The big one is coming say preppers

[MTR]

I think this is potentially irresponsible. We could easily get another GFC and printing money is a great response until it doesn't work anymore and it turns into hyper-inflation instead. Nobody knows how much money printing is enough to cause that to happen.

But I don't espouse sitting in a corner and sucking your thumb.

So instead of being leveraged to the hilt on property, I believe we should be focussing on how to improve our robustness to the unknowable events coming around the corner. We can do this by:

- Keeping some decent liquidity buffers for a rainy day.
- Diversifying income streams, not just property or shares but also business too - in different countries as well as markets if possible.
- Buying insurance, even if it's just options against a big fall in the ASX / S&P500.

For those of us who have some capital, protection of that capital base needs to be paramount. A lot of people have had their wealth confiscated by putting the whole shooting match into something they thought was "low risk". Taking big risks with small amounts of the portfolio while taking next to no risk with the bulk of the portfolio is a great strategy to both make money and be robust against the unknown future.

Hi HE

We are all responsible for our own actions on this forum, no dummy spit from me

I never mentioned anything about LVR or strategizing for that matter, so I think you are assuming that I believe investors should be LVR till they choke.... wrong

What you are stating is fine in terms of mitigating risk but this is common sense, any smart investor should know how to mitigate risk, its not rocket science.

I am simply stating that investors should not get caught up with negativity as this will waste valuable time and energy. Most of the negative posts regarding doom and gloom never actually happened, just need to research over the last 5 years.

I wish everyone a great investing journey but the most powerful tool is being positive, does not mean you ignore what is happening around you, but geez don't get sucked into the WHAT IF THIS AND WHAT IF THAT... 80% of what you think will happen actually never happens.

MTR

 

[HiEquity]

What you are stating is fine in terms of mitigating risk but this is common sense, any smart investor should know how to mitigate risk, its not rocket science.

I am simply stating that investors should not get caught up with negativity as this will waste valuable time and energy. Most of the negative posts regarding doom and gloom never actually happened, just need to research over the last 5 years.

Hi MTR

Sorry - I didn't mean to get stuck into you - I could have worded that better.

But I do believe that mitigating risk is one of the things we should be talking about more around here - it's not rocket science but it's something that a lot of investors don't do enough of. In order to mitigate risk we need to spend a bit of time considering the negative side of things.

You are right - most of the doom and gloom never happened. But the wrong event only needs to happen once to wipe someone out. I know a few people whose lifetime savings got wiped out in the GFC - but we don't focus on those stories around here - only the successful ones.

Arguably though, there is more to be learnt from those who got wiped out than those who happened to be in the right asset class for that particular event at that particular time. Sometimes it's skill but sometimes it's also dumb luck that, if continued, will lead to being wiped out in the next big financial "event" that targets that asset class instead.

I wish we heard more from those who have lost everything - but we never do.

 

[MTR]

Hi HE
Not at all

I get this and agree with you.

I do know a few investors that retired - last major boom in Perth and then lost the majority of their assets and back to a day job. Their fatal error was that they continued to purchase when the market peaked. Blinded by the amount of money they were making and just thought it would continue, ignoring market conditions which were changing

I think so many factors can come into play.... it is not just the market it can also be inexperience, if relatively new to a particular strategy, too much debt, wrong product etc etc.

I personally have learnt a lot in the last 12 months, had no idea how much money was required for my developments, so if an investor/developer does not have the adequate cash buffers I can see some getting seriously burnt.

Also with developing market conditions can go from boom to bust while building, how do you mitigate this risk???? something that needs to be looked at prior to the project, if you can not sell can you hold it, will the rent cover the mortgage?? All this stuff needs to be considered.

MTR

 

[Lord Shanghai]

I do know a few investors that retired - last major boom in Perth and then lost the majority of their assets and back to a day job.
MTR

Thanks MTR. You would be doing all of us here a great service by giving us some case studies of the people you speak about. What exactly happened? What did they own? How exactly did it all end in tears?

As an aside, I would like to thank you for your contribution to this forum. The wisdom you share benefits us all. Heartfelt thanks.

