The only way Isn't up

Discussion in 'Property Market Economics' started by MTR, 7th Feb, 2018.

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  1. Illusivedreams

    Illusivedreams Well-Known Member

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    Have not sold one yet.

    All but 2 rents renewed within the last 90 days no tent reductions.
    Also managed .15% reduction of PPR loan

    We are in a very healthy LVR and with have good amount of loans with this institutions.

    Alot of buying ops now and.more coming no doubt.

    Investors alot on here with healthy portfolio's will not have any issues
     
  2. Sackie

    Sackie Well-Known Member Premium Member

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    Basically those who planted well and cleaned up in summer are now looking forward to new buying opportunities come winter.

    Imo its probably the best sequence of steps with inventing.
     
  3. MTR

    MTR Material Girl Premium Member

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    Yep, buy on a rise, either sell or access equity prior to peak...... rinse and repeat


    However...one hiccup.... credit squeeze, investors may have issues sourcing loans moving forward
     
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  4. Sackie

    Sackie Well-Known Member Premium Member

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    I'm sure heaps are having issues with finance. It's such a great feeling not having to rely on finance.
     
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  5. jins13

    jins13 Well-Known Member

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    It's funny because I had a lengthy phone conversation with my managing agent who I've had a professional relationship with him when I first commenced in my investing journey and he commenced his agency. He felt that there will be many fire sales happening soon (NSW) and to expect some reductions in rental return. He also expects that it's going to be flat for the next five years as well. I guess that's something which we already know, so nothing new.
     
  6. Silverson

    Silverson Well-Known Member

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    You are definitely talking about the minority here and when I say minority I would go as far as saying sub 3% of the population can buy real estate without having to rely on finance with the exception of those who have sold and have cash waiting.
    I always like following your posts and love your positive outlook and attitude toward the property market however truth be told this outlook only makes sense to me if holding for more then a decade at a minimum, then the holding costs vs the dismal yields come into play.
     
  7. MTR

    MTR Material Girl Premium Member

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    Yes, the credit squeeze the nail in the coffin
     
  8. MTR

    MTR Material Girl Premium Member

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    Yes, I know quite a number of successful developers who can not source finance. This is the new norm.

    What does this mean? prices will drop. I am getting phone calls from RE agents in Melb that can not sell development sites. Also near impossible getting finance for 4+ unit sites.

    I guess the worm will turn one day, until then most will be treading water
     
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  9. jins13

    jins13 Well-Known Member

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    The credit squeeze and also the conversion of the loans converting to PI as well. It's been a good run and grateful that I was able to take advantage with some of the purchases. I guess overall my overall portfolio is worth less than a year ago, but it's a long game and as long as I have good tenants, I'm happy.
     
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  10. MTR

    MTR Material Girl Premium Member

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    Yes this is very serious, I have been whinging about a recent loan with AMP where it was converting from IO to I&P, which was going to cost me $3000 above my loan per month:mad:

    I had to change lenders which meant I had to get my house valued (bank), and provide tax returns/income.

    Fortunately I was able to do this, moved to Resimac at 3.99% IO.

    I also know an investor who has gone from cash flow positive to $11,000 pm due to conversion from IP to I&P.

    Can you just imagine those investors who are retired now and have many properties which are now reverting from IO to I&P. How can they meet the service criteria if they only have the rental income and if their properties are now going backwards … it could get quite ugly.

    This is just the beginning and why I can see that the property markets will continue to flat line or fall as investors will have no choice but to sell which means more stock comes to market. Who will soak this up???? if you cant service loans you cant buy
     
  11. wylie

    wylie Moderator Staff Member

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    Any investors who are retired and have loans reverting from IO to P&I should have looked at this, surely, as part of their retirement plans.

    We certainly have known that our IO periods will be expiring and the dates this will happen.
     
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  12. Someguy

    Someguy Well-Known Member

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    I can’t see significant wage growth any time in future. The rise of the gig economy, fall of unions, higher percentage of people with university degrees (thus competition and devaluing) and rampant underemployment will all keep a lid on wage growth no matter how low our unemployment goes.

