The perfect storm for Property Investors!

[nonrecourse]

The name of the game is remaining solvent

Yes, I must admit some amazement over why a long term player would be selling anything, let alone the jewel, at this point of the cycle.....?

Would like to be enlightened as to why.....

Hi Thorpey; Up until a year ago there is no way you could have convinced us that we'd be selling our jewel in the crown either. We purchased the property from a real estate family who have through the generations been around for over a 100 years in the area we invest in. They couldn't make this particular rough stone sparkle. We paid what they considered top dollar in October 2005 with empty possession as it is a commercial building in a blue chip bayside residential suburb

We borrowed 120% by xcoll most of our property that wasn't held in our super fund. 66% of our debt is in our jewel. We went out and hired another agent from outside our area that was not from the old boy network who was willing to listen.

Our asking rental price was double what the previous owners had been asking. For six months we knocked back offers that gradually climbed up. Basically as our solicitor advised, we just didn't blink. We had prepaid the interest only a year in advance and our tank was empty after that

Six months out from having to make the next annual interest payment (5 years fixed interest in advance at 6.69% to October 2011) we struck gold with an ASX 123 company who took out a 3x3 lease with CPI increases the first option then market review plus outgoings and single holding land tax.

The jewel has doubled in value and it means if we sell the entire rest of our portfolio is debt free and we have blue chip tenants all paying ever increasing sums which means we can start to look at limited recourse loans for our future acquisitions.

In the next ten years we intend to triple our net worth without having the lead weight of debt.

 

[The Fence]

Thanks for that nonrecourse !

wow, you really do like the card playing scenario....!

Glad you have decided to control the gambling habit and go for cash.....hope you succeed in the future...!

 

[MichaelW]

Lang Walker poised to snap up some prizes

Hi Guys,

In case you're still on the sidelines, unswayed by my modest arguments, and are still concerned about the future property market direction, then this view from Lang Walker might help your decision process.

When others are forced to bail out, Lang Walker is ready to make an offer, writes Ben Wilmot.

Property tycoon Lang Walker is on the hunt for property bargains - and he appears well set to pick up some prize assets

The legendary developer's name has been linked to a number of distressed situations as the market has turned down.

Walker laughs off industry talk that he is only considering projects that offer the chance to make profits of more than $20 million.

But he is well positioned. "I've always been a counter-cyclical operator," he says.

Walker says that his group saw the writing on the wall when property markets were booming. The group realised $1.2 billion from the sale of key retail centres and development projects to Mirvac Group in late 2006 and is now cashed up.

"What we're seeing now, we're in a position where people have to bail out," he says. "We can wade through those opportunities."

Walker says that a lot of the fund managers that developed property and ran trusts now can't compete. "This credit crunch has knocked the socks off a lot of other players." he says.

Walker is not expecting a quick resolution to the market's doldrums. "I think we're still in for 18 months of pretty difficult times," he says.

"Whilst the really difficult times are out there, there's certainly opportunities that are bobbing up - that's what we're spending our time on."

The billionaire has also kicked off a hefyy list of his own projects. One of the latest is the $1 billion Citiswitch Industrial Estate at Bremer, near Ipswich in Queensland. The Reject Shop recently signed a 10-year lease.

Walker says that industrial property, along with residential property, is one of the areas that he is looking at closely as the property cycle bottoms. "There's still quite good demand for space from logistics tenants," he says.

** edit **

Walker has been linked with several potential office purchases this year, but none have gone ahead.

Walker says he is instead looking at more residential plays.

He says once the banks start lowering interest rates, one source of pressure will come off the residential market.

While this might not happen for 12 months, he is upbeat.

"We're certainly very bullish about the residential market... from the middle of 2009 out," Walker says.

Although some analysts are gloomy because of global concerns, Walker is not swayed by the naysayers.

"Unlike the US, I don't believe Australia has had a major overbuilding scenario," he says. "If anything, I believe it's almost the opposite."

Walker is bullish on the prospects of residential and commercial projects that will come on stream at the start of 2010.

He says the credit crunch is probably levelling out a lot of land prices.

"It's coming back to realistic levels... I guess it's paring back the competition we had in the markets."

Key summary points:

• 18 months of pretty difficult times.
• bullish on residential and commercial property.
• believes we are in residential under-supply, the opposite to the US.
• "very bullish" on residential from the "middle of 2009" out.

Maybe we share the same crystal ball... I'm timing my residential MUH development for a mid-2009 commencement to come on line early 2010.

Cheers,
Michael

 

[lizzie]

i agree with you michael ... just wish i was a bit more cashed up!

 

[tubs]

i agree with you michael ... just wish i was a bit more cashed up!

Me too. All my cash is tied up at the moment building. As soon as that's finished, I'm off buying again!

 

[Aaron Sice]

interesting that the US fed is now "bailing out" FNM and FMC - the largest private (but heavily regulated ex govt assests) mortgage lenders in the US.

i would expect that 18 month downturn to be a full blown recession now - regardless if the Fed support will stop a blowout.

