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House prices to stagnate for 'years'

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tyson similar to you but own my own home.

Agree with most you have said but perhaps one.
You can specialise in Property/Business and or equities and excel beyond the "Norm"
Often as has been my case with property this becomes a business in itself quite separate from my core business--Civil Construction.
But agree balance is best.

I was not making a bone with anyone. In fact I agree with what you are both saying. I too have made a lot of money from property. Have brought and sold vacant blocks of land and doubled them in just over 12 months. At the right time and place edging new developments, no big deal, same as Oxiana going up 100%. I have also halved my money on deals.

It is the money equation that I refer, the ruler over it, etc., everything in the financial cycle at the right time (if it can be done/difficult to always get it right) is the name of the game.
 
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I have stratergies that I can use to make money in just about any property market whether it be up down or sideways, so saying people won't make money in property is just plain wrong. The problem is when most people bag property investment they are only thinking of the "buy and hold" stratergy.

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Hi Tysonboss1,

I'd be interested in hearing a bit more about this- what kind of strategies are out there that allow you to profit from a declining, or stagnant property market:confused:

Is there some secret way of shorting a house:confused:
 
Nationalisation??? WTF!?!
Looks like it could be a done deal. "The Law of Unintended Consequences" comes to mind.

http://news.bbc.co.uk/1/hi/business/7184813.stm

Treasury lines up new Rock boss
Northern Rock branch
Northern Rock is inching closer to being nationalised.
The Treasury has recruited the former boss of Lloyd's insurance market, Ron Sandler, to lead Northern Rock, should the troubled bank be nationalised.

A decision could be taken within days, says BBC business editor Robert Peston.

According to bankers close to the Rock, the Treasury has a fully developed plan to own and manage the bank, should a commercial solution be impossible.

Mr Sandler is widely regarded as having restored confidence in Lloyd's after its years in financial disarray.

The BBC has learned that Mr Sandler would become executive chairman of Northern Rock in the event that the troubled bank is fully nationalised.

The former boss of Lloyd's of London is well known to Prime Minister Gordon Brown, and worked for the Treasury in developing the so-called stakeholder pension and investment products that were intended to help those on lower incomes save for retirement.

Shareholder meeting

The coming week will be a crucial one for Northern Rock.

On Tuesday, shareholders will attempt to restrict the ability of the company's board to sell assets without seeking their permission.

Their action in calling an extraordinary general meeting to vote for shackling management is regarded by the Treasury as potentially hostile to the interests of taxpayers.

Taxpayers are exposed to the Rock to the tune of £55bn through direct loans made by the Bank of England and guarantees to other lenders made by the Treasury.

A decision will also be taken imminently by the Treasury on whether to pursue a proposal by the investment bank Goldman Sachs to convert up to £15bn of the taxpayer loan into bonds, for sale to international investors.

If that proposal to raise new finance for the Rock flops, it is likely to undermine attempts to organise a commercial rescue of the Rock by either a consortium led by Virgin or by the Olivant Group.

Chancellor Alistair Darling says his priority is to secure repayment of taxpayers' money.

On Thursday at the Treasury Select Committee, the chancellor made it clear that nationalisation remains a very live option.
 
Hi Tysonboss1,

I'd be interested in hearing a bit more about this- what kind of strategies are out there that allow you to profit from a declining, or stagnant property market:confused:

Is there some secret way of shorting a house:confused:

Obviously the stratergy you use will be different in each phase of the cycle.

