The 44 Melbourne suburbs where most houses sell for less than $600,000

Post to Facebook on 30/6/2018 at 12:54 AM
Commenting on “The 44 Melbourne suburbs where most houses sell for less than $600,000”
https://www.domain.com.au/news/the-44-melbourne-suburbs-where-most-houses-sell-for-less-than-600000-20180629-h11zn7-442060/

I did not, do not and will not put all my eggs in one basket. I diversify my investment to minimise risk. Property is one in my investment scheme.

You reap what you sow; and if you do not put in time and effort to learn about the real estate industry and all the associated risks, you are going to make big and expensive mistakes.

I repeatedly said that knowledge is power. If you do not do desk and field researches, you have no idea how much you can get for your money, now and in the future.

It is important to attend open-for-inspection and auction, especially when you are not ready yet to buy. Obviously you have other commitments and cannot spare the precious weekends to inspect properties when you do not even have the finance ready. If you have no time now, how will you find the extra time miraculously when you start house hunting?

Many years ago, while most investors were looking for properties in the $500K or more, my budget was just under $200K to $230K. I paid 10% as down payment (deposit) upon signing the sale contract. The rent received was more than enough to cover interest and principal repayment for the loan, all rate and charges plus other expenses.

Instead of spending $600K on just one property, one can buy 3 x $200K. Lower price properties are easier to rent out, and therefore it is unlikely all the 3 properties are left untenanted. However, if the $600K property is untenanted, the loss will definitely affect the hip pocket.

Can you think of other advantages using such strategy?

Where are these properties I invested in? They are all in the suburbs mentioned in the news article.

What about the capital growth? They are worth around $450K to $500K now, more than double the original the purchase price.

I put my money where my mouth is!

Thank you for reading.

What is a reasonable rental increase?

Post to Facebook on 27/6/2018 at 9:14 PM
Commenting on “What is a reasonable rental increase?”
https://www.domain.com.au/advice/what-is-reasonable-rental-increase/

A good tenant is hard to come by and therefore a landlord will tend to keep the tenant by not increasing the rent unreasonably. This helps towards his mortgage repayment.

For a small house in a not highly inflated area, the rent increase may be just another $5-$10 per week, or around 2.5%.

I consider an increase not greater than the inflation rate is reasonable. However, there are many factors that can justify a much higher increase. Please read the article attached.

I have uploaded a file entitled "Rent Increases". It gives very useful information including where to lodge a complaint if you consider the rent increase is too high and unreasonable.

If the property is leased through a real estate agency, try having a word with the agent first, and explain your situation before you lodge a formal complaint.

If you want to find out more about rent and rent increase, you can visit Consumer Affairs Victoria website, or search for legislation Residential Tenancies Act.

Thank you for reading.

https://www.domain.com.au/advice/what-is-reasonable-rental-increase/

The most popular suburbs in Melbourne for auction sales at the weekend

Post to Facebook on 25/6/2018 at 12:09 AM
Commenting on “The most popular suburbs in Melbourne for auction sales at the weekend”
https://www.domain.com.au/news/the-most-popular-suburbs-in-melbourne-for-auction-sales-at-the-weekend-20180618-h11j6h-440449/

Do you really need to live in a particular suburb or is it your friend's influence that you decide to live close by? Do you have any other good reasons for you to follow the Joneses?

I had clients looking for properties close to their church, or club. Some want to live within a school zone. These may sound like reasonable justification; however, if the prices of properties in the preferred suburbs are beyond their budget, they should reassess that selection criteria.

If you are like one of my clients mentioned above, I would have advised you to ask yourself the questions: How often do you go to the church? How often do you meet your mates at the club? Did all the doctors, surgeons, neuro-scientists, barristers, just to name a few well paid professionals, attend Glen Waverley High School or Melbourne University?

Different people have different needs and wants, and often based on factors including tangible ones such as phase of life cycle, employment, etc. and intangible ones such as status and ambition. There is no point to live among all those with big houses but never turn on the heater in cold days because it costs too much to warm the house.

