Does Property Build Wealth?

Really, I am not convinced that this is the case.

I think the total opposite, most investors will not use Trusts.

I only started using Trusts around 3 years ago once I started developing property , after advice from my accountant, prior to this every property was in personal name.

Regardless, how many people do you actually know in the real world that own more than 2 properties, other than investors that you associate on this forum, I am talking family and friends, I only know 2 people.

 

Couldn't agree more, Quality over quantity wins and having a super high risk plan with little equity and masses of debt in the hope of speculative growth is not every ones idea of smart investing.

 

I've been lurking Somersoft & here for 4-5ish years now (think my first SS post was about 4 years ago) and I've read enough threads to see that there are definitely people who had a tonne of success by taking on (what I personally think is insane levels of) leverage & risk, then riding boom markets.

While i'm pretty confident any property bought in 2016 is going to have seen decent growth in 2036, I don't think we're going to see anything like what happened fairly recently. The 2000's boom makes sense to me, you can't have a romper mining/commodities boom & see the ASX absolutely soar without it spilling into other asset classes. I also believe it was compounded by fairly mediocre town planning (50's/60's style focus on 'burbs, cars & roads) which has made anything inner a finite resource with very large demand but given:

• Slow down in commodities
• Increased government oversight into banking & lending
• Growing xenophobia toward OS (Chinese) money
• Housing affordability growing importance as a political/election issue
• State & Fed government finally willing to start playing nice and doing a better job at public transport infrastructure (lowering some of the pressure on inner living)

I wouldn't want to be betting on this happening again in the near future:



My crystal ball is just as inaccurate as every other punter's but spinning the wheel on a high leverage / high neg gear portfolio because it paid off in the past just doesn't seem like a brilliant future move to me.

 

HI P
I can also tell you that I know investors who have taken a shirt load of risk and also gone into bankruptcy. LVR to the hilt is absolutely fine, but get the timing wrong and you will go backwards very fast.

There is absolutely no secret to property investing or investing in general, you make money when markets are booming/rising..... regardless of the strategy, you can actually sit on your hands because the market is doing all the work.

Anyone who purchased over the last 4 years in Sydney, Melb, Perth which all recorded double digit growth, and some investors doubled their money. I would be gobsmacked if investors did not make money in these markets (metro), no brainer.

There is no point relying totally on tables and graphs IMO etc. because it shows a pattern but does not at all mean history will repeat itself and it also does not show the big picture which can be misleading. In recent boom cycles what happened was not at all close to what happened in previous booms cycles for all the States above that I have mentioned.

We are now seeing changing property markets and will investors make money when its close to the peak? the risk is much higher now.

The comments that we will never see the same growth in the future is a very common statement, I read it often on this forum and SS, I totally ignore this stuff because it makes no sense to me whatsoever.... property works only one way, supply vs demand, its really that simple. Markets can be effected by - immigration, economy, finance tightening, interest rates, market sentiment, job losses etc.

If we revisit the recent booming markets it is relatively easy to identify why markets boomed and it always comes back to supply and demand, however the reason why there is a demand may be very different for each State.

MTR

 

Wealth builds itself, which is the market really.
You just got to get in the way of it with various tools to capture some, could be property, shares, business, etc.
Most people use an umbrella to avoid getting rained on by wealth.
You got to turn that umbrella upside down and catch the wealth which falls everywhere.

 

I edited out a few of your sentences to be a bit more concise, but yeah broadly I agree with this. Markets don't boom in isolation.

While I wouldn't say that we will never see the same growth (I ~think~ we probably will, just need to wait for China or similar to have its next growth spurt. Global population growth isn't slowing, we still have a tonne of stuff we can dig up) I don't think its reasonable to assume the recent performance & growth that we've seen in the cities you mentioned (Melbourne, Sydney, Perth) are going to keep booming like they have. I could be wrong, it wouldn't be the first time, but my magic eight ball says "ask again later".

 

Maybe I'm way off, but I like the theory of buying when you can afford to, irrespective of the market conditions and holding long term. A bit like dollar cost averaging with the share market. The aim would always be that, one day, it would be worth more than the day it was bought. Yeah, its speculative, but it's all I've got.

 

But whats stopping you from approaching it in perhaps a better way..?

 

Nothing wrong with this, most people do this. However, it makes sense to buy/go hard when the market is hot because boom cycles generally last on average around 3? years therefore you can maximise the profits.

Holding long term is not bad, however if you have a choice to make money in a shorter time frame which would you pick? cost averaging is just that, average and long term, eventually it will reap rewards. All to their own.

MTR

 

What you are doing Is speculative, you are holding long term for potential growth, could be years, bust cycles could be 7+ years.

If you are buying when markets have already started rising and you understand when and where it happened.....then what is speculative??

 

with trusts i assume (and i could be entirely wrong) that individuals who are trustees would be included in the stats but corporate trustees wouldnt.

thoughts @Paul@PFI @Terry_w ?

