Refinancing and equity extraction complete - confidence low

Having just refinanced my PPOR and extracted equity in a separate IO split for investment, I'm now in a position to start shopping for an IP.

However in the period I started educating myself on property as an investment vehicle, my confidence at jumping in has eroded. Not so much because of lack of knowledge or understanding (though I really want to keep improving here), more so broader market sentiment and related economic concerns looking ahead.

One only has to look across numerous threads here on PC where experienced investors seem to now be in a hold pattern, some even cashing in and getting out to a degree depending on the market. This really makes me wonder if now is a good time to buy in. Many months ago I was excited and thought it was a sure thing, but now my gut is telling me hold.

I'd be buying at the lower end of the market and as such have been investigating locations such as Hobart, close to the Ipswich CBD etc.

As a total noob, I'm wondering what others think about jumping with the current climate. There seems to be multiple indicators of concern that the ride, at least for the shorter-mid term may not be that great.

Or am I perhaps better holding at the moment, paying down the PPOR and being ready to jump with better timing. I hear sayings like 'time in the market' being key, yet others saying 'timing the market' especially with the latest lending restrictions is the new 'key'.

I know there are other assets classes to consider, but they scare me more if using leverage funds, plus one can't leverage said funds anywhere near as far as property.

 

I hope you also have income protection for the unforeseen event/s and how is your employment outlook like as well?

 

Yes I've got income insurance to 65 paying 75% .

I've been in the same employ for I think 12 years. Though that is a bit more a concern in recent times. The business has a new 1/2 owner/partner, and they are spending big on a new building, equipment etc, though work seems to be languishing (scary for this time of year in our industry). Talking to people on the ground in Brisbane at least things don't look too good business wise.

 

I am not buying now because I am already committed to a number of projects. If I was in the market to buy now, I would consider Adelaide. I'm not very confident about anywhere else right now.

This sounds sensible to me.

 

I posted this back in April: How do you take a breather and clear your head when investing? and I was in the same situation, funds drawn down and sitting in offset waiting for me.

I started to get scared, I am not ashamed to admit fear. I was questioning if it was the right thing and if I knew what I was doing, Had I analysed or did I just play with a calculator and get a number I liked, am I sure of what I am trying to do or am I just playing investor?

God it was hell and it took about 3 or 4 weeks before I pulled myself together.

I took a short break from being so active on the forums and I spent time doing other avocational things, in short I emptied my head of all of it, then I filled it back up with only the relevant information.

Then I took the leap and bought an IP.

It was my first one and as scary as it was, it was 5% scary and 95% exciting but 100% awesome. Take a break, have a breather, enjoy the journey without rushing to the destination .

Now? I got bloody hooked on the adrenaline of the purchase, now I want to go again..... and again..... and again..... and again..... and again..... and again lol

 

I still get buyers remorse on every purchase - before and after being locked in.

 

Cheers for the input everyone.

 

There are plenty of different markets out there at different stages of their cycles. You just need to research the markets that are going to help you reach your goals and implement a plan to get there. Do the numbers on the property at a higher interest rate and a couple of weeks vacancy just in case. Numbers don't lie so that will give you peace of mind if the numbers do stack up.

It's completely natural to be nervous at first. I didn't sleep well after my first IP purchase but as soon as I got that rent in my bank account I went searching for the next and the next after that.

 

Have run through a few stress tests on a spreadsheet?

Plug in a few scenarios and see what happens?

 

In my opinion there is never a bad time to buy in Australia. There are thousands and thousands of markets utilising so many strategies available that the opportunities are endless if you know where to buy and what strategy to employ. Usually when my peers (the investors I know personally) stop actively investing in the many markets available in Australia, it's not so much because of the markets themselves showing no opportunities, but much more to do with their own risk mitigation, balancing current investments/commitments with time available and part of a wider strategic plan.

I believe if your personally in a position to invest, meaning you have little to no debt, good income and serviceability, a buffer and decent knowledge - then there are always good opportunities across the country in the thousands of markets to be found, requiring varying strategies to make them financially fruitful. There are probably good opportunities in every single state right now. Just need to know where, what and how.

Just my 2 cents.

 

It is your choice, your checks, your money.

If you really freeze up, I will send my account number for you so you know it can be put to use ;-)

We live in a big country, different areas doing different things.

 

hammer, a fellow forum member has been kind enough to share with me a great spreadsheet to help with this .

