House prices to keep rising for years

[nomore4s]

Can I pose this question. In 6 months time I will be able to get a 5 year % rate fixed loan between 4 and 4.5%(I work in a bank and get discounts).

With my high income(200K plus), I intend to buy 5 properties for approx 600K each in inner city areas in Melbourne within 5km of CBD and sit on them for 5 years. How can I lose?

lol, is this a loaded question or what.
Alot of it depends on personal circumstances imo. Factors like
- amount of savings & general financial position
- Job security
- Age and family situation
- Long term goals & plans
- Gearing level for the 5 properties.

If it comes off you make a killing if it doesn't well .......

As to how you can lose
- You lose your job and high income
- Property prices crash and you end up with negative equity after 5 years.
- Rent prices drop (probably unlikely atm)

All hypothetical but you did ask.

Make no mistake you can lose despite what the bulls say but like I said above you can also make a killing, risk to reward - something you need to be comfortable with.

But with such a high income you no doubt have a huge head start & advantage.

 

[kincella]

Lionesse....why jump in at the deep end first....why 5 now...start with one...and how safe is your job ???....have you saved the deposits ?? or are you using the equity in your home.....I am considered a bull on property, but I am not silly....I believe interest rates will go lower, and this year will be very unsettling for a lot of people....
I would be looking for bargains...and might buy one...then wait and see another 6 months....there is no rush...
you will always find a bargain if you look hard enough.....I missed one recently...about 70,000 below mv....turns out it was a nasty divorce..add a rogue agent and someone won and the others lost...
apparently people are now buying one bedrooms,,, to save money....and the industry believes that will set a trend....all the single people who prefer to live alone....they also believe the mc mansions are falling out of favour.

and answer to the others...my figures were out of whack...an alziemers moment perhaps....70% of the population are home owners, 30% are renters...but of those 70% about 20% are also investors....the govt provides the other 10% of rental properties.....so 90% of the properties are held privately.....
I also know people who rent, but also own property....but not very many do this...although I have not seen any studies...just assume it would be a low %...
of the 20% people who own, and have one investment property, the % who own multiple investment properties, reduces dramatically to less than 1% of the population....
most people I know also have one investment prop, and a few have multiple properties...like myself
cheers

 

[lioness]

Thanks nomore & kincella for your replies.

Yes, I intend not to jump and buy them all at once. I intend to buy up to 5 properties over the next 3 years. The reason being, to take advatnage of the lowest fixed % rates in Australia's history. I figure buying them over the next 3 years starting end of 2009(after prices have fallen), will average my purchase price down at the lowest point.

I don't have the deposits, I intend to use redraw. I already have one investment property with 60K equity.

Also, my wife used to earn 250K but is at home now with 2 kids, but she intends to go back to work in the next 3 months and will earn approximately 150K part time(3-4 days per week). So, I have her income as back up in case I lose my job. On this point I am not willing to say I MAY lose my job so I will not take any risks. Life goes on.

Any more thoughts for me???????

 

[lioness]

In fact the only way to lose is if house prices continue to fall after I have purchased them given they will be cash flow positive.

But I know my market very well as I have been watching prices for 2 years, so I know exactly what to pay and if not walk away.

 

[kincella]

lionesse....OK that sounds much better...am sure I have stated this on this forum before ...I was looking at property around Toorak Oct/ Nov 08 and am not saying prices came down...just lower value props on the market to what there usually is...last year early 08 would need min $500,000 for a 2bdr...this year may have picked one up for $400,000...different street, location, and definately not similar properties...one in Dec thought might go for 400,000...but sold for 600,000.... the market was there and snapping them up

another region where I watch the market NSW/Vic border .....average house about 380,000-400.000.....from Mar 08....all the lower level props on the market and selling...1 bdr flats, fibro houses etc the real bottom of the market...and they were selling for higher prices than would normally fetch...all those sales dropped the median house prices down....but the normal houses were no longer on the market.....
then late Nov early Dec 08...something I consider was quite dramatic....they had sold all the bottom of the market....the usual were still missing....but now they were selling much higher priced properties...several on the market and sold,,,,where you might see only one house above the 2 mill mark...suddenly there were 4-5....and other properties above the 400-500 mark were now selling.....the standard median house is still missing.....