 

@MTR I am sure that you know that what most people do isn't really a great example...Not trying to be picky at you at all just stating something important imo.

 

Yes, because a trust is a relationship behind the scenes, it is not known if a land owner is acting as trustee or not.

 

Not really sure what you mean? however, on this forum my assumption is that the majority of people are buy and hold.

It seems clear by the amount of threads and comments, most on PC are not too interested in strategising, the main plan is to continue accumulating, increasing debt with the belief that property will double every 7-10 years regardless and buy whenever you can, not too much consideration to market conditions??

Of course there will be some that are active investors but in the main they are passive investors.

BTW, I am not stating that what I am doing is better than what you or anyone else is doing I am just presenting some facts for discussion.

MTR

 

Totally agree with this. But what is too much debt or to little equity? It will differ for some during your age etc. but is there a rule of thumb?

 

[QUO"MTR, post: 208215, member: 349"]Not really sure what you mean? however, on this forum my assumption is that the majority of people are buy and hold.


All good @MTR, I was really referring to the comment @Allgood made "irrespective of the market conditions and holding long term". As you know this is what happens when people for example buy at say 11-12 o'clock and are expecting to have decent CG in the say medium term. We know that scenario is not optimal to say the least.

BTW, I am not stating that what I am doing is better than what you or anyone else is doing I am just presenting some facts for discussion.

Perhaps your approach is 'better' than mine or someone else's who has a similar strategy but can learn from you or me or someone else to improve it in way that makes it more efficient, less risky with better potential for cg etc. I so often see the notion peddled that "there is no right or wrong, and we each do what suits us". That is such BS imo. There is definitely 'right and 'wrong'. When is buying OTP at 11 oclock with the goal to leverage off it soon after into prop 2 ever the 'right' thing to do....yeah of course someone will come forward and say well hang on it worked out well for me. But for the majority of cases.. we both know it aint gonna be the case. Anyway I am agreeing with your last post really, and my comments here are not directed at you (I know you get it) but just my thoughts on this matter.

Cheers

 

Its very interesting how many people have lost money from following so called experts, property gurus/spruikers, lets see - Real Wealth Creation, Dymphia Boholt to name a few.

So getting the right advice is critical. however how do you know? you don't know what you don't know.

For me its about the TRACK RECORD, no point taking advice from someone who is not making money for themselves and their clients.

MTR

 

So are you saying over the last 50 odd years well located property in metro areas has not doubled every 7-10 years and buy and hold is not a valid strategy?

Market condition do make sense and I agree there is merit in property clock and spending some time trying to study the recent market activity and whether there is a good possibility of boom. But let's be honest. If you can predict these things with certainty all the time most people would have sold everything and just bought in Perth in 2005 and Sydney in 2012. But not everybody can get that timing right correct? Lots of people have been predicting Brisbane to boom for past 2 years but there is no boom based on figures I am seeing and no one can say with certainty when and how much it will boom by.

Cheers,
Oracle.

 

Hi Oracle

If you believe this then it will be your reality, sorry for the pop psych comment, but timing is not that hard to get right. I am not a brain surgeon, I never even went to Uni

What has predictions got to do with it??????You don't have to jump in prior to the rise this would be hard for anyone to get right, you need to get into it when it starts rising and the indicators will be clear to everyone. However, most will fluff around and do nothing and then jump in when its too late.

Over 50 years property has gone up, down, sideways etc. but we all know this.

Its not rocket science buy when the market is rising, you will make money, buy when the market is falling you will lose money. Its fact... history has proven this, I am simply stating that it makes sense for investors to become an expert of markets.

But you can have a pretty good idea when a market is hotting up and you don't need graphs for this. Stock is tight, property sells in much short time frame, there are many buyers in the market and not enough stock, multiple offers, agents give you a heads up if you network with them and they are also a key to finding opportunities.

No it wont be perfect but if I became financially free in 7 years and followed 6 boom cycles during this period prior to developing purely by cashing in on growth and I am average Jill why cant anyone else??

 

Sorry, I think we've all confused each other. What I mean is that rightly or wrongly I don't have the time or resources to spend every day watching every micro market in the country and choose not to throw at huge amounts of cash flow towards a negative property as others here might. I certainly agree that there are, faster, more lucrative ways to play the game, but surely if it's my approach vs doing nothing, then buying a few, paying down some debt and forgetting about them until retirement isn't a bad retirement plan.... as opposed to doing nothing at all. Heck, if 10 properties make 100k each over their lifetime, that's a mill I would not have had if I did nothing. Obviously when looking at an area as part of my due diligence I consider where it is on the property cycle but I wont be waiting until the minute before the next boom to try to pick the next golden suburb, rather buy what I think will do well long term when I can afford it.

I think everyone here who has success picking the next hotspot do an awesome job, I just hope to ride on their coat tales!