Screw Property Investors

While not ideal, if the current Labor policy is implemented then it's not the end of the world for me.

I'm a property investor and I'm not dead yet

The changes haven't affected me yet. Maybe when I try for my next loan? We will see.

All my loans have reverted to P&I except one. At the same time I increased my income so no net difference really. I started getting ready for this in 2015

 

Businesses go bust all the time because because of making poor decisions, especially if they get it wrong during the buying process
How many times do you hear of people overpaying for a business and then the good times come to an end and they are over exposed.

 

@Perthguy,
Risk is not around those who can but those who can't,
The Reserve Bank estimates around $120 billion in loans will convert to traditional principal and interest loans every year between 2018 and 2021, that's close to half a trillion and represent a significant number of loans.

It doesn't take a lot of forced sales to create the panic, and then FONGO kicks in.
The same hysteria which drives up drives it down.

 

I was responding to the comment

"Dear investors...........We may be royally screwed"

with "not all of us"

I stand by my comment.

We are not all royally screwed. Fact.

 

None of the investors in my circle of friends feel they will be royally screwed. Quite the opposite, we are all generally very excited about what opportunities lay ahead.

You will find experienced and successful investors are far from fretting. They are generally very optimistic, trying to identify the best opportunities and then planning how to best capitalize on them.

 

There will always be winners and losers.... managing risk is key

Most critical atm are the investors who can no longer source finance and the real risk of oversupply due to credit squeeze

Its not if..... we are now seeing this

If you can turn lemons into lemonade great.... show us the numbers or anything that makes sense atm

I know of at least 4 developers who have been caught with their pants down

By this I mean they can not sell the product and also the strategy of selling the DA no longer stacks up ......oversupply and builders can not source finance

 

Don't bet on it. Labor's policies are brutal. I refer back to QLD State Labor under Palaszczuk and their May 2017 Budget - Land Tax & Absentee Surcharge for any Aussie citizens who owns a property in QLD over $350k land value who is overseas more than 6 months in a financial year.

They made it retrospective (they backdated anyone overseas since 1 July 2016) . I was overseas at the time - 4 months since I had invested my Super payout into a run down QLD property - so will take about ten years to break even on outlays - and had already racked up over 6 months on an extended trip.

I got smashed with that tax, but even worse, I also had racked up another 6 months for 2017-2018 financial year as well. All up I am stuck with over $11,000 already in taxes - for a self funded retiree who lives off the equivalent of a pension income. Now forced to stay in Australia for more than 6 months a year with no fixed abode soon, to avoid the taxes - basically I am a prisoner of the State until I am 'allowed' to go and travel & stay where I want.

I was unable to return to Australia too because I was struck down with serious medical problems and was not fit to fly as per doctor's directions for several months. OSR QLD said there is no exemptions for medical causes for absenteeism.

Federal Labor has the same punitive style mindset when implementing legislation. They are very socialist/Communist minded (blind Freddy can see that) and see property investors as the 'elite'. I am branded as being 'rich' by QLD Labor (as per what the Property Council of Australia was told about QLD absentees by Labor) when that could not be further from the truth. They are on another planet.

Totally permanent disability with no prospect of being able to ever work again and having to live off my early Super payout to survive. Labor is a complete joke. If Shorten's team gets in then the pain is going to be exponential. He also wants to halve the 50% Capital Gains Tax Discount too. That is down to 25%. Making it harder and harder each time to make money on property.

 

I would assume most starting out investors, who accumulate with greed, hence high LVRs may be in trouble....? I would presume most on this forum have plans B, C, D etc for changes.....?
All it means for me is that I may take longer now to duplicate again.
I am an investor though not a generator of income just via RE, I generate income from our business and in part put that towards RE, for alternative passive income.
Actually, some of my IO loans will expire in 2.5 years so I am actually thinking of buying in QLD at the moment, so different horses for different courses!

 

Can you give everybody a bit more info on your plight?

If you were stuck on a pension, and overseas but being branded as rich, this sounds awful.

And what happened to your rundown property that you invested your super payout into? Did it become productive at some point or require a substantial capital injection of funds?

