My LVR would be sitting pretty at 153% and I would be looking to find a few more!
...if you have an IO loan, try refinancing your 153% at the end of 5
What if property prices drop 40%?
- Thread starter alexlee
- Start date
...if you have an IO loan, try refinancing your 153% at the end of 5
No, I mean LVR of 153%
. Current LVR is 92% so if the properties fell by 40% the new LVR would be 153%. Make sense?I get you...makes perfect sense Welcome!
Lets hope that Alex's thread (no I am not saying that Alex said that the market will fall 40%) about 40% fall does not eventuate.........your bankers will be knocking on your door.
I guess it won't matter...so long as you pay the mortgage.
You are a braver man than I gungadin!
Lets hope that Alex's thread (no I am not saying that Alex said that the market will fall 40%) about 40% fall does not eventuate.........your bankers will be knocking on your door.
I guess it won't matter...so long as you pay the mortgage.
You are a braver man than I gungadin!
No, I mean LVR of 153%
I despair that many here have no concept of risk/reward.
Alex put forward a "hypothetical" 40% drop in values and explained how he would survive it. While I didn't think it was the best plan available, I respect him for thinking about the possibility that it could happen and stress-testing his investment theories.
Merely saying you doubt it will happen and thereby ignoring the possibility is hardly a thoughtful approach. There is a very real risk of something very bad happening soon. But I have said that a dozen times already, so there is no reason for anyone to take notice now.
You guys 'n gals have an obligation to yourselves and to your families who trust in you, NOT to have the family put out in the street. There will be a few astute/lucky investors who will make their fortunes in the chaos. Some will be wise enough to survive, basically in tact and some will be wiped out. As always the majority will not have a clue what happened. They will be the flotsam carried on the raging waters.
It is almost too late to start reading and planning now.
Alex put forward a "hypothetical" 40% drop in values and explained how he would survive it. While I didn't think it was the best plan available, I respect him for thinking about the possibility that it could happen and stress-testing his investment theories.
Merely saying you doubt it will happen and thereby ignoring the possibility is hardly a thoughtful approach. There is a very real risk of something very bad happening soon. But I have said that a dozen times already, so there is no reason for anyone to take notice now.
You guys 'n gals have an obligation to yourselves and to your families who trust in you, NOT to have the family put out in the street. There will be a few astute/lucky investors who will make their fortunes in the chaos. Some will be wise enough to survive, basically in tact and some will be wiped out. As always the majority will not have a clue what happened. They will be the flotsam carried on the raging waters.
It is almost too late to start reading and planning now.
You didn't have time to read that post did you? Not properly.
Did I play it too safe? I was twenty three with a young child when I went into my first business so no! I have 300 ounces of gold futures now which can vary in value thousands of dollars a day, ($1,500 while I was having a beer tonight) so again no! On 22nd of Jan I was $65k down on my stock market holdings in three weeks. I have worked at it to the point that I am only down a little today. I didn't panic or cut and run. Again No!
I didn't always play it smart though and it is only recently the penny has dropped that working hard interferes with making money. I respect you, and the others here who are making things happen. I dislike intensely your arrogance, greed and your insistence that your's is the only way. I believe it is yesterday's way.
Being a man of simple tastes with a low-maintenance wife my primary goal is not to lose what I have built up. I am fully aware that I have almost nothing in common with most here and that I really only stick around as a counter to the dangerous brain-washing which occurs here.
I hope you were prepared for that answer, but you should not ask rude questions of grumpy old men.
Did I play it too safe? I was twenty three with a young child when I went into my first business so no! I have 300 ounces of gold futures now which can vary in value thousands of dollars a day, ($1,500 while I was having a beer tonight) so again no! On 22nd of Jan I was $65k down on my stock market holdings in three weeks. I have worked at it to the point that I am only down a little today. I didn't panic or cut and run. Again No!
I didn't always play it smart though and it is only recently the penny has dropped that working hard interferes with making money. I respect you, and the others here who are making things happen. I dislike intensely your arrogance, greed and your insistence that your's is the only way. I believe it is yesterday's way.
Being a man of simple tastes with a low-maintenance wife my primary goal is not to lose what I have built up. I am fully aware that I have almost nothing in common with most here and that I really only stick around as a counter to the dangerous brain-washing which occurs here.
I hope you were prepared for that answer, but you should not ask rude questions of grumpy old men.
I just wonder, if you knew 30 years ago what you knew now, would you have played it safe? Even without the benefit of hindsight (i.e. the last 30 years contained a lot of scary periods but the long term trend was up), would you, at 30, have said 'things can get very bad so I'm going to pull back'.
When you start as a 20 year old doing most things different from your peer group, you HAVE to be arrogant and believe that yours is the only way. I've softened a bit, in that I know it's not the only way, but I don't think it's the wrong way, either. As for greed...... it just seems a waste to have achieved everything you want to achieve by 30.
