out.

    kay henry

    Profile photo of AUSPROPAUSPROP
    Participant
    @ausprop
    Join Date: 2003
    Post Count: 953

    yeh hey we’ve all been duped. I was in Perth on holidays once looking at top end property and wandered off track a bit, found a home open that appeared great value (a private sale I should add). The bank approved finance no problems and I engaged all the experts I could think of at that time, engineers etc. So I thought all was cool, then I found out later I had paid about 10% over the market. I assumed at the time that the bank would tell me if the valuation didn’t stack up, but hey they just took security over my other properties and shut up! Dumb I know… luckily time eroded my loss and I actually sold for a healthy profit after a few years.



    Extensive list of ‘Off The Plan’ property available for sale in Perth.

    John – 0419 198 856

    Profile photo of kay henrykay henry
    Member
    @kay-henry
    Join Date: 2003
    Post Count: 2,737

    Perhaps the lesson in this- and Ausprop just said it- is to keep the dogs… because in a few years time, they may become Best in Show :O)

    Really, if people sell at a loss- a 10% loss on a 600k unit in docklands, for example + costs (could be around 70k), then they have made a loss. Sometimes it’s better to keep it and make a profit later.

    kay henry

Viewing 13 posts - 1 through 13 (of 13 total)

You must be logged in to reply to this topic.