The Psychology of Declining Markets....

Discussion in 'Investor Psychology & Mindset' started by sash, 28th Jan, 2016.

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  1. teetotal

    teetotal Well-Known Member

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    Depends what is "retired" in your dictionary.
    Nobody mentioned it in this thread though.

    My opinion, Retired = no mortgage, regular NET passive income from rent which is equal to what one may be earning atm. And above all having time to do whatever you want to do rather than spending time at work to earn that living.
    Your definition seems incorrect.
     
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  2. MTR

    MTR Well-Known Member

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    Similar to you:)
    I have now been through 6 property cycles, started investing in 2001.

    I have seen a couple of investors lose everything from SS days.






    MTR:)
     
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  3. euro73

    euro73 Well-Known Member Business Member

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    I believe the moral of the story is...

    If you think owning a large portfolio is where your hard work ends, it's not. It's taken you a lot of effort to build the portfolio, and congratulations on completing all of, or the majority of, the acquisition stage. That's great, and should be applauded. You're well ahead of the curve and have put the foundation in place for a great outcome. But patience is now required. In order to move to early retirement, you have to go through the consolidation stage.

    This is where you must allow time to mature the portfolio to a point where it's either grown so valuable that you can cash out, pay down all your debts and then reinvest the profits in other income generating assets and live off those yields or dividends, or time for the yields to mature so much that the portfolio doesn't need to be sold, but can instead be left to continue to grow, while generating more than enough income to service itself at rates of 7 or 8% , AND provide you with enough surplus income to live off.

    If you are fortunate enough to have started investing a long time ago , and have already matured your portfolio to a point where it washes its own face very comfortably, even at rates approaching 7 or 8%, and still leaves you with a surplus cash flow, the hard work can be enjoyed now. But if your portfolio hasnt matured sufficiently yet, the hard work hasn't been finished yet and you shouldn't go lay on a beach just yet and expect magic to just "happen"

    Be patient. Time needs to do its thing before you can pack it in. While you wait for the portfolio to mature , it's important to ensure you have other income streams besides rent, so that you can live comfortably while that clock slowly ticks on. And in my view, it's also a time to focus aggressively on debt reduction, as that's what will be rewarded in this new regulatory environment.
     
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  4. willair

    willair Well-Known Member Premium Member

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    If you travel around Australia and camp out in the bush,you will meet several and i would not call them sophisticated investors living off their investments unencumbered freehold properties,equities,bonds,not one i have meet were mortgaged ,most have had enough of investing as property is only one area,and all have multiple income streams per month or several times each year,and that is what i find strange about sites like this,if some control so much as they say they do,then why are they not sitting back taking each day as it comes anyway they want,without the worry..
     
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  5. Xenia

    Xenia Well-Known Member

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    Perfect comprehension
    and all with a relaxed pose and feet up on her desk.
    probably still with PJs on too :)
     
  6. MTR

    MTR Well-Known Member

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    You have a way with words.... perfect
     
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  7. melbournian

    melbournian Well-Known Member

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    any examples just to reflect on the experiences without naming anyone directly?
     
  8. larrylarry

    larrylarry Well-Known Member

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    No disagreement there but that wasn't how it read to me earlier. So clarification was good.
     
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  9. JDP1

    JDP1 Well-Known Member

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    Not sure about this...

    the yield plays often get hammered in bear markets...much more so than the non yield plays ( ie cg focussed properties). The cg focussed properties will hold their values much better in bear markets. Wont that constitute less risk for your portfolio as compared to yield plays in bear markets? given that the CG will likely be outweighing any yield in $ terms.

    ( based on the assumption that the vast majority of properties have stable/consistent yield and cg as an inverse relationship. Its difficult to find properties that deliver good numbers for both irrespective of market conditions.)
     
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  10. MTR

    MTR Well-Known Member

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    Investors not managing debt, finance was easy to source during this period, market changed and they could not access equity and interest rates started to rise.

