Who has a crystal ball... Please help!

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From: Paul Hendriks


Hi All,
Does anyone think the market is definitely about to correct to its actual true value, or am I being negative thinking a huge recession is just around the corner?
I have just sold my home in the Hawkesbury valley NSW for $400k, mortgage of $130k & moving to the Southern Highlands NSW, & am wondering which way to go with my funds.
Buy our own home to $400k transferring mortgage with us? or
Rent for awhile, around $300 p/w & buy a cheaper IP up to $300k, making sure it is cash flow positive, so we can sleep at night.
Then look to buy more IP's 12 - 18mths down the track, or maybe buy our own home after that time frame.
We have about $270k of funds to use of our own, but have very low income?
Advise would be much appreciated
Paul
 
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Reply: 1
From: Jim Kouta


Rent and then buy in 12-18 months. Haven't you been reading the papers and listening to our politicians talk about the inevitable doom and gloom ahead?

Westpac chief(forgotten his name) has warned buyers it's a very dangerous time to buy at the moment so my advice to you also is to hold off for a while. And if you're worried about "missing the boat", it's already been missed.
 
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Reply: 1.1
From: Paul Hendriks


Thanks Jim
Your'e advice is straight forward, & I must admit my gut feeling is to be very careful.
That's why I have posted this - for advise.
If we were to put our cash in the bank as you suggest, have you got a recommendation for a term deposit, or some other fund?
We are with Westpac...
I'm not that concerned on missing the boat as you put it, I just thought it may be wiser to put our funds into R/Estate rather than the bank.
It's just hard to come to terms with having a substantial amount of cash in the bank, rather than R/E.
I figured if we just about own a I/P, then that would be safe, plus if things got really bad, then we could move into the I/P ourselves if we had to.
I appreciate your suggestions Jim, as it sounds like you have done very well for yourself.
Regards
Paul
 
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Reply: 1.1.1
From: Yuch .



You may have already missed the boat. The market may be too hot at the
moment. BUT there are always other investments you can look into other than
putting all your money into term deposit/managed funds!!!

I agree that you do need to put some money into term deposit/managed funds
so you have something to fall back on, but don't stop investing just
becasue it's not the right timing to invest in the property market.

As far as I know, some property investors are now investing in the option
market (buying puts!!) and some are wrapping. The point is you can always
make money in any market, just have to be open minded to other options!

Happy investing!

Regards,

Yuchun Chen
Market Management Systems
NEMMCO Ltd
(02) 8838 5042

I am the Master of my FATE, the Captain of my SOUL, but a Slave of my
STOMACH






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Reply: 1.1.1.1
From: Rick Gibson


It is important to remember that there is always bargains to be had, it just depends on the amount of time and effort you are prepared to put in finding an investment property.

It has been said that the deal of a lifetime comes around on average about once a week, there is always abnormalities or extenuating circumstances that force a vendor to "fire sale" their property so to speak.

Putting your money in the bank is only going to lose you money (in real terms) as the returns from the bank are far outstripped by inflation.

Opportunity is around us all the time and the biggest risk in investing is the risk of doing nothing. If you think property is expensive now, wait till next year.
 
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Reply: 1.1.1.1.1
From: Jim Kouta


There are three crucial factors one has to consider when buying into Real Estate NOW, especially Sydney\Melbourne 8km radius around the city.

1. Owner\occupiers
2. Investors
3. Renters

1. Owner\occupiers have bought forward their purchase due to lower interest rates, as a result this has inflated prices.

2. Investors have moved out of shares in droves and put their money into property, as a result this has inflated prices.

3. Renters have also bought forward their purchase due to the Government grants, as a result this has inflated prices.

As you can see, prices have escalated almost 100% in some areas. So even though it's affordable now, even a slight interest rate increase will deter many buyers in the future. The Government Grant won't last forever and investors will turn back to shares in the next year or so once they realise creating wealth through property takes a VERY LONG TIME. Most people don't want to enjoy life at 65 when gains are realised. Given that prices have increased so much, it's inevitable there will be a correction, how big, nobody really knows. But remember, the bigger the boom, the bigger the bust.

Regards,

Jimbo.
 
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Reply: 1.1.1.1.1.1
From: Anonymous


Dear Paul and Jim,

I must say thank you for your doom and gloom predictions and inciting panic amongst the large group of newbies (myself included) who are members of this forum, and who just may be purchasing in the current market.

We are in the process of buying our first house at the moment, sure house prices are a little higher than normal, but we would rather have $14k from the Government and be paying off our own home, as opposed to waiting for another twelve months for the market to cool off and wasting over $11,000 in rent.

Yes, it's hot at the moment, but we are in this for the long run. We have a long term strategy and if that is kept in mind throughout, then I figure we will be able to whether any troughs (or peaks) in the market.

Just my 2c worth :)

Fire Head
 
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Reply: 1.1.1.1.1.2
From: Tom Cleary


Everyone wants to know wazzup.
Reality check#1 the recession hasn't happened yet, its only tottering on the brink, should come tumbling down oct/nov.
Reality check#2 we are about to embark on a military adventure (Not that I don't agree with it, it was a long time in the coming)which will keep people cautious for some time to come.
So prognosis in for a few veeery bad months, but mercifully a short sharp correction, so March or April things will start to turn up. So best time to buy will be around the end of Dec -early Jan.
Regards
Tom
 
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Reply: 1.1.1.1.1.1.1
From: Anonymous


Does anyone have an figures on wars reducing property values, WW2, Korea, Vietnam. My view is they didn't and this current crisis will not either.

If anything it will be businesses, that is the share market, that will cop a hiding. And usually when that happens people move into cash and real estate for security.

If I had the money I would be developing right now not just buying IPs.
 
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Reply: 1.1.1.1.1.2.1
From: Sergey Golovin


Actually it is a interesting question - does inflation slows down during turbulent time or goes up compare to interest rate?

Serge.
 
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Reply: 1.1.1.1.1.2.1.1
From: Paul Hendriks


Thanks for your input people.
It really is amazing to see so many different points of view, we will all see the results no doubt over the next year or so, & maybe use that as future reference.
I am definitely not a doom & gloom person as Firehead suggests, merely after opinions so I can then make up my own mind about which way to go, since most of you have much mare experience than myself in the property market.
My brief conclusions after reading comments are that property will flatten out & in some cases drop back in price, but in the long run will bounce back like it did after the 90's recession, (wish I didn't sell back then)
I don't think we could go wrong with an I/P in the Southern Highlands, as the new M5 extensions will bring it fairly close to Sydney.
Anyway, that's what we'll start with for now, & as Rick Gibson pointed out, it all depends on the effort put in to find the right I/P.

Regards
Paul
 
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Reply: 1.1.1.1.1.2.1.1.1
From: John Holmes


Interesting discussion. I am actually considering selling and will auction last weekend of October in inner city melbourne. My rationale is that I have had very good growth since March 98 (100%) and am carrying a large personal mortgage on my own home. I want to cash up while the market is still hot rather than risking a downturn and a prolonged flat period. I am interested in others views.
 
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