Building Wealth in Uncertain Times

[chilliaa]

And ask yourselves this:
why was the book called: building wealth in uncertain times.
I bet to the people living during this time, times felt pretty uncertain as well.
But as we fast forward 15 odd years the current generation just look back at those people and say they were 'lucky'.

I have absolutely no idea what the next 15 years offers to investors, but i do know that there will be some people that use the current uncertainty to their advantage, will prosper and will be branded the 'lucky' generation by those in 15yrs time.

I do know for a fact, that those people that just hide in their shell and do nothing, will definately be those that continue to whinge that life is not fair and that they were never given the opportunties.

So instead of sitting on your backside, coming up with graphs, media reports, 'expert' opinions why not to do something, how about trying to figure out an angle where you can make money from this uncertainty.

Negative or positive, i will always follow the positive path.

 

[Peter 14.7]

Interesting Thread.

I could add to the debate but perhaps why property is fundamentally a wise investment can best be summed up in a very recent experience.

This weekend, at a wedding weekend, in Fiji, in a pool, swam 6 men, all 20 to 30 something professional men, me included but 42. Surrounding was respective wives and girlfriends. Beer in hand, the male’s discussion flowed into how they all traded shares and made good money, although firm details on gain where thin. "Shares kicked cash, property butt every time." They all loved shares and agreed that the bride was silly to have her money in cash for the last 12 months and not shares. Note: ignoring that she and new Hubby were paying for them and us to be there and the last 12 months for shares had been hell?!?!

Anyhow I floated quiet, mostly admiring sexy wife in new one piece (but that is off topic and a whole another story), when I got asked "what about you Peter?". I said honestly "Some speculative shares but overall don’t trust the share market, have property."

Well….. the two big share investors got into me. Property is negative growth after costs, losing money each day, only value in the land, blah, blah etc...All NPV and FPV and deflation stuff.

When they finished, I simply said, so you all rent then? "Well, err, No” they all said. In fact each owned and was paying off PPOR. I said “but if property is rubbish and you are all so good at shares, why not rent??? Why pay off a home loan with dead money??

They replied because houses are essential to live in and they keep going up in price be it WA,, SYD or ACT.

I said "I win" and as I swam over the wife to order another Pina Colada served in a fresh coconut, I added "ohh and my PPOR was fully paid off by my property investments in 2003!"

Wife smiled, gave me a much longer than usual kiss and said, loud enough for all males and females present to hear "I love your Darling"

True Story.

Peter 14.7

 

[Dazz]

I said "I win" and as I swam over the wife to order another Pina Colada served in a fresh coconut, I added "ohh and my PPOR was fully paid off by my property investments in 2003!"

Wife smiled, gave me a much longer than usual kiss and said, loud enough for all males and females present to hear "I love your Darling"

Sounds awesome - how did it taste ??

 

[boz]

In uncertain times we've got to go back to basic.
No doubt when you build a house or buy a house you increase your wealth.
No doubt when you borrow money you destroy wealth or future wealth (when these moeny is repayed).
Also in the last few months I really stopped to measure wealth with money (fiat): a house 100 year ago was a house like it is now and say that you increase your wealth because the value of it in AU$ is higher is pointless.
Even gold oil and other item I start to compare the price with themself to see what the real value is, for example gold at over 28 times oil is getting quite expensive. In australia homes still a bit overvalued compare to oil, gold or just wages.
I do care what home price is in AU$ but it is not that important in these uncertain times.
disclosure: may be trading currencies got me to hate them...

 

[Bill.L]

Hi all,

Good timely post Ian, though it sounded exactly how Jan would have written it. Was she perhaps sitting next to you at the time of writing?

Slow and steady wins the race. What I discovered from Jan's books was a plan that is pretty much foolproof over the long term if the economy continues as in the past. The proviso of course, is that people do not over commit in the shorter term.

Some seminar presenters/property gurus come in here from time to time and suggest instant wealth over the shorter term, using fancy financing methods that have downside risk as well as upside opportunity.
New investors often fall for the 'fast money'.