While your friend's and your situation may be similar at some stage, and therefore you believe your compatibility is a good reason to move to the same suburb, do think again. What suits your friend in that suburb may not suit you or your family. You may end up living in misery. Being similar is NOT being identical.

I must emphasise to you, the readers, NOT to get into mortgage stress. Buy a house with your budget. The size of the house is not the key success factor of a happy home. Home is where the heart is!

Thank you for reading!

Negotiations now ‘part of the auction process’ as more Melbourne homes pass in

Post to Facebook on 25/6/2018 at 9:25 AM
Commenting on “Negotiations now ‘part of the auction process’ as more Melbourne homes pass in”
https://www.domain.com.au/news/negotiations-now-part-of-the-auction-process-as-more-melbourne-homes-pass-in-20180623-h11rfq-441262/?fbclid=IwAR1P4Lb5kf_wOzeVfKtqGnE8pP2TJOikkjiZ2PKq4-M-kQgEra7_Bhg08CI

Que sera sera, 'whatever will be, will be' means that the future is up in the air, and whatever is going to happen, is going to happen. It is equivalent to “let nature take its own course”.

So do you need to go into the owner’s house to negotiate between the owner and the highest bidder after the property (house) is passed in? Why didn’t you give more when you were out in the open?

You are a “captured” victim if you walk into the house, even you may be cordially invited by the auctioneer accompanied by an agent or representative who had been standing next you throughout the auction.

The owner is unlikely to have much negotiation skill, and therefore you are at the mercy of the professional who will tear you apart and break you emotionally. You end up signing on the dotted line parting another 5% or more of your precious money.

The auctioneer and other agency staff know it immediately how much you like the house and want to buy it, because you agree to walk in to negotiate. Furthermore, your body language sends out the signal to say, “I buy it, I buy it”.

The pressure is extremely intense, and your heart palpitate so much that it is about to jump out from your mouth. The so-call negotiation is only one way, UP. There will be a lot more heavy selling, which targets on what you have told the agent from day one.

You are unlikely to get a good deal, because you are in the owner’s territory. You cannot get out because the door is locked.

May I pause a while and bring you to one of my earlier blogs. I did mention that you should tell the agent only the things they NEED to know, and not everything you want to tell.

Obviously paying a higher price is not an issue if you can afford to do so, otherwise, compound interest mathematics will show that you will be paying thousands or even tens of thousands more over the life if the loan.

There is always the fear of losing that house to the second highest bidder or another unknown interested party. The question is, if that bidder was so keen, why didn’t he show it by giving a bit more than you in the open?

How about telling the agent to give you a call at certain time that afternoon or evening and meet you at home or a neutral place, but never the agency, to talk about it? You can always say that you have to attend another auction or open-for-inspection.

You should choose a spot in the house where you feel most comfortable, so that you are on the upper hand.

Please remember, que sera sera. If that house belongs to you, you will get it sooner or later. If you fail at the auction, it may be a blessing in disguise. If someone manage to buy it, do not cry over it. Let a new search begin!

Thank you for reading

https://www.domain.com.au/news/negotiations-now-part-of-the-auction-process-as-more-melbourne-homes-pass-in-20180623-h11rfq-441262/

Australian Tax Office’s foreign property buyer crackdown only ‘partially effective’, audit reveals

Post to Facebook on 23/6/2018 at 4:05 PM
Commenting on “Australian Tax Office’s foreign property buyer crackdown only ‘partially effective’, audit reveals”
https://www.domain.com.au/news/australian-tax-offices-foreign-property-buyer-crackdown-only-partially-effective-audit-reveals-20180620-h11mfj-440823/

In 2014, Chair of House Economic Committee Victorian Liberal MP Kelly O’Dwyer, gave a presentation at a REIV forum speaking on proposed policy changes on foreign investment in real estate. I looked around the room, I could hardly recognise anyone, except a former student and friend who was then a licensed estate agent.