    Credit easing and rate drops are things I could see happen in attempt to keep the property market alive though I doubt the effectiveness of a rate drop as it only increase confidence and not necessarily lending capacity
     
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  13. MTR

    MTR Material Girl Premium Member

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    If it were that simple? How do you plan for changes, when you don't know what the changes will be?

    Some guidelines - for example you can not extend IO loans for an additional 5 years unless you meet servicing criteria, this is new. In the past it was a phone call to the bank, presto, extend additional 5 years. What if investors retired and planned for that additional window of 5 years? Not unreasonable considering it was in black and white.

    With some banks if you are over 50 years they will not extend IO regardless whether you can service or not.
    Servicing criteria has changed significantly. This is not something that investors can necessarily plan for, it has recently happened, and its still evolving.

    It will impact on all investors, already happening, and why we are seeing markets softening.

    Fears of housing 'fire sale' as interest-only loans roll into full repayment


    MTR:)
     
  14. wylie

    wylie Moderator Staff Member

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    But we have know for years what the changes will be. Even in the past if we've asked (and possibly been approved) an extension of IO, we do have a letter stating the year our next one will move from IO to P&I. Anyone assuming they can extend IO is taking a risk.

    We have one ending this year and another in 2025. I've asked about extending the first one, but don't expect that will be approved. But I've pre-planned on how to pay the extra.
     
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  15. MTR

    MTR Material Girl Premium Member

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    Never had a problem in the past extending IO, been doing this for years.
    This is however the new norm for banks, not something that investors have seen in the past.

    I have been banging on it for a while now.

    Fall out will be huge.....its literally going to kill some investors, where they will need to offload.

    This reminds me when banks abolished low doc and no doc, there was blood on the street
     
  16. wylie

    wylie Moderator Staff Member

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    My point is that now we are retired, I've factored in that we no longer will be able to extend the IO period. That is not new or "news" for those of us who have planned for our retirement.

    Sure, there must be some people who have extensive loans who've not thought about it, but I'd suspect most with big loans will at lease have thought about this if they are approaching retirement. Things must be planned, and this is but one of the things to be considered.

    And those not approaching retirement, who are shocked or surprised at the inability to extend the IO period will have some choices to make. With a big loan, they may have to look at refinancing, or selling a property. But most would try to hold on I'd say (it holding makes financial sense in all other respects).

    Whenever something like this has happened, we've found a way to hold on. Other times, we've chosen to sell, but never for this IO to P&I reason. Lifestyle reasons... yes.
     
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  17. MTR

    MTR Material Girl Premium Member

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    Thats good, but you cant assume everyone will do this. We just dont know
     
  18. euro73

    euro73 Well-Known Member Business Member

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    The P&I "cliff" has been discussed a lot on these forums for several years now......

    I have been warning those investors with IO loans and immature yields to recalibrate their portfolio's for several years. Whether that involved keeping what they already had and adding a granny flat for some additional cash flow, or keeping what they had and buying a cash cow or two, or offloading some properties and replacing them with some cash cows - it was , and remains, important that investors can not only BUY a portfolio but also HOLD a portfolio. Otherwise you may find yourself forced to sell in a market where many others are also being forced to sell. Sadly, too may people I talk to every day , and too may people on these forums , are still looking for the growth silver bullet/fast track to wealth rather than changing tact to cash flow + debt reduction... the only safe and secure strategy for a constrained credit environment.

    This hasn't just popped up in January 2019. Its been well documented and well discussed for a good few years now. So without trying to be mean, at this stage - right here right now in 2019 - anyone running into cash flow /holding issues only has themselves to blame. They have had plenty of time and plenty of warnings to recalibrate their portfolio's in preparation for these things.
     
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  19. MTR

    MTR Material Girl Premium Member

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    Nothing about this is mean, it is what it is
     
  20. Sackie

    Sackie Well-Known Member Premium Member

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    Agree, and I'm not suggesting contrary to that,

    It also makes sense (having a positive outlook) if your adding value and manufacturing your own profits, which is what I mainly focus on.