Property investment to grow in value!

[Sunfish]

You have to admit, though. Lower chance of margin calls for property loans.
Alex

That's a double edged sword. Because you don't face the risk of a margin call you can lose discipline and delay making decisions too long.

I have been lightening up all the way down because the Damocles Sword hanging over every margined share-trader keeps one's mind focused.

And Willair, it is never too late to sell, although I would never try to give trading advice either. There is no rule that says that you must go down with the ship.

 

[alexlee]

That's a double edged sword. Because you don't face the risk of a margin call you can lose discipline and delay making decisions too long.

Which is a huge problem when you're trading, I agree. With property, BEACUSE there's less likelihood of a margin call you have more time before having to make a decision. With margin loans and trading, they can yank the carpet from under you at a moment's notice.

There ARE risks at the moment, I agree. That's why I just refinanced one loan and have the money in an offset account, have no margin loans against the shares and am cautious about taking on more debt. But surely as investors we have to evaluate how likely each risk is. We can't mitigate all the risks and I don't want to, because that means I'll be missing out on the opportunities as well.
Alex

 

[pjparker]

We can't mitigate all the risks and I don't want to, because that means I'll be missing out on the opportunities as well.

And there will be plenty of opportunities, both shares and property over the next year or so.

Its events like these that we see the transfer of wealth from the impatient to the patient.

I just know I don't want to end up like my parents, they played it safe, but are asset rich cash flow poor like most BB's. I would prefer to be rich in both.

Paul.

 

[Sunfish]

'Tis OK. I'll climb back under my rock.

But you must give me brownie points. I do try to get you, (no, not you, others) to look at the big picture with their eyes wide open.

 

[ernie]

Interesting to see all the doom and gloom talk all around us. When all was well with the share and property markets all the stories we heard were about people making their money, how they did it, etc. These days, it's all about which company went belly up, who got burnt bad, margin-called, etc.

A wise man once said, "buy when there's blood on the streets..." Methinks there's quite a bit of it there now, although perhaps we'll eventually see a flood rather than just puddles. In any case, I believe now is the time to be thinking about buying rather than selling. By all means prepare for the worst, but don't panic

 

[s_t]

Sunfish, there are plenty other investors here more highly geared and less prepared than Alex (like me! - for the geared bit anyway). Unfortunately, it kind of makes it hard for you to make a point when they aren't the ones who are replying (and possibly thinking) about what you are saying!

 

[komstak]

This plan would surely increase the demand for properties:

http://www.workpermit.com/news/2008...a-needs-skills-expo-lures-british-workers.htm

 

[steveadl]

I'm glad I didn't leverage into shares/MF's last year when I was contemplating it. Was considering going into the geared MF's with extra gearing of my own. Decided I would wait a bit as I believed the market was due to pull back after the last few years gains (although didn't think it would be quite this big of a fall back).

Sure as hell glad I did. I would have received margin calls for sure, and would have put myself in a very tough position now. I've found over the years, when it comes to the sharemarket - I'm not a good investor. I've even sold down some of my indivdual shares to reduce personal debt - sick of seeing shares go down (thank God I never leveraged these ones - only used my own money).

When I do get back into the sharemarket - any levearge will be through LOC drawdowns as opposed to margin loans. The current market is a good learning opportunity.

Having said that - I have no problem leveraging as much as I can into property. Assuming you make wise choices with the individual IP's, taking into account your finances.

The same time last year I was deciding against leveraging into shares, I was loading up on more IP debt. My LVR has decreased since then thanks to value rises, but even if it hadn't - generally speaking, I can't be hurt by outside effects I don't have control over ie. marco economics, herd mentality, interest rates (if you decide to fix) etc. Even if my IP's had dropped by 10% - I wouldn't be forced or have a need to do anything. Just keep plodding along and wait for a rebound.

I guess what I'm trying to say is - I just don't see anywhere near the same amount of risk leveraging into property as I do leveraging into shares . Just my two cents.

 

[trendsta]

Yes, it is all about credit. JP Morgan has just bought Bear Sterns for $2/sh (No, that's not a typo) valuing BS at US$236 million. 'Twas US$3.54 billion end of Feb.

Anyone buying bank shares?

Hi sunfish,

Even worse, at its peak in Jan 07, it was trading at 150USD, valuing it at bout 22 billion. Friday it closed at 27 valuing it at 3.5 billion

... and drum roll thanks..
this morning bought for $2 total value of 236 million ...

 

[Sunfish]

I guess what I'm trying to say is - I just don't see anywhere near the same amount of risk leveraging into property as I do leveraging into shares . Just my two cents.

Just because you can't see a risk does not mean it does not exist.

 

[alexlee]

Just because you can't see a risk does not mean it does not exist.

Sometimes, seeing too much risk means you miss out on opportunities, too.
Alex

 

[steveadl]

Just because you can't see a risk does not mean it does not exist.

I didn't say there is no risk, I said that is much lower (IMO) with realestate as opposed to shares.

Take me for example - my IP's could crash 30% tomorrow. Aside from the fact it's highly unlikely - even if it did, it wouldn't change my situation other than to decrease my paper worth.

If I had margin loans and my portfolio went down 30% in value tomorrow (at the same LVR I have property at), chances are there would be margin calls, extra cash needed, forced sales, continuing declines in the value forcing a repeat of the above again etc.

So my point is - leverage on property is nowhere near as risky as leverage into shares. Yes the banks can call in a property loan (we've all heard examples) - but how likely is this if the loan payments are still being made? And would this really be on any decent scale compared to the amount of loans out there?

They also don't have a readily made valuation at the click of a button like shares to ascertain the value of the property - short of sending valuers around to every indivdual house on their loan book. True they can see median prices, but in order to go ahead with it, owners would demand valuations etc.

 

[DavidMc]

That's why I just refinanced one loan and have the money in an offset account...

Did your valuations come in as expected or were they conservative?

Was a mortgage insurer involved? My broker tells me for loans up to 80% credit is still 'fine' however the mortgage insurers are tightening up.

I'm in the process of a revalue/refinance now.

 

[alexlee]

Did your valuations come in as expected or were they conservative?

Was a mortgage insurer involved? My broker tells me for loans up to 80% credit is still 'fine' however the mortgage insurers are tightening up.

I'm in the process of a revalue/refinance now.

I thought they were conservative by about 10%. But my MB got me up to 83% LVR without LMI, so the difference wasn't that much in the end.
Alex

 

[willair]

I
And Willair, it is never too late to sell, although I would never try to give trading advice either. There is no rule that says that you must go down with the ship.

It's never as bad as it all looks,and i don't intend to go down with any ship once all the shorting stops on the Australian Financial Institutions then the market will just find it own level,plus the exit tax bills are still too high. for me might has lost over 30% in the total holdings,but have bought back in several time on the way down..
happy trading ..willair..