It is sad that many real estate agents and representatives of Chinese / Asian ethnicity who dealt with the Chinese nationals more than others, were not present. In fact, many that I knew of from Glen Waverley and Wheelers Hill were missing at the forum. It is a must that real estate professionals to understand and keep up-to-date with the laws. Not only not to break the laws, but also ensure no clients knowingly do the same.

The question on how to stop the foreigners from buying existing properties was raised. Buyers were supposed to get prior approval of Foreign Investment Review Board FIRB to buy properties in Australia. One attendee said that it was not the role of an agent to police it.

A buyer who signs the sale contract may not be the final owner, because the buyer can put their name and include the clause “and / or nominees”, meaning during settlement, the property can be owned by someone else.

The attendee had a point, because the initial “buyer” could have obtained approval from FIRB, but the final owner on settlement is someone who did not have it.

I rose up and gave an option on how to overcome the problem. There were numerous clauses in the sales contract regarding cooling off period, penalty, etc., and it should not be that difficult to include an additional clause to stipulate that “all buyers and nominees who are foreigners must have the obtained approval of FIRB upon the signing the Contract.”

Why is it “upon signing the Contract” not ‘at settlement”? Some people could be banking on getting their application approved by the date of settlement. What if it is not approved and the transfer goes through? The argument then continues to point fingers at the conveyancer or lawyer.

Property can be sold to other people, including friends and relatives, without going through an agent. This can also mean selling to someone without getting prior approval of the FIRB, innocently or intentionally.

FIRB was a toothless tiger, but it seems the new revamped FIRB has many holes too, letting the foreigners sneak through to buy established homes, demolish them and build some big eye-sore mausoleums.

If you hear of any foreigners bragging about how smart they are, get away from FIRB and the slip through the loophole, inform FIRB.

What should the Consumer Affairs Victoria, the real estate authority, do to to these agents if they are found to be the accessory to the breach?

Well, their licence should be suspended for 2 years, OIEC or Director put in jail for no less than 3 months, plus paying a fine of $250,000 on top of the forfeiture of the commission made from the sale.

Similarly, buyer’s advocates should not be allowed to pledge innocence if they assist foreign clients to buy establish homes without the sighting documentation of FIRB’s approval. Failing to fulfill that duty-of-care should land them in $50,000 fine and 2 years suspension to practise in the real estate industry.

Thank you for reading.

‘Great level of discipline’: How a teenager bought her first home at the age of 18

Post to Facebook on 14/6/2018 at 6:05 PM
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https://www.domain.com.au/news/great-level-of-discipline-how-this-firsthome-buyer-bought-an-apartment-by-the-age-of-18-20180613-h11be7-439780/

I have been advising you, the readers, to work very hard and save, save and save. I know you can achieve your goal in buying your first home, or more in later years, if you are prepared to sacrifice some social activities and unnecessary expenses.

Like what the old adage says, "no pain no gain". If you have set your mind to achieve something, I doubt the so called pain is nothing more than just a little twitch, and in no time at all, you will realise it is all over, and your goal is within reach.

As a "poor" overseas student, I could not afford to save because whatever money earned in part time work after school / university hours went towards paying fees and rental of a room.

Only after graduation, things got better. I married young, and together with my wife, we managed to save enough for the deposit for a 3-bedroom brick veneer house. This is history.

It is important to learn the principal of compound interest. Deposit in an account earns an interest. This interest is added to the balance and the total in turn earns more interest the next period, if the interest rate remains the same or more. It is much better than putting money in a cookie jar or piggy bank.