Kristine,
An interesting comment about 'bells and whistles'. A niece of mine is currently buying a PPOR with all the bells and whistles. She is part of the generation that "need it now". It has to be new. and everything that she ever wanted, plus she plans to start a family in a couple of years, yet is borrowing to the absolute maximum right now.

I wonder how many of the D&G brigade are exactly the same, wanting it all now, yet cannot afford "it all". Are they talking themselves into the negative, making excuses for doing nothing, just as it was possible to do in the '90's, the '80's, and the '70's.

It is still easily possible to buy a PPOR well within your means, to pay it off over a few years, to then start investing slowly by buying a below median priced IP, using the rent and your previous house payments to pay down the loan over a couple of years, then buy another, repeat, repeat........Whoops....somerising Jan's books again.

I think I just invented a new word.

bye

 

[willair]

I don't know what others feel about property as an investment, but I have found that long-term investment in residential rental property has served and continues to serve me well. I do not expect or need capital growth of 10+% or more every year. I do not expect or need to have 0% vacancy rate or 5+% rental yields every year.


.

Ian thanks a lot for posting , i have only ever heard you talk once at one of the very early Brisbane meettings at Salisbury on the southside a few years back,when you spoke about the fit-off in the units you both bought in Noosa in hastings street, i learnt a lot that night about looking at items different,and i also have picked out a few more tips from this post,thankyou..
..willair..

 

[Petal]

What a beautiful, wonderful, inspiring thread. It is like a big glass of iced water in the middle of the desert.

Thank you Ian..

 

[VYBerlinaV8]

Great thread, and one which strips away much of the BS and brings us back to basics.

I have always been a fan of finding very well located property with good yield. If you can decouple the costs of ownership from your working income, by getting sufficient rent in the door, then there's no real reason you can't simply acquire a number of properties and let them grow over time (even if you do have some small holding costs initially). Does it really matter what the growth rate is? As long as it beats inflation in the long term, I don't think so, although having very good location tends to help.

As far as 'uncertain times' goes, how many times have we said or thought "I wish I could go back and invest at 1991 prices". Well, that's what people will say 15-20 years from now.

So let's put the two ideas together. If I can buy assets now at no real cost to myself and hold these assets for several decades, I stand a very good chance at making substantial $$. Of course, there are still risks, but these can be mitigated if you think carefully and act appropriately.

I should also confess that I am currently tipping both my own and borrowed funds into Australian shares at the moment. Much like property, shares follow a cycle. I don't expect to be a millionaire overnight. But I do expect to be a millionaire from shares alone by contributing consistently over a 15 year period and managing risk where I can.

It's very easy to take your eye off the ball by listening to negative media, and forgetting the fundamentals.

 

[oracle]

Thanks Ian for the post. I very much agree with your views.

For me the below paragraph summed it very nicely...

What are the alternatives that provide better prospects for the average investor? Show me something that has a lower risk profile with a better return than your well-located median-priced residential property.

I believe residential property investing is a full proof strategy for a long term. It has been proven time and again.

Sometimes, it is hard have enough patience to wait for 1, 2 or 3 property cycles as you want to be wealthy/rich now. I suffer from it too, but my strategy is while i explore and learn and master other strategies which can lead to a faster wealth creation (eg. business, shares, commercial property, property development, renovations etc.). I will in the background continue to keep investing in residential property. It is relatively lower risk and is definitely bringing me one step closer to financial independence. It is like a back up plan for me. If I never develop my niche to faster wealth creation, I should still do OK with my residential property investments.

Cheers,
Oracle.

 

[Martel]

Having said that, I do maintain my belief that you cannot read too many books or talk to too many people so negativity is not a justification for censorship.

Could the moderator who removed my earlier post in this thread please explain why?

 

[Sim]

Could the moderator who removed my earlier post in this thread please explain why?

Because it was off topic.

This thread isn't about stats. It's not about proving anything. It's more about the psychology of investing and looking at the big picture.

I do not want this thread to degrade into the same "my stats are bigger than your stats" type thread we are seeing on the forum right now. Feel free to start a new thread if you must.

 

[TheAnalyst]

Hi

My view does not always attract a lot of support. However, i post it for those like different view.

1. Always careful on what you are doing. I saw/heard a lot of people buying at 2006-07 top and now LOST a lot of money. For example, an invesotr (was on the paper) bought in Dalketh for $1.70m and sold recently for $1.4m.

