Paddy, you claim to earn $40K per annum at Woolworths, and you say you purchased all three of your properties 50/50 with Aimee. Is Aimee also only 22 years old like yourself, and how much does she earn per annum?
You also say you aim to own 30 properties with 3 million dollars worth of equity within 15 years, allowing you to retire! But how do you expect to finance so many properties on such a low income (or zero income on retirement)?
The big danger with property investment is that it is very easy to get into and banks are falling over eachother to lend money to anyone willing to have a go.
Try going into a bank and asking for a 500k loan to buy shares or trade FX or Gold and they will laugh at you but property is a different matter.
But all investments carry risk. During the up phase of any market, those who sell their assets will see a capital gain but at some point all markets peak and fall back and those who buy at the top, end up losing unless they can afford to hold and ride it out. Leveraged buying increases the risk of not being able to hold when things get tough.
if you look at Mandurah in WA, seven years ago it was one of Australias property hotspots with blocks in some areas fetching prices normally only seen in Perths western suburbs. People piled in to buy land around Ravenswood and Greenfields on the promise of 20% annual growth. I have a friend who paid 550k for a block in 2007 in Ravenswood and built a very impressive 4x2 on it. It is now valued at around 525k so technically he has lost 25k from the land value plus the cost of building the house. He isn't bothered though because he lives there and doesn't intend to sell. However, it goes to show that even in a rising market there are markets within markets that can lose big time.
The point of this is to say that although property investment may seem easy, it actually isn't. As soon as you sign on the dotted line and take ownership, you are at the mercy of the market and unless you understand that market, you risk losing.
Of all markets, property is probably the hardest of all to understand. It requires a huge amount of local knowledge and that can only be gained through experience. I doubt that the average 21 year old would have the requisite experience to be able to judge potential growth in rental returns and capital or to assess potential downside risks.
I doubt further when Patrick states that they hadn't budgeted for council and water rates.
When the history of this period is written your story and others like it will act as cautionary reminders of the madness.
The banks are more fucked than I thought.
Property acquisition as a topic was almost a national obsession. You couldn't even call it speculation as the buyers all presumed the price of property could only go up. That’s why we use the word obsession. Ordinary people were buying properties for their young children who had not even left school assuming they would not be able to afford property of their own when they left college- Klaus Regling on Ireland. Sound familiar?
The evidence of nearly 40 cycles in house prices for 17 OECD economies since 1970 shows that real house prices typically give up about 70 per cent of their rise in the subsequent fall, and that these falls occur slowly. Morgan Kelly:On the Likely Extent of Falls in Irish House Prices, 2007
The original article text has been deleted at the request of Jennifer Duke (Property Observer).
Looks like pandering to the sociopathic portion of gen y to me 'but I want a golden goose daddy, I want one now' ok Paddy, I mean Varuka, anything you want.
We should have asked him 'how does it make you feel?', 'what would you like the thread to say sweetheart?', and so on and so forth. He appears to me to be a part of the generation that believes they are unique, special and have never experienced adversity because no one would let them.
I pity you that you think this sort of pandering is normal and healthy, no doubt you contacted the original author and got her to request its removal, would you have done that if the thread was positive? I highly doubt it. The fact that someone who appears to have such poor emotional resilience has found himself in a position to own $100,000's of debt is a shining example of why I am a bear.
The big danger with property investment is that it is very easy to get into and banks are falling over eachother to lend money to anyone willing to have a go.
Try going into a bank and asking for a 500k loan to buy shares or trade FX or Gold and they will laugh at you but property is a different matter.
All to do with Risk, while shares can lose all there value if the business goes bankrupt over night and be worthless a houses is a tangible asset that always retains some value and history shows even in large declines, property retains most of its value. Property also has the ability to regain its value in future years while once shares tied to a bankrupt business are lost they normally stay lost. This is why banks will lend for property as it is many times more secure then shares.
