Today's poll about 2009 property prices

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Permalink Reply by Bandwidth on 7 November 2008 at 3:54pm

You make a good and considered point Mrs. Cake Jarvie.

Good RELIABLE public transport and infrastructure such as schools are a major consideration

My thoughts

Property is, and will probably always be, a good way to store wealth for the following reasons

Over time, as rent goes up, the cost of maintaining the asset decreases.

Over time, the income from the property can be enough to maintain a comfortable lifestyle.

Over time, the asset appreciates

Funds, for other investments, can be obtained, with a reduced risk of a "margin call" and the return from these investments can be used to purchase more property or reduce the debt on non deductable assets

If property is owned in multiple locations and one decides to move then the lack of rentals is not a problem.

Regardless of wat the press says and does property will go through natural cycles.

BTW I would love to know what I would have been able to buy 1 Acre of manhattan Island for at the bottom of the 1930s depression.

This is a non emotional, logical, investment view of the situation.

Sensible investments in sensible assets have a high probability of growing OVER TIME.

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Permalink Reply by Bytta on 9 November 2008 at 10:26pm

Amen to that Bandwidth!
I'm looking to buy a property investment these days as well since lots of people are fearful to approach the market. The thing is if we can control our spending and maintain the discipline of allocating money for investment, we shouldn't be panicking during the downturn.

Like Warren Buffett said, " be fearful when people are greedy and be greedy when people are fearful."
What a beauty!

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Permalink Reply by JeffK on 11 November 2008 at 6:34pm

While I agree with you both about long-term investing, there is a matter of investing wisely by buying at the right time. I don't see how property can do anything but fall over the coming years with:

1. Negative sentiment about property
2. People losing their jobs
3. The credit crisis, which means that banks are less willing to lend, so fewer people will be able to borrow, no matter where interest rates are
4. The fact that household debt is at an all-time high

Every other housing market around the globe has plummeted, why should we be immune?

I don't pretend to have all the answers, just curious as to why you think it's a good time to buy property...

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Permalink Reply by Bandwidth on 12 November 2008 at 12:52am

So when wil you buy :-)

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Permalink Reply by JeffK on 12 November 2008 at 11:08pm

End of 2009/beginning of 2010. Depends on how quickly prices come down over the next year. Assuming that they come down! ;)

So I still want to know, why now?

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Permalink Reply by Bandwidth on 13 November 2008 at 4:34pm

There are areas which have been hit and yet are in high demand. If I could find a good area with about a 8.5 to 10% return I would not hesitate. Even 7.5% return would be tempting.

I have a policy of not going beyond 50% LVR so I am not in a position to look at the moment.

Also returns on my other investements will soon be able to sustain another property purchase

One we get the next jump in the share market I will defenitely be looking seriously.

Maybe I will get a bargin I can sel you in late 2009/early 2010 :)

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Permalink Reply by JeffK on 13 November 2008 at 7:10pm

Sure, you can offload it to me after it has dumped. And as a bonus, you can offset you capital loss against any gains you have had ;)

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Permalink Reply by Linda Kathleen Schmidt on 17 November 2008 at 6:35pm

Interested in your attitude and wonder about mentoring and just how much it is?

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Permalink Reply by Bandwidth on 17 November 2008 at 8:40pm

Hello Linda Kathleen Schmidt

Was the reply and question about mentoring directed to me

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Permalink Reply by Mrs. C. Jarvie on 18 November 2008 at 2:46pm

Bandwidth, I've taken your rule on not going above 50% LVR and applied it to my home loan as if it was an investment property. (I <3 spreadsheets.)

Assumptions: a loan of 50% principle at 7.67% interest calculated monthly; a constant tenant at the current rental value; quarterly and annual costs (city rates, water rates, strata levies and land tax).

At the end of year one you would take a loss of $149,089.

Accounting for high inflation on quarterly and annual costs year two profit is $1941, year 3 profit is $2969, year 4 $3994, and year 5 $5017.

I'm still adding the figures to see how long it would take you to earn back your initial outlay.

Cheers- Christine

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Permalink Reply by Bandwidth on 18 November 2008 at 4:50pm

I am having trouble seeing where you are getting the numbers from

I have never incurred a loss like that

If I purchased a property at what I consider a reasonable rent return a 400,000 property would return at least 395.00 per week

Rent return 20280.00
Interest @ 50% LVR 15340.00
Leaves 4940.00 for other expenses

What rental return are you using

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Permalink Reply by Mrs. C. Jarvie on 18 November 2008 at 5:37pm

I am including your 50% of the purchase price in the first year P&L.

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