Is the Sydney and Melbourne market too 'hot

From: Always Learning


Dear All

I am an Aussie living in Japan. I have 2 IP in Melbourne, both are cash flow positive and I have now more equity in my IP at 34 years old than the current "reasonable benefits limitation" of super ! I want more IP, but I don't have time/money to fly to Sydney or Melbourne to look each weekend.

From my point of view the market seems too hot to invest in now! My only alternative seems be to "trust" a "buyers agent" to get me a "good deal"? Would anyone care to give me their opinion of how I would measure a "good deal"?

Are there good deals/good value in the market now? Or should I just hold my cash and wait for the downturn? Thus my question is not "If I should invest in IP" but "when to invest in IP?, now or latter?". I seem to remember Jan Somers books recommending not invest when everyone else is investing, i.e. the market is "hot" with wanabee IP investors.

Is it possible in the current market to get $160PW for each $100K of property? Both my existing IP at purchase meet this target, and with great capital gains.

Sorry for so many questions.

Glenn
 
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Reply: 1
From: Rolf Latham


Hi Glenn

If you are the typical expatriate Aussie then you are buying with much harder currency than most locals.

Some would argue that in parts of Sydney and Melbourne it is the Expats with wads of cash that have caused a signifiant upward impact.

I would suggest that if you are looking at a 100 to 200 k market segment that in this sector there will be no downturn. Thats the 30 to 65 % median price band where demand is and will remian high and returns are ok.

Ta

Rolf
 
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Reply: 2
From: W W


Glen

Sydney and Melbourne are pretty hot at the moment, but there are still plenty of great deals to be found. There hard part is doing it from overseas.

You could search via the internet and then get family/friends to go and check it out for you, get building inspections etc done. I suppose if the numbers stack up thats the main thing. Doesn't really matter what it looks like too much.

Can you please tell us about the situation in Japan. I hear that prices have dropped by about 50% since 1990. Interest rates are about 2% and most properties are cashflow positive, but that there is still not much capital growth.

Regards
Woz
 
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Reply: 1.1
From: Always Learning


Rolf, let me clarify a few points.

a) "wads" of cash...well, I wish!!! Tokyo is expensive as hell! But I have to admit I can save more here than back in Austaxland!

b) You recommend in the 30~60% median price band, ie 100k to 200k. I was in North Sydney CrowsNest last month; my god, it's more expensive than Tokyo for a smaller house on tiny bit bigger land!!!! $650K for a semi and with a return of $500pw. In Melbourne I would assume that middle ring suburbs are available at that price point (eg. Mulgrave, Ringwood etc), but where in Sydney? "Go far west"

c) Would you recommend a buyers agent?
 
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Reply: 2.1
From: Always Learning


Woz, thanks for the reply. Let me respond

a) Searching via internet is easy, however asking family and friends to look at a large number of properties is difficult. Of course if I could "target" two or three then no problem to ask for family help. This is the difficult point, on the internet there are 1000's of properties maybe with nice pictures with "POA" or auction. The information I want "vendor motivation", rental price, outgoings etc make targeting a few places for friends/family to look at very difficult.

b)When you say "numbers stack up" what do you consider good? Previously I used $160pw for 100K of property (freestanding house on regular land with standard outgoings) in an area I believe would offer good capital gains. I think I have been lucky!!

c) Tokyo, well cash flow positive properties seem to be available. I am investigating the possibilities now. However One thing is clear; I need to get a "PR" resident visa to get a regular home loan, not so easy. IP loans I am sure will be more difficult again. Rental returns seem to be good, 10~11% with deals on interest rates like 0% for the first 2 years and reverting to standard rate 2.73% on the third year. Japan is in deflation, prices are falling, land too, the value of a dollar today is less than a dollar tomorrow. It's crazy thing to get your head around with IP.
 
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Reply: 2.2
From: Colin Mills


Not so sure about Syd/Melb being hot but I'd suggest you missed the boat as far as the currency is concerned. You will be paying almost 70 Yen to buy one Aussie compared to 55 last September. That has to hurt.
 
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Reply: 1.1.1
From: Rolf Latham


Hi Glenn

Ooops, I wasnt meant to be recommending anything like that I thought. I was just commenting on your existing stock.

I dont make recommendations on property investments generally, but I know how to get money for them. If I was any good at selecting properties I wouldnt be so poor :eek:)

Ta

Rolf
 
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Reply: 1.1.1.1
From: Always Learning


Rolf : Don't worry, I was not thinking you are making recommendations about what and where I should buy.

My concern is that the market seems to me to be a little crazy in Melbourne and Sydney. The IP pie is too hot, if I stick my fingers in I may get burnt.

As per Jan Somers books, she recommends not to buy when the market is peaking, when everyone else is buying. Reading Jan's book gave me the courage to invest in IP, on paper today I am $500K richer for it. Not bad for a $24.95 book! Now I want to take IP further, I currently think I should wait until everyone is selling, then go in big! currently everyone is buying!!!
 
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Reply: 2.2.1
From: Always Learning


Your right, 55yen/dollar to 70yen/dollar a big jump.

Well I wasn't really thinking about using my money (yen). I was thinking about using OPM, via refinancing with my existing IP's
 
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Reply: 3
From: E B


Hi Glenn. Pick the right location and inner Sydney prices stay static in a downturn. I have owned several properties over 25 years and never lost a cent yet. The unit i live in now (Darlinghurst) has gone from $137k to $500k in ten years...

Regards EAB.
 
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