so high flyers lost money in the markets and now selling up.....only explanation ?....the middle of the market is holding off, with rates coming down...those houses will go back on the market at higher prices.......and first home buyers are stuck with paying higher prices for lower value properties...
then again I could be out of whack......
thats 2 suburbs, 2 very different markets, different lifestyles, but similar results
I believe you can find a bargain at any time....but dont be fooled by the median prices you see,,,,if there is normally 30 sales a month...of high and low value props...thats fine....but if suddenly only 30 low priced props are selling....it changes the median value .....but the actual properties cannot be compared.....
you need to compare apples with apples...half hour a week on the realestate site..compare the properties for sale....specific suburbs..then compare the ones that sold ....the domain site also shows recent sales
cheers...and keep us posted how you fare

 

[kincella]

Ok lionesse...wasted my time on the last lengthy post....since you have done your homework and research....maybe some one else will benefit from my research...
so what if the prices go down....I believe they will return to the normal 10-15% growth rates as in the past....

sitting on 5....and reasonably sure there is another pot of gold waiting for me...within another 3-5 years

 

[tech/a]

Can I pose this question. In 6 months time I will be able to get a 5 year % rate fixed loan between 4 and 4.5%(I work in a bank and get discounts).

With my high income(200K plus), I intend to buy 5 properties for approx 600K each in inner city areas in Melbourne within 5km of CBD and sit on them for 5 years. How can I lose?

They all will be cashflow positive from day 1 also(I have already checked the rents and they average around $600 per week), so no need to pay them off although I intend to build up cash reserves for tenancy vacancies anyway.

Why wouldn't I do this given in 1-2 years inflation will be out of control.

PS My principal residence is fully paid off and worth 1.2 million.

Any comments??

Well-- If interest rates double you'll be snaffled.
Your $200k is around 100K taxed so you'll need $150k a year to service the debt.
Other than that I think you could do better than placing all your eggs into the CBD of Melbourne.

 

[lioness]

Well-- If interest rates double you'll be snaffled.
Your $200k is around 100K taxed so you'll need $150k a year to service the debt.
Other than that I think you could do better than placing all your eggs into the CBD of Melbourne.

Tech/a, you missed the whole point and most crucial point of my post.

I intend to lock in 4 properties on interest only loan for 5 years between 4-4.5% interest rates, so if interest rates double, it won't affect me. Then with the 5th property, keep this variable and then sell in 3-5 years later after achieving capital growth to pay down part of the remaining debt when it comes out of the fixed period. Get it?

Also 5km to the city is not the CBD of Melbourne, it is inner city, there is a huge difference in price and growth between the two. Also Melbourne has been forecast to take over Sydney's population growth by 2030.

 

[kincella]

LIONESSE...I agree with your plans...the only thing to add for consideration...what if...you found a bargain priced shop in Chapel St....
5 years ago maybe 500.000 recently 1 mill.....rents are better than residential...not strip shops...only CBD or Chapel st, maybe parts of High St, Armadale, and never shopping centers...not for us smaller players

the young ones are still down there spending their money....but the retailers are slashing prices.....am expecting some to close down....I could be wrong, but doubt it

expected fallout from the commercial sector...ie in the centros and bigger players that killed it with high debt.....may flow out into the smaller market.....just expecting some fallout

I found one 6 years ago..bargain priced....tenant on bargain basement rent...but lease due for renewal 2 years.....then brought the rent up to mv....doubled....use cap rates for commercial, its usually 1% lower than the bank rates...as interest rates come down so does the cap rate...divide the rent by say 5% is higher mv for the building....rates go up so does the cap rate...= lower mv ...but you probably know all this....
a lot of investors like self have been out there buying the single shops for the superfund....good returns and good growth

 

[lioness]

Thanks Kincella for the advice.

As for all the other whingers constantly downramping on here, they have gone into hiding as my factual posts have obviously stunned you all.

Can anyone else shoot holes in my argument??

I doubt it.