2. If I have sold the properties as I planned in 06 and 07, I would now be $.5m better than at that time. I was a bit greedy and did not sell.

3. Property is a long term investment, but be careful what are you going to play the game. For those looking for cash flow saying 5% (at moment for residential is very good), if in 5-7 years time, the market does not move much, would like to take on the investment? I bet you will be sick of: finding tenants, do the maintenance, go to thecourt, pay the extra mortgage.... A lot of people in the game is for the capital gain --- me too. If not for the capital gain, only for 3-5% cash flow, not many would still play the game. That was why the shares atrracted a lot of people.

 

[BayView]

I still strongly believe that the so called gloomers do have something to offer.

A D&G'er is only worth listening to if they have had a few cycles of experience behind them and are actual players in the game.

If they are simply looking at economic models and current indicators, and haven't bought any property, or don't own any property, they are simply making assumptions.

I agree you need to keep your view balanced, but it is important to analysis who is speaking and what they have done.

 

[BoatBoy]

I agree you need to keep your view balanced, but it is important to analysis who is speaking and what they have done.

And what their motives are

Dave

 

[Francesco]

Because it was off topic.

This thread isn't about stats. It's not about proving anything. It's more about the psychology of investing and looking at the big picture.

I do not want this thread to degrade into the same "my stats are bigger than your stats" type thread we are seeing on the forum right now. Feel free to start a new thread if you must.

I believe many persistent D&Gs think that this current/coming downturn/recession is different, 'this time it is different' for Australia, that there will be a one time event in 100+ years and that it will mean a 10+ year of flat/declining price for RE, never been recorded in official stats in Australia before. In other words, despite all the economic pump priming of all the top global countries, the one in more than 100 years unseen-before event will happen. It will mean a less than 1% chance-of-happening event materialising, ushering in a new 'paradigm'.

Of course, this is not a call to throw caution to the wind, as always in RE do DD and calculations, but above all it helps to see through the fog if we can see the big picture in current economic perspectives.

 

[Bill.L]

Hi all,

Francesco,

You have said it all by using the 1% chance of "this time it's different". I know a bloke who has thought "the end" was just around the corner for the last 40 years. In that time he has done nothing about wealth creation.

Now as he approaches 60 years old, he has nothing and will rely on the government pension for his old age. But here is the real crux of the matter, if he is eventually right, the government may not be able to pay him his pension!!!

He has wasted 40 years for what?? There is 'risk' in everything we do, surely it is better to bet that what has worked in the past will continue to work, rather than do nothing, whilst waiting for the 1 in 100 event to happen.

bye

 

[Peter 14.7]

Sounds awesome - how did it taste ??

The drink I assume

Fresh coconut is very different from what we have here which is dried coconut. Really fresh, the flesh is like jelly. After you drink it they crack the nut open and you eat the alcohol infused flesh.

"Fiji time" makes sense when you spend a week there! And perhaps in property that is what Ian is on about. A very low stress investment as well than shares which are really a day to day option.

Sorry to be off topic sim.

Peter

 

[BayView]

Because it was off topic.

This thread isn't about stats. It's not about proving anything. It's more about the psychology of investing and looking at the big picture.

I do not want this thread to degrade into the same "my stats are bigger than your stats" type thread we are seeing on the forum right now. Feel free to start a new thread if you must.

I can't even be bothered to look up stats, let alone then go to the effort to transfer them to a post here.

 

[our obsession]

Ian Somers

I don't know what others feel about property as an investment, but I have found that long-term investment in residential rental property has served and continues to serve me well. I do not expect or need capital growth of 10+% or more every year. I do not expect or need to have 0% vacancy rate or 5+% rental yields every year.

I love it, and it's fun.

I am very proud of what we have achieved, (and creating for ourselves), for the future, buy well, hold and rent, building, growth-at whatever the rate, equity, IRR and do it all again baby!

And it is fun, and the people we have met, things we have learnt, stuff we have shared and others that we can give a leg up to..

We have a very priviliged life. Mr OO and me.

 

[andrew_de_a]

i think some people just like to disagree for the sake of it.