Reply: 1.1.1.1.1.2.1
From: Brett Burt
Property doesn't appreciate equally every year. In the last 5 years Sydney
and Melbourne have really gone well year in year out. But next year, maybe
the year after growth may drop off considerably or there maybe zero growth.
My personal opinion is that the baby boomer phenomena will change the
landscape of property investing and ownership in the next few years and the
smaller generation following will not have the intertia to drive up property
prices as the bb's did. Even so property still does not appreciate at a
regular 7 or 10% each year.
So you accumulate 7 or more properties over say 15 to 20 years. You go back
to the first one and borrow a portion of the increased equity. This
borrowing will be based on your ability to service the loan and how much it
has apppreciated in value. You do this to the next one and the next one.
When you get to number 7 you apparently go back to the 1st and reborrow. But
what if the appreciation hasn't occurred? What if there is a slump? Your
borrowings are now huge. What if rents don't move but your seviceability
requirements increase? To the banks you maybe becoming a bigger risk as your
debt levels increase. They may not allow you to borrow to live on. You must
have the capital growth to continue to fund your high debt (high risk)
method of retirement. You can't rely on inflation to help as in the eighties
early nineties.
Things always look great in property when we have had huge capital growth in
recent years and everyone has been a winner. What about when we don't get
the capital growth or when interest rates surge back to 17%? Or developers
flood the market on you? I am sure others can add to this list. Remember
what happen to the dotcom's and the stock market in the US after huge
capital growth in the nineties.
When there are so many other ways of approaching and capitalising on
property investment that are safer, why go down this risky road? Defamation
laws prevent me mentioning the names of well known investors who have used
this method and gone bankrupt (or nearly bust) or/and had to go back to work
to feed themselves, but I think that we will see quite a few people go bust
in the next few years who attempted the high risk strategies currently
promoted by various guru's.
Regards
Brett
----- Original Message -----
From: "propertyforum Listmanager" <
[email protected]>
To: <Recipients of 'propertyforum' suppressed>
Sent: Sunday, January 20, 2002 7:32 AM
Subject: Re: The Investors Club
> From: "Alan Hill" <
[email protected]>
>
> Brett,
>
> You alluded to the fact that part of Mr Young's strategy involves
borrowing the increased equity to live on.......could you expand on what you
personally see as the problems with such a strategy?
>
>
>
> To reply: mailto
[email protected]
> To start a new topic: mailto
[email protected]
> To login:
http://bne003w.webcentral.com.au:80/~wb013
>
>