GeorgesA said:
should i hold or sell with loss??
- Thread starter tigerGT
- Start date
thanks
Thanks for your thoughts Kenneth. I will be looking into all your suggestions further. I will update you guys soon, in the meantime i shall be browsing the forums and reading some books...
This thread was very beneficial for me and im sure many others. I have actually printed it off and believe that its such a good read for people considering purchasing a house in this current market.
Thanks to all and i hope to be able to contribute to others as you have contributed to my knowledge of this IP market. There is always more to know. No one knows it all...
Good luck to all in all there IP decisions...
Will talk again for sure on the forums
Cheers
Georges
Thanks for your thoughts Kenneth. I will be looking into all your suggestions further. I will update you guys soon, in the meantime i shall be browsing the forums and reading some books... This thread was very beneficial for me and im sure many others. I have actually printed it off and believe that its such a good read for people considering purchasing a house in this current market.
Thanks to all and i hope to be able to contribute to others as you have contributed to my knowledge of this IP market. There is always more to know. No one knows it all...
Good luck to all in all there IP decisions...
Will talk again for sure on the forums
Cheers
Georges
I don't understand why there is so much debate about this. His answer is simple.
If he can afford to HOLD then he should HOLD.(full stop)
He bought at the peak, that was maybe the wrong thing to do maybe not.
But now, what benefit is there if he sells for 340K ?
So he can buy it back next year for 340K ?
There is no reason to sell and take a loss now.
If you had bought Telstra shares for $5.10 4 weeks ago and watched them drop to $4.70 now will you panic and sell at $4.70 just because the price dropped ?
and I must say his house is a safer investment than Telstra will ever be.
I can't beleive what I'm reading here. You guys are actually advising him to take a loss and sell.
12 months ago if this issue was raised all of you would have advised him to HOLD FOREVER. I wonder what has changed since then.
Regards
Investor
If he can afford to HOLD then he should HOLD.(full stop)
He bought at the peak, that was maybe the wrong thing to do maybe not.
But now, what benefit is there if he sells for 340K ?
So he can buy it back next year for 340K ?
There is no reason to sell and take a loss now.
If you had bought Telstra shares for $5.10 4 weeks ago and watched them drop to $4.70 now will you panic and sell at $4.70 just because the price dropped ?
and I must say his house is a safer investment than Telstra will ever be.
I can't beleive what I'm reading here. You guys are actually advising him to take a loss and sell.
12 months ago if this issue was raised all of you would have advised him to HOLD FOREVER. I wonder what has changed since then.
Regards
Investor
pics of d house
http://www.somersoft.com/forums/gallery/showgallery.php?cat=500&ppuser=5405
Thats the one!!!
the inside is fully renovated
http://www.somersoft.com/forums/gallery/showgallery.php?cat=500&ppuser=5405
Thats the one!!!
the inside is fully renovated
Definitely granny flat material
GeorgesA said:
To all this you should add the "paper loss" of the property's value, and it takes you back to about -10K~15K of your potential personal net worth each year.
Firstly - I (in a sincere and a friendly manner) wish you that 10K~15K a year will be your biggest loss in this life.
Secondly, and I'm not sure what may be the implications on your credit history or on your other assets, and let's put ethics aside for a while, but - What happens if you just decide to stop paying the loan, stop subsidising your tenants, stop accumulating a loss of 10K~15K x number of "hold" years, and just leave that negative-equity property to the bank to deal with?
investor said:I don't understand why there is so much debate about this. His answer is simple.
If he can afford to HOLD then he should HOLD.(full stop)
He bought at the peak, that was maybe the wrong thing to do maybe not.
But now, what benefit is there if he sells for 340K ?
So he can buy it back next year for 340K ?
There is no reason to sell and take a loss now.
If you had bought Telstra shares for $5.10 4 weeks ago and watched them drop to $4.70 now will you panic and sell at $4.70 just because the price dropped ?
and I must say his house is a safer investment than Telstra will ever be.
I can't beleive what I'm reading here. You guys are actually advising him to take a loss and sell.