Quote:
But all investments carry risk. During the up phase of any market, those who sell their assets will see a capital gain but at some point all markets peak and fall back and those who buy at the top, end up losing unless they can afford to hold and ride it out. Leveraged buying increases the risk of not being able to hold when things get tough.
I agree, same with any investment you may make in any class. Investors should always have a buffer for future events.
Quote:
if you look at Mandurah in WA, seven years ago it was one of Australias property hotspots with blocks in some areas fetching prices normally only seen in Perths western suburbs. People piled in to buy land around Ravenswood and Greenfields on the promise of 20% annual growth. I have a friend who paid 550k for a block in 2007 in Ravenswood and built a very impressive 4x2 on it. It is now valued at around 525k so technically he has lost 25k from the land value plus the cost of building the house. He isn't bothered though because he lives there and doesn't intend to sell. However, it goes to show that even in a rising market there are markets within markets that can lose big time.
Mandurah was hit hard as it relied on wealthy retirees and holiday homes. Prices did rise a lot prior to 2007, more then doubled from 2003-2007.
Ravens wood however is presently above is median in 2007. The median in 2007 was $415,000 is is now $446,500 but is volatile due to the small number of properties It has.
I find it hard to believe that some one paid $550k for just land in Ravenswood, middle of nowhere. Now you are telling us that the House and Land is worth less then just the block of land.
Either your friend is one very stupid person, when you could buy Canal blocks for that price in 2007 in Mandurah. Seems more to this storey then you are telling us.
Prices have remained flat or increased in Ravenswood, doubtful prices of your friends block have decreased by hundreds of thousands of dollars. If what you say is true tell your friend I got a Bridge he can buy if he loves throwing away money like this.
You seem to have a lot of friends, people you know who are stupid, incompetent, make a lot of bad choices. You must be a shining light to them. How does your head fit through doors way when you visit so many friends who clearly made so many bad choices.
Quote:
The point of this is to say that although property investment may seem easy, it actually isn't. As soon as you sign on the dotted line and take ownership, you are at the mercy of the market and unless you understand that market, you risk losing.
You talk about investment, but you give us an example of your friend who is an owner occupier who has lost a lot of money, which he has not as he has not sold. If he sells he might get a buyer prepared to pay much more for his property tomorrow then today or yesterday. You just don't know. So why are you comparing owner occupiers to investors, at least the investor would have had a yield on that property.
Quote:
Of all markets, property is probably the hardest of all to understand. It requires a huge amount of local knowledge and that can only be gained through experience. I doubt that the average 21 year old would have the requisite experience to be able to judge potential growth in rental returns and capital or to assess potential downside risks.
I doubt further when Patrick states that they hadn't budgeted for council and water rates.
I agree with this, very naive not to include these costs as they are basics of investment 101, but you have to learn some where and real experience is the best way to learn. At least he is trying, he will either succeed or fail, but if you don't try at all you fail no matter what.
When the history of this period is written your story and others like it will act as cautionary reminders of the madness.
The banks are more fucked than I thought.
Veritas I'm certainly not disputing there's some idiots who have not done well in PI, through whatever the negative circumstances thats arisen.
Please understand there's those who do know & understand what they are doing & it's serious stuff.
For any loan the Bank(or whoever) does obtain a satisfactory inspection of the property offered as security ( this is done by the BANK) Honey they do CONFIRM your personal, employment & financial details.
It's up to the person then to understand their obligations to maintain the loan, as to the term, IR, installments, prepayments, security particulars, insurance & fees/charges.
Then they write.. "we are pleased to assist you with this loan"
Newjerk? can you try harder than dig up another person's blog. My first promo was with Billabong and my name in English is modified with a T, am Perth born but also lived in Sydney to make my $$ It's Absolutely Fabulous if it includes brilliant locations, & high calibre tenants..what more does one want? Understand the power of the two "P"" or be financially challenged Even better when there is family who are property mad and one is born in some entitlements.....Understand that beautiful women are the exhibitionists we crave attention, whilst hot blooded men are the voyeurs ... A stunning woman can command and takes pleasure in being noticed. Seems not too many understand what it means to hold and own props and get threatened by those who do. Banks are considered to be law abiding and & rather boring places yeah not true . A bank balance sheet will show capital is dwarfed by their liabilities this means when a portions of loans is falling its problems for the bank.
