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From: Mike .


Second Investment Property
From: Eddy
Date: 5/19/00
Time: 9:32:56 AM

Hello fellow investors. I have a ? I have one investment property in Newcastle, a 2 bed. villa. Cost 120000 and returns 155pw. It is one of two villas on a standard block of land set amongst normal houses. The other villa has just come up for sale at 130000.

To my mind it would be great to buy the other unit, not only for tax purposes but because I would then own the total property. My partner however is a little more cautious as she believes that the r/estate market is slowing and we should wait. Any views would be appreciated. (keep up the articles, reading them keeps me busy for hours!)
 
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Rob

Reply: 1
From: Mike .


Market Forces
From: Rob
Date: 5/19/00
Time: 7:34:31 PM

It doesn't matter really when you buy a property especially if you are in for the long term. You have to ask yourself this first, "Will it be a long term investment?" If the answer is yes then there is nothing to stop you.

Quite often the right time to buy is when the market is slowing down so an even better reason to truly look into the property. Though do your due diligence on the property and make sure it a good investment. It's not the price that makes property a good investment alone but also the return etc...

Hope this helps. Rob
 
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EddyM

Reply: 1.1
From: Mike .


Re: Market Forces
From:
Date: 5/22/00
Time: 10:26:42 AM

Thanks Rob for the advice. Yes, I am in it for the long term and, given that its my second property I am a little more confident this time...I expect the confidence improves with each purchase... Good investing! Eddy
 
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Les

Reply: 1.1.1
From: Mike .


Re: Second Investment Property
From: Les
Date: 5/21/00
Time: 2:43:03 PM

G'day Eddy,

I think Rob was probably answering you with the entry titled "Market Forces" - and I would echo his words about "due diligence". How long have you owned the 1st one? Has its value increased, or is its twin over-priced? Rental vacancy rate 3% or less? If negatively geared, can you support a second? Will the vendor leave something in? If not, do you have the deposit sorted?

As far as "slowing down" is concerned, I believe it is typically only the upper end of Sydney properties that actually drop in price when the growth runs out of steam, so the "slowing down" is probably a slow-down in the upward trend (thus it may not grow in value by huge amounts for a few years - does this affect your plans?).

I would also agree with you that owning the whole block gives you a bit more choice for the future, so if the "due diligence" all says Yes, then make your decision. If not, then due diligence will probably have made the decision for you.

Good luck - and keep in touch,

Regards, Les
 
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EddyM

Reply: 1.1.1.1
From: Mike .


Re: Second Investment Property
From: Eddym
Date: 5/22/00
Time: 10:45:28 AM

Hi Les, thanks for replying. I always look forward to reading your thoughtful comments. I am in it for the long haul and do not intend to sell. I have had the first property since Dec 22 '99, so not long. I believe that the value has increased by 10%. The property is presently overpriced but then most are when you start negotiations.

As I said to Rob I am more confident this time 'round so would not pay more than what I paid for the first one. Depreciation and the tax advantages make it an attractive proposition, provided I could agree on a 'reasonable' price. Deposit? I wont use my money, I didn't before and borrowed the whole amount and did a deposit guarantee.

I have been thinking about the concepts of yearly revaluations raised in this forum recently, ie if the property was purchased at say $200K and 12 months later was valued at $220, borrow the additional 20K as this point and use it for, say your first mortgage (not investment)... I like the concept and will discuss it with my accountant when I see him. What is your view on this approach?

With these properties I do not expect huge increases in valuations, I like their position, rentals seem steady within the area, nice homes surround so I really concentrate on the purchase price relative to the rent it will generate and it comes us almost positively geared.

Eddy
 
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