12 months ago if this issue was raised all of you would have advised him to HOLD FOREVER. I wonder what has changed since then.
Regards
Investor
Well, hooray!
Well said, Investor!
As I have commented before about property investing, if it was easy everybody would be doing it. It's not and they aren't.
I have been carrying an empty house for three years now, and believe me that means finding heaps of money at regular intervals. I wasted lots of money on the property in the first six months instead of just renting it as I bought it and coming back to it later.
I could have sold it a couple of times - at a whacking loss - but when I look back over the years I have hated selling anything, have never got 'real' value when I have sold, and have regretted it later.
So I have just plugged away, finding the money when I can, capitalising the debt when I can't, and now it looks as if there is some light at the end of the tunnel but, of course, that could just be the headlights of the train!
George, with all due respect, don't spend any more on the property. It looks to be in good condition, it has a tenant, just leave it be. It will have it's day in the sun but the more you fret the more stress and anguish you experience.
The tenants rent the whole property. I once got a great tenant who had lived somewhere else for three years, and just up and left when the owner wanted to start fiddling about with the arrangements, wanting surveyors to have access and to start preparing plans for subdivision etc They left me, too, when I painted the house. All they wanted was a quiet place to live and to be left alone.
If you are obliged to spend $50,000 on your wedding, so be it, but what is the point in disturbing a good tenant, trying to sell a property for less than you paid for it, and paying for the loss for years to come?
Why not think about your whole situation - life is not lived in compartments - and see where you can manage the risk a bit better. Have your gala wedding, but perhaps have the round-the-world honeymoon a little later?
Have the guest bring their own sugar almonds? Hire smaller limousines?
Have you considered reviewing your mortgage arrangements? Is there any equity so you could increase your borrowings and capitalise the debt for a while? What about the PAYG variation as mentioned before - that would moderate the cash flow rather than waiting a year for a tax refund.
In twenty years time you will be very glad you kept this property. Having property is, in many ways, like having children. They are very costly and can cause us many sleepless nights, but the benefits far outweigh the sacrifices we make during the early years.
You have shown yourself to be a young man of courage in buying the property in the first place. Don't be deterred by this temporary set-back, and make sure you buy another one as soon as you can.
Best wishes
Kristine
**********************************************investor said:I don't understand why there is so much debate about this. His answer is simple.
If he can afford to HOLD then he should HOLD.(full stop)
He bought at the peak, that was maybe the wrong thing to do maybe not.
But now, what benefit is there if he sells for 340K ?
So he can buy it back next year for 340K ?
There is no reason to sell and take a loss now.
If you had bought Telstra shares for $5.10 4 weeks ago and watched them drop to $4.70 now will you panic and sell at $4.70 just because the price dropped ?
and I must say his house is a safer investment than Telstra will ever be.
I can't beleive what I'm reading here. You guys are actually advising him to take a loss and sell.
12 months ago if this issue was raised all of you would have advised him to HOLD FOREVER. I wonder what has changed since then.
Regards
Investor
Dear Investor,
1. I wish I can agree with you. If it was you or me, I guess we can easily make the decision and probably end up with the same decision outcome too.
2. Unfortunately, the call belongs to GeorgeSA. GeorgeSA has to make his own decision on his own and at the same time able to live with it and its attendant costs/consequences.
3. You said that "There is no reason to sell and take a loss now." Yet you know at the same time that there a number of forum members recommending to him to adopt this very position. Thus, there are many forum members who may not agree with you. So poor GeorgeSA, which side should he be listening to except to weigh all the feedback and decide for himself the best way he can, to his own best interests.
4. What is deemed to be in his best interest, only GeorgeSA can decide for himself and not any one of us.
5. for your kind consideration and further discussion where neccessary, please.
6. Thank you.
regards,
Kenneth KOH
I do not know why people keep comparing shares to property as if there is a relationship between how you would manage either. They are very different asset classes.
I would think most people who love property do so because it is very forgiving. It is my understanding that historically (in Australia at least) there has not been a ten year period where property has not recovered.
