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  • Profile photo of wealth4life.comwealth4life.com
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    Several high level friends of ours are predicting worse to come. Low Doc home loans forclosurers are increasing at an alarming level, with one mortgage management company telling us that the only department in their group growing is the bank closure department. Credit card debt in australia is at new levels reaching over 30 billion dollars and people aren't paying their cards off but opting to get new ones with lower rates then max them out as well, some thing has to give here! The Perth boom is about to go the other way with reports saying that the average house sale is now dearer than QLD who has a larger population base. Banks are tightening their lending criteria and the valuers are getting harder on vals of residential properties. I am interested in finding out how many people that read these threads are really positive and what you believe is a good investment to get into. D

    Profile photo of mcdeyessmcdeyess
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    Have you thought about shares? The current commodities boom is going well thanks to our friends in China [biggrin]

    Though it is good to diversify I am guessing you were asking more specifically about property.
    I bought my first investment property a few years ago in QLD without knowing too much and just wanting to get into the game. It is going ok but I would like to be more informed and researched before buying again.
    Like yourself I am confused as to what direction the market is taking. For a long time I have looked at things like the massive debt held by individuals in Australia, and that is household not just credit card. I have felt that many people live beyond their means and when interest rates increase by a few % things are going to get tough. Your post suggests the more heavily geared are already hurting. In many respects I feel the current commodities boom is a major factor in keeping us afloat as a country. I am not sure what else there is going to be when that dries up. I don’t think there is going to be some massive drop in house prices, it is more likely that the market “levels out” to allow incomes to catch up and improve affordability. How long with that take….. who knows. Interest rates always play a big part and they are certainly creeping up. I have read that by mid – late 2007 or early 2008 affordability will be improved.
    I know that even in a “down” market money can be made by savvy investors but typically I believe people who play it conservative seek to invest for the long-term and reduce the debt in their portfolio. Others tell me that as the property market falls, shares often rise…. maybe those commodities aren’t looking so bad after all!

    I don’t think I have been very helpful, but I think this is a great question and would love to hear what the more experienced investors on this forum think.

    Cheers,
    [email protected]

    Profile photo of wealth4life.comwealth4life.com
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    Thanks for the reply

    So all you other readers here what are you investing in currently or are you not investing at all ?? with 42000 members surley there are some savey investors other than the “regurlar few” come on don’t be shy …

    D

    Profile photo of TurtleTurtle
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    Hi,

    as an investor and licenced real estate agent I find two things to be true.

    1) there is always bargains to be had in any market. Yes they are harder to find when the market is going south, but they are still there.

    2) The market is only as difficult for you as you let it be yourself…the more homework (due diligence) you do and the more self education you undertake the better off you will be regardless of market conditions.

    My point is – know the market and watch where it is going, but dont let it frighten you…you can’t change the market conditions, but you can change your reaction to it and its effect on you.

    The brisbane martket is apparently all over the place, but I have sold a number of properties to investors in the last few weeks because they have done their homework and know what to expect. Learn to know where to look, good properties are always there and good returns can be made with a bit of homework.

    hope this helps
    Grant

    Profile photo of Mortgage HunterMortgage Hunter
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    Originally posted by mcdeyess:

    Have you thought about shares? The current commodities boom is going well thanks to our friends in China [biggrin]

    A lot of money has recently moved from property into the share market. There is some speculation that the current share boom is almost done whilst others believe it has another year or two in it.

    As sure as night follows day it will end and money will move back to property.

    What type of investor are you?

    A contrarian who buys when others are selling and is positioned before the next boom but may have to hold that position until it comes.

    Or are you a trend follower who waits to see where people ar making money and then jumps in hoping to make some too? Just don’t wait too long or you will be like the thousands why buy at the top of each boom and wonder why they don’t make money.

    I am a buy and hold investor with a long term goal. I hold both property and shares. I spent last year adding more Managed Funds to my portfolio and am happy I did so. I am currently looking at buying another IP on the East Coast where the boom has been off for a while.

    Just my opinion as an investor and in no way is this advice to anyone.

    Cheers,

    Simon Macks
    Residential and Commercial Finance Broker
    ***NODOC @ 7.15% to 70% LVR***
    [email protected]
    0425 228 985

    Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.