 

[MTR]

Thanks

I know a few investors who no longer post due to what happened..... but of course not going into all the details here.

One of the bombshells that investors were not expecting at this time was change in bank policy, so suddenly the rug got pulled out from under them as lo docs/no docs were no longer available. This really hurt some investors who were in the middle of substantial deals and leveraged to the eyeballs.... they could not access funds and they continued to have to service massive debt, so the only solution was on selling making massive losses.

 

[Lord Shanghai]

Thanks

I know a few investors who no longer post due to what happened..... but of course not going into all the details here.

Have any been cleaned out/bankrupted? Or is it mainly temporary setbacks?

One of the bombshells that investors were not expecting at this time was change in bank policy, so suddenly the rug got pulled out from under them as lo docs/no docs were no longer available. This really hurt some investors who were in the middle of substantial deals but they could not access funds, however they continued to have to service massive debt.

One of the unintended consequences of the new lending rules will be less supply of new buildings coming on stream. With immigration constant or rising and interest rates as low as they are, do you think the demand for existing established housing will rise?

 

[kathryn d]

This is what the 'doomsayers" are trying to warn people about.
Policies will change. Jobs are never safe.
Don't get over confident that nothing bad will happen.

Just because you can access credit now, doesn't mean you will later, even if you pay all your bills on time.....
in the last GFC, our credit was turned off by many, until the economy picked up...and we always pay our bills on time.


I don't consider myself a doomsayer, but a realist.


Sometimes, all it takes is the ripple effect.

 

[MTR]

Have any been cleaned out/bankrupted? Or is it mainly temporary setbacks?




One of the unintended consequences of the new lending rules will be less supply of new buildings coming on stream. With immigration constant or rising and interest rates as low as they are, do you think the demand for existing established housing will rise?

I was not referring to my personal scenario whatsoever.

I have been an investor for over 13 years and retired around 8 years ago from property investing. I was referring to some investors who I know that were playing in the same market, different product and took on more risk than I was prepared to take.


MTR

 

[MTR]

Can not answer this question, no one knows for sure what will happen in the future and that is my point .....and IMO why I think this thread should be taken with a grain of salt, predictions are just that, a guestimate.

The only thing I do know for sure is making money with property investing has more to do with supply vs demand and getting the timing right, not time in the market as most seem to believe.

I don't want to reinvent the wheel I would rather network with successful investors who have got the formula right, paying attention to markets and being prepared to jump in when the signs are right (early stages) will probably give you a better chance than following some charts that are regurgitated every quarter with meaningless data which in most cases is out dated

 

[WattleIdo]

Arguably though, there is more to be learnt from those who got wiped out than those who happened to be in the right asset class for that particular event at that particular time. Sometimes it's skill but sometimes it's also dumb luck that, if continued, will lead to being wiped out in the next big financial "event" that targets that asset class instead.

I wish we heard more from those who have lost everything - but we never do.

I'd like to read more about this too. I have a 'high risk' kind of personality and actually need to hear real stories about how things can go wrong and why. I don't like insurance. I'm optimistic. I work hard at allowing the conservative me to blossom.
In order to evaluate risk, it's necessary to know the full story.
.
Please tell us some real stories and the sign posts that were dismissed - more effective than the doomers and gloomers projecting into the future.
(Then there's also the Schadenfreude - so satisfying ).

MTR: The only thing I do know for sure is making money with property investing has more to do with supply vs demand and getting the timing right, not time in the market as most seem to believe.

Agree with this. Like others, I enjoy reading about your strategies and success.

 

[INVSTOR]

During the GFC my husband had the best employment conditions, highest wages, highest job stability, was knocking back job offers. We applied for a loan with one bank for $470,000 to purchase a new investment and got a loan accepted from another bank for $450,000 to build two new houses. Life never looked rosier for us. There was an active poster on this site that I queried when she spoke about how bad times were. The response was very aggressive and far from helpful when trying to understand what others experiences were.
I didn't end up going ahead with the loans as I wanted to travel interstate.
Job stability for my husband is currently low so I'm looking at getting rid of some debt and increasing buffers. We really want to make the most of family life over the next few years so making life as comfortable/easy as possible.