Paddy, you claim to earn $40K per annum at Woolworths, and you say you purchased all three of your properties 50/50 with Aimee. Is Aimee also only 22 years old like yourself, and how much does she earn per annum?
You also say you aim to own 30 properties with 3 million dollars worth of equity within 15 years, allowing you to retire! But how do you expect to finance so many properties on such a low income (or zero income on retirement)?
I expect his accounting job at Deloitte will start to pay dividends. Soon he'll be able to take over the world. As soon as the spots clear up that is.
Whenever you have an argument with someone, there comes a moment where you must ask yourself, whatever your political persuasion, 'am I the Nazi?'
I noticed its 50/50 between you & Aimee. You do understand the differences between "joint tenants & tenants in common?". What it exactly means?
The financial implications if your relationship goes sour? Anythings possible... It seems you are both not silly & hopefully committed, if so, don't have kids till later, you both need to put hard into the financial commitments... That's if you both want kids.
So yes have plan B & do think of the worst case scenarios.
Chris
7 Oct 2014, 03:23 PM
Looks like pandering to the sociopathic portion of gen y to me 'but I want a golden goose daddy, I want one now' ok Paddy, I mean Varuka, anything you want.
We should have asked him 'how does it make you feel?', 'what would you like the thread to say sweetheart?', and so on and so forth. He appears to me to be a part of the generation that believes they are unique, special and have never experienced adversity because no one would let them.
I pity you that you think this sort of pandering is normal and healthy, no doubt you contacted the original author and got her to request its removal, would you have done that if the thread was positive? I highly doubt it. The fact that someone who appears to have such poor emotional resilience has found himself in a position to own $100,000's of debt is a shining example of why I am a bear.
You're really an angry one aren't you?
Go concentrate on paying your bills before you try to damn, judge & assume , keep being average if that's your best.
He's not an average 22 yr old, but he's going to need to understand & think carefully his future .
.be aware of economic & market conditions .what factors will be going to affect his ability to have cash flow .timing is important he does need to understand when it's relevant .location .quality DIY can save $ if they are hands on, eg if one can fix leaky taps without call in a plumber they save their $ .landlord insurance & other
.avoid the evangelist type property seminars & the associated spruiking.
Newjerk? can you try harder than dig up another person's blog. My first promo was with Billabong and my name in English is modified with a T, am Perth born but also lived in Sydney to make my $$ It's Absolutely Fabulous if it includes brilliant locations, & high calibre tenants..what more does one want? Understand the power of the two "P"" or be financially challenged Even better when there is family who are property mad and one is born in some entitlements.....Understand that beautiful women are the exhibitionists we crave attention, whilst hot blooded men are the voyeurs ... A stunning woman can command and takes pleasure in being noticed. Seems not too many understand what it means to hold and own props and get threatened by those who do. Banks are considered to be law abiding and & rather boring places yeah not true . A bank balance sheet will show capital is dwarfed by their liabilities this means when a portions of loans is falling its problems for the bank.
All to do with Risk, while shares can lose all there value if the business goes bankrupt over night and be worthless a houses is a tangible asset that always retains some value and history shows even in large declines, property retains most of its value. Property also has the ability to regain its value in future years while once shares tied to a bankrupt business are lost they normally stay lost. This is why banks will lend for property as it is many times more secure then shares.
I agree, same with any investment you may make in any class. Investors should always have a buffer for future events.
Mandurah was hit hard as it relied on wealthy retirees and holiday homes. Prices did rise a lot prior to 2007, more then doubled from 2003-2007.