    Profile photo of foundationfoundation
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    A lot of money has recently moved from property into the share market. There is some speculation that the current share boom is almost done whilst others believe it has another year or two in it.

    As sure as night follows day it will end and money will move back to property.

    I would say it’s not quite that simple. If this money that you say is due to flow back into real-estate is the product of debt (and / or debt-funded bubbles), the markets historically have demonstrated an interesting, though brutal way of absorbing excess liquidity…

    What type of investor are you?

    A contrarian who buys when others are selling and is positioned before the next boom but may have to hold that position until it comes.

    I gather you believe that there is some kind of contrarian ‘buy signal’ for residential real estate at this point of time? Do you disagree that currently (East coast specifically):

    – The majority believe that house prices never fall, they can only stop rising at worst.
    – The majority believe that house prices in the near future (anywhere from 1 to 5 years) will resume their steady upward march at rates in excess of inflation?
    – The majority would rate the chances of interest rates exceeding >10% within the next decade as near impossible?
    – The majority believe that in the long term, buying a house is a good investment?

    Now surely a contrarian would look at these 4 indicators (and many more) as forecasting bad things for house prices? Compare that to 1991-3.

    – Nearly everybody knows somebody (or of somebody) who has either had their house repossessed, sold at a loss or cannot afford to sell at a loss. Those that don’t are bombarded with hard-luck stories in the newspapers and current affairs.
    – Many home-owners are prepared to lock in 5 years at 12.9 percent because they think there is a decent chance interest rates are about to rise again and they’ll be forced to default on their mortgages.
    – The majority consider real estate investment to be speculative and risky.

    Perhaps a contrarian might consider manufacturing… [eh]

    F.[cowboy2]

    Profile photo of gmh454gmh454
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    Foundation thank you.

    Japan market peaked at 30k, tin late 80shink it is now around 15k.
    US market peaked at 11.7k in I think 2000 made it all the way back 11.5k before getting profit takersdropping it again

    Both of these followed exceptional booms, totally out of sync with rest of the world.

    Kind of like the Sydney property market of a few years ago (don’t mention Perth…please..)

    Profile photo of air_nittaair_nitta
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    I disagree about the Perth market slowing. Everyone is talking about the “bubble bursting” in the media over here in the wild west, but honesty if anything the market will just flatten.

    This wont happen for a long time. Perth has a lot going for it. Its closer to Asia and the pacific to attract immigration, the resources boom as we know is fueling the boom. Countries are lining up for its resources which is creating a fantastic economy. Further to this, 800 people are moving to Perth a week! Effectively, the equivalent of a population of a highschool is moving to WA! Thats amazing stuff.

    If you know Perth, you also will know how well the infrastructure is well set up for this kind of housing boom. I am originally from South Australia and I laugh when Perth citizens complain of traffic: its nothing! Comuting from Mount Lawley to Maddington for work everyday is a 20 minute drive (17ks) in peak hour – doing the speed limit as well i might add, naturally!

    The city is young and cultured, and is surrounded by many trees and the swan river. The public transport system is excellent, with the constantly delayed but ever building mandurah train line due in 2007. I predict AT LEAST another 3 years before the boom slows. I know there will be some skeptics, particularly sydney and nsw investors.

    I work in real estate in WA, and we have a database of over 10,000 people all looking for property in the area. The demand for land is incredible! you have to see it to believe it.

    ************************************************************************
    In saying that, i am increasingly concerned about credit card debt in australia and the lack of baby boomers looking to invest in their retirement. We tell our clients everyday, all you need is 6 properties in 10 years and you can retire with more money than you will ever need. Its that simple, but they say “no, i cant afford to invest”. You cant afford not to, its that simple.

    When the pension is gone, and their employer contributed super dries up in 10 years, 70 year old baby boomers will have to go back to work which is a terrible, terrible shame. I am bracing myself for the massive economic change we will no doubt experience and it will take something radical from the government to change the course for the boomers.

    rant over, how is that for a first post lol.