 

[SBH]

In fact the only way to lose is if house prices continue to fall after I have purchased them given they will be cash flow positive.

But I know my market very well as I have been watching prices for 2 years, so I know exactly what to pay and if not walk away.

LOL! you've downramped yourself here so I shouldn't bother. The credit orgy is over haven't you heard? You work in a bank you would think you would have noticed credit crunch written on a memo or email somewhere......
Anyway here's the story, the entire western world has been living on it's credit card for decades, now it is in default. Your poxy get rich scheme of buying 5 houses, doing nothing then selling for a profit never made sense now the world is waking up to that. I may as well be sayingvthis in ancient Greek for all you care because this does not compute with you bulls.... The hoax is up! I hope you realize before you pss all your money away

 

[overlap]

Highly recommend the link just posted by The Edge in this thread....

https://www.aussiestockforums.com/forums/showthread.php?t=14101

"The era that defined Wall Street is finally, officially over. Michael Lewis, who chronicled its excess in Liar’s Poker, returns to his old haunt to figure out what went wrong"

http://www.portfolio.com/news-marke...folio/2008/11/11/The-End-of-Wall-Streets-Boom

House prices are discussed about 1/4 way down into the article.

 

[robots]

hello,

some more fine opinions just like all of us, wonderful

this period is fantastic overlap, st kilda up 14.8% Sept08 quarter, everything still 7 or 8x average income for average house

not much has changed has it? and thats because we floating in the best country in the world, a step ahead of every other place where we make changes

we get guns out of society and get on with proper respectable life

thankyou
robots

 

[lioness]

LOL! you've downramped yourself here so I shouldn't bother. The credit orgy is over haven't you heard? You work in a bank you would think you would have noticed credit crunch written on a memo or email somewhere......
Anyway here's the story, the entire western world has been living on it's credit card for decades, now it is in default. Your poxy get rich scheme of buying 5 houses, doing nothing then selling for a profit never made sense now the world is waking up to that. I may as well be sayingvthis in ancient Greek for all you care because this does not compute with you bulls.... The hoax is up! I hope you realize before you pss all your money away

My real estate agent just rang me as my investment property i coming up for lease again. It was $400 per week and he said put it up to $450 per week. So I did and the tenants accepted straight away. Property is inner city Melbourne(Carlton). Magnificent return now of 7% yield and cash flow positive. This property game is wonderful.

I cannot lose when compared to shares which are down 45%. Will my Carlton property fall 45%? Not a hope in hell.

 

[wayneL]

Will my Carlton property fall 45%? Not a hope in hell.

It might not.

But never say never. Look at what is happening in other anglo economies. UK is dwon about 20% in a bit over a year from the peak.

...and rents are coming down too.

 

[lioness]

It might not.

But never say never. Look at what is happening in other anglo economies. UK is dwon about 20% in a bit over a year from the peak.

...and rents are coming down too.

Wayne, I am open to the belief of some fall, but nowhere near 45% as per the so called 'blue chips' of the stockmarket.

Further to this, there will be a fundamental shift away from shares for 5 years as too many have been burnt by so called 'blue-chips' never lose stocks like the banks. Expect another flight to property for perceived safety.

I repeat perceived safety.

 

[wayneL]

Wayne, I am open to the belief of some fall, but nowhere near 45% as per the so called 'blue chips' of the stockmarket.

Further to this, there will be a fundamental shift away from shares for 5 years as too many have been burnt by so called 'blue-chips' never lose stocks like the banks. Expect another flight to property for perceived safety.

I repeat perceived safety.

It ain't happening here.

 

[robots]

hello,

and the falls of US and UK property aint happening here man, isnt that strange different things happen around the world

st Kilda up 14.8% Sept08 Quarter, broady up melton up and a host of others

thankyou
robots

 

[Glen48]

House sale in Brisbane down 28%, divorce due to financial pressure has doubled 15m gong into Pokies from the 10.4 all is rosy in paradise.
Those who have not sold are stuck with a fall can't say asset falling millstone around their neck.

 

[robots]

hello,

got a few brass one's left in a plastic bag might flip them to the street crew in Melbourne today

thankyou
robots