Is now the time to buy?

[scott]

I follow specific parts of the Sydney market and despite all REAs saying that the market has flattened out, bottomed etc, it appears to me that the prices are still falling, with some properties on the market for months.

My impression is that conventional wisdom says that it would be not wise to purchase now, especially if it has a negative cash flow.

Why take on an investment that costs you money and is probably not appreciating?

My plan was to watch the market carefully and sit tight until I see an upward swing in prices and then buy and hopefully ride the elevator up.

If this happens in one or two years from now I have not wasted money on holding costs and thus maximising the return.

However, speaking with a colleague his tactic is to make a lot of low ball offers, as this being a buyers market. and hope to buy very low.

It has been said that you make your money in RE when you buy.

Am I (or we being investors) asleep at the wheel when I (we) should be out there making low offers and condition the market to accept these offers as the market price.

Just as it was said the investors can drive up the prices in a sellers market should we not be driving down the prices in a buyers market?

Any thoughts?

Scott

 

[Rixter]

Scot, it all depends on ones chosen or preferred strategy they're wanting to apply. Now maybe the right time for some and now maybe the wrong time for others. Only the individual in question can decide if its right for them.

Personally, as my strategy is based on "Time in" the cycle , & not "Timing" the cycle , all the time is right time for me to buy.

Cheers

 

[Kennethkohsg]

Dear Scott,

1. It's all depends on which stage of the property cycle which one is more comfortable in playing the game successfully.

2. Perhaps, you may want to read Kieran Trass' book on "How to Profit from the Property Cycle".

3. Michael Yardney of Metropole Properties Group, who is also a member in this forum, has also written quite a bit on this topic too, in one of his newsletters.

4. For your kind update, please.

5. Thank you.

Cheers,
Kenneth KOH

 

[voodoo]

Hi,

Every time i read interesting info in books or on this forum, I save it to a word document so I can refer back to it whenever.
I like the following two strategies when looking for property.

the first is by peter Spann....

Growth rate and Cycles
The average annual Australian growth rate over a decade is 8%,
Property growth comes in spurts and yearly growth varies considerably from flat to very high. But this averages out to approx 8%pa.
Many suburbs follow the pattern of 2 years flat, 1 year up, 2 year jump.
Followed by a repeat of 2 years flat, 1 year up, 2 year jump.
This is never perfect, but is approx right.
It starts as flat, then rises in the 1st year,
2nd year up 7%, and this is the warning of a growth spurt to follow.
3rd Year growth is 16% and
4th year 20%.
If we bought a 100k property at the end of the 2nd year in the cycle, it would be worth $139,200 at the end of the 4th year, or growth of 39% in 2yrs.
Growth then stagnates for a couple of years, then moves to 8% for year 8, this is the warning for the next big jump 14% and 21% over next 2 years.
The 100k property is now worth 233k.

the second by Steve Navra....

Rental Reality:[/B]

This is well explained on www.navra.com.au, but to paraphrase:

1. Find a property that you might consider buying.
2. Identify (eg. via a Property Manager etc) what the actual YEARLY rental is likely to be for that property.
3. Find out (via a statistical organisation such as Residex) the average 5-year yield (in %) for the suburb that the property is located in.
4. Divide the YEARLY rental by the 5-year % to give you your rental reality figure.
5. If you can buy the property for less than the rental reality figure, you're doing good! If not, look again.

cheers,

 

[WillG]

Hi Scott,

I believe it is always time to look at properties and do the numbers on a case by case basis. This will sharpen your skills at identifying 'good potential buys' and 'good buys'.

It is possible to find good buys in all markets. Every property has its pro's & cons and it is your job to find the properties with more 'pro's' than cons

Cheers

 

[see_change]

If we were looking at buying at the moment , I'd be happy to look in Sydney at the moment, but I'd be making really low offers in areas where I think there is a higher chance of finding motinvated buyers.

I'd be making offers , at a level where I'd be getting close to cash flow neutral , in the knowledge that many people would be offended by my offers and possibly even threaten me...

The sort of prices I'd be offereing would be about half of the price at the recent peak , so assuming that we're down about 15 % from the peak , then I'd be offering about 35 % below that.

I don't know if any would be accepted , but you never know ...

See Change

 

[Kennethkohsg]

Dear Scott,

1. Based on what you have posted, you are probably and likely to use "TIMING" to profit from your property investing. Am I right to assume that you are likely to adopt the Buy-Low and Sell High at market peak" property investing strategy, rather than "Buy-Hold-Never Sell" long term property investing strategy?

2. Your friend is using another strategy by buying low/at bargain price. He is primarily targetting out for property sales by motivated vendors.

3. To me, one key consideration will be your own personality and personal inclination/effectiveness i.e whether you are more adept in profiting from the property cycle through timing VS profiting for the different property traits or/and motivated vendors throigh effective property sourcing and negotiation or both.

4. The kind of investing knowledge and skills required by these 2 different strategies are actually quite different, technically speaking.

5. For your kind update and considerations, please.

6. Thank you.

regards,
Kenneth KOH

 

[markp]

Now is a great time to buy using the tired old bargain buy stategy.