    Eventually the loans were greater than value of property because market kept nose diving.

    If they had enough income stream/cash flow then perhaps they would have survived? Don't know
     
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  11. MTR

    MTR Well-Known Member

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    That is a fallacy, blue chip properties just fall harder.

    Look at what happened to blue chip in Syd, Perth, Melb when the markets turned. They also fell back, in fact blue chip took years to recover in Sydney and Perth blue chip has still not recovered from the crash in 2007.

    It is difficult to find cash flow properties and I would not buy cheapies in a one horse town, its pointless due to maintenance etc it will turn to negative very quickly. But perhaps it has worked for some, if I was flipping this sort of product and there was a market then why not?

    There are many other strategies ie business income, developing , buy at rise/sell down prior to peak reduce debt increase income. Buy house, build at rear, sell 1, keep 1. Balanced share portfolio for income??

    Plenty of forum members are doing all sorts of stuff. All to their own and what works for you. I was just pointing out holding properties that are bleeding you are going to hurt when rates rise and markets turn and then have no options than to sit back and wait for the next cycle. No control, I don't like this.

    MTR:)
     
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  12. sash

    sash Well-Known Member

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    Agree 100% with this.....most people by without stress testing their portfolio with the following criteria:

    1. What if rents drop 15% will I be able to service my loans. Just experience this in Perth and has happened in the Hunter. So those who think it will not happen...think twice.
    2. What if I up to 40% of portfolio becomes vacant...will I still be ok? Had this happen once when I had 8 our 17 properties vacant at once!
    3. What if I lose my job? Do I have funds set aside for a minimum of 6 months of repayment?
    4. Do I have a safety net...if the market goes to hell in a hand basket?

    I guess I am just a "Bufflao Soldier"....as Robert Nesta Marley says...

    People....the massive boom is over ..the question is whether there will be severe correction?? Me thinks there will be one in Sydney...just common sense.



     
    Last edited: 29th Jan, 2016
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  13. sash

    sash Well-Known Member

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    I see properties under 600 in Blacktown again...also in some Pazzamatta areas......
     
  14. Sackie

    Sackie Well-Known Member

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    +1.
     
    Last edited: 29th Jan, 2016
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  15. Gockie

    Gockie Life is good ☺️ Premium Member

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    If I saw houses in Parramatta at 600k i'd be buying up the whole street...
     
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  16. sash

    sash Well-Known Member

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    Question...the stats you are looking at...are they not 3 months or more old?

    The 64k questoin...are you doing the old talk to estate agents and boots on ground research..that is more reliable no? That will definitely give you the future trend....
     
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  17. sash

    sash Well-Known Member

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    Well give it a couple of years....it will come.....but will be harder than Blacktown where it will be quite common.....also will be common in Campbelltown and Liverpool catchments again...
     
  18. ellejay

    ellejay Well-Known Member

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    Unfortunately forum members who've never experienced this keep on shouting buy more with the money you didn't use paying off debt. Apparently this allows greater flexibility. I also held through a crash (7yrs) and know that flexibility Iis the last thing you have when you can't sell and have to keep working to pay the mortgage. Have to bow to the great experience of those that shout loadest though.
     
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  19. sash

    sash Well-Known Member

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    Agree that is like catching a falling knife.

    As per my post above...make sure that you have a means to pay. My set-up reduces princpal 150k-200k per annum via excess cashflow into offsets. This where the never ending packet of Tim Tam comes in. This is funded by two major streams - income from a job and income from a diversified base of shares and properties of whihc 97% is property.
     
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  20. JDP1

    JDP1 Well-Known Member

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    its not a hard and fast rule of course but it is certainly not a complete fallacy either. Depends on a variety of factors that contribute to supply and demand.
    Look at the inner eastern suburbs of melb- your neck of the woods..what happened in the last downturn and where they are now. Of course they fell ...but not crashed ( ie held their values better)..and were also one the first to come out of it.