What to do in a FOMO stampede?

Frankly I've never brought in a market that is this hot, all my investments have been done in a cool or lukewarm market. The issue is with the current market, not all suburbs are moving up at the same speed. some suburbs might well reach its height while some have not so it really needs to look at suburb by suburb bases. 2 Million is still a lot of money so there should still be a lot of options available, but with it's current condition, its difficult to separate appropriately priced vs ridiculous price as everything happens so dynamically, so all I could say is good luck.

 

Agreed - for melb, most of inner (houses only) are up by c20%-40% inc kew, malvern, toorak, glen iris, camberwell, canterbury, brighton, albert park, middle park, south yarra.

Middle ring is up c15% for houses excluding units/ apartments. Vermont south, vermont, doncaster, glen wav, mount wav, footscray, sunshine.

Outer is up c15% for houses/ townhouses however outer bayside (Mornington Penninsula) up by over 30%.

Suburbs with a lot of units carlton, fitzroy, richmond, collingwood, flemington, ascot Vale, doncaster, clayton are also up c15% but don't show as units are keeping the median low.

So still possible to find suburbs where ripple effect is still in its infancy and prop could be had for c10-15% higher than 3-6 months ago (def not auction but private sales).

 

Lower North Shore apartments are also moving quickly from the last two month's of being on the ground.

 

Make sure to factor in an interest rate rise and what that could mean for you.

 

Here is a different long term perspective.. if you are after an A grade asset in a premium area with long term demand drivers then you should probably forget about getting in for a bargain. If you are at your max earning capacity get in before someone else rising up the ranks does. Wealth and borrowing capacity is all relative at the end of the day.

 

Good post here. My buyer's agent was focused on a particular area and I was on board with that plan. It was sound, but the mortgage broker let us down last year and was not proactive to get the financing sorted. I let myself down by not dumping him earlier and going with someone else. End result, by the time finance was approved, we got priced out of the area very quickly and suddenly, and now I have no choice but to either alter the criteria (which would mean purchasing a lower quality investment in same area) or looking for another suburb that still has good fundamentals, but where we have not yet been priced out of a solid investment grade property. The latter feels like the better option tbh.

 

That is so not true .

Timing is 90 % of the equation . Any one who says the opposite is just wanting you to buy something now ...and not at another time .

our first PPOR , good street concord west went sideways for the seven years we owned it because we bought at the top of the market .

the first seven ip’s we bought all doubled within a year of buying them . We saw what was happening and moved quickly . All crappy little 3 bedders in cheap areas in Logan .

cliff

 

[QUOTE="Songo, post: 990201, member: 2549"I have no choice but to either alter the criteria (which would mean purchasing a lower quality investment in same area) or looking for another suburb that still has good fundamentals, but where we have not yet been priced out of a solid investment grade property. The latter feels like the better option tbh.[/QUOTE]

this concept of good vs bad quality investment properties is to a large degree a falicy by some people to give you the feeling that only they know what properties you should be buying . One of the biggest proponents of this concept on the forum ended up going bankrupt and taking a lot of people with him . He was a great salesman ....

you can make money from nice properties and you can can make money from ex housing commission properties in places like Mt Druitt , Logan goodna etc .

cliff

 

Good vs bad is just a relative term and I doubt anyone would argue that all properties in a given suburb will give the same returns over time. Some will perform better than others for variety of reasons.

 

Hum but as a doctor with an almost guaranteed income, I think you have a different perspective.

My partner has always struggled to service a loan for a number of reasons. When she had the opportunity to buy, I said take the money while it's there. Take it and run for the hills. Looking back over the last 4 years, it was the right move - the property has barely gone up, but there has been literally no other chances for her to service a loan in that time. Zilch. Not even close...even if APRA intervention never happened. Even if I knew for a fact the market was at its peak I would still have told her to buy. The window to borrow money was open to her for such a brief moment in time when she just happened to check all the right boxes.