I wonder whether you would have a different perspective if you were 30 years younger and you know that you can make money trading, etc
Fair comment. But for a younger person, long term investing does work if you have risk management in place and the world doesn't come to an end.
Actually, I was expecting something nastier, but along the same lines.
There are many who are going to be seriously burned in the years to come. But each of us are only really interested in our own portfolios. You're talking about reining in those who would otherwise take too much risk, blindly following the long term investing route (where the goal is real but there are holes everywhere). I come from the perspective that you should make the attempt, even if there is a risk you'll fall by the wayside.
Alex
Fitzpattrick's Law
I'm amused that so many of you have tanked Alex on the 40% drop in property. Since last August 2006 I have been saying that I expect to see property prices drop 50% in Brighton Victoria.
Murphy's Law says if things can go wrong they will. Fitzpattrick said that Murphy was an optomist!
We have just lived through the largest asset bubble in living memory, 16 years of unbelievable growth. I am 54 years old and the one certainty of life is Newtons 3rd law in Physics for every action there is an equal opposite reaction............
Ladies and scally wags hang onto your hats in the next ten years your going to see so much red ink with shares and paper money that you'll have some idea what the dirty thirties were all about.
With the subprime fiasco and the credit crunch well on its way yet we still have people thinking that things haven't changed? We are headed for a soft depression full stop what does that mean? The cogs of finance are griding to a halt and finance is going to get very difficult to obtain. That means that new business's are not going to start up. It means people who want to purchase property are going to need very large deposits and that means fewer buyers which leads to falling prices.
I agree with you Alex about holding onto your property with two modifications. Sell one property so that you have some reserve and put it into gold bullion as a backup if you lose tenants in the wash up.
Why gold bullion because the aussie dollar like the U.S. dollar and the Euro money supply has exploded like all fiat currencies in order to prop up the deteriorating financial mess. hard assets like unencumbered property and gold bullion will hold some value in a market in free fall.
The rantings of a mad man you say? Have you spoke with your bank manager lately? They are like rats on a sinking ship at the moment. Things have gone pear shaped. How many times have you heard the banks here say that the subprime fiasco will not cause problems here...........
I'm amused that so many of you have tanked Alex on the 40% drop in property. Since last August 2006 I have been saying that I expect to see property prices drop 50% in Brighton Victoria.
Murphy's Law says if things can go wrong they will. Fitzpattrick said that Murphy was an optomist!
We have just lived through the largest asset bubble in living memory, 16 years of unbelievable growth. I am 54 years old and the one certainty of life is Newtons 3rd law in Physics for every action there is an equal opposite reaction............
Ladies and scally wags hang onto your hats in the next ten years your going to see so much red ink with shares and paper money that you'll have some idea what the dirty thirties were all about.
With the subprime fiasco and the credit crunch well on its way yet we still have people thinking that things haven't changed? We are headed for a soft depression full stop what does that mean? The cogs of finance are griding to a halt and finance is going to get very difficult to obtain. That means that new business's are not going to start up. It means people who want to purchase property are going to need very large deposits and that means fewer buyers which leads to falling prices.
I agree with you Alex about holding onto your property with two modifications. Sell one property so that you have some reserve and put it into gold bullion as a backup if you lose tenants in the wash up.
Why gold bullion because the aussie dollar like the U.S. dollar and the Euro money supply has exploded like all fiat currencies in order to prop up the deteriorating financial mess. hard assets like unencumbered property and gold bullion will hold some value in a market in free fall.
The rantings of a mad man you say? Have you spoke with your bank manager lately? They are like rats on a sinking ship at the moment. Things have gone pear shaped. How many times have you heard the banks here say that the subprime fiasco will not cause problems here...........
We have just lived through the largest asset bubble in living memory, 16 years of unbelievable growth. I am 54 years old and the one certainty of life is Newtons 3rd law in Physics for every action there is an equal opposite reaction............
I prefer the first and second laws of thermodynamics. Put simply you can't get something for nothing.
True. And many good traders do beat buy and holders. I certainly don't dispute that, seeing as my job involves talking to traders every day.
But I am tired of being called a coward by a smart @rse so the matter is closed, now and in the future.
I'm not calling you a coward at all. However, I think your perspective is coloured by your age and circumstances, as are mine. You do realise I'm one of the more pessimistic ones on the forum right now. Yet I'm not going to sell my properties and am planning to buy more.
I think we come from two very different perspectives. You have more experience, and have seen more downmarkets than I have. My knowledge of downmarkets is largely academic. However, because I am in the circumstances I'm in, I think I'm going to be the few that survive and even prosper in a downturn. Even a nasty downturn.
