thx Spiderman really good food for thought, especially to beginners like me as I know these advanced/creative strategies are too complicated for me (at least for my first IP...). THink I will still try to get my first IP as soon as saving>40K, don't think I should wait until the 'everything is set'. THe rent catching should help witht the holding cost a lot for long term holding, riding out this flat cycle if it really is as predicted.
Bill Zheng's latest seminar
- Thread starter plusnq
- Start date
A couple of years ago all these guros preached use OPM and borrow get in debt and buy buy buy
Now they are pessimests
Why are homes in Australia differant from the USA
We have high immigration
We have a labour shortage
We dont have enough homes
We are seeing higher rental yeilds
We have a resource boom
70% of homes are owner occupied which stop major falls of house prices
Property is a long term investment 10 years or never sell
I am a fan of Jan Somers forget the rest
Now they are pessimests
Why are homes in Australia differant from the USA
We have high immigration
We have a labour shortage
We dont have enough homes
We are seeing higher rental yeilds
We have a resource boom
70% of homes are owner occupied which stop major falls of house prices
Property is a long term investment 10 years or never sell
I am a fan of Jan Somers forget the rest
Thanks Plusnq
did Bill say anything about where he thought RENTS were heading? Any theories on peak rent??
Furthermore, what were his comments regarding buying at all anywhere if he believed prices in the blue chip suburbs would simply track inflation ie appears based on his sentiments that its almost pointless to buy for 6-10 yrs if your money can't get a return > inflation.
Not that i agree/disagree with him but it seems kind of strange if a mortgage broker reliant on investors as his predominant client base is saying that.
did Bill say anything about where he thought RENTS were heading? Any theories on peak rent??
Furthermore, what were his comments regarding buying at all anywhere if he believed prices in the blue chip suburbs would simply track inflation ie appears based on his sentiments that its almost pointless to buy for 6-10 yrs if your money can't get a return > inflation.
Not that i agree/disagree with him but it seems kind of strange if a mortgage broker reliant on investors as his predominant client base is saying that.
I was also there guys.
I guess he would no longer agree with M Yardney that one can build a multi million property portfolio in your spare time! (unless you trust Metropole)
Hi
You are probably wrong. In fact i know you are because I have discussed this at length with Bill
Interesting that the only property person he had up there speaking yesterday was my business partner George Kafantaris, a director of Metropole.
That's because Bill has now come around to recognize that the way to make money out of investments in the future is to add value - the strategy I and the team at Metropole have been suggesting all along.
That was one of the main messages of his session wasn't it?
And I know he does trust Metropole with his personal property investment, property management, renovation and development.
Having said that I definitely don't agree with all his predictions. But I am very, very impressed with his intellect and his theories.
I agree with you, this would very much support Mr Yrdney, as it would validate the 'develop on your behalf' section of his business.
Personally i think Zheng's arguments ring a bell of truth. As Yld Matters has been saying for ages, property prices cannot keep increasing faster than peoples wages.
I agree that property will probably hover around inflation levels (maybe slightly less as credit conditions will not ease up soon) for several years.
On a more speculative note, i think the market will see an increased interest in 'owner occupiable' apartments as houses get priced out of the market.
I think the new round of advice from property experts will centre around purchasing properties that have delevopemental qualities. However personally to me this sounds nuts as a strategy. If the underlying assets are having trouble appreciating, then why take the additional risk of developing.
A bit like the current credit crisis, where investment banks had to take bigger and bigger risks to maintain investment returns.
I feel likewise. I also say the same about you.
I tend to listen to the opinions of those I respect, work out which elements or strategies resonate with me and act accordingly.
We all have different risk profiles, objectives and circumstances. There is no one size fits all strategy when it comes to investment strategies.
How can development create a LOW RISK opporuntity of creating profits if the overall market stagnant.
Lets assume that you can make 20% development margin.
But the overall market is growing by say 3%.
Year 1 purchase the property
Year 2 complete development.
Banks will not go back to their wheeling and dealing mode for at least another 10-15yrs, so forget about easy access to credit. Thus you will need much higher equity than before.
At the end of year 2, you have made a 20% profit on the development (10% annualised). % profit on capital employed will depend leverage situation. But this is where the 'abnormal' growth finishes. After this period your properties will be subject to growth as per the over all market.
And for all this you have to be CORRECT in your ability to extract 20% from the development.
If you really want to increase your property exposure in the current market, a much easier and less risky approach in my opinion is to 'low ball'. Low balling works best in a weak market. With low balling you know the current market price, you know anticipated rent. So you wait for a distressed sale, and put in a below market offer. If its accepted, great, if not move to the next one. At least you can 'lock' in your abnormal profit. You can also create insurance for yourself by being able to fix the borrowing costs against a known rental. Thus you are not exposed to any unforeseen changes in prices.
