Is the end nigh?

[Crystal]

Reply: 6.1.1.1.1.1.1.1.1
From: Crystal .


Hi Terry and other newbies,
I was asking the very same questions in early 2000 on the old forum.
Should I buy now or wait?
Should I fix or go variable or a split loan?
I posted these questions and others to my mentors on this forum and the answer to the question of when to buy an IP is...
as soon as you can afford one!
The experienced investors answered my newbie questions with the same patience and wisdom as they do today.
So what if the property market corrects or interest rates rise! Make sure you can afford worst case scenario and go for it.
I was sure I was buying at the peak of the market and that interest rates would rise (and they did for a while) but if I hadn't purchased in 2000 I'd still be waiting today!
I jumped in the deep end and I'm glad I did.
Good Luck,
Crystal

 

[always_learning]

Reply: 6.1.1.1.1.1.1.1.1.1
From: Always Learning


<p>

The following is my ideas based on limited experience.

<p>

Surely as in all stock market or property market booms and busts, the real issue comes down to “Which stock did you buy?” or “Which property did you buy?”. Just as are IT stocks even in the IT boom that have not been affected by the .com crash, there are IP’s that will not devalue during a property crash. Surely each property is its own “business” and what ever the market is like the business case for that investment must be considered on a case by case nature. Do the numbers work for this individual property? Am I speculating that exceptional CG of this property will save me? or do I have a better strategy?



<p>

Is there real value in this investment; under capitalized and/or good returns? Surely the winner plan is to have the best strategy, methods of analysis and be committed to achieving them. If so, you don’t need to worry about boom or bust cycles. Except during a bust with the right strategy you will gain soooo much more! Clearly in any boom a lot of duds get sold for over-inflated prices, solution: don’t buy a dud!

<p>

I am learning not truth-saying. My question is; is my logic wrong? Surely Jan's books are about a good strategy!

<p>

<table border="0" cellpadding="0" cellspacing="0" >

<tr>

<td rowspan="4">

</td>

<td colspan="2" align="center">

<p align="left"> Investment Laws</td>

</tr>

<tr>

<td align="right" >1st Law:</td>

<td>"What ever you don't invest you forfeit."</td>

</tr>

<tr>

<td align="right">2nd Law:</td>

<td>"What ever you reap is what you've sown"</td>

</tr>

<tr>

<td> </td>

<td><p align="right">Jim Rohn;</td>

</tr>

</table>

 

[Jas]

Reply: 6.1.1.1.1.1.1.1.1.1.1
From: Jas



Isn't there a Warren Buffet quote along the lines of "I made a fortune
from buying too late and selling too early"?

Quite frankly, if that's cool with Warren in the sharemarket, it's cool
with me in property.

Jas

 

[WebBoard]

Reply: 6.1.1.2
From: Terry Avery


Hi TW

When I said "TW is quiet/not buying" I meant that you have been quiet on your activities of late. Compared to what? Compared to your previous posts over the last three years. Three years ago you were buying and selling, buying and holding but lately you haven't mentioned any of the deals you are doing. Now your have clarified that you are selling. So I add your name to my list of experienced IP investors who are selling and not buying at the moment.

You say "Maybe they SHOULD do something? Perhaps with good caution?" I agree that one needs to make a start somewhere but I see the market as being crazy so my purpose was to caution newbies not to get caught up in the excitement but to do due diligence.

You say "When SHOULD they start buying? when prices are low? when all the "professional adviser, who by the way are WORKING in their job as advisor and not out in the market LIVING it, tell them its a terrible time to be in the market." No arguments about property professionals working for wages there.

You say "Do newbies understand this?" I don't think they do unless they have read widely AND have read the archives of this forum.

You say "Reality check, this boom, how many people are still going to want to be property investors when the market goes to mud." I would think that very few will want to be IP investors so I too see good time ahead for us long term investors.

You say "And is it our place to try and save them?" No I don't think you can save people from themselves. As I said human nature is to ignore the negatives and then whinge a lot when it all turns to custard.

You say "Lets just imagine us "saving " them.......then where the HELL is my market in the bust time? nobody is selling cheap, jumping out of the fire, because we "saved" them." I agree, I am not buying as I believe there will be a lot of good quality bargains out there when they do fail.

I agree that a lot of mums and dads will be cinders and that us die hards and those who survive the baptism of fire will soldier on and do well. I agree that we will have to put up with all the wannabes and that the term mum and dads is a generic term for the novice investor who doesn't really understand what they are getting into.

I am not saying to anyone not to buy, just saying be careful!

