Landlords shouldn't bet house on capital gains

[ToGetProperty]

[ Chapter 10 'Time - Not Timing' was a god send, the opening paragraphs is what we continue to try to remember.
[/B]

Yes, this forum and Jan's book give me indeep knowledge of property investment. However, I completely disregard this important argument: "Time - Not Timing", in my own strategy.

Time in the market is used for most of investors (ma and dad). You can be a Millionaire within 10 year with this strategy.

However, if you want to be a millionaire within 2 to 5 years., you must time the market perperly. For example, 3 years ago, I start to buy my first property. I could buy in Blacktown or Ermington. At that moment, Blacktown's market was dead and Ermington is moving. I got into Ermington first. Within 2 years after that, I have enough equity from my growed IPs to buy 4 properties in Blacktown where is booming 20% this year and last year, keep up and up. Do you see the point? If I don't time the market property, I can't hold so many IPs.

There is more examples in Ocean View's message and read through his messages. You can be a millionaire within one year in his way - land lover.

Please read Jan's book and practice it in a creative way.

I also don't like Jan's book that buying Units should be the same as buying houses, and so on.

 

[suggo]

Millionaire in 10 years is fine with me!

I am happy with the method of buying that Jan uses, I figure that four years ago I was 30yrs old and had $6000 in the bank and was looking at working till I'm 60 and retiring on the scraps that my super throws to me. Now I should be retired on a more then comfortable income by 40, 45 at the latest, and I am happy going along at that pace.

Of course I wish everyone else the best of luck in their money making exercises (yes even brains & LB ) but for me and the wife the sleep at night factor comes into it!

 

[jahn]

Brains
Just a thought (not stirring the pot)
The scene with using the equity in the property, to then invest as Acey suggested, isn't that a good option, when you consider that that money is being used to generate more income, from basically something you never had, or had access to, before. Even if it only ended up a 1% net gain, its better than no gain, )or my super fund )
Yes, I know if you invested badly and had a capital loss, it would be smelly, but we are talking about due diligence in investing, and not leapng in just for the sake of it. Hopefully in that case, over a period of time, the CG from a wise IP selection, would cover your backside.
jahn

 

[brains]

Jahn,

What your saying is correct, my post was getting at the nature of the investment.

Say you had an IP equity worth $400k. You take out an 80% LOC, which is $320k with interest only repayments of $1787.00 per month at 6.7%.

Say you invest that $320k in direct shares or a fund or whatever your chasing a higher rate with (waiting on Aceys reply)and it goes bad (like thay can).

You might still have the house, but you have that big interest payment to make every month.

You sell the house to pay out the LOC and then you have nothing (or the 20% equity left wich isnt much)

So, if you use the LOC for an investment that goes bad, you can lose the house (or houses) its secured against and that aint much fun.

 

[jahn]

Brains
Thanks for reply (been sidetracked with end touches for reno)
Fair call.
What about the option of safer prospects along the lines of investments/funds tracking top 200 or share market, or property fund.?
Hopefully they won't go totally belly up so you lose the house. I suppose the challenge is to get the interest rate covered, which hasn't been too noticeable just lately, with the safer choices.
BTW. You make a good arguement for investing in IP's

 

[brains]

I dont think its a good time for property funds, id say the next few years will show terrible growth in them. And even an indexed 200 fund can be negative, look at the previous 3 or so years.

I suppsoe its possible but usually the risk/reward equation doesnt add up for most people using borrowed money. Not for me anyway.

 

[brains]

Still waiting on Aceys astute reply on this one.

Originally posted by brains
Acey, I consider myself astute but others might not.

My statement was made in the light of using the LOC funds in a conservative/low risk investment strategy, which is what most people would demand.

Sure i can get higher returns than the 5% cash rate around at the moment but would not be willing to risk LOC funds on spec. or higher risk investments just as im anti margin loans for share buying, i couldnt stand a margin call. I would also hate to be making interest payments on a loan for an investment that has gone bad, could not think of a worse scenario for an investor.

And im not a real fan of the cashbond concept (as BillL has previously noted) they wouldnt work real well in a low growth environment.

Basically what im trying to say that i dont mind risky investments but not with borrowed money - the only investment i borrow money for is property.

I didnt even borrow money to expand my business, i took the slow and steady path of organic - self funded expansion.

And Suggo - lighten up mate

 

[Aceyducey]

Originally posted by brains
Still waiting on Aceys astute reply on this one.

Brains, I didn't see any need to reply to your post so I just let it go.

Cheers,

Aceyducey

 

[brains]

Acey,

I thought you might like to expand on this statement:

"It's actually pretty easy to find better returns than the housing interest rate level & the small fees charged for most LOCs.

If it wasn't very few of us would ever buy property."

Originally posted by Aceyducey
Brains, I didn't see any need to reply to your post so I just let it go.

Cheers,

Aceyducey

 

[Aceyducey]

Originally posted by brains
Acey,

I thought you might like to expand on this statement:

"It's actually pretty easy to find better returns than the housing interest rate level & the small fees charged for most LOCs.

If it wasn't very few of us would ever buy property."

Brains was that what you were asking? Sorry I didn't recognise your question amongst all your rhetoric

In my best impersonation of a wise Chinese sage (yes so it's not that good an impressions, big deal)

{SAGEIMPRESSION}
Think beyond the square my son.
{/SAGEIMPRESSIONS}

We are still able to find residential property in Australia that is positively geared when the deposit is funded through an LOC & the rest of the property through bank loans.

This is without exploring all the alternatives to residential property as an asset & Australia as a jurisdiction.

If you explore all the other options out there I'm sure you will find many ways of turning equity into greater wealth- it just takes the willingness to look & the openness to think beyond the average.

Of course, if you are within your comfort zone & being successful, why move!

Cheers,

Aceyducey

 

[brains]

Sorry mate, i thought we were talking about turning equity into income/cashflow.

Originally posted by Aceyducey
Brains was that what you were asking? Sorry I didn't recognise your question amongst all your rhetoric

In my best impersonation of a wise Chinese sage (yes so it's not that good an impressions, big deal)

{SAGEIMPRESSION}
Think beyond the square my son.
{/SAGEIMPRESSIONS}

We are still able to find residential property in Australia that is positively geared when the deposit is funded through an LOC & the rest of the property through bank loans.

This is without exploring all the alternatives to residential property as an asset & Australia as a jurisdiction.

If you explore all the other options out there I'm sure you will find many ways of turning equity into greater wealth- it just takes the willingness to look & the openness to think beyond the average.

Of course, if you are within your comfort zone & being successful, why move!

Cheers,

Aceyducey