But during a flat or down trending, or on the eve of a down trend you can "lease option" a property which is basically a rent to buy contract where you sign a lease with the tenant stating that they pay a rent much higher than the current market rent (probally almost double the current rent) but they get an option to buy the property at a later date for preset agreed value and all the extra rent they have paid to you is used as a deposit should they decide to take up the option, benefits to you are it turns a neg cashflow property into a positive cashflow through out the term of the lease, the extra money can be used to offset interest costs or for other investments, and it locks in your sale price at a value that you are happy with and making money on,.... even if the value goes down.

a second option and my preferred option is to sell a property on a "vendor finance agreement" also known as a "Wrap" this is where you sell a house to someone who might not otherwise beable to get a loan(suchas selfemployed or exbankrupt) But instead of them getting a loan from the bank they buy the house from you and pay you in weekly instalments at an interest rate of 1.75% more then you are paying to the bank, so I might buy a house for $200,000 then sell it to the client for $225,000, I pay 8% interest to the bank the client pays 9.75% to me, so in effect I become more like a financer than a land lord, an rates, maintance etc is the clients responsibity so my main profit comes from the interest margin and the sale profit,

In a flat period following a down trend you can do renovations(as long as you are prudent with costs, buy well and only spend money on improvements that add value to your target market that you are going to resell the property to), you can search for properties that have been under rented and need quicks sales, you can do small developments and / or subdivions etc.etc

and in a booming market you just put your party hat on and hold as much property as you can because every fool is making money.
 
Wraps are a valid form of Property investment.
Work brilliantly for the Vendor in flat or negative times and terribly (although not disastrously) in runaway bullish periods.

Then of course we haven't touched on Commercial OR Industrial both lag the Retail domestic market.
With infrastructure struggling to keep up here is a great opportunity!
 
a second option and my preferred option is to sell a property on a "vendor finance agreement" also known as a "Wrap" this is where you sell a house to someone who might not otherwise beable to get a loan(suchas selfemployed or exbankrupt) But instead of them getting a loan from the bank they buy the house from you and pay you in weekly instalments at an interest rate of 1.75% more then you are paying to the bank, so I might buy a house for $200,000 then sell it to the client for $225,000, I pay 8% interest to the bank the client pays 9.75% to me, so in effect I become more like a financer than a land lord, an rates, maintance etc is the clients responsibity so my main profit comes from the interest margin and the sale profit,
I'd say good luck on this one.

Who in their right mind would want deal with people whom the bank won't lend money. (doesn't this say something) Sub-prime?

1.75% of 200k is $3500, then pay tax and its less than $2000. Chicken feed.
Why would you want the hassle of chasing payments, loan administration, legal documents, searching for houses, stamp duty, transaction costs, trying to find the right buyer and not to mention all your time in this.

And then in a few years time when you want out?

You'd be better off working at KFC
 
We are very careful in the SM to distinguish between trading and investing. This distinction doesn't seem to be made by property people.

Wraps, Lease options, reno and sell, development etc is not really "investing". It is trading and/or running a business.

BTW, wraps are very risky for the wrappee... unacceptable according to some. http://jenman.com.au/find/index.php?type=simple&query=wraps&button=SEARCH
 
I noticed that a piece of improved crown land that has a 125 year lease on it , created for the property , which is coastal , a house built on it in 1981 , renovated throughout , 4 bdrms clifftop views etc etc . now on the market for $7M .
1st price I saw was at lease beginning $880K , the resale $2.5M , the asking $7M .

For lease land , holy expletive expletive !
 
I love Jenman he has some good stuff and some god awful stuff.

Lets look at this.

Let's compare any of the major banks with wrappers.

First, a bank. If a home is worth $300,000 and the loan is $200,000, the borrowers have $100,000 in equity. If they default on the payments, the bank will sell the home and the equity is given to the borrowers. In this example, the borrowers receive $100,000. They get to keep the equity.

Now, let's look at a wrap loan. If the borrowers default, the wrap sharks snatch the equity and give the borrowers nothing. In the above example, it's the wrappers who receive the $100,000 in equity. That's the exact opposite to a bank.

I really love this.
Half the information.
Firstly the Wrappor comes to a deal with the Wrappee at time of contract for a predetermined sale price at a date in the future--usually 3 yrs.
This can be a 2 way street for BOTH parties.
Lets take the $200K home. Lets say the agreed price is $266K or a 10% Compounding GUARANTEED increase on the Wrappors $200k purchase with a guaranteed buyer.Sure he gets a premium on the property interest rate.The Wrappor has stamp duty to consider so his profit is eroded somewhat.