Cheers

Terry

 

[WebBoard]

Reply: 6.1.1.1.2
From: Terry Avery


Hi Paul,

Your point about the banks not caring whether the property sells for market value is taken. However, I can't see why, in a rising market, they would sell at a fire sale price to just recover their capital and costs. Especially if they are going to have to chase the owner for the balance. Banks seem to prefer to get the most they can.

Your final point that it takes something pretty awful to get a bargain out of a bank in NSW illustrates the point.

Cheers

Terry

 

[WebBoard]

Reply: 6.1.1.1.1.1.2
From: Terry Avery


George, George, George,

Spoken like a true property salesman. Of course in your mind any time is good to buy, you won't eat if you can't sell.

I am not seeking reasons not to invest as I am invested in both shares and property and I am doing well thank you.

No you were not talking to me in Melbourne in 1991 at the peak because I was overseas at the time and I bought extremely well in Melbourne in the bust that followed in 1992.

If you take your sales pitch blinkers off you will see from my post that I won't be saying I wish I had because I have been and continue to invest in property. I am not saying anyone should not be buying. I said several times in my post that I could be WRONG. Based on my experience we are in a boom, which are inevitably followed by busts. History shows us this quite well.

You said

definition of insanity...doing the same thing over and
over, and expecting a different result.

??? I must be insane, I keep buying properties, I just refuse to pay ridiculous prices that offer no yield or capital gain.

I also agree with TW, on some things, but I do not lay at her feet in total agreement (although such a thought may have appeal to TW) this forum is about expressing differing views and you seem to have taken exception to a view contrary to yours and used sarcasm as your weapon. But then you need to move those units don't you? I don't have a vested interest in stopping people from their own folly, I am not selling anything, I am just putting forward my analysis of the situation as I see it.

Cheers

Terry

"Sarcasm is the lowest form of wit" Bernard Shaw

 

[WebBoard]

Reply: 6.1.1.1.1.1.1.1.1.2
From: Terry Avery


Hi Crystal,

Terry and other newbies?

Gee after 10 years I wouldn't call myself a newbie but then I do learn something new all the time.

You are correct in what you are saying and what I say is just my opinion, you can take it or leave it. My strategy suits me and should not be taken as a recipe for everyone else. Yes I bought again in 2000 but 2002? Well I think the ball game has changed so I am holding off for the time being. My view of things is that risk has increased to a point where novices are taking incredible risks, that is all I am saying.

Cheers

Terry

 

[WebBoard]

Reply: 6.1.1.1.1.1.1.1.1.1.1.1
From: Terry Avery


Hi Jacinta,

I am not sure that the quote goes like that, but Warren Buffet certainly made his money by going against the crowd. He bought cheaply when others had sold off and sold off when others were prepared to pay ridiculous prices. So, yes I think he is pretty cool too.

Cheers

Terry

 

[duncan_m]

Reply: 6.1.1.1.1.1.1.1.1.2.1
From: Duncan M




Hi Terry,

Could you give some examples of 'incredible risks'.

Thanks, Duncan.

 

[Sim]

Reply: 6.1.1.2.1
From: Sim' Hampel


On 3/4/02 12:37:00 PM, Terry Avery wrote:
>
>So I add [TW's]
>name to my list of experienced
>IP investors who are selling
>and not buying at the moment.

Umm... Terry, I don't think TW said she was NOT buying...

(Please correct me if I'm wrong TW)... Terry, my understanding of part of TW's strategy is that it is multi-faceted. That is, she is not a "find one thing and do only that over and over and over again" type of person. She is (dare I say it ?) a Freestyler.

One of the things she does is to buy tired properties in areas which she believes are about to experience significant growth, improves them, rides the boom and then sells at the top, to reinvest the money she made and do it all over again somewhere else. This is her "trading stock".

TW also buys blue-chip properties in near-CBD locations, which she generally carries little debt on (so they're not costing her lots of money to hold). She can do this because of the profits she made from trading properties.

So while she may be busy selling off trading stock now at the top of the cycle, I'm sure she is busy reinvesting that money into other property in areas which have not yet boomed, (as well as blue-chip properties, which she will hold long term and so is not so concerned about the market cycles).

My point is, that by TW's definition of Freestyling, we should be adjusting our investing strategy to suit the current conditions (micro and macro !), and indeed use a multiple of strategies to maximise our investment potential. So saying that she is only selling and not buying is a little misleading I think.

As I said, I am willing to be corrected (but only by TW) if I have completely misunderstood the general concept of this part of her strategy.

 

[WebBoard]

Reply: 6.1.1.1.1.1.1.1.1.2.1.1
From: Terry Avery


Hi Duncan,

Incredible risks? Well, where to start?