Property as opposed to shares does not carry the risk of total loss. A property bought today will not be worth nothing tomorrow. That is why lending institutions allow such high gearing.
You can add value to property, as some forumites have suggested. What can you do to improve your share value. Write an encouraging letter to the CEO.
We are talking a paper loss here. Hopefully GeorgesA had the property valued at the peak and can draw down equity for another purchase and keep investing.
The only reasons I can see to sell are;an inability to service the loan, an inability to invest in a better returning asset, or the property no longer fits the investors risk profile.
If these are real risks then action needs to be taken, otherwise hold on and reap the longer term benefits.
I would think most people who love property do so because it is very forgiving. It is my understanding that historically (in Australia at least) there has not been a ten year period where property has not recovered.
Property as opposed to shares does not carry the risk of total loss. A property bought today will not be worth nothing tomorrow. That is why lending institutions allow such high gearing.
You can add value to property, as some forumites have suggested. What can you do to improve your share value. Write an encouraging letter to the CEO.
We are talking a paper loss here. Hopefully GeorgesA had the property valued at the peak and can draw down equity for another purchase and keep investing.
The only reasons I can see to sell are;an inability to service the loan, an inability to invest in a better returning asset, or the property no longer fits the investors risk profile.
If these are real risks then action needs to be taken, otherwise hold on and reap the longer term benefits.
GeorgesA said:
GeorgesA,
Now I know why you got yourself into an awkward situation.
You dismissed the input of experienced investors. Generalising that all their advice was worthless to you.
Rethink your attitude and you have a chance at becoming more experienced and knowledgeable as an investor without doing it all the hard way.
Cheers,
Aceyducey
Hi all,
Investor and Kristine, I have to disagree with you on this one. Georges has already stated that the house is in an average area and a fair distance from facilities.
At current inflation and interest rates, Georges yield on the property (on his purchase price) will only be 5.3% in 20 years time, and will still be cashflow negative!!
The growth that we have all enjoyed from property in the last 30 years, may not happen to the same extent in the immediate future (ie 10 or so years).
We have had exploding population, inflation, increased household income due to more women in the workforce, and finally lower interest rates that have driven the last few booms.
Unless we get inflation(meaning 6+% for quite a few years), or interest rates down around 3%, then I don't see where the next boom can come from!
It all comes back to Georges expectations about his investments. If he just wishes to hold one property, then by paying down the principal over a long period will eventually turn this property into a sound investment.
But could he use his money (as in the annual loss he is taking) in a better way??
Does he want to???
The reason many investors use the saying "cut your losses short" is so that they don't hold on to a losing position for lots of agony, only to end up selling at the worst possible time to get rid of the pain. They do this because they were expecting x to happen and they know they were wrong if y happens. Therefore get out before there is much pain and start again with lots of research, and a clear mind.
bye
Investor and Kristine, I have to disagree with you on this one. Georges has already stated that the house is in an average area and a fair distance from facilities.
At current inflation and interest rates, Georges yield on the property (on his purchase price) will only be 5.3% in 20 years time, and will still be cashflow negative!!
The growth that we have all enjoyed from property in the last 30 years, may not happen to the same extent in the immediate future (ie 10 or so years).
We have had exploding population, inflation, increased household income due to more women in the workforce, and finally lower interest rates that have driven the last few booms.
Unless we get inflation(meaning 6+% for quite a few years), or interest rates down around 3%, then I don't see where the next boom can come from!
It all comes back to Georges expectations about his investments. If he just wishes to hold one property, then by paying down the principal over a long period will eventually turn this property into a sound investment.
But could he use his money (as in the annual loss he is taking) in a better way??
Does he want to???
The reason many investors use the saying "cut your losses short" is so that they don't hold on to a losing position for lots of agony, only to end up selling at the worst possible time to get rid of the pain. They do this because they were expecting x to happen and they know they were wrong if y happens. Therefore get out before there is much pain and start again with lots of research, and a clear mind.
bye
Bill,
Isn't it the case with most booms that people simply don't see where the next one will come from?
