A Series of Unfortunate Events

[vahsi000]

A Series of Unfortunate Events by Lemony Snicket.
I was thinking about the whole Property Investment process.
Are there ways where Investors can lose money whether it's long/short term.
What are some of the pitfalls that are not so obvious.
Like some that I'm aware of are:
-Buying something that one can't afford, hence being forced to sell at a lower price.
-Buying an over-priced property due to lack of research.
-Not insuring your property and the tenant causes major damage to the property.
-Once again, not insuring and natural disaster destroying your property.
Just a quick question though, is it standard practice by insurers to cover all types of natural disasters or should one always read the fine-print to discover what it does cover?
-Decline in property value due to a sudden change in the population demographics (i.e. bikey gangs targeting a specific suburb and its surroundings / increased criminal activity in the area).
-Rise of unemployment? Causing people to possibly look for cheaper alternatives, reducing demand, potential cause to reduce weekly rent?
-Rise of interest rates? (I'm not sure about this, but if interest rates go up, does weekly rates fluctate in line with interest rates?)

These are the ones I can think of at the moment, if you guys can think of others. Please feel free to add...

 

[Peter Parker]

These are the ones I can think of at the moment, if you guys can think of others. Please feel free to add...

The above has been mostly external factors affecting the property itself. One more that could be added is site contamination scares (or that found in the same estate), especially if you're forced to sell.

However there are potentially other things that force a sale at a loss due to changed personal circumstances:

* You losing your job and being unable to hold
* A marriage breakup and being forced to offload assets
* Being uninsured and something bad happening
* Legal action
* A major business or family issue, diverting you from supervising your portfolio
* Major surgery/disability
* Big unforeseen expenses
* Entering into an unfavourable contract

 

[alexlee]

One gets hit by a truck while just going one's merry way on the street.
A meteor striking you in the head.

If you look for them, there are always plenty of risks. You have to assess likelihood as well as the risks themselves.

You're going to give yourself nightmares, Vahsi, and do you even own property? Once you own some, you'll realise a lot of those risks are very unlikely or can be mitigated (take out insurance, keep a cash buffer, fix rates, etc).

 

[vahsi000]

Less than a week ago, i saw a driver who has crashed into someone's place on carlisle ave Mount Druitt. If you had asked them how likely it was for someone to crash into their homes, i'm sure they would've also thought that the chances be unlikely.

I'm not saying we shouldn't go out of our homes because of the risk of being hit by lightning... But as they say "Never say never!".

 

[alexlee]

Less than a week ago, i saw a driver who has crashed into someone's place on carlisle ave Mount Druitt. If you had asked them how likely it was for someone to crash into their homes, i'm sure they would've also thought that the chances be unlikely.

Why stop there? Why not find news articles about people who get struck by lightning, meteors, random flying cows? I read about car accidents every day but I drive. I still don't see your point. Try not to buy properites on corners? Cower in the back of the house every night afraid someone will crash through your living room?

I'm not saying we shouldn't go out of our homes because of the risk of being hit by lightning... But as they say "Never say never!".

Actually, you SHOULD get out of the house because chances are a car will crash into it?

The only way to protect yourself against all the bad things that can happen to your IP is: don't buy an IP at all. Better yet, live in a tent in the middle of the bush.

Worry more about the likely stuff like interest rates and paying too much and so on.
Alex

 

[Gentle_Chief]

The most unfortunate one would be to look back in 5 years time and say "jeeez, I should have bought back then in 2010, rather than worry about the WWIII, climate change & bikey gangs"

A Series of Unfortunate Events by Lemony Snicket.
I was thinking about the whole Property Investment process.
Are there ways where Investors can lose money whether it's long/short term.
What are some of the pitfalls that are not so obvious.
Like some that I'm aware of are:
-Buying something that one can't afford, hence being forced to sell at a lower price.
-Buying an over-priced property due to lack of research.
-Not insuring your property and the tenant causes major damage to the property.
-Once again, not insuring and natural disaster destroying your property.
Just a quick question though, is it standard practice by insurers to cover all types of natural disasters or should one always read the fine-print to discover what it does cover?
-Decline in property value due to a sudden change in the population demographics (i.e. bikey gangs targeting a specific suburb and its surroundings / increased criminal activity in the area).
-Rise of unemployment? Causing people to possibly look for cheaper alternatives, reducing demand, potential cause to reduce weekly rent?
-Rise of interest rates? (I'm not sure about this, but if interest rates go up, does weekly rates fluctate in line with interest rates?)

These are the ones I can think of at the moment, if you guys can think of others. Please feel free to add...

 

[Tuppence]

The most unfortunate one would be to look back in 5 years time and say "jeeez, I should have bought back then in 2010, rather than worry about the WWIII, climate change & bikey gangs"

As one who could have bought five years ago, but didn't, and opted to sell a PPOR and buy a new one three years ago instead, I 100% agree with this. Ya live and learn.

 

[gg1965]

The only way to protect yourself against all the bad things that can happen to your IP is: don't buy an IP at all. Better yet, live in a tent in the middle of the bush.

You can't do that as you may get struck by lightning.......didn't you know that tent poles are good lighning conductors.

Besides, a branch may drop from a tree and flatten your tent.

No where is safe if you are paranoid.


g

 

[Alex P Keaton]

lol and a wild animal might sneak into your tent at night and attack you!

 

[Piston Broke]

Taking advice from strangers on a forum who have absolutely no clue (nor do they want to have) about your specific stuation.

 

[Paul Do]

The most unfortunate one would be to look back in 5 years time and say "jeeez, I should have bought back then in 2010, rather than worry about the WWIII, climate change & bikey gangs"

Not really. How many people in Sydney in 2008 regretted not buying in 2003? You shouldn't automatically assume that buying a property at any time is the optimal decision.

 

[Propertunity]

How many people in Sydney in 2008 regretted not buying in 2003?

Whilst that may have been true in 2008, in 2009 & 2010 when prices in many areas surpassed those of 2003, the pain may well be forgotten by those who held on.....or may still be raw for those who sold or were forced to sell.

You shouldn't automatically assume that buying a property at any time is the optimal decision.

That's true. But the vast majority of people are inherently bad at timing the market. I have some clients who "dollar-cost-average" their way into large property portfolios because they don't know if the dip is going to continue down or the uptrend is a bubble about to burst. But they keep a 10 year horizon and don't let the winds of change upset their course setting too much....and just hang on.

 

[virgo]

Hello

Hello Paul Do

Is that really you (of the I buy Houses book)?

I've read your book and i must say it is one of the best property books around!

I'm so excited you have joined this forum; looking fwd to your postings of wisdom and experience.

cheers