Ravens wood however is presently above is median in 2007. The median in 2007 was $415,000 is is now $446,500 but is volatile due to the small number of properties It has.
I find it hard to believe that some one paid $550k for just land in Ravenswood, middle of nowhere. Now you are telling us that the House and Land is worth less then just the block of land.
Either your friend is one very stupid person, when you could buy Canal blocks for that price in 2007 in Mandurah. Seems more to this storey then you are telling us.
Prices have remained flat or increased in Ravenswood, doubtful prices of your friends block have decreased by hundreds of thousands of dollars. If what you say is true tell your friend I got a Bridge he can buy if he loves throwing away money like this.
You seem to have a lot of friends, people you know who are stupid, incompetent, make a lot of bad choices. You must be a shining light to them. How does your head fit through doors way when you visit so many friends who clearly made so many bad choices.
You talk about investment, but you give us an example of your friend who is an owner occupier who has lost a lot of money, which he has not as he has not sold. If he sells he might get a buyer prepared to pay much more for his property tomorrow then today or yesterday. You just don't know. So why are you comparing owner occupiers to investors, at least the investor would have had a yield on that property.
I agree with this, very naive not to include these costs as they are basics of investment 101, but you have to learn some where and real experience is the best way to learn. At least he is trying, he will either succeed or fail, but if you don't try at all you fail no matter what.
Mike, you have to compare apples with apples. You cannot just state shares are very risky and a bad investment, whereas property is always a strong safe investment. There are good and bad property investments, just like there are good and bad shares investments. Investing in coca cola shares is not like investing in a startup involved in a tiny niche business. As the example Jimbo gave with that Perth suburb, property can drop in value for a variety of reasons, just like with company shares. Company shares also have the ability to regain value in future years if the management make the right decisions, and invest and innovate.
For the record the council rates etc was pretty tongue in cheek... I couldn't answer that question as nothing could I? Imagine the trolls then
To be honest, we haven't had any issues so far at all. But it's only early on, I know things won't go 100% to plan, but that's ok, we have $$ and insurance policies for this.
Tassies market doesn't fluctuate anywhere near as much as the mainland. (Be that because it's "regional" or undesirable or whatever you guys think) we haven't really had a property boom over the last few years like Syd, Perth, Melb.
Like I've stated I'm not in this to make 100k overnight. We've sacrificed to get what we have, and we will continue to so.
I doubt the council rates comment was tongue in cheek, but everyone has to start somewhere and making mistakes are often the best way to learn. At least you have chosen a relatively stable market to invest in. People who punt on Sydney and Melbourne deserve what they get IMO.
I wouldn't be surprised in the slightest if your development project ends up costing more than you first anticipated, but again, it's often hard to know exactly what you are in for until you give it a go.
Best case scenario you will have timed the market correctly and you will do very well.
Worst case you will go bankrupt but will have enough practical experience at a young age to make better decisions in future.
Mike, you have to compare apples with apples. You cannot just state shares are very risky and a bad investment, whereas property is always a strong safe investment. There are good and bad property investments, just like there are good and bad shares investments. Investing in coca cola shares is not like investing in a startup involved in a tiny niche business. As the example Jimbo gave with that Perth suburb, property can drop in value for a variety of reasons, just like with company shares. Company shares also have the ability to regain value in future years if the management make the right decisions, and invest and innovate.
Yes and I agree. I did not state property is very safe or could not decline, I stated it does decline and will. I was stating why banks lend to property in larger amounts then shares. Property is a much safer investment then shares regardless if it may fall in value. A house is not going anywhere, it can burn down, be destroyed but it will be insured and rebuilt. A mortgage includes land which is hard to destroy. Companies, shares go bankrupt all the time, disolve. Banks will always lend more money to property at it provides a profit with the least risk. It is still risky like any investment, but it is less risky then most.
Yes you are correct, you can always invest badly in property like any other investment.
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