Who's thinking of selling?

Hi guys,

I've fixed most of my loans but recently got letters suggesting my variable loans are going up by 0.35% and 0.5% in one hit! 6 months ago I could have bought 2 or 3 more properties, but as of today I don't even service with my current portfolio according to the banks.

Just wondering how many others are in this situation and if you're considering selling some? If you do trade out, what do you do with your cash/equity until you service again?

Alternatively, is anyone switching to P&I? It seems the rates given on P&I are significantly better on P&I, almost so much that the repayments are the same as IO!

 

IO loans are getting jacked up hard.

I fixed 3 loans at 4.25, IO perios ending 2020-2022. The one I didn't fix with CBA went from 4.15-5.05% in the space of 1 month. I fixed that last one at 4.79% a week ago. IO expires 2022.

No need to sell for me, at least not until 2020 when these fixed terms expires. Until then, just gotta make sure there's a cash buffer in case it's needed, and reassess when the time comes. Who knows what the situation will be but I feels like this is here to stay.

Having said that, I wouldn't hesitate to sell if the numbers aren't stacking up or the investment isn't performing.

From what I've been hearing, many people switching to PI because the servicing difference is becoming marginal.

If you don't mind me asking, what interest rate are you paying and with what bank? Also what type of property is it? (location, unit? house?)

Good luck.

 

Are you sure this is the case? If you have only spoken with the majors you may be surprised just how much more borrowing power (and how cheaply) you actually have!

 

This will be an interesting thread, because the thing that bursts bubbles is negative sentiment so I'm curious to see how people are feeling.

I think the area to watch is the very recent investors, who are often hugely inexperienced and therefore more likely to panic, especially those who've bought into new development areas.

I think with the IO changes and rates rising, sentiment is looking pretty vulnerable. I've come across a few people selling and my general impression is people have turned quite bearish on the bubble. Not long ago, people didn't believe there even was a bubble. The media has also gone bubble mad, not unlike what I saw in Ireland in the last year. A lot of industry seems to be predicting a slowdown at a minimum (I remember the "soft landing"...)

Admittedly, watching Canada right now is pretty scary. Some cities are down nearly 20% since April. When the tide turns, it can turn faster than you think.

That said, I'm not selling right now. If you're holding the right sorts of assets, carefully chosen, you may well be better off holding.

 

Two my friends are selling their houses now.

1) 1st friend bought a house a few years ago (OO) and now can't handle higher repayments due to lack of buffer. Tried to find a second job and work, but couldn't do it for long-term, so gave up.

2) 2nd friend thought the price would go down (or flat), so decided to sell a few IPs to deleverage and decrease the debt.

 

All my loans are 5 to 6 percent IO.. How are you guys getting such low fixed below 5%
Id fix to 5% if I could

 

i wont be selling because i am well buffered, plus i am +ve geared, will be looking to buy a PPOR if a soft landing occurs and turn my current one into rental, cause rental is market is very good where i am

 

I have a good buffer and when I started the rate were closer to 6%. Can and will sell if the numbers are right though

 

We sold 1 IP last year and PPOR this year to fund a new PPOR build and have a stash of cash in offset.
We are now neither buying more or selling....
Sit on hands and see where this next couple years goes and then reassess.
Money is still historically cheap!
I think as someone mentioned above it will be the very new entrants to the market that will be stinging with rate rises.

 

I haven't even made the first repayment yet and the rate has gone up! No problem for me servicing but may sting others.

 

Sold everything but PPOR with debt offset account cash is more than the debt on the PPOR
now play the stock market until I see better value emerge else I keep playing the stock market.

already has large shares holding so got plenty of dividends each year to keep building the cash pile.

Like Natedog said most older investor who made a bucket load has locked in the profit.
Remember equity is just a figure on paper, it is not real until realised and that figure on paper can do weird things to your wealth if things go wonky...

Pretty much debt free at this stage with a large share holding but each investor has to work out on their own where their comfort zone is and act accordingly, you don't want to be a forced seller in any market cos you don't have control and it can do massive damage to your wealth.

 

My PPOR is fixed on P&I for the next 2 years.
IP #1 is fixed for the next year on IO and will roll onto 2 years variable IO after that. I'll convert it to P&I in 3 years time.
IP #2 is on P&I @ 80%.

I'm relaxed with the above scenario. I expect that by the end of 3 years we'll see more competition again, particularly if you have a solid track-record.

Hit my serviceability wall last year. IPs in hold mode. Focusing on some substantial share investments in the meantime ( less 20% of this leveraged ). May pursue a DA for a development next year.

