House prices to stagnate for 'years'

[Tysonboss1]

What we really should be looking at is refining the ores ourselves, even extruding rail tracks etc. Our resources are large but finite and secondary industries should be growing from them. Now that would be jobs.

Good idea,..

Let me know when you have released the prospectus on this new company and i will take a look,... good luck on the capital raising.

 

[RustyK]

No you wouldn't subtract the holding costs in the intial calculation because these holding costs will be differtrent for every single investor,... ie. some have 90%LVR others 20% LVR.

You would look at return on investment the same way as people work out the 5year share price return figure,.... being the capital growth + dividends translated to a p/a % return.

just like when it is published that woolworths has had a 5 year share price return of 22.5%,... this is simply capital growth + dividends, property should be treated the same.

as I pointed out in my earlier thread the properites that were worth $1000 in 1890 would be worth far more than sydneys median house price today, so the actual capital growth would be far more than 5.1%,.... but even at 5.1% its a decent 10.1% when rents are included.

I think you need to still account for some holding costs but I do see your point with respect to interest. However Rates, Insurance, Repairs and Maintenace, Agents Fees, an allowance for capital refurbs etc need to be included as they are real costs that will affect your return regardless of how much you have or have not borrowed.

Tax is also something needs to be considered as after tax return is important and there are no franking credits.

A 5% net income return on investment in todays market is probably a little optomistic in my opinion.

Cheers

RustyK

 

[Tysonboss1]

I think you need to still account for some holding costs but I do see your point with respect to interest. However Rates, Insurance, Repairs and Maintenace, Agents Fees, an allowance for capital refurbs etc need to be included as they are real costs that will affect your return regardless of how much you have or have not borrowed.

Tax is also something needs to be considered as after tax return is important and there are no franking credits.

A 5% net income return on investment in todays market is probably a little optomistic in my opinion.

Cheers

RustyK

Rates, maintaince and insurance are all quite small costs compared to the rent collected and really should be taken out of the rental return so you could calculate it as a 4.8% rental return after costs as oppossed to a 5%return.

a 5% return is easily achieve if you know what you are doing, infact I don't invest unless I can get 5.2% return immeadiatly with a good chance increaseing it fairly rapidly,... and I have managed to maintain inexcess of 5.2% across my entire portfolio as a whole even at todays valuations, which when combined with brisbanes capital growth has ment I have quite happy with property investing.

 

[numbercruncher]

Thats good for you but look at it now for new Investors.

House 400k, rent $400 p/w at best, Interest 9pc + rates/Ins/Maint/dutys etc - plus your deposit isnt free it could earn a good return elsewhere if not used in the Investment property.

I live in a 350k House (rented) for 300p/w. How does the Investment market attract new players with this equation ?

 

[Tysonboss1]

Thats good for you but look at it now for new Investors.

House 400k, rent $400 p/w at best, Interest 9pc + rates/Ins/Maint/dutys etc - plus your deposit isnt free it could earn a good return elsewhere if not used in the Investment property.

I live in a 350k House (rented) for 300p/w. How does the Investment market attract new players with this equation?

If you look you will find properties with a good return, I could easily find properties in both brisbane, sydney and melbourne with rents higher than 5%.

Real property investors wll be able to find good investments even in the current market, remember it's not supposed to be easy,

it's not as simple as walking into a real estate agents office and asking an agent to sell you an investment, if you do this you will end up with a $400,000 property returning a 3.8% return.

Real estate investing is much like stock investing,... some people buy mediocre managed funds with average returns and some people spend time reserching and identifying key performing stocks and do well,...

 

[wayneL]

If you look you will find properties with a good return, I could easily find properties in both brisbane, sydney and melbourne with rents higher than 5%.

But those types of properties (making a presumption on the types of properties) should contain a hefty risk premium. At say 6% return, that's a risk discount and you rely very much on cap gain for a profit. Nice if you can get it, but a dangerous game as recession approaches.

