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From: Jim Kouta


Hi all,

As an experienced property investor in Melbourne for over 30 years and remaining positive for all those years I have just about thrown the white towel in. Prices are ridiculous at the moment and it's almost impossible to make money, although the smart investors will always find something(maybe not in this climate though). My advise to the newbies is to save your cash and buy in 1-3 years time when things slow down and people are forced to sell because they can't afford to hold onto their IP. You will make more money in the bank at the moment! Senior management at a large bank and several high profile real estate agents(close friends) have admitted that lot's of people, especially newbies are going to get burnt. Just like the tech bubble burst in the stock exchange, so will property. Call me a dooms dayer if you wish, but also consider my 30 years in real estate and hopefully what I see as being good advise. And those who talk about history and that property never falls, there's always a first, when, I don't know.

Personally, I'm going to sit back, save my hard earned cash, invest in something else, which I haven't worked out yet and sympothise with people who spend ludricous, almost laughable amounts of money on property who expect to make money and then snap them up for a bargain in 1-3 years time.

Finally, property is a great investment, but now is not the time.

Read this article from the financial review:

http://www.domain.com.au/news/goto.asp?url=/news/2001/08/18/nat121.asp
 
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Reply: 1
From: Peter Davidson


Hi Jim,

Even though I haven't been investing for 30 years(this is my 19th year), I too cannot help but think there will be a crash. I've been asking a lot of questions and it seems as if it is a very, very dangerous time to buy at the moment, even Real estate agents admit this. Like you, I have stopped looking all together and will wait for a buyers market, not a sellers market, which I'm sure isn't too far away. Save, save, save newbies and when the time is right, POUNCE!

Regards,
Pete.
 
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Reply: 1.1
From: Jakk Bass - The SLUM LORD


G'Day to both you gentleman,

I tend to agree to what you are both saying and if one can afford the luxury of sitting back, drinking stubbies and waiting for the inevitable crash/correction to eventuate, (which I have no doubt will happen, but when??), in order to go out there and do the easy pickings, then just do that.
On the other hand, I have been looking outside the square, so to speak, and going out on a limb and actually finding stuff that works, not just in this market but hopefully in any future corrected market.
The fundamentals of property investment are not new, they existed long before any of us started investing in property and no doubt will exist long after we are gone.
We buy property for an expected higher future value and a present day return and at the same time to give us some security.
There is no doubting that todays property climate seems to be overheated, scorching hot in some areas, but remember, "What seems dear in Real Estate today, will seem cheap tomorrow." The question is how long will tomorrow take to get here?

regards
Jakk
 
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Reply: 1.1.1
From: Michael G


Hi,

There are ways to make money in any market. The trick is that its not the same strategy.

Looking in the papers I see deals, just called someone today to possibly deal a nice deal.

Yeah I do wraps - but it does keep me going while the market turns.

In the meantime I'm building up experience, contacts, track record, cashflow and potential capital.

Michael
 
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Reply: 1.1.1.1
From: Trina Blum


Hi,

Does this advice just relate to the Melbourne area or any area in Australia? I live in Perth, am a newbie at property investing and was intending on buying a property next year for investment. Are you saying that I should wait a bit longer and continue to pay my mortgage off before branching out into an investment property?

Trina
 
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Reply: 1.1.1.1.1
From: Anonymous



Bunch of PESSAMISTS

BUBBLE HAS A LOT OF INFLATION ALL OVER YET
 
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Perfect Market for newbies

Reply: 1.1.1.1.1.1
From: Lan Diep


As a newbie investor, I feel that today's market is the perfect training ground for my first step into property investing.

When I seriously decided that I wanted to start investing in property 6 months ago, my first plan was to just buy a 'good' property and get rental income. Was a fool am I! A few seminars, books, stories, editorials and newspaper articles later .... I still haven't purchased a property.

Every weekend is spent attending auctions, inspections, researching and reading - and to no avail, just can't afford those prices.

As each week ends and prices increase, the more knowledgeable I become of my selected market and the more issues that arise in the media and on this forum. Suddenly, I wished I had paid more attention in my Economics classes re: effects of interest rates on the market. I have gained so much invaluable information, which I am sure would not have been as readily available one year ago (or maybe the teacher appears when the student is ready :)

However getting back to my reason for this post, I agree with Jim and others, in that it is quite a volatile market for newbies, but also an educational one. But there's still so many questions to answer..

I don't want to wait and watch the world go by...procrastination is my worst fear. If I wait, won't interest rates increase? Would the cost of an overpriced property be the lesser of two evils to higher interest rates (no doubt will happen)?

But if I buy now, will I be burnt just like Jim and others state? Someone please tell me how, how will I be burnt? Will I end up paying for the mortgage because the vacancy rates are so high? Will my property's capital growth be stunted in the first several years because I had paid an exorbitant price for it?