And they don't see it until it's well underway.
In regards property however there are several clearly visible trends which have the prospect of leading into the next boom.
1) Immigration rate - we're importing 100,000 people per year and increasing. Due to our need for more professionals as baby boomers retire and the need for people to do the jobs Australian's won't this will continue to trend upwards. Where will these people live?
2) Persistent Australian housing shortage. We're still seeing a deficit in the number of dwellings across Australia.
3) Dwindling household sizes. 2.74 ten years ago. 2.6 today and declining. This pushes up housing needs while the population remains static (which it isn't).
4) Consumer sentiment. Everyone remembers the last housing boom and many people are cursing themselves for missing it. Lots of them will be ready earlier next time, and are simply looking for a positive trend. Either from fear (gotta buy now before property gets even more expensive) or greed (we can double our money in just a few years).
All of these are currently in play, it's a matter of when and how much influence, that's all
Cheers,
Aceyducey
Isn't it the case with most booms that people simply don't see where the next one will come from?
And they don't see it until it's well underway.
In regards property however there are several clearly visible trends which have the prospect of leading into the next boom.
1) Immigration rate - we're importing 100,000 people per year and increasing. Due to our need for more professionals as baby boomers retire and the need for people to do the jobs Australian's won't this will continue to trend upwards. Where will these people live?
2) Persistent Australian housing shortage. We're still seeing a deficit in the number of dwellings across Australia.
3) Dwindling household sizes. 2.74 ten years ago. 2.6 today and declining. This pushes up housing needs while the population remains static (which it isn't).
4) Consumer sentiment. Everyone remembers the last housing boom and many people are cursing themselves for missing it. Lots of them will be ready earlier next time, and are simply looking for a positive trend. Either from fear (gotta buy now before property gets even more expensive) or greed (we can double our money in just a few years).
All of these are currently in play, it's a matter of when and how much influence, that's all
Cheers,
Aceyducey
Acey,
I don't disagree with any of that, in fact they are the very reasons why some property can still be a good investment.
But not all property.
From my perception the driver of most of the cap growth in average houses has been inflation and recently the drop in interest rates. ( The house we owned in Mulgrave has only increased in value by the combination of inflation and lower interest rates since 1981).
Now if we don't get those to the same extent in the future (next 10 years), then I would not expect the "very average", not well located, property to move much at all.
Georges house, from the photo, looks very average, perhaps ex commission??, in an average area.
Do you know of anything that would make this area more attractive so that it could have greater than average cap growth??
bye
I don't disagree with any of that, in fact they are the very reasons why some property can still be a good investment.
But not all property.
From my perception the driver of most of the cap growth in average houses has been inflation and recently the drop in interest rates. ( The house we owned in Mulgrave has only increased in value by the combination of inflation and lower interest rates since 1981).
Now if we don't get those to the same extent in the future (next 10 years), then I would not expect the "very average", not well located, property to move much at all.
Georges house, from the photo, looks very average, perhaps ex commission??, in an average area.
Do you know of anything that would make this area more attractive so that it could have greater than average cap growth??
bye
Hi all,
Just adding to my 2 ealier posts, that I forgot to include.
The driver of baby boomers looking for retirement investments has also pushed the property boom. While the number of people entering that age group (near retirement) will remain large, the rate of growth into that category will fall. Hence another diminishing driver of growth.
bye
Just adding to my 2 ealier posts, that I forgot to include.
The driver of baby boomers looking for retirement investments has also pushed the property boom. While the number of people entering that age group (near retirement) will remain large, the rate of growth into that category will fall. Hence another diminishing driver of growth.
bye
Acey,
Exactly right. They will need INCOME.
They won't get it from this type of property. $220 pw before any costs, while tenanted. All for the princely sum of $345,000. As the baby boomers go from retirement to 85, they will look for better returns than this, with lower risk.
Even money in the bank pays 5.5% on $345,000 pays $364 pw with no vacancy or tenant worries, PM fees, rates, insurance, maintenance etc.
