What would you do?

Hi All

I probably made some mistake to have sold 5 of 6 IPs at the bottom of the cycle (this year). I have been thinking of getting in the game again.

Stevens' comments on rates made me worried a bit. I have done some in depth research on property prices and found a lot of properties (90%) have tripled the value in the last 10 years (used current bottom price againt 1999-2000 price. Can this sustain?

I also done some research between 1989-1999 and found the property value was almost flat. This makes me think ---- could property value stablise at current market condition for another 5-10 years afte boom in the last 10 years?

Obviously, vacancy rate is up and rent is down. Now the rate is up. Would property value go up in the short term (5 years)? or it would be like 1989-1999? The residential IPs I bought were for capital gain not for cash flow because the return is just too low. If there is no hope on capital gain, I would not think of rushing in the game in the short term.
 
I have done some in depth research on property prices and found a lot of properties (90%) have tripled the value in the last 10 years (used current bottom price againt 1999-2000 price. Can this sustain?
No
I also done some research between 1989-1999 and found the property value was almost flat. This makes me think ---- could property value stablise at current market condition for another 5-10 years afte boom in the last 10 years?
Yes

It's not the bottom of any cycle, you've made no huge mistake selling.
I don't expect much growth in property for a while & have been acting accordingly, so unless you see some great bargain I wouldn't be rushing back in.
 
with resi IPs you have 3 prongs of wealth creation - yield, CG and debt deflation. I am not really interested in CG, I am interested in (a) will some other bunny pay for this thing whilst (b) my debt is eroded. And if there is any surplus cashflow to pay for the big guys lap dances then that is a real gem. MY CG is the free asset I am getting. Any real CG is icing on top
 
Having read today's Property Report ---- which has vindicated my comments --- 90% (above ) properties have went up more than tripled. I do not think the wages have tripled over the same period, not even doubled.

I seriously think it might be a flat market for a long long time To buy a house for living, it might be ok, but to buy an investment property, in particular, so much negative geared, it might not be a good idea. (but if you got a + cash flow one, it might be ok)
 
... If they keep going up, there'll only be a handful of people in the country who can actually afford a house ...

I'm sorry but I don't get this 'affordability' argument.

Rewind to 2 years ago and we were all affording 4% higher IRs. OK so prices have risen 10+% since then. But our repayments are much, much lower now than then.

Sure a % suffered mortgage stress and sold but the vast majority did not.
 
Hi All

I probably made some mistake to have sold 5 of 6 IPs at the bottom of the cycle (this year). I have been thinking of getting in the game again.

Hi TheAnalyst,

Whether you have made a mistake in selling the properties or not really depends on your strategy. Did you buy the properties with the intention of selling them once they had made a reasonable gain? Have you funds left over from the sale of the properties? If so, what are you planning to do with the funds? Use it for lifestye, or to invest again in other asset classes?

I'm not sure that if I'd just sold 5 IP's I'd be keen to buy back into the market soon. You obviously had your reasons for selling out at the time.

Regards Jason.
 
Hi TheAnalyst,

Whether you have made a mistake in selling the properties or not really depends on your strategy. Did you buy the properties with the intention of selling them once they had made a reasonable gain? Have you funds left over from the sale of the properties? If so, what are you planning to do with the funds? Use it for lifestye, or to invest again in other asset classes?

I'm not sure that if I'd just sold 5 IP's I'd be keen to buy back into the market soon. You obviously had your reasons for selling out at the time.

Regards Jason.

Yes. I always want to sell when CG is up to some degree. I do have some funds but I do not know how to use them. That is why I am thinking of wetting my feet in the game again. I believe last 5 years was the best for CG. I am not sure it could return any more in any time soon. At moment, I left the funds in the cash acccount (5% return) while I am investigating what I am going to do -- shares, property, or a new business. That is why I seek advice from those experienced players. If more of the factors point to south, I would be an idiot to jump in for the sake of investing.

At moment, I am also worried I may waste the funds by playing something stupid. The factors confuse me are:

- current recovery seemed was fueled by first home buyer - by government assistance;
- 10% above over last 10 years was caused by many factors - particularly subprime and easy money; whereas 10 years period before the last 10 years was flay on property value;
- Australia has always been a commodity driven country, not only now.
- A lot of FHB buying something they can not afford; if the rate reachs to 6%, a lot of these FHBs will not cope very long; Last year when my rate reached 10%, I was shocked and almost could not cope.
- it seems RBA is going to get back to normal.

It is a very difficult time!
 
I would agree with that however rents are falling. the lag is so incredibly long to turn a cf- to a cf+

I am not sure whether you can get to CF+ stage in 10 years. For example, you buy a $400k property at 7% (normal) - interest + rates + maintenance = $30 000. So the rent has to be about $600 a week to break even ---- I feel it is very hard to achieve this rent level given the wages do not increase that much. (Forget about the depreciation thing). Most of these $400k house, you can get $350-$360 a week at moment. You need increase rent by about 70%....

I did not research on commercial - the return is also so low about 4-5%, for example, I saw an ad - asking $2.5m with net rent $94k. Even if you get at $2m, the return is only 4.5% around.

Very confusing
 
There are CF+ properties out there, you just have to look and negotiate a bit harder.

I purchased a 2 x 1 Townhouse in Mosman Park in Feb this year for $339k, $305k loan, asking price was $439k 6 months earlier and then offers over $380k at time of offer (2 months before settlement).

Have just signed a 12 month lease at $425 a week

Will be looking for my 2nd purchase once I have paid off a few debts I think
 
Build your own CF+ property in the country. $50k land, $100-110k house, $280pw rent. Not too shabby.

You can also buy established CF+ places all over.
 
There are CF+ properties out there, you just have to look and negotiate a bit harder.

I purchased a 2 x 1 Townhouse in Mosman Park in Feb this year for $339k, $305k loan, asking price was $439k 6 months earlier and then offers over $380k at time of offer (2 months before settlement).

Have just signed a 12 month lease at $425 a week

Will be looking for my 2nd purchase once I have paid off a few debts I think

Thanks - encouraging. This guy must have lost a lot of money if they bought in 2007 or 2008
 
Having read today's Property Report ---- which has vindicated my comments --- 90% (above ) properties have went up more than tripled. I do not think the wages have tripled over the same period, not even doubled.

Sorry if i missed it but could you please post me a link showing that 90% of Aus properties have tripled in the last 10 years?
Thanks
 
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