 

Interest Rate Update

 

Interest Rate Update

 

I think there's much better value in the stock market right now, and I want to have cash ready when the market does drop. I wish I had that in Ireland (was too young at that stage to really buy much). People are just as silly on the way down, so there are always great bargains oversold.

 

Don't you worry, you will have plenty of opportunity going forward
you can't escape the fundamental rules of money just like Newton law of motions
you can tinker around the edges, you can have some favourable tails wind but it can't sustain forever.

for a start compounding only works well from a low base for a reasonable period of time
else 99% of the population can't afford anything.

after that there will be either a correction, period of no growth, wait for salary to catch up and the base reset and it start again.

No people are not silly on the way down or during the crash, most are force seller because they don't understand the fundamental rules of money.

Leverage has deadly consequences if you don't know how to manage it.

sometimes the best course action for an investor is to do absolutely nothing and sit on a pile of cash

A good example of this is the stock market , why do some companies prosper crash after crash and many gone bankrupt at the first sign of trouble, it will be no different for any other asset, investors and business.

The one that knows how to manage risk and understand the law of money will survive and prosper and the one that doesn't join the graveyard
there are other issues like business model but money rules is a major part.

 

RE Ireland experience - That;s quite interesting, so before the crash the bubble was spoken about and appeared in media frequently??? Can you elaborate more on the vibe at the time

 

Looking to sell my IP atm.

Have developed the block and the property has seen good CG, which I will be able to realise and cash out CGT free, so i figure its better to use a CGT event now.

The property is also 40+ years old, depreciation is none existant, and my borrowing capacity isn't that crash hot, being that most of my income is Shift work and overtime and the banks are gearing that at present.

Will hopefully sell for the price I'm after and search for another development block or sit on my hands till a good buy presents itself.

 

The media went quite nuts in around 2006/2007 to the point where the news in particular was actually blamed by many, as if all the negativity brought on a sort of self-fulfilling doomsday or panicked people. In reality the crash happened quite slowly. I moved in 2008 but through 2006 when the market as a whole had already peaked, people still didn't believe it would end so to speak. Prices began dropping in some cities, smaller towns really, first. Next came fringe suburbia (which made up the bulk of the price drop, many estates ended up totally abandoned, honestly hundreds of them. And the oversupply didn't really become as obvious until during the collapse. A lot of it was stalled projects, new suburbs, stalled apartment blocks etc where developers couldn't sell and these became practically worthless, but people were also leaving properties vacant so oversupply was a lot worse than it seemed during the late part of the bubble.) Dublin prices, in the good suburbs anyway, did drop but not as much.

One thing I think has to be emphasised is that point above. Good, popular, quality suburbs had a bit of a panic sell, and yes a lot of them got inflated by people getting carried away, but they retained their demand and those areas have led the recovery. So it's very much down to what assets you're holding. If you're holding a great quality family home in a very popular, inner city area, unless you bought it at the absolute peak, then don't get caught up in the panic.

With the crash, most of the drop was led by new development. As oversupply started ticking up, buyers wouldn't buy, and banks were less willing to lend, and it sort of became a perfect storm of negativity. And also because prices were so inflated, people were almost hyper aware of even the slightest little thing to do with housing. So I think at the very peak, people were expecting a crash, especially after prices started stalling in other cities, and in America and parts of Europe. Ireland's crash got started slightly later than a lot of USA. Prices stalled for a very long period though. By 2008 prices were only down 10%, and at that stage employment was still strong, everyone thought there would be a soft landing. I didn't think it would crash as hard as it did, but the real pain was in the new suburbs, the 'ghost estates'. Builders started discounting, you know "25% off" that sort of thing, and people just couldn't compete so those areas got into a downward spiral.

I read an article once that had a good description of how it went: it didn't so much pop as exhale. It happened pretty slowly and there was a lot of doubt it really was happening or would. For people who held on, I don't know anyone who hasn't recovered in full now, and I have one particular friend for example who lost about 15% (his estimate) on a nice family home he owned, but from 2010 or so rental growth began to rise quite a bit. People still needed to live in houses, and they were after quality homes, so those attracted demand fast. Prices have been going up in the double digits again for those places, so that's the advice I'd give. Avoid anything where there's been a lot of development and look for assets where competition is tight, like family homes.

 

Interesting to hear everyone's thoughts.

Regarding going to P&I, a lot of banks are assessing at P&I 7.5% regardless of what you're currently paying so it sounds as though going to P&I doesn't affect serviceability. And with P&I rates going down and IO loans going up, it might be worthwhile to switch a couple to P&I.... Thoughts?