AND..how will I know when and how the market will correct itself? Property prices don't usually go backward. Maybe the market is setting the benchmark for Melbourne's future market. Before I know it, Melbourne prices will be Sydney's prices. If I can't afford now, what makes me so sure I can afford it in the future?

All these questions and more still to answer....and this is the perfect market in which to resolve them ----> or give up completely :)

Lan
 
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Perfect Market for newbies

Reply: 1.1.1.1.1.1.1
From: Paul Zagoridis


Hi Lan

This does NOT constitute advice because I probably wont follow it myself. I don't really know anything.

Sydney, Melbourne and Brisbane are currently "hot" markets. That means every human and their canines are out buying residential real estate at increasing higher prices (some of it even as an investment). It seems to be driven by easy finance and FHOG - depending what niche you're looking in. We won't know for sure what is driving it until after it stops. Economists work best with history.

You are right that housing prices rarely fall. Median housing data shows that prices generally plateaux during a correction. My attitude is that a correction allows more desperate sellers, so I can pick up a huge bargain then. Many investors can't borrow money when things get tight because they don't keep a reserve.

Another reality is that capital city median housing doubles in value every 7-10 years. That is a 10%-7% annual compounded growth rate. Not bad. "Well selected" property does better. What is "well selected"? I'm an economist by training, I'll tell you after you've found it.

So if you are not in the market, the best time is now. Those who sit it out may or may not time the market accurately, but the successful ones maintain their portfolio, selling only to fund better performing investments.

I would counsel against getting greedy in this market. A deal that looks too good to be true, probably is. That applies to both positive and negative geared camps. Don't spend the next 5 years exclusively chasing the holy grail of positive cashflow with high growth.

Find yourself a nice little earner that should do well over 10 years. Be prepared to hold it for 10 years even if it fails to perform over the next 3 years. That's where you get experience, it won't cost you too much. Getting rich in real estate should be boring.

Oh and keep some cash in reserve for when it gets interesting.

Paul Zag
Dreamspinner
Oz Film Biz is at
http://www.healey.com.au/~paulz
 
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Perfect Market for newbies

Reply: 1.1.1.1.1.1.1.1
From: Robert Longmore


Just a little quote from the worlds greatest investor, Warren Buffet. "You only make money on an investment when you buy, not when you sell. How much you pay will directly influence your return"

my personal favourite " You never sell good investments! "

sure he invests in stocks, but his techniques and rules apply in all investment vehicles.
 
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Perfect Market for newbies

Reply: 1.1.1.1.1.1.1.1.1
From: Sim' Hampel


For the newbies out there who are suffering from analysis paralysis in regards to their first (or next) property purchase... I have two bits of opinion-not-advice for you.

1. Decide what you want from your investments. Ask yourself some questions like... Why are you investing ? What is your investment timeframe (ie. how long do you intend to hold the investment) ? How many properties do you want/need ?

2. Now based on your answers to question 1, you have 2 choices:

2a. If you want a couple of properties to hold long term (maybe eventually 7 or 8), which by the time you get to retire should provide you with a nice income to supplement any superannuation you have, then I suggest that you go back and re-read Jan Somers' books and see what she has to say about timing the market.

Hint: short term market fluctuations don't matter terribly much over a the long term (20 years or more). In other words... buy now if you think you can buy a suitable property (Jan tells you what to look for) and are prepared to hold long term and won't overextend yourself in doing so. A downturn/crash in the market won't bother you if you are not looking/needing to sell !!

2b. If you want lots more property, or don't want to wait until retirement to make lots of money, or are generally just impatient... then you will probably find that Jan's strategies are a little too slow for you. In this case, you need to find some strategies that work at different times of the economic/property cycles. This is a whole different ball game, and not something you want to get stuck on if option 2a would have suited you.

Jan's strategies are simple and proven and are a good start to property investing... I suggest that if people are getting stuck on all the more "advanced" strategies people discuss here in the forum, that they need to take a step back, re-evaluate their goals and maybe start simple, following Jan's advice in her books. You can always change or add new strategies down the track.



Sim's random kinda-meaningful cliche-quote:
~ ...beware of the dark side. Anger... fear... aggression. The dark side ... are they. If once you start down the dark path, forever will it dominate your destiny, consume you it will... ~
 
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Perfect Market for newbies

Reply: 1.1.1.1.1.1.1.1.1.1
From: Sergey Golovin


Lan, have look on the other side of that coin.

Let say you did get an investment property and rented out and you could not get any tenants. Could not afford to pay back weekly/fortnightly repayments. Instead of selling it you can move into that property and keep it as owner occupy for year or two. Then move on and get your self another place, buy more investment properties.

It is all up to you. No one will say a word. Even if someone will say something about it, well so what, after all you are the one who pays for it.

But yes you are dead right you have to start somewhere. Just be careful, that’s all.

Serge.
 
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