If in 3 yrs time the property has risen MORE than 10% Compounding a year then BOTH the wrappor AND the Wrappee have capital gain. Dont say it doesn't happen IT DOES and HAS.

The Wrappee knowing the home is to be his will try harder to keep it well maintained,will do everything he can to make his payments as he knows default will mean forfeiting everything. His opportunity will be lost.

So back to these nasty wrappors.
They are smart enough to protect themselves from default.
Banks insist on Mortgage insurance for loans over 80% LVR.
Nasty buggers.
This protects the banks if default and eviction and fire sale--- they can sell it at anything they want then the insurance company starts legal action against the poor mortgagor who THOUGHT his insurance covered HIM---what a joke!

The difference is that Mortgagors could not only default BUT have a very nasty bill on top.
Sub prime lendors are screaming like stuck pigs.WHY?

Wrappors take control,have their home and any equity--the wrappee walks away no more to pay.

Seems to me the Wrappors could teach the banks a thing or 2.
Infact they have!
You can now get a lower cost loan that the banks will lock in equity or part equity as a condition.

Its business for Christmas sake,both parties have risk,this one sided crap view is designed to stir up controversy and sell more of his books.
don't tell me Jenman hasn't a hidden agenda!

Haven't seen any reporters chasing Wrappors down streets but seen many reports on banks kicking out Mr and Mrs Average!
 
I'd say good luck on this one.

Who in their right mind would want deal with people whom the bank won't lend money. (doesn't this say something) Sub-prime?

1.75% of 200k is $3500, then pay tax and its less than $2000. Chicken feed.
Why would you want the hassle of chasing payments, loan administration, legal documents, searching for houses, stamp duty, transaction costs, trying to find the right buyer and not to mention all your time in this.

Well not really chicken feed when you factor in the a wrapper will normally add $25,000 to the price so that $25,000 profit from the word go, but offcorase your not getting that $25,000 in cash you get it slowly over 5 yrs and in the mean time you are making $9.75% on it because you only lent $200K but they owe you $225K,..and you can end up with up to $100 ( depending on the size of the wrap deal) a week passive cashflow from as little as $6000 of your own money invested in the deal.

and if you renovate the property then wrap it you might only owe the bank $210,000 but you sell the house for $250,000 so you are earning $9.75% on the equity you created in the reno.

There are alot of good people out there that can't get finance, such as self employed people. Obviously you just don't offer a wrap to any random person you interveiw them and conduct checks and the like to make sure they are accepable.

As for Wrap not being worth it, One of my close mates creates wrap deals for a living, he spends probally about 2 hours a month managing his existing deals and probally about the 10hrs a week setting up new ones.

Wrap deals are not for everybody you have to build win-win situations, If you focas on building win-win outcomes wraps can be fantastic opportunities for both the wrappee and the wrapper,
 
I love Jenman he has some good stuff and some god awful stuff.

Firstly the Wrappor comes to a deal with the Wrappee at time of contract for a predetermined sale price at a date in the future--usually 3 yrs.
This can be a 2 way street for BOTH parties.
Lets take the $200K home. Lets say the agreed price is $266K or a 10% Compounding GUARANTEED increase on the Wrappors $200k purchase with a guaranteed buyer.Sure he gets a premium on the property interest rate.The Wrappor has stamp duty to consider so his profit is eroded somewhat.

!

your describing a rent to buy lease option here more so than a true wrap arrangement.
 
Yes your right.
Wrapping isn't available here in SA that's why the subtle differences were missing.
My understanding of Wraps was/is that of which is legal in my state.

I stand corrected,however the same applies to the comments made re wrapping.

Here is a more complete explanation in which the subtle difference is evident

http://www.propertyinvesting.com/resources/5
 
Tech

If the Wrapper goes BK and assets repossessed, the wrappee loses their home and ALL their equity through no fault of their own. Not an acceptable risk IMO and it is not generally recognized.