    [blink]

    Profile photo of Don NicolussiDon Nicolussi
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    most stuff you read from property authors and “gurus”, the tape set and seminars (have never been to one) talk about the wisdom of identifying opportunities (usually in a down or flat market) that the “herd” can not see. Why is it we all expect to get rich doing exactly the same thing as everyone else. Or in other words waiting for market forces to do ALL the work.

    cheers

    I Buy Property http://www.cashflowproperties.co.nz

    Don Nicolussi | Mortgage Broker - Home Loan Warehouse
    http://homeloanwarehouse.com.au
    Email Me | Phone Me

    "I think of finance as a technology, a way of getting things done." Robert Shiller

    Profile photo of wezwazwezwaz
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    air_nitta

    Even though you are in real estate, you must get your head out of the clouds. Every boom breaks. Will Perth go for another three years? My guess is that it probably won’t support rampant speculation for so long. Doesn’t mean to say it will come crashing down, but it will have a period where it remains flat. Of course, the people who rush in and buy at the top will wish they had never heard of property as an investment.

    When any boom is in progress, there’s always the “I can’t see any end to it” mentality. Step back and think about it. It has to end – there’s nothing surer. Nothing grows at extraordinary rates forever. You know, whether it be property or shares sometimes there are just no more buyers left to keep pushing prices higher. Then the music stops.

    Never think the property boom in WA won’t end because the resource boom is fueling it and there is “endless” growth in China to fuel resources. That’s going to have a day of reckoning as well. The best we can do is take advantage while these booms are in place.

    Wes.

    Profile photo of foundationfoundation
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    Originally posted by air_nitta:

    We tell our clients everyday, all you need is 6 properties in 10 years and you can retire with more money than you will ever need. Its that simple, but they say “no, i cant afford to invest”. You cant afford not to, its that simple.

    Welcome to the forum. My question may seem a bit harsh to a newcomer, but I’ll push on anyhow…
    Leaving aside the clear ethical and potential legal implications of this statement, I wonder if you could enlighten me as to how a 50-odd year old with moderate savings outside super and their PPOR will “retire with more money than [they] will ever need” if they purchase 6 properties?
    I can’t foresee any scenario under which this statement, if followed, would bear the promised fruit.

    Cheers, F.[cowboy2]

    Profile photo of bruhambruham
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    G’day all’

    I must be doing some thing right! Going against the “herd”.
    I ‘m in search of two dual – occ sites. Must be exactly to my requirements.
    As more people abandon property for shares, I must be doing “good”!!
    When I charged around the property scene in 1999, I bought anything I could lay my hands on. A BLOODY DISASTER!!!
    A FOOL AND HIS MONEY ARE SOON PARTED. Yes I stuffed up big time.
    Took three -four years to un-stuff the whole situation. And the money lost in time and selling etc still hurts like hell.

    Now I buy only dual -occ sites in “the” right location. As the property prices of Sydney’s northern beaches cool, I’m out about looking, looking and still looking.

    Steve Mc Knight once said that property investing isn’t easy. He got that right.
    I see properties that are nearly just right (almost perfect)
    but I think, careful idiot, no more stuff ups.

    Foundation, yes you would most definitely need more than six properties to live off.
    My strategy is direct shares, managed funds, listed property, un -listed property and of cause superannuation funds.
    Property comes a long last. I’ll be dead by the time they are of any benefit to the “kids”
    Investing is now a play thing for me. I’ve got mine. It’s now all about the “GRAVY ” for the “kids”.

    bruham.

    Profile photo of camdercamder
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    Greetings all,
    Admittedly foundation, that was a fairly broad statement that wealth4life has made but hopefully wealth4life chooses who he makes the satement to, and with using superannuation payouts at the end of his working life , a man may be able to pay off existing property debt, As to having more than you will need, dunno about that one but here is scenario for the forum!!!

    If I was to post that I could provide a property with a selling price of $190k and a gross income of $380/week -: Rates are about $2000 per year and in a town of about 9000 people.??
    Would the property be snapped up???? What a great scenario for Steve’s 11 second rule!
    When you buy these opportunities why worry about “booms” etc???

