What if the market tanks??

I've held property (just one ip) through a crash and was fine as it rented the whole time and interest rates went through the floor. Luckily as I wouldn't have been able to sell it at all without losing a lot of money. These things serve as a good reminder though and probably as a result I have virtually all my ips on P&I, cf+ and am aiming keeping LVR around 50%. Increasing value is a bonus but not something I'm expecting as part of my plan.

 

I have a similar low risk strategy, however its important to note that the rewards will be much less. more wealth is generated through property by more leverage. but too much greed in this regard can get you going backwards. Its pretty much spelled out in the jan sommers books what to do. But people ignore the lower risk stuffand take on more risk buying in regional areas or mining towns. Slow and steady wins the race imo

 

Have not read any books lately, I will make a point of buying your book and reviewing it, lots of pressure.... am joking. Will ready your book though
All the best with this

 

This is my struggle every year - where to get decent coffee on Xmas day. Anywhere in Mount lawley open?

First world problems.

 

There are always 2 sides to the story, some have also made pots of money buying in regional, just look at Steve McKnight, sold the lots more than doubled his money.

People who get burnt in property you will find their leverage will be too high to manage debt when markets turn and they purchased the wrong product at the wrong time. In the main in Australia most people buy negatively geared property, this is hard to hold when interest rates rise and markets turn.

I also know investors who have gem properties in Karratha that tripled in value and high cash flow, yes of course it has come back, but they are still sitting on high income and LVR is low due to entry level.

MTR

 

Try Cantina. I am drinking black these days, cutting out milk, amazing I am actually OK with this, took about 3 days

 

ellejay, you have done very well.... and guess what, some investors would consider NZ high risk?? But you made it work, good for you.

 

BHAHA ...no pressure.....Im so excited about this project... you know like those little dogs that get so excited and wet themselves...... thats me....

 

Not finished yet, hoping to ramp it up in 2016

 

Anything not Sydney or Melbourne IS a country town. More subject to wild peaks and troughs and long periods with no growth.

 

Forsyth is open between 8 & 9 only.

 

Yes comparatively they are country towns but if my memory is correct Sydney had a long period of stagnation?

And during that period a lot of country towns had significant growth

 

Sydney started a huge boom in around 1999/2000. Then the boom stopped 2004 and Sydney stagnated 2005-2008. But different parts of Sydney did different things during this time - the cheaper areas fell in value, (if I had to put a number on it, I'd say as an example, a house bought for mid 4's dropped to maybe mid 3's), but the stronger more expensive areas stayed steady or were even still gaining (somewhat slowly) overall. (Note... I did not own houses in more expensive places at this point in time but my feeling of the market is that the market in the East was not too affected by the downturn/slowdown post 2004), but my unit in West Ryde stayed steady.

I've felt its been more or less all upwards from 2009 till now, and now, again, the weaker areas are likely to drop back (they have had massive growth) and the more expensive areas should still be reasonably steady.
Anyway, where I am, it seems to just flatline at worst.
I can't completely predict future movements but I do see patterns and trends...

 

Thats a good update

Yes obviously melb and syd were the most obvious bets

It just annoys me when people on this site, especially those new to investing rag on regionals, most have only been investing a year or two

Money can be made anywhere, a good deal is a good deal

 

The property market is a cycle and yes it will turn to winter.
It's not the value of properties that makes any difference to anyone, it's the exposure to debt. People with high LVR cannot hold onto properties in a down market unless there is an increase of income elsewhere.

In a down market investment properties are disposable. People will do anything to hold onto family homes but investment properties are dropped like hot potatoes.

My plan - increase cash flow, not by purchasing positive cash flow properties, but by creating multiple streams of income in businesses.
- Reduce debt

 

What is your book about Kate?
Christmas can be a great time to catch things up, I got a lot done last Christmas break, not so this year though as we will be on holidays in Melbourne soon so not sure how much I can get done.

 

This is Sydney's housing market from 1980...
Property News – onthehouse.com.au

 

Stay tuned....that is coming to the cinemas...via Perth, Northern Territory, and finally Sydney.....already putting in cheeky offers in Perth....had one nearly bought for 265k...place needed a quick refresh for 10k ...and it will val up to 340k. Will continue with cheeky offers...the downside is rents have come off a bit so will need to subsidize tenants for a while

As for Sydney...one near my suburb still on the market...Jan last year would have got 1.3m....they wanted offers over $1m for sale...now 3 mths later offers over 900k...asked agent if they will take 790k...no bikkie yet......

I don't the slow down will be 8 years...but in places like Perth/Darwin and later Sydney I can see 5-6 years of no movement.

 

I have been thinking along similar lines but i thought it might be too early to start looking seriously as i am expecting further price drops

I guess if your offers are low enough then it shouldnt matter when? Just keep trying til it works?
Do you do cash offers?

 

To be the Devil's Advocate...

How is it worth $340k after the reno - if the market is continuing to go backwards as has been mentioned?

You will have paid $265k for the property - won't this automatically lower similar type house values to the same price range?

If you buy for $265k (in this apparent falling market), add 5% for purchase costs = $278250, add another $10k for renos = $288250...

Assuming it was supposedly $340k, but if you had to sell it today (or within 6 months, say) in the current market...more likely to be a sale of closer to $300k (based on market conditions mentioned), deduct agent and selling fees of say; $6k = $294k...and current rents are not flash as you've mentioned...how is this a good buy worth pursuing?

No offense, but I can't see how a $10k reno adds much to the value of any house - in a market such as this; it might make it more presentable for a sale...paint it, maybe a bit of new carpet and possibly replace a few tired cosmetic things around the property such as lampshades.... and you'd need to be doing all the work yourself to save costs.