 

Thanks,
Not on a pension funded by the government. Medically retired and awarded a lump sum for my permanent disability - equivalent to about 8 years salary. That was not enough to live off as only 48 years old. Needed to urgently work out a way to become a 'self funded retiree'.

so, I cashed out my Superannuation as well. That way I could invest the combined money to draw an income stream. The disability lump sum I got effectively ruled me out of being entitled to any government assistance because I exceeded the assets threshold - a Catch 22.

I got access to my Super under the Total Permanent Disability rules. That Super - my nest egg for retirement paid out early minus a huge tax deducted.

The run-down property I over-capitalised on due to being deceived and misled by the buyer's agent as to how much I would need to spend on it. The property was also not a 'bargain' as I had been told but rather way overpriced. I was basically hoodwinked. I have no legal recourse.

As a result, overall costs have severely overshot my initial budget. Adding salt to the wounds was the apparent significant increase in rent I was told to expect. $70,000 renovations basically just put rent at standard rate or maybe $20 above.

Not in a good way when seeking advice from the so called experts and should never have been told to invest in Qld with Absentee and Land Taxes not compatible with retirees spending time overseas. They were made well aware of my circumstances and my vulnerability. I was an easy target unfortunately.

Recent appraisals by more reputable agents, after renovations, put my property in a price range that starts $35,000 above purchase price when I have invested more than $120,000 over purchase price and more than 1.5 years of 'capital appreciation' since settlement .

With Land tax & Absentee Surcharges that are extremely exorbitant, usual taxes, rates, maintenance and fees on top of that, rental income charged at highest non-resident income tax rate, I am left with little after to use for myself.

As the years progress and land valuations increase the land value, my rental income will be wiped out to cover costs and I will also need to pay extra to service the taxes. It is already not far off being a liability.
Plus CGT implications (Foreign Resident Rate meaning no CGT discount and higher CGT rate) I will be forced to sell it at a loss. Ironically I will be subject to a 'Capital Gains Tax' when overall the investment equates to a massive loss!!

The only way out of this hole is to remain a resident and not leave Australia for more than 6 months in a year. A good part of my treatment was convalescing overseas - being far more conducive to a better health outcome.

Now I am basically a prisoner of Australia for 6 months a year, not allowed to step one foot outside or pay the huge taxes. Thanks to QLD laws. But cost of living in Australia is sending me backwards. But yet another Catch 22 situation on losing if I stay, but also losing if I go back overseas to reduce living costs. The impact on my health is currently very dire. Not looking good. Getting things in order as a result.

 

there will certainly be plenty of buying opportunities when this happens more frequently

Its interesting when you look at the stats (assuming these are accurate ☺)

6.2% of population has an ip (1.5M). Of those

72% investors have 1ip (1.09M)
19% have 2ips (295k)
7% have 3 ip (100K)
...
If you make the assumption that most 1 and 2 ip owners can weather an io to pi storm its only a very small number of 3+ ip investors spread out over many areas who are going to get hammered. Only a portion of these will sell. If negative gearing was removed and not grandfathered well thats a different story

The real impact on the market is negative sentiment, constrained ability to access credit and rising rates for the rest of the population that has the potential to do the most damage.

 

Dont forget people with even one property and that goes backwards in price and they have some major repairs, some of these people flog it off as it becomes to all to hard. Now imagine when someone has 2 or more in same state and pay large land tax bill and multiple major repairs come up and prices dropping...

 

Gosh if I only had that situation....?
Just repainted and re-carpeted and installed air conditioners in 3 houses. Pay hugeeeeeeee land tax bills, which sometimes makes me wonder if should sell some, but no not really, what's the point of you build such a large asset base. Hopefully QLD OSR won't stay too greedy, they have not CPI-ed the land tax thresholds since I started investing there 18 years ago.
In addition two bathrooms need major overhall, and another houses' retaining wall needs to be fixed, costs in thousands....but I keep persevering on.
I think you are right many investors who may be in early years in their investment journey may give up, I just try to concentrate on the large picture ahead, appreciating in value my large asset base. It is not easy but I just deal with it like with any other business challenges...either that or sell.