If inflation stays at 3% pa, then the property will still only produce $363 pw before costs in Year 17!!
To me this type of property, could have legs if it could be purchased for around $170,000 on a cashflow basis. At that level, you are not counting on the great unknown of future cap growth.
bye
Exactly right. They will need INCOME.
They won't get it from this type of property. $220 pw before any costs, while tenanted. All for the princely sum of $345,000. As the baby boomers go from retirement to 85, they will look for better returns than this, with lower risk.
Even money in the bank pays 5.5% on $345,000 pays $364 pw with no vacancy or tenant worries, PM fees, rates, insurance, maintenance etc.
If inflation stays at 3% pa, then the property will still only produce $363 pw before costs in Year 17!!
To me this type of property, could have legs if it could be purchased for around $170,000 on a cashflow basis. At that level, you are not counting on the great unknown of future cap growth.
bye
Dear Bill,
1. While I do enjoy your "sparrings" and exchange of views with the various forum members to a certain extent, nonetheless, I feel that I need to say this: Say what you like, a cogent and well argument does not create (material) wealth for any one of us... A well presented/argued viewpoint does not neccessarily means that the outcome will turn out exactly what we think or will want to think it out to be. Remember the saying, " the only thing that we can be certain about this world is change (or/and its uncertainities)".
2. I only know that I am making monies in my property investments when I have a lot of monies to stack them aways into my bank account when I sell or/and when the lending bank gives me more monies to further invest and to acquire more properties to further expand on my present property portfolio. That is what I will be most concerned with, as a property investor.
3. To me, whether I can make things happen in a way so as to enable my life goals to be realised in spite of the various evolving and changing scenarios is my central concern. I will not allow myself to be distracted in intellectually challenging debate as to whether the things will turn out this way or that way.
4. Please also bear in mind the role played by the investor's own personality and mentality in determining his/her property investing outcome.
5. In his seminars, I have observed that John FritzGerald will often the divide his seminar presentation into 2 parts:- one about the Investors" Personal Self Psychology and Self-Development and the second part on the Property Investing Dynamics and Techniques. John will also tell his audience if the people themselves are not "pro-active, self-responsible and Postive-Minded", then he will not encourage them to invest in properties at all. Neither will John further invite them to stay back for the second part of his seminars. And interestingly enough, I have observed that most of the audience ( more than 70% or thereabout) will normally leave the seminar room after listening to him speak on the first topic. Consequently, a re-energised John, and with much more enthusiaism than during the first part of his seminar, will start to share with his newly-found small and attentive audience group about the property investing fundamentals and his property investing experiences.
6. Having been regularly attending the varous seminars by conducted by different "gurus" myself, I also realise that many of them have similarly organise their workshop into same 2 basic parts: One on the Investor's "Self Motivations/Development" and the other on the Property Investing topics proper.
7. Likewise, based on GeorgeSA's present "light-hearted" attitude in wanting to quickly dismissing the precious gems and wisdom passed down by the authors (who are themsevles highly successful property investors) in their books, I dare to say and further infer in private that GeorgeSA is likely to make more mistakes again in his property investing if he fails to truly learn the required lessons from his present situation.
8 As in Aceyducey's post, "GeorgeSA will need to change his present attitude..." and personally, I have do doubt that GeorgeSA has to if he wants to be truly be successful in his property investing in future.
Dear GeorgeSA,
9. I really mean what I say above, with all good intentions and genuine concerns for you. This is really what I can "see" about you at this point in time.
10. I know the truth hurts but no hard feelings please, as I sincerely want to mean you well.
11. Thus, I sincerely hope that you can truly reflect and learn from your present situation so as to be able to avoid making these similar mistakes in future.
12. For your kind considerations and quiet reflection, please.
13 Thank you.
God Bless,
Kenneth KOH
1. While I do enjoy your "sparrings" and exchange of views with the various forum members to a certain extent, nonetheless, I feel that I need to say this: Say what you like, a cogent and well argument does not create (material) wealth for any one of us... A well presented/argued viewpoint does not neccessarily means that the outcome will turn out exactly what we think or will want to think it out to be. Remember the saying, " the only thing that we can be certain about this world is change (or/and its uncertainities)".