 

[MTR]

Hi Invstor

Reducing debt is a good strategy, are your properties in Perth?

 

[Lord Shanghai]

There's a special kind of person on this forum who thinks that talking the market down will deliver them more value. They devote countless hours to this end.

There was an active poster on this site that I queried when she spoke about how bad times were. The response was very aggressive and far from helpful when trying to understand what others experiences were.

I think I know who you are referring to. Is this the person who spouted perpetual doom and gloom and why everyone should buy gold coins that she/he was pedalling? People who may have taken her advice back in 2010/2011 and bought gold have probably lost money. Pity she is too arrogant to admit the error of her ways. She/He seems to have gone quiet now that she/he has bought property.

 

[INVSTOR]

Hi Invstor

Reducing debt is a good strategy, are your properties in Perth?

2 in Brisbane, 3 in Perth.
Selling 1 in Brisbane, 1 in Perth - probably over two financial years - depending how consumer confidence is looking
Will possibly use proceeds to receive higher income from remaining properties through development or offset new PPOR debt. Need to spreadsheet difference and tax but I think dev't would far outweigh PPOR interest savings.

 

[MTR]

2 in Brisbane, 3 in Perth.
Selling 1 in Brisbane, 1 in Perth - probably over two financial years - depending how consumer confidence is looking
Will possibly use proceeds to receive higher income from remaining properties through development or offset new PPOR debt. Need to spreadsheet difference and tax but I think dev't would far outweigh PPOR interest savings.

I would think if you are looking at selling in Perth it is probably best to do it sooner than later, just my opinion.

 

[INVSTOR]

I would think if you are looking at selling in Perth it is probably best to do it sooner than later, just my opinion.

Agree. I'm thinking latest break lease could end up being a blessing.

 

[datto]

asx up 100 points today. Doomsday preppers running for cover ! lol

 

[HiEquity]

I'd like to read more about this too. I have a 'high risk' kind of personality and actually need to hear real stories about how things can go wrong and why. I don't like insurance. I'm optimistic. I work hard at allowing the conservative me to blossom.
In order to evaluate risk, it's necessary to know the full story.
.
Please tell us some real stories and the sign posts that were dismissed - more effective than the doomers and gloomers projecting into the future.
(Then there's also the Schadenfreude - so satisfying ).

The GFC stories I am aware of are mostly variations on the same theory. Exposures to individual shares (Babcock and brown, abc childcare, etc) that looked high yield at the time, together with a margin loan, leaving nothing left at the end.

Other than that there was the developer holding a big development site who couldn't get finance for the development, couldn't afford the holding costs and couldn't offload in the market at any reasonable price. That wiped out almost a decade of savings.

 

[antistar]

The GFC stories I am aware of are mostly variations on the same theory. Exposures to individual shares (Babcock and brown, abc childcare, etc) that looked high yield at the time, together with a margin loan, leaving nothing left at the end.

Other than that there was the developer holding a big development site who couldn't get finance for the development, couldn't afford the holding costs and couldn't offload in the market at any reasonable price. That wiped out almost a decade of savings.

Also overly geared commercial property landlords whose tenants went out of business.

In investment 101 we learn that you should only be investing money that you don't need i.e. you can afford to lose. This means that firstly you need to make sure you have enough for a comfortable living, no unsecured debts, a solid cash pile, a stable living arrangement, and then anything above and beyond you go and invest. Many 'investors' skip the basics and throw in any little bit of cash they secure into non cash assets plus leverage to the max. No wonder a recession will hurt / wipe everything out.

A solid cash buffer and non agressive gearing should generally see you through most crisis or recessions (which are a recurring and expected reality - some milder and some more severe).

 

[Jaggannath]

Sometimes, all it takes is the ripple effect.

Yup, sometimes the irresponsible few can drag down the responsible many...

Also overly geared commercial property landlords whose tenants went out of business.

This always makes me wonder about CIP... are the rates of default any different? (noting the higher need for a bond IIRC)