Unlike now, information and knowledge were premium commodities many years ago. These days you can search for banks that offer higher interest to new depositors or term depositors. Why don't you invest some time to earn more money using your idle money in the bank?

https://www.domain.com.au/news/great-level-of-discipline-how-this-firsthome-buyer-bought-an-apartment-by-the-age-of-18-20180613-h11be7-439780/

Fall in house prices is 'quite a bit larger' than expected

Post to Facebook on 12/6/2018 at 12:59 AM
Commenting on “Fall in house prices is 'quite a bit larger' than expected, says ANZ”
https://www.theage.com.au/business/banking-and-finance/fall-in-house-prices-is-quite-a-bit-larger-than-expected-says-anz-20180606-p4zjr9.html

Only if these bankers and economy gurus read my blogs, they will not make statements like “fall in house prices is quite a bit larger than expected!”

Besides just simple “pure” mathematics, many other factors are involved in predicting the rise and fall of the real estate market.

Unlike share market which normal takes less time for the participants to respond, and less people to put their hands in stirring the buy-sell pots.

A real estate transaction takes much longer time to complete, if nothing drastically happens during the process.

More people besides the purchasers and decision makers such as the lenders, government policy makers, developers, etc, can change the outcome; even the most buoyant market can slump overnight leaving a long trail of financial and family destruction.

The recent Mortgage Choice franchisees are suffering big financial setback, which is due to their inability to write more than $1.5M new mortgage loan each month. In a declining market, a lot of potential buyers are very cautious to venture into the real estate market.

In my opinion, the fall will continue until third quarter 2019 in most suburbs. Some will recover sooner but unlikely to pick up with a sudden up swing. I am still hesitant to accept regional cities/towns will continue to rise. It is more than likely the trend will reverse soon.

Thank you for reading.

https://www.theage.com.au/business/banking-and-finance/fall-in-house-prices-is-quite-a-bit-larger-than-expected-says-anz-20180606-p4zjr9.html

Why Australia's great banking boom has ended

Post to Facebook on 5/6/2018 11:57 AM
Commenting on “Why Australia's great banking boom has ended”
https://www.theage.com.au/business/companies/why-australia-s-great-banking-boom-has-ended-20180605-p4zjg9.html

Not only Banking boom has ended, the article actually states that "There's a simple reason for that: Australia is finally building enough dwellings to contain its growing population."

Haven't I argued before that there was oversupply of dwellings in Australia, and that the way the calculation of housing demand should not be proportional to the population growth?

A growth of 5% in population may mean demand of round 50% of 5% if assumption is made that some of these include couples and some families with children.

Although this article is more about banking, in fact it confirms that housing prices has dropped, and in exclusive suburbs, "the falls are as deep as 10 per cent". This is just the beginning, in months to come, the falls may be as disastrous as I have predicted - 20% for most suburbs, and up to 50% for some.

I have also shown you how to calculate the auction clearance rate, and a handful of readers have attempted and proved that it has been around 50% fr several months and not as optimistic as over 60% quoted by the reports.

Do not be disheartened and disillusioned by what has been happening with the Banking Royal Commission Enquiry, and tightening of credit. While many see this as misfortune, I see opportunity.

For almost two years, I have been giving free advice to people in person as well as via my blogs NOT to invest in properties. Unfortunately, several did expect my endorsement and blessing for their signing on the dotted line. I presume people are suspicious about my motive in giving free advice.

In recent time, there are reports of boom in some regional cities/towns, despite a downward trend experienced by Melbourne. I visited three of these cities/towns about a year ago anticipating report like this to be published in due course; my conclusion was not to place my bets in them.

Australian economy is NOT as robust as what many economists reckon, and therefore any virtual boom in these cities/towns is short lived, nor sustainable.

I want you to learn to ask one question no matter where you are going to invest - "where are the jobs and how do people get there?"

Thank you for reading.

‘Buyers are willing to walk away’: Pushback against vendor quotes at Melbourne auctions

Post to Facebook on 12/11/2018 at 5:00 PM
Commenting on “‘Buyers are willing to walk away’: Pushback against vendor quotes at Melbourne auctions”
https://www.domain.com.au/news/buyers-are-willing-to-walk-away-pushback-against-vendor-quotes-at-melbourne