For some people that are casual workers in certain industries, in highly volatile fields or with constant health issues or very unusual family commitments etc etc, sometimes if the money is there they have to take it. Better to be in the game at the peak than to be locked out completely.

 

But the yield for "blue chip" properties is a lot lower. It can be a lot harder to hold, so the trade off is that it has better CG...or has it? Is that just a fallacy? I think that's what he's getting at.

 

My belief is timing is way underrated and if you can get it approximately close then your journey to achieving your goals will be expedited greatly. Failing that, buying great value assets in somewhat flat to growing markets is the next best thing. Timing the market is one thing but personal circumstances also need to be able to take advantage of that timing.

Anyhow, I'm a big fan of 3 simple (but not necessarily easy) steps which have worked very well for me over the last almost 20 years.

1: Always attempt to time approximately
2. Buy value in OO areas in Sydney, Melbourne and Brisbane.
3. Ability to add value

 

there’s always exceptions to every “ rule “ and that situation is a valid one . My main issue is people down playing the importance of timing . Yep , being a Dr obviously helps . But during our initial buys , we never got close to maxing out our borrowing capacity . Another part of the reason why we’ve been able to buy
when the market is down is that we’ve been happy to ignore other rules such as not selling . I didn’t want to max out borrowing , refinance and have increasing debt . After the boom in the 2000’s we sold the majority of our properties , paid tax , paid down our LOC’s and waited . We had a LOC on our PPOR and waited . When the GFC hit , for a period no one was lending , but we had money available in our LOC so we were able to buy .


cliff

 

I was led to believe that we had maxed out the borrowing capacity. Didn’t follow through well but now with a new broker we may be be able to borrow 1mil. My partner is very reluctant to buy now in crazy FOMO but to me better buy now then wait before lending rules change again. Timing is good but may not always be possible if you have limited funding (for a limited period). I am thinking to sell our previous PPOR as well if we get a crazy price

 

I did chat to our broker not that long ago . Age is an issue now , and I’m working less hours so making less money .

We’re happy to pay down debt now . One a mill in last year .

Cliff

 

Absolutely! I like buying when nobody else is buying. When I go to an auction, and I'm the only bidder, or I can play hardball & say this is my offer, take it or leave it. Others like buying at the start of a boom, because once it starts moving, it usually keeps it up for a while. If you buy at the top of the market, you've usually got a long wait before you see more upward growth, and if you need to sell before them, could be left with negative equity.

 

I hear this statement about 'Investment grade property', all the time & it quite irks me. It's usually something said by spruikers trying to get you to buy, or newbies that have been sold the idea that there's only certain areas that are any good for investment.

 

I agree however there are properties that I believe will give inferior returns in time. Quite a lot tbh if we're talking Australian wide.

 

I’d agree if you’re talking australia wide . We’ve bought in capital cities , major regionals with diversified economies , eg Townsville / Rocky but not cairns or Gladstone ( looked but decided against ) . There are some lower SES suburbs which we have avoided which are considered to be rough even by the standards of Mt Druitt / Logan , eg ravenswood in Launceston or Gagebrook in Hobart .

we’ve avoided mining towns . Personal preference is always going to be somewhere on the coast .

cliff

 

Oh, yes, lots I wouldn't touch, but that doesn't mean that they're not good investments for the right person with the right attitude, or skillset to make the most of it.

Even if you look at some of the crappy stuff we bought when it was ALL we could afford. Were they good investments, NO, but were they good for us, then YES. You don't go broke making a profit, and we didn't keep some of them long, just long enough to make money & get out again.

For example, crappy ex-houso in Moree (yep, you heard it right). Bought for $25k, sold a few years later for $40k. Buying that home enabled us to move onto other stuff. It was rented for $150pw, and got some CG which was rolled into something else.

There was a lady back in the SS days who had very little income, and it was all self employment stuff, so couldn't get loans. She lived in Regional SA, and bought and sold really crappy stuff and reno'd them. Eventually earned enough from it, to build herself a new home. Would I have bought any of that stuff, Hell no! But they worked for her, in her circumstances and with her skill set.