...The real problem with the bounce in the financial stocks is that no one can say with any certainty that a federal takeover of the semi-government mortgage backers will end the crisis any time soon.

The latest figures show that about 9.2 per cent of US mortgages are at least one month in arrears, the highest level for 39 years.

The great irony of a federal bailout is that while it is designed to restore confidence in the market, it also undermines the regulatory backing of the financial system.

Twice now within two decades two government interventions in the market have resulted in failure.

The first was the $US300 billion ($365 billion) savings and loans bailout, aimed at saving financial institutions that had gone on a debt binge with the protection of the Government's own deposit guarantees.

Now Fannie Mae and Freddie Mac, which were installed to support the mortgage market, have failed for several reasons.

The agencies have always been perceived as being government-backed when they were not (at least until this week) and were meant to invest in the safest of financial products, but went astray when they chased leveraged deals to match Wall Street firms.

Because they were listed companies, they had to compete with Wall Street and this has led to their downfall.

Moreover, for months both the agencies and the Government have assured the market they had funds excess to their regulatory requirements.

Given the US Government has now come to their rescue, the question is: so how good were the regulatory requirements in the first place?

Former Fed chief Alan Greenspan has long urged the abolition of Freddie Mac and Fannie Mae and now the next US Congress will hopefully get to finally put the nails in their coffins.

As much as the short-term motives behind the action by Treasury Secretary Hank Paulson were right -- being to attempt to install some confidence in the market -- no one should expect a rapid increase in liquidity as a result of the moves.

The lessons for policy makers on the dangers of market intervention, in what is meant to be the home of capitalism, should now be clear...

http://www.theaustralian.news.com.au/story/0,,24317238-20142,00.html

http://www.theaustralian.news.com.au/story/0,,24314989-25131,00.html

 

[Rockstar]

My crystal ball is still a bit foggy, but I don't think it will be too long until my "Tipping Point" Hypothesis is put to the test. I think a 2% differential between the prevaling rental yield and the variable mortgage rate will see the market tip back to upswing.

It might be 2009 or it might be 2010, but things are certainly moving in the right direction.

One Year On - worth a bump.

How's that Tipping Point hypothesis looking Michael?

There are apparrantly now 32 suburbs within the nations capital city metro areas (including South EastQueensland’s Gold Coast and Sunshine Coast) that fit the criteria of being more affordable to buy than rent.

An interesting article from CBA/RP Data showing an increase in suburbs where it is now cheaper to buy rather than rent. Full report in this link. http://www.commbank.com.au/personal/home-loans/buy-vs-rent.aspx

Where is it cheaper to buy than rent?

In recent times there have been some fundamental shifts in the Australian property market.

Property values fell through most of 2008 however, the market has recovered virtually all of those losses through the first half of 2009, interest rates have fallen to a 49 year low, and weekly rents have recorded several years running of dramatic growth.

The effect of these combined factors is that many renters are now doing their sums to work out whether paying off a home loan is actually going to be cheaper than paying a landlord.

As Australia’s leading home lender we have teamed up with RP Data, Australia’s leading property information researcher, to provide an insight into those areas where, on average, it has become more affordable to purchase a home than to rent it.

 

[MichaelW]

Wow,

Is it really a year on since I started this thread. Interesting that it seems now to have been a bit prescient and things have played out pretty much as suggested with property prices rising, particularly in the more affordable high yielding areas.

Not everyone that contributed to this thread was convinced this is what was going to happen though as the quote below demonstrates...

Having said that if you go back and look at my posts in the last year I have described an impending soft financial depression that is now starting to play out. We don't shy away away from putting our money where our mouth is. Our least valuable asset sold this week and our jewel in the crown goes up for auction next thursday. By selling our least valuable asset first at a 10% discount we are now in a very strong position. We are into property for the long term and the next ten years of very difficult times will also be one of enormous opportunity.

Poor buggar. Ah well, we did try and warn them...

My post with the link to Lang Walker just a few back in this thread also makes for interesting reading 12 months on.

Cheers,
Michael

 

[ok180]

Where is that nonrecourse guy these days?

 

[Shadow]

Where is that nonrecourse guy these days?

He posts on another infamous forum as 'Limited Recourse'.

He is still claiming that the AUD will shortly fall to 0.38 and the ASX is about to drop below 2000.

 

[JulieW]

Timing

So am I right to assume that the consensus here is that:

A property boom is the most likely scenario occuring somewhere in the next 5 years or so, starting from 2012-2015.

Buying opportunities are present now and the 'prices rising this is the boom starting news report encouragement' is not necessarily so and actually there is an 18 month window to buying well if you're careful with choosing your stock.

On the other hand, the 1987 / 1999 property story is the history most likely to repeat and we're about 2 years in to that cycle.

(and excuse me if I've wondered into the big kids room. It seems I'm trying to learn to drive before the steering wheel and pedals have been explained!)