Good points Leo & Tony.

dabbler, if you can shoot me that account ASAP that' be great

 

If you are fearful or timid you'll always find reasons not to invest:
Interest rates just went up
They may take away negative gearing
The Chinese aren't buying as much
Trump won the US election
I might be made redundant
The twin towers came down
A tsunami wiped out 270,000 people
The share market is booming maybe that's where I should invest
The share market crashed maybe I should buy gold
The residential tenancy Act has changed more in favour of tenants
I need a new car first
I'll wait till the kids finish high school
I might get an inheritance and invest some of that
....... take your pick or add your own.

As for me, l took the view that most of these worries never actually come to pass. So I'll invest and let those investments grow while I'm deciding what I want to do when I grow up.

 

I've never had that... though on my very first buy I should have shopped around more, (I realised all the negatives/less than brilliant aspects of it only afterwards) but I made a solid gain on that one anyway.

 

I've been waking up in the middle of the night with buyer's remorse and I'm only looking around while I get enough for my next deposit together

 

I hear ya. Looking to purchase a ppor in Melbourne and the market has jumped in country vic by 30-35% in last 5 years, bout 200k in the last 2-3 years and still selling strong. I can save 65k a year which is almost the same amount as it's going up every year. Everything tells me to wait(state of economy and interest rates rising) as I don't want to be the last person to jump onboard. But seeing prices rise so fast is playing with my emotions and I'm confused right now.

 

Logically pretty much every sign is that house prices shouldn't be rising right now in many markets.

Apartment oversupply
Rising interest rates
Poor GDP figures
Stagnant rents

Sometimes markets are totally illogical though. But if there is a crash, there are such glaring signs that people will be wondering how they were so blinded to the obvious.

 

great insights Spoony! Agree with you 100%, there's alot of negative noise and sentiment out there. Most of my peers are in white collar professional services and majority are always worried with negativity this, recession that - but the way I see it is if we head into a severe economic downturn, most people are stuffed anyway (being facetious) so I'd rather be the one who is able and ready to invest when that happens than always worrying irrespective of economic conditions

not knowing your personal circumstances and having only a vague idea of the markets you are identifying - wouldnt be able to comment on your personal circumstances, although have an end goal in mind, identify the right asset, understand your structures, manage your cash well and have an exit strategy seems to be the way to go (if PC has taught anything)!

 

I'm still in the process of finding my first IP.

My take is:

1. Leverage is good
2. Can you afford NOT to buy?
3. Will you willingly leave your retirement in the hands of the Government and whatever pension/super changes might happen in the next x decades?
4. Will I be able to leave something for my spawn?

The thought of #3 and #4 scare me. I feel like I have no choice but to invest in something to secure my financial independence in the future. I just happen to prefer a physical asset over shares.

 

Cheers everyone, lots of info, it's always good to hear ones not alone in these concerns too.

Great points, being ready to jump is always a good thing, but 'waiting' for the fall can cost you too. Timing is key but the tricky part is the diversity of Aussie real estate, so many markets, which in fairness does open up many opportunities. Though most (all?) of these markets are still vulnerable to a number of concerns raised through this thread, probably irrelevant of their current cycle?

I've pulled $84k out of my PPOR for this purpose. It's currently against a IO loan. So first IP budget I'm planning at the lower end of the market, $300k or so at most. The remaining PPOR loan is drawn to $172k, with about $22k available sitting against that. The longer term outlook is to pay down the PPOR while renovating it (as much my self as possible) to see some added CG on this property. It would be nice to achieve this over the next 5-6 years with an outlook to sell the PPOR with a relocation then on the cards.

The issue here is the relocation which would be regional has it's hurdles. While I'm on an average wage now, income may be more of a challenge with this relocation (Northern NSW/Northern Rivers most likely), the old Tree Change thing. So while I'll hopefully have the bulk of the money to buy another PPOR, they'll be a level of finance still needed they for the short fall vs current PPOR. As such IP's will need reasonable yields so as not to be too great a burden.

So the first IP isn't going to be an issue, the next without some CG in either PPOR or IP is going to be a bit of a struggle with current lending, and decent yields are going to be needed also I'd say to help with serviceability I'm sure.

The longer term plan is to have some level passive income to live on going in a more regional location. We've got a bit of a future semi-self sustained lifestyle ideal, so aim to help keep lifestyle costs down too. Oh and I'm 38