Lets assume that you can make 20% development margin.
But the overall market is growing by say 3%.
Year 1 purchase the property
Year 2 complete development.
Banks will not go back to their wheeling and dealing mode for at least another 10-15yrs, so forget about easy access to credit. Thus you will need much higher equity than before.
At the end of year 2, you have made a 20% profit on the development (10% annualised). % profit on capital employed will depend leverage situation. But this is where the 'abnormal' growth finishes. After this period your properties will be subject to growth as per the over all market.
And for all this you have to be CORRECT in your ability to extract 20% from the development.
If you really want to increase your property exposure in the current market, a much easier and less risky approach in my opinion is to 'low ball'. Low balling works best in a weak market. With low balling you know the current market price, you know anticipated rent. So you wait for a distressed sale, and put in a below market offer. If its accepted, great, if not move to the next one. At least you can 'lock' in your abnormal profit. You can also create insurance for yourself by being able to fix the borrowing costs against a known rental. Thus you are not exposed to any unforeseen changes in prices.
Hi Chilliaa,
This can all be done in 1yr - I did it on my 1st duplex - project cost 570k - final value 800k.
It's pretty tight at the moment and you can still get easily 80% on low doc. This may or may not change.
Why can't you do this low balling with property that has development potential thereby doubling the certainty of increasing your inherent equity potential outcome?
Regards,
Hi
You are probably wrong. In fact i know you are because I have discussed this at length with Bill
Yes Michael I realised this after I made the comment. What I was alluding to was the fact that he would not agree that you can just make money in your spare time by depending on capital growth doing its magic anymore. In his eyes these days are over. (Unless I was deaf at his seminar!)
Also not mentioned in this thread was the fact that he is currently selling up properties that he owns in mortgage belt areas and holding the inner ring portfolio. I guess Michael may think this is not such a bad idea being an inner suburb advocate himself?
Last edited:
Not too sure that George appreciated the fact that his exposure to the audience was cut from half an hour to about 10 minutes. And I think Bill could have done fine without him. Michael are you seriously saying that Bill would have sought George out to speak at his event?
Hi Chilliaa,
This can all be done in 1yr - I did it on my 1st duplex - project cost 570k - final value 800k.
It's pretty tight at the moment and you can still get easily 80% on low doc. This may or may not change.
Why can't you do this low balling with property that has development potential thereby doubling the certainty of increasing your inherent equity potential outcome?
Regards,
Firstly let me be the first to admit that i am 100% green when it comes to development
The point im trying to make is that isnt development much more risky if the overall asset class is stagnating. What is your INSURANCE that the development profit can be created (maybe by pre-selling).
I thought that the real benefit of development is creating development profits that are then leveraged by the rising market. Thus you can create equity on equity which allows significant growth in the number of properties being held.
But if the overall market is stagnant then you have to develop to sell, which means that you are effectively just like any builder (minus the skillset)
Not too sure that George appreciated the fact that his exposure to the audience was cut from half an hour to about 10 minutes. And I think Bill could have done fine without him. Michael are you seriously saying that Bill would have sought George out to speak at his event?
You are right - Bill cut him short as he ran overtime. So George may not have added any value in 3 minutes before a lunch that was an hour overdue.
Yes Bill invited George to come along and speak and give some real life examples to help validate the theory.
It is possible that if he was allowed to speak for the allotted time that you would have got some benefit from George - its hard to do much in 3 mins.
That's what MY has been saying in his newsletters for years...
But if that's part of your ''core business'', I guess it's hard to tell people not to develop...?
Fair call. I will take your word for it mate. And don't worry - I do appreciate listening to folks like George, Bill and yourself and get your take on things. I'm sure George will get a chance at your next event to impart his wisdom to the crowd.
Yes and I will have to sell some if the market is stagnant or slow - but not sell everything. How much you can hold will be determined by your serviceability comfort zone, buffers etc.
The idea is to sell when you need to but hold onto what you can without putting financial stress on yourself and family.
Also I reiterate that I can do this because my flexible employment allows me to. I could not take this on if I was working full time.
This is a radical change of tune for Bill from an aggressive debt-hungry approach to a much more conservative one.
It's very odd as this type of message doesn't help his mortgage broking business.
I wonder whether he might start some new business soon.
Cheers,
It's very odd as this type of message doesn't help his mortgage broking business.
I wonder whether he might start some new business soon.
Cheers,
Maybe it is an age thing. As people get older they do tend to become more conservative and less willing to take greater risks.
And thanks Shane for sharing the information.
Definitely not an age thing Raja. His conservatism is solely based on his belief in his analysis of the affordability crunch that he sees eventuating in the next 1-3 years.