Another approach would be to be concerned that one is part of the group that DOESN't survive. But when I'm satisfied that I can survive a 40% drop in asset prices, and the worst case scenario is that I declare bankruptcy and start again (on a good salary) in my 40s, there's very little to fear.
On the other hand, I don't think a forum of gold hoarding renters would be all that interesting.
Alex
Last edited:
100% agree - less available credit will ease the "money pressure" on any asset class, be it shares or residential/commercial property.
The price of assets is lifted not by demand only (I have a strong demand for a mansion on Sydney harbour!!) but by the ability of the demanding ones to pay! Less money from the bank - less money on the street.
The sharemarket rose with margin loans and private equity firms (which had not too much equity...), the property market rose due to easy funds for everyone and you don't need the US extremes of "sub prime" and ARMs.
The historically high levels of property prices worldwide are the outcome of more and more flexible lending.
(BTW - Did everyone get mortagages of even 80% 30 or 40 years ago?)
With the contraction of money supply the reasonable outcome is the deflation of assets value. Simple.
Bear!
Not just this thread but other threads on SS have become somewhat bearish ... I'd like to credit myself with the change in attitudes but it is unlikely (I was written off as a nutcase long ago).
So could the psychology be changing out there in investor land? Interesting times.
Not just this thread but other threads on SS have become somewhat bearish ... I'd like to credit myself with the change in attitudes but it is unlikely (I was written off as a nutcase long ago).
So could the psychology be changing out there in investor land? Interesting times.
I wouldn't give myself too much credit, YM. The media is doing its job for you.
Booms don't last forever, as you keep telling us. The more important question is, what do we plan to do next? I'm planning for the bear market, and the boom after THAT. You're just going to sit there and watch the bear market unfold even as you watched the bull market unfold, without significant exposure to the market. You'll have fun watching, but the people investing will be the ones getting rich (and risk crashing and burning - and many will).
I never wrote you off as a nut case (there are a few of those on the forum). I wrote you off as being too 'smart' to be a property investor.
Alex
Alex, I thought you said you would be happy if this happened and would be taking opportunities of the bargains?
Thats certainly what Im waiting for, Its bad news for investors who have maxed out recently but good for newcomers, Im saving my penny's personally.
Thats certainly what Im waiting for, Its bad news for investors who have maxed out recently but good for newcomers, Im saving my penny's personally.
My LVR would be sitting pretty at 153% and I would be looking to find a few more!
If your Loans blew out to 153% of the Value of the properties you own now due to a 40% price drop, I seriously doubt that you would get ANY finance at all for more purchases.
I'm ready for it if it happens, yes. It will be a great opportunity. If it happens, I'll probably view it in the future as one of the best things that happened to me. But there is a matter of degree. I'm going to gradually buy anyway.
Put it this way, if the market really tanked 40%, would you lose your nerve? If you haven't conceived of the possibility, and it happens, you freeze.
I don't think I can get the loans to suddenly double my property portfolio within a short space of time. In my case, I'll just keep buying, each buy only a small incremental addition to my portfolio.
Alex
Knowing what I do now I still would never have leveraged myself to the hilt on property. I now know how to get better returns with lower risk.
But I am tired of being called a coward by a smart @rse so the matter is closed, now and in the future.
You're too hard on yourself SF.
You can get called whatever they want to call you, but you know that you are a success; that's all that matters.
I, like you are a bit older than many here, and I also don't see the need to be leveraged to beserk proportions to do well.
I want to do well, but never put the ranch in danger in the process, and it's not required.
I like Warren Buffet's quote:
"I made a fortune out of buying too late, and selling too early".
The psychology here won't change I think you'll find YM.
For what it's worth; I don't think you are a nutcase, but no-one will take you all that seriously while you are an arm-chair expert with a calculator (in property).
The outlook may change in light of a possible downturn in the near future, which will cause a shift in strategies probably.
For example; the highly LVR'ed group may start to (hopefully) think about consolidating their financial position through some debt reduction and some rent increases. If they don't they may find their LVR's getting higher, which is dangerous, and they will also not be in a financial position to take advantage of a downturn.
The low LVR'ed group (like Alex and I) will be looking to buy near the bottom of the downturn, and won't be concerned by a drop as our financial position is solid.
Incidentally, I follow the debt reduction camp as a matter of course anyway; it means that in any situation I'm prepared; I can ride out the downturn, and I can buy when there is an opportunity, and I can sleep at night.
I don't think that the regular and experienced investors in either group are going to fold up their tents and be fearful; just manage risk and get prepared to buy when the downturn occurs.
I agree with LAA. you have in general argued logiically and seem to be familiar with the ABS website. Though you have probably played the bear thing to an extreme.
Anyway, I think your contributions have stimulated a lot of healthy thought amongst people reading the threads you have contributed to.
Plus you have handled unnecessarily derogatory criticism really maturely.
So keep reading and researching, and passing on your views.
I do take note of what you say.....