These are properties that probably yield 9-11% in normal, non-bubble times.

 

[Kimosabi]

If you look you will find properties with a good return, I could easily find properties in both brisbane, sydney and melbourne with rents higher than 5%.

Real property investors wll be able to find good investments even in the current market, remember it's not supposed to be easy,

it's not as simple as walking into a real estate agents office and asking an agent to sell you an investment, if you do this you will end up with a $400,000 property returning a 3.8% return.

Real estate investing is much like stock investing,... some people buy mediocre managed funds with average returns and some people spend time reserching and identifying key performing stocks and do well,...

Buying a Bargain in a Boom isn't a Bargain in a Bust.

Buying a Bargain in the Bust is a real Bargain....

There were many "Real Property Investors" in the US who believed their own bullsh1t, who have now been wiped out...

I heard the latest boom in the US is Tents

 

[tech/a]

Industrial and Commercial rents far exceed 5.2% in my areas.

Think outside the square.

There were many "Real Property Investors" in the US who believed their own bullsh1t, who have now been wiped out...

There are many more who will never retire without a pension who believed their own Bullsh1t.

 

[wayneL]

More risk in commercial, especially as recession approaches.

It's getting slammed here.

http://www.ft.com/cms/s/0/e67e1352-d027-11dc-9309-0000779fd2ac.html

Yields should be minimum 10% IMO.

 

[tech/a]

Lenders are afraid that borrowers may find it's worth the hit to their credit scores, if they can drastically reduce their housing expenses. Someone with good credit and a $600,000 home in a town with cratering real estate prices could buy a similar house nearby for $450,000, and then let the other $600,000 mortgage go into foreclosure.

From the US.
Simply creative thinking by burrowers.

To head off more defaults, Countywide sent out letters to 122,000 homeowners last week informing them that their home equity credit lines were shut down since their estimated home values had dropped below their loan amounts.

A good thing,as many simply ammortise their debt.

 

[Tysonboss1]

But those types of properties (making a presumption on the types of properties) should contain a hefty risk premium. At say 6% return, that's a risk discount and you rely very much on cap gain for a profit. Nice if you can get it, but a dangerous game as recession approaches.

I would actually say the opposite,... they are far less risky,.

take for example one I bought last year,... It's a duplex where I secured both units for $257,000. It's in a good outer suburb of brisbane achieveing capital growth and is at the lower end of the market.

It is less risk because the return is so much higher because I have 2 rent streams from it and it is actually positve geared,.... even if I loss a tenant I still have the other tenant paying rent.

If recession hits,... it's the properties at the top end that will suffer as renters try to down size to cheaper accomadation which actually increases demand for my favourite sectors the low to medium income housing.

 

[Tysonboss1]

Buying a Bargain in a Boom isn't a Bargain in a Bust.

Buying a Bargain in the Bust is a real Bargain....

There were many "Real Property Investors" in the US who believed their own bullsh1t, who have now been wiped out...

I heard the latest boom in the US is Tents

I am not a Property trader, The properties I buy I am expecting to hold well into the future, (unless I wrap them).

I buy properties where I can achieve good rental returns that I can bring to positive cashflow in a few years, In areas I believe will have good capital appreciation over the next 10 years,...

Even with 11 consecutive rate rises I have never been in a better finacel position than I am in today.

Even if there were a large scale price drop of 40%, that would just make the buying better for me.

 

[tech/a]

Even with 11 consecutive rate rises I have never been in a better finacel position than I am in today.

Even if there were a large scale price drop of 40%, that would just make the buying better for me.

Its just a case of doing business.Tysons business is as he has stated.

I could add that there are a few here that coiuld say the same with their share trading.

Even with a 20% drop in the share market I have never been in a better financial position as I am today.

Even if there were a large scale price drop of 40%, that would just make the buying better for me.

Personally I and a few I know liquidated all long term positions held through the bull run in July.
This is where many of us are right now.