2. I only know that I am making monies in my property investments when I have a lot of monies to stack them aways into my bank account when I sell or/and when the lending bank gives me more monies to further invest and to acquire more properties to further expand on my present property portfolio. That is what I will be most concerned with, as a property investor.
3. To me, whether I can make things happen in a way so as to enable my life goals to be realised in spite of the various evolving and changing scenarios is my central concern. I will not allow myself to be distracted in intellectually challenging debate as to whether the things will turn out this way or that way.
4. Please also bear in mind the role played by the investor's own personality and mentality in determining his/her property investing outcome.
5. In his seminars, I have observed that John FritzGerald will often the divide his seminar presentation into 2 parts:- one about the Investors" Personal Self Psychology and Self-Development and the second part on the Property Investing Dynamics and Techniques. John will also tell his audience if the people themselves are not "pro-active, self-responsible and Postive-Minded", then he will not encourage them to invest in properties at all. Neither will John further invite them to stay back for the second part of his seminars. And interestingly enough, I have observed that most of the audience ( more than 70% or thereabout) will normally leave the seminar room after listening to him speak on the first topic. Consequently, a re-energised John, and with much more enthusiaism than during the first part of his seminar, will start to share with his newly-found small and attentive audience group about the property investing fundamentals and his property investing experiences.
6. Having been regularly attending the varous seminars by conducted by different "gurus" myself, I also realise that many of them have similarly organise their workshop into same 2 basic parts: One on the Investor's "Self Motivations/Development" and the other on the Property Investing topics proper.
7. Likewise, based on GeorgeSA's present "light-hearted" attitude in wanting to quickly dismissing the precious gems and wisdom passed down by the authors (who are themsevles highly successful property investors) in their books, I dare to say and further infer in private that GeorgeSA is likely to make more mistakes again in his property investing if he fails to truly learn the required lessons from his present situation.
8 As in Aceyducey's post, "GeorgeSA will need to change his present attitude..." and personally, I have do doubt that GeorgeSA has to if he wants to be truly be successful in his property investing in future.
Dear GeorgeSA,
9. I really mean what I say above, with all good intentions and genuine concerns for you. This is really what I can "see" about you at this point in time.
10. I know the truth hurts but no hard feelings please, as I sincerely want to mean you well.
11. Thus, I sincerely hope that you can truly reflect and learn from your present situation so as to be able to avoid making these similar mistakes in future.
12. For your kind considerations and quiet reflection, please.
13 Thank you.
God Bless,
Kenneth KOH
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Thats fine Kenneth but just to let you know since yesterday i have purchased a book by jan sommers and rich dad poor dad.. MY attitude was light hearted but thats because during the boom a monkey could make money on a property.. You didnt really need to be an expert back then!! if you bought in 2002 and sold in 2005 you would have made money.. Unfortunatly for me it happened too late.. I now believe that in this market that knowledge is very neccesary and i am taking steps in order to ammend my prior attitudes towards this. I dont thik im taking a light hearted attitude though... I am reading all your posts like scripture and absorbing as much as i can...
I know i have made a bad decision in this purchase. However im glad it happend now when im 24 and not at a later date. I will use this as a learning curve and use it to the best of my advantage...
Anyway KOH , no offence taken
hope everyone is having a good day
Georges
Kristine.. said:
$50,000 for a wedding
and an extra for good measure.we got married for under $1000. okay, it was with a celebrant, in a lush garden at home with masses of candles, two of my stepkids provided the wedding music (flute and clarinet) with the rest of the background music on the cd player, i self catered with food from catering places and bbq chickens and the boys on the bbq itself, filled the large family room/kitchen with helium balloons with ribbons, tubs of champers, no set time to leave etc ... best wedding i've been to.
books to read - about covered, but i would really suggest trust magic by dale gartherum-goss (available at businessmall.com.au) for structure advice.
lizzie
all comments are my opinion only