    It is not for sale at this stage , but this is a property that we just settled (“Jan 06) on for $150k plus legals and is a house divided into 3 flats with 3 more flats built on the back and council approved as 6 flat complex.
    Only one was tenanted at 85/week. We took a gamble on the need for single bedroom accommodation in this town !!
    We have spent approx $3000 building fees and maybe $3000 more when we have to repair water pipes (which we knew about)

    But as at today we have rented 4 (that is the 4 we spent money on ) for a total of $380 /week with one of the tenants caring for the lawn.
    So already this is a good return and there is more (no not steak knives)
    We have 2 more flats to reno and an achievable return of a further $180/week. (Maybe spending another $4000)
    That will be a gross return of $560/week for outlay of $168k .
    My point???? Well I am not sure myself and this is not boast


    (although I do feel somewhat vindicated for taking the gamble in the first place) It is also 2 blocks from the main street and 1012m. But , rather it is just a roundabout, snide comment on the negativity that is forthcoming in some of these forums and the constant stream of people looking for “deals” at their computer desk and not getting off their bums and looking harder .
    This is a town about 7 hours drive away form our PPOR but there is a saying “The harder you work the luckier you get”!
    BTW we are 58 years old and still working but still not sure if we will “have more than we need” at retirement.
    Again —“What is his point ????” Dunno really and in fact —Sorry if I bored you and maybe I should have just not posted anything but hey, I wrote all this so may as well send it.
    Cheers for now Len

    Profile photo of WylieWylie
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    We could live very happily on the rent that five fully owned houses in Brisbane would give us.

    Wylie

    Profile photo of foundationfoundation
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    Just to clarify, my question was directed to air_nitta, not wealth4life. air_nitta works in real estate, and appeared to be giving dodgy investment advice to his/her clients.
    I actually agree that 6 fully-owned average 3 bedroom houses in decent suburbs near a capital city should provide a fairly comfortable standard of living in retirement… but how is somebody near retirement age expected to pay for them?
    And Camden, no need to apologise, its always good to hear about positive real-life investing successes.

    Now to get back to the OP’s question, yes I think there is worse to come. I firmly believe that interest rates will continue to rise over the next few years, and I also believe that even at current levels they are causing considerable hardship. Any rise in IRs lowers the affordability and borrowing capacity – this in itself is enough to cap prices at best, and likely cause further declines in prices in already depressed areas.

    I’ll give a couple of anecdotal examples in my next post.
    Cheers, f.[cowboy2]

    Profile photo of DazzlingDazzling
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    Excellent work camden….very inspiring story indeed, and likely to improve further when you get units 5 and 6 up and running. I bet your finance provider thinks you are a top customer.

    Now where did you get that idea about getting off your bum and out from behind the computer and mixing it with the real world ?? Do you mean life cannot be downloaded or emailed to me as an attachment ??

    Excellent thoughts wylie….I’d love to catch up with you over a cup of tea, especially to pick your brains on the self management side of things. We do it as well, but you seem to have the runs on the board…..perhaps you are nicer with them than the wife and I.

    Need six properties to retire on ?? Hmmm, I reckon one big one would do it for me. I remember an older lady standing up and saying she only had one IP, but it was an office block that her deceased husband left her more than 30 years prior. It was renting for 1.1 MM p.a. nett, that’s $ 21,100 p.w. after all costs paid by the tenants. I think she was reasonably happy, and really didn’t need six of them. We really do need to get away from these average smo 3 bed houses renting for $ 180 p.w. to get anywhere. Anyone actively promoting these or similar needs to have a good hard look at themselves.

    Property has been reasonably kind to us over the past good while, especially the last 2 years….yes I’m in Perth. We are looking to purchase again, probably a dirty big block of dirt. Our spirits are high, and if the WA media are talking gloom and doom, then we actually take comfort from that. We concentrate on specific contract details, both sales and leasing contracts and the nitty gritty therein. What Mr Rossen (the Prez of the REIWA) is quoted as saying, usually has very little bearing on real life out there where it’s every dog for itself.

    What the “property market” as a residential median is doing…..has absolutely zero bearing on what we do.

    As I’ve noted on the forum before, don’t fly up in the stratosphere looking at the “market” on a macro level…..you’ll go blind and broke trying to figure out all of the gobbledegook, with far smarter individuals with access to every piece of data coming out their ying yang trying to convince you one way or the other.