Don't tell me it hasn't happened... it has. ;)

If wrappers could somehow overcome this risk to the buyer, it would be a great product for those who need/want it.

NB Wrap/LO whatever.

***

PS Interesting that some folks attempt to sully NJ for wanting to make a buck from what he does, yet it's quite OK for them to make a buck in any way they think fit... monumental hypocrisy IMO.
 
Tysonn,

Have you actually put these strategies into play or is it something you are considering doing?

If youve already done it, did it all go to plan?


Cheers.
 
Tech

If the Wrapper goes BK and assets repossessed, the wrappee loses their home and ALL their equity through no fault of their own. Not an acceptable risk IMO and it is not generally recognized.

Don't tell me it hasn't happened... it has. ;)

If wrappers could somehow overcome this risk to the buyer, it would be a great product for those who need/want it.

NB Wrap/LO whatever.

***

PS Interesting that some folks attempt to sully NJ for wanting to make a buck from what he does, yet it's quite OK for them to make a buck in any way they think fit... monumental hypocrisy IMO.

You can write what actions are to be taken in the event of a default into the wrap contract,.... you can also protect these deals inside investment structures as you would any other investment.

My mate has only ever had one wrappee default on the loan, he re sold the property under a new wrap aggreement within 2 months and paid out the previous wrapper that had defaulted $35,000 because in the 2 years the property had increased.

Neil Jenman will always spread horror stories of "EVIL" property dealers ripping off the little guy,.... but the truth of the matter is wrap deals are a fantastic opportunity for some people to buy there family home and get off the rent treadmill.

Wrap deals is one of the oldest ways to finance property,... most of sydney was sold under wrap contracts in the early days.
 
Tysonn,

Have you actually put these strategies into play or is it something you are considering doing?

If youve already done it, did it all go to plan?


Cheers.

I have only completed one wrap deal,... all is going great though it is a stratergy that I want to use alot more. It's not really a stratergy worth doing if you are only going to do one or two.

But as I said my mate is an expert in these deals he has completed many of them and only had issues with one debtor but that was sorted out in a win-win situation.
 
You can write what actions are to be taken in the event of a default into the wrap contract,.... you can also protect these deals inside investment structures as you would any other investment.

My mate has only ever had one wrappee default on the loan, he re sold the property under a new wrap aggreement within 2 months and paid out the previous wrapper that had defaulted $35,000 because in the 2 years the property had increased.

Neil Jenman will always spread horror stories of "EVIL" property dealers ripping off the little guy,.... but the truth of the matter is wrap deals are a fantastic opportunity for some people to buy there family home and get off the rent treadmill.

Wrap deals is one of the oldest ways to finance property,... most of sydney was sold under wrap contracts in the early days.

I'm talking about the "WRAPPER" going broke. As the house title is not in the wrappee's name, they lose the house and all equity.
 
I'm talking about the "WRAPPER" going broke. As the house title is not in the wrappee's name, they lose the house and all equity.

As I said you can protect the deals inside trust/ company structures to provide atleast some insulation.

But if the wrapper goes broke and the bank sells the house the bank can only take the money owed to them,... any equity left over will be passed onto the wrappee...

But if a person is in the postion where they can offer a wrap deal they are normally in a pretty secure financel position.

At the end of the day there is a portion of risk in everything,... One of the biggest risks is that if the family doesn't get a wrap deal,.. property will always be just out of their reach,....and they will be renting for ever.
 
As I said you can protect the deals inside trust/ company structures to provide atleast some insulation.

But if the wrapper goes broke and the bank sells the house the bank can only take the money owed to them,... any equity left over will be passed onto the wrappee...
Can you explain how this works? How does the wrappee end up with equite?
 
Hey Wayne , your on the pulse of the UK house market . Are prices rising still ?
I assume this more so in and around London would be the case , given that it is the hub of culture etc. that it is known for . A City , sorry greater city , that has everything , all compacted in a cosmopolitan basket with everything in close vicinity .

Or is there a decline in housing in the outer regions ?
 
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