To many are "Reactive" in my view.
They have longterm views with short term stratagies.
Its just business.

 

[lioness]

I am not a Property trader, The properties I buy I am expecting to hold well into the future, (unless I wrap them).

I buy properties where I can achieve good rental returns that I can bring to positive cashflow in a few years, In areas I believe will have good capital appreciation over the next 10 years,...

Even with 11 consecutive rate rises I have never been in a better finacel position than I am in today.

Even if there were a large scale price drop of 40%, that would just make the buying better for me.

Tyson, can you tell me what suburbs you have bought into please and their original costs versus what they are worth now and their rental returns.

 

[wayneL]

I would actually say the opposite,... they are far less risky,.

take for example one I bought last year,... It's a duplex where I secured both units for $257,000. It's in a good outer suburb of brisbane achieveing capital growth and is at the lower end of the market.

It is less risk because the return is so much higher because I have 2 rent streams from it and it is actually positve geared,.... even if I loss a tenant I still have the other tenant paying rent.

If recession hits,... it's the properties at the top end that will suffer as renters try to down size to cheaper accomadation which actually increases demand for my favourite sectors the low to medium income housing.

Question: Why do you think the returns are traditionally higher in low end properties?

 

[Tysonboss1]

Question: Why do you think the returns are traditionally higher in low end properties?

Hard to explain because there are alot of factors but I will try,.. the price of the top end properties is higher becuase ,..

1, the cost of building a larger home on a larger block with more features is obviously higher,.... but even though the cost of the dwelling is alot higher the extra rent you can charge is not in proportion to the extra cost,... eg. it might cost you 80% more for a top end property but you can only charge 50% more rent.

2, there is obviously more demand from buyers for properties in the medium to high sector because most property buyers even alot of mum + Dad investors want to own a 'NICE" with nothing to do property that they can drive past and show there friends how "nice" their investment property is,.. so they pay a premium for this nice property and accept a lower rent yeild,...

for example a nice three bed home in brisbane might cost $425,000 and rent for $360.00, but the three bed unit in my duplex is renting for $240 and the whole complex only cost me $257,000.

I can use two of the properties that I own to prove this point,.... the first property I ever bought is a really nice 4 bedroom has in a nice area. It's worth about $450,000 and is getting $385/ week rent,.... I bought it for $218,000 and only hold $160,000 debt on it so it is positive cashflow

but compared to my duplex which I talked about which I bought for $257,000 which gets well over $400/ week rent. rent return is not as good.

 

[theasxgorilla]

To many are "Reactive" in my view.
They have longterm views with short term stratagies.
Its just business.

It's business, but it's also life. I think this is why it's important to have hobbies and other sources of income. You can't force many types of investment in the same way that you can work harder and more often to get more money. Investment value often increases as a function of time, among other things. With trading for example, there is usually nothing you can do to force the money to come. You just gotta wait. Waiting can be fun with hobbies and other ways to enjoy the fruits of sound investing.

ASX.G

 

[numbercruncher]

Bit of useless Information for ya'll.


The last time Interest rates were over 9pc in Oz was 1996.

In 1996 the average wage was 30k and the average property was 120k.

Just thought Id share that

 

[theasxgorilla]

The last time Interest rates were over 9pc in Oz was 1996.

In 1996 the average wage was 30k and the average property was 120k.

Just thought Id share that

And we were about to embark on THE largest property boom in recorded Australian history

 

[theasxgorilla]

Question: Why do you think the returns are traditionally higher in low end properties?

I agree, and I'll give it a shot. Lower-end properties are usually the last to receive benefit from capital gains during a boom. If the boom isn't sufficient then they might not even benefit at all. So this end of the market becomes a different kind of game. Plus, I expect that way back when banks actually used to have lending standards many of the inhabitants of the areas where you find these properties would not have qualified for loans. So you end up with a plentiful renter class.

ASX.G