OK let's start with OTP. You use a deposit bond to buy 1,2,3,4 or more units OTP with settlement in 2 years. Right now in Melbourne there is a glut of apartments and many that have finished are selling on the secondary market at less than the original price. So much for stamp duty savings there. Obviously too many people paid too high a price. Supply is exceeding demand NOW so what is going to happen in two years time when all those other apartments are completed? I would regard committing myself to buying OTP now to be incredibly risky because I will have to find the finance for all those OTPs when time for settlement comes.

This strategy was a good one two years ago which is why some clever people used it. When they could see the writing on the wall and had made their money what did they do? They stopped buying OTP and started selling seminars telling people how they did it. This leads to over supply and higher risk. My rule of thumb is that by the time it becomes a strategy in seminars then it is too late to make huge amounts of money. If you are early in the seminar cycle you can make some good money but if you are late in the cycle you stand to lose money. The Greater Fool Theory at work.

Other risks out there. You have equity in your property and attend a seminar on the tax advantages of buying IP and negative gearing. You buy through a second tier marketer at an inflated price and use your equity to borrow 105% of the money for the IP. The rental market is over supplied because so many others are doing the same and you don't receive rent or if you do the yield is so unprofitable you are losing money. When you come to sell you find the property realises 60% of your purchase price but you still have to repay the bank the full amount. You are therefore committing your future cash flow to repaying a debt instead of building your wealth.

The lack of knowledge is placing many people at risk of losing large amounts of money with no recourse. The risk is because of ignorance. Education and knowledge reduces the risk because you can put in place strategies to manage and reduce the risk. From time to time we have this discussion on the forum and I felt it timely to remind everyone, especially newbies that there are risks involved. It is obvious to me that many newbies are not educating themselves sufficiently. READ the archives people. All the time we see questions of a fairly basic nature which could be answered by reading Apprentice Millionaire or the archives. A number of these posts show they have not made the effort, maybe they have just found the forum and ask the question because they don't use forums or can't see the links to the archives. Maybe they are too lazy to put the effort in and laziness increases the risk because we all know that due diligence reduces our risk.

Have I answered your question Duncan?

Cheers

Terry

 

[WebBoard]

Reply: 6.1.1.2.1.1
From: Terry Avery


Hi Sim,

OK I stand corrected. TW has not said that she is not buying. My original point was that she had been quiet on what she was doing lately (in regards to buying or selling) compared to two or three years ago when she shared news of her deals (after they were done).

And I am not implying that TW is not contributing, she makes valuable contributions to the forum, but her focus has been on other activities of late.

Cheers

Terry

 

[WebBoard]

Reply: 6.1.1.1.1.1.1.2
From: Terry Avery


Hi George,

As I said in my post I was looking at what ifs. It doesn't matter whether you put $200,000 or $500,000 the ratios remain the same. So it makes no difference whether you are looking at median property or high end. The point was what would happen if the market went up this much and then came back that much? The spreadsheet was MY way of looking at a situation. I am not a mathematician or a programmer so I make no claim that the spreadsheet was "very analytical". In fact it doesn't analyse anything!

Thankyou for the statistic that median priced property has never dropped back more than 4%. Was that after a period when every man and his dog were attending semiars and buying multiple OTP IPs? My argument is that the frenzy of buying we are seeing is not like previous periods. The madness of crowds is exemplified by delusional behaviour. People believing that this time it will be different, that everyone will become rich, that you can't lose. This occurs just at the point that the market goes bust and I feel that point is imminent.

You said "however do your homework buy right, make certain you can afford to hold long term and keep going!" Yes I agree with you there except I would add better to have a deal where there is value rather than paying too much. In the long run the latter will make you more money. What people forget is that the property market moves in cycles, yes it could go back 4% but it may take 6-8 years to claw back that 4%. Isn't it better to buy at 4% less and then enjoy the subsequent rise?

Cheers

Terry

 

[Crystal]

Reply: 6.1.1.2.1.1.1
From: Crystal .


Hi Terry,
I'm terribly sorry for implying you are a newbie. We all appreciate the contributions from experienced property investors to the forum.
I was tempted to listen to the *don't buy now* suggestions back in 2000. Fear of the future and the unknown nearly stopped me from investing. I'm just glad I didn't procrastinate and took the first step which is always the hardest.
Kind Regards,
Crystal

 

[WebBoard]

Reply: 6.1.1.2.1.1.2
From: The Wife


Terry,

I have gone a little quiet on exact facts lately, and that is because I have been accused by more than one person on this forum, of trying to "talk up" particular suburbs after I have purchased there for my "own evil gain" which is totally incorrect, I was just sharing info,

so I sorta went ....BUGGER YA'S!! I shant be saying what I am doing anywhere anymore.