As an example a house across the street has been for sale for the last year, nothing wrong with the house I think its in a good area and its one of the better houses in the street. I have counted 3 agents sign boards come and go and I think it is now for lease. It will probably sell for a bargain.

But a far better strategy is the one used by sophisticated investors (and I ain't one of 'em) who pay near or even full price for a property and still get huge capital growth because they know what and when to buy and can anticipate market movements.

But a bargain is not to be sneezed at, and its a great way to start.

 

[cain family]

Vendor who would consider a bargain offer!

Hi

I have been reading your posts, and we are vendors in the market who would take a BARGAIN for the buyers offer.
So maybe just ask the question, they can only say NO!

Our house has been for sale, then we took it off the market and refinanced our loan to buy our new house (we dont live in Sunbury where the house is) and now have it for sale, either with tennants or as a first home.

For valuation purposes, the bank valed it at $225k.
We would take $197 now but with a QUICK QUICK sale (30 days or less!) and just walk away!

So if I am anything to go "buy" maybe other vendors may be the same!

Danielle
0423513776

 

[Monopoly]

now have it for sale, either with tennants or as a first home.

For valuation purposes, the bank valed it at $225k.
We would take $197 now but with a QUICK QUICK sale (30 days or less!) and just walk away!

Because you are primarily dealing with investors here, it may pay you to disclose what the rent is, that way any interested investors can decide for themselves if the yield/return is worth considering on this property.

Cheers,

Jo

 

[cain family]

Response to Jo

HI Jo

Thanks for your response.

$867pcm at the moment, and is due for increase when lease expires of anywhere up to $250pw.

If you added car accomodation I would expect again for the price to rise again!

Thanks so much

 

[Monopoly]

HI Jo

Thanks for your response.

$867pcm at the moment, and is due for increase when lease expires of anywhere up to $250pw.

If you added car accomodation I would expect again for the price to rise again!

Thanks so much

Equating to a 5.3% gross yield if one of the investors takes up your offer of buying it for $197,000. That's not too bad.

 

[Rixter]

Whats the historic CG like for the area?

 

[cain family]

Hi Rixter

I am no investor but I can tell you what we paid and now its worth if this helps

We settled on this property on April 2002 for $152200 and it was valued at $225 from the bank on 8th Oct this yr!
We have only added airconditioning and a new hot water service.
The other appliances, carpet, curtains and refurb were done for us as part of our sale price.

We lived there for a short amount of time and then relocated to Bendigo to raise our family!

We now just want out of the debt tied up in the house and dont have any need for greed.

Danielle
0423513776

 

[Monopoly]

Whats the historic CG like for the area?

Rix,using the link I provided earlier, here is a bit of (sadly, somewhat dated) info on Sunbury:

http://www.doi.vic.gov.au/doi/doielect.nsf/2a6bd98dee287482ca256915001cff0c/6e3080a43774e33a4a2569d8002a6b75/$FILE/Sunbury.pdf

Also too, is this graph that will show you (up till 2004) how the area did percentage/price wise (you can alternate between the two variables)
http://www.aussiehome.com/trendCharts/vic/

There is plenty of information on the area, it's population, growth trends etc but I don't have them on hand atm, sorry.

Cheers,

Jo

p.s. I don't know how to shorten links so anyone who can, please feel free to do so.

 

[cain family]

Jo,

Thanks so much for your quick and informative responses!

Can you tell me how to calculate yield? As this is a popular question and I am unsure how to calculate it?
Thanks again

Danielle

 

[Rixter]

Rix,using the link I provided earlier, here is a bit of (sadly, somewhat dated) info on Sunbury:

http://www.doi.vic.gov.au/doi/doielect.nsf/2a6bd98dee287482ca256915001cff0c/6e3080a43774e33a4a2569d8002a6b75/$FILE/Sunbury.pdf

Also too, is this graph that will show you (up till 2004) how the area did percentage/price wise (you can alternate between the two variables)
http://www.aussiehome.com/trendCharts/vic/

There is plenty of information on the area, it's population, growth trends etc but I don't have them on hand atm, sorry.

Cheers,

Jo

p.s. I don't know how to shorten links so anyone who can, please feel free to do so.

Ok thanks Jo.I have the links, just thought CF may know straight off.
Cheers

 

[Rixter]

Jo,

Thanks so much for your quick and informative responses!

Can you tell me how to calculate yield? As this is a popular question and I am unsure how to calculate it?
Thanks again

Danielle

Danielle,

Divide the annual rent by the property purchase price , then mulitply by 100% = Rental Yield Percentage.

Hope this helps

 

[Monopoly]

So that is:

867 pcm (x 12) to give you the annual figure of $10404
Divided by $197000 (purchase price)
= 0.0528 X 100
= 5.28%

What did I say 5.3, not bad off the top of my head!

 

[Bill.L]

Hi all,

Perhaps this thread could go back to the topic of "is this a good time to buy" rather than is it a good time to buy a particular house in Sunbury that already has a thread of its own.

It's late and I must be a little grumpy

bye