    Instead, get down on your hands and knees and scrummage through the weeds, sniffing out the gems in the rough that the other more intelligent people have already “surfed” over. Sometimes they are absolute crackers.

    Good luck everyone.

    OK, Foundation, bring on the misery stories.

    Profile photo of foundationfoundation
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    Sure, here comes an interest rate related misery story. This was related to me over lunch yesterday, and I’ve embellished it only with interest rates and repayment approximations. The rest is as was. It happened to the brother of a close friend ([rolleyesanim] yeah, I know). She was amazed how trapped he had become…

    2BR townhouse purchased, mid-south(?) Sydney 2002. Purchase price $365000, 10% deposit plus costs. 3 year fixed interest rate at a touch over 6%.

    Forward 3 1/2 years.

    Fixed interest period has run out. Repayments jump up from around $800 f/n to over $950 f/n. Further interest rate rises would cause financial pain.

    Option 1) Lock in another fixed interest period
    Option 2) Sell up and rent for half the price

    Young fellow explores option 1. Rates offered by current (non-bank) lender are high, so he tries another lender – 3 yrs @ 6.71% – not too bad. Application approved subject to valuation… which comes in at $295,000…[eh] Panic yet?

    Time to at least think about option 2. Estate agent appraises the house at $330k asking price, but “you’ll need to consider offers around $310-315k”.[crying]

    Cripes! Back to the current lender to talk things over. They’re refusing to negotiate their high fixed rates, and he explains that he’s considering selling up, at which point he’s told in no uncertain terms that he “requires our permission before offering the house for sale”! Wha….?[grrr] He’s told this is a no-go unless he can convince a bank to give him between $10 and $20k in unsecured personal loan, depending on sale price…

    …but the story does look like having a happy ending. The lad has just left for the greener pastures of Birmingham, England and a salary of 60,000 pounds as a mid-level public servant (!! what’s that in AU?!). Fortunately their parents have offered to make up any shortfall and the house is now on the market.

    Is this likely to be a one-off, or are similar situations occurring in all the eastern cities?

    And finally, to cement my position as the doomiest and gloomiest “valued forum member”; as I already stated, I am expecting further rate rises this year and next, and barring significant changes to the world economy more after that. The result may very well be large numbers of people realising that debt has them ‘tied to the wheel’ of 9to5. The words “wage-slave” will not be used in jovial conversation, and the literal meaning of mortgage will be well understood…[biggrin]

    Cheerios, F.[cowboy2]

    Profile photo of bruhambruham
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    foundation,

    I believe every word of your post. People are telling me stories of near forced sales due to no growth in the market. negative gearing
    sucks if you have your hand continuously in your own pocket covering negative gearing costs. No capital growth. Just capital loss.
    One fellow sold at a loss of eighty thousand dollars just so he could escape the tread mill.
    I’ve been in this situation, so I know how he feels.
    This is one of many property sob stories going around Sydney .

    For you “sandgroppers” there’s a story that W.A. property is a bubble ready to explode.
    I checked out some of Perth’s suburbs yesterday. The prices of property that you couldn’t give away two years ago is beyond belief.
    Four hundred thousand dollars for three bedroom houses out in the sticks.
    Perth is now dearer than Queensland. Now that is unbelievable !!!!
    Jumping into the Perth property market is now gambling.

    bruham.

    Profile photo of AUSPROPAUSPROP
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    I know of some Perth investors that are going to Qld for cheap deals. They may be cheap but it needs to be in relation to the strength of population movements and economic growth. I hadnt even heard of the suburbs that the guy mentioned. Sydney is looking cheap too but NSW seems to be in economic dire straits and from what I can gather is it is still not a good idea to buy there i.e. trending down? Unfortunately reigning in the growth states thru higher interest rates will punish the slower states but it may be a reality the way things are going. interetsing times, as they all are. It’s different this time, just as every new day is.

    Profile photo of redwingredwing
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    many people looking at Melbourne as well(plus SA and NT still making moves)

    “Money is a currency, like electricity and it requires momentum to make it Effective”

    Online Positive Cashflow and Renovating Calculators

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