And apart from that, yes I have been busy elsewhere, lots of frenzied property buying going on, I took that opportunity to set up a business.

Sim, you are correct, I am surprised at how much detail you pick up from our brief conversations about what I do.

Cheers TW

 

[WebBoard]

Reply: 7
From: Choon NG


Great discussion so far. This has been a very educational post and one that I greatly enjoy so far.

While I can see/understand the cycle (currently near the top ???) based on the view so far, has anyone got some answers to the fundamental question :

Who is actually buying now ?

My view (not sure about OTP CBD apartments, but general suburb properties, and I know only Melbourne south-east market) on the current demand for houses/units in the suburb:-
a. Baby boomers - Selling out and moving to another newer/smaller property nearby.

b. Rural/overseas investor - Increase in demand (at all levels in CBD) by low A$. Rural boom. Just imagine the extra amount of $$$ flowing around (not just out of borrowing ) and that gives us an indication of the strength of this group of buyers.

c. First time investors - Know/heard of people around me - all becoming investors over the last 2 years. Most due to basic believe that property is "safe and sure win in the long run". Not a single person was due to the seminar sellers (must be my network !!)

D. First home/upgrade (median and higher price ) - Helped by the low interest rate and 2xincome. Also helped by excess equity from the own/Baby boomers trying to give the next generation a hand.

Of all the major groups(what have I miss out ??), only C and maybe some in B can be consider as higher risk, as A and D can be considered to have longer ability to ride the cycle. All these is underpinned by the trends in population growth and smaller household.

Now, if the bubble is going to burst, how serious can it be ? In fact, I personally don't think that it can be that bad if employment and interest rate stays in the current range.

From the demand/supply, there is still more demand (not sure of the % from each group) unless the economic environment turn really bad.

Anyone care to add more insights so that all of us can benefit from a better understanding of the market and profit from it ?

cheers,
choon

 

[see_change]

Reply: 7.1
From: See Change


Choon

I don't think the bubble will "burst" until interest and unemployment rates do go up . They will be the trigger.

see change

it's better to be guided by your dreams than your fears

 

[Mr. Fabulous]

Reply: 7.1.1
From: Mark Laszczuk


So TW,
Can we assume that because a few idiots act like five year olds and point fingers. call names and make pointless accusations that the rest of us have to suffer for it? I'm quite sure that the number of people that are keen to hear your stories and experiences (within reason of course, meaning that you have the absolute right to only tell what you want to tell) far outweigh those that would stoop so low. Please don't hold back on account of a couple of idiots.

Mark
'no hat, some cattle'

 

[WebBoard]

Reply: 7.1.1.1
From: The Wife


Mark,

You are right, although I am still going to be very cautious over what I say about where.

Currently I am looking at a property,

It has a
service station
40 seat cafe
100 seat restaurant
Reception
6 motel Units
managers residence
The buildings and fittings are worth about 1.25 mill.

But to me the property is worth notmuch/nothing as its got close to zero turnover. I realise this is a property/business deal. We are at a stalemate in negotiations at this point. I am going to ask for collective ideas on this deal tonight at freestylers in Canberra.

Paul Zags idea I agree with, which is fulfilling the vendors requirements for sale of the property ( which would mean buying them a boat with all mod cons so they can sail to England and die...the vendors words not mine)

Any other ideas?

I offered 500K in cash...they said no.

I now only want to pay $350K for it.

I am happy to pay 1,2 Mill, if they vendor finance me, and my repayment terms dont start till 1 year after the purchase, and then at a percentage of the take.

I am still waiting on their reply to this.

I'm all ears to any other thoughts and or suggestions.

also....

I am on the lookout for a house that needs renovation.....what I would like to do, is get some of the "old hands" on this forum, to supervise how the reno should be done, and all volunteers who want to "do the work" under the direct guidence of some of the reno experts on this forum, can do so.

So what I need is

1. A house someone owns and wants renovated.
2. Reno experts ( michael talk to u tonight and GeeCee we need you)
3. Students who want to learn the art of profitable renovation.( you WILL be doing the work)

Cheers, TW

~Before you criticize people, you should walk a mile in their shoes. That way, when you criticize them, you're a mile away. And you have their shoes~

 

[Robert]

Reply: 7.1.1.1.1
From: Robert Forward


I got a house that needs a reno...

Pick me, Pick me, Pick me.....

Cheers
Robert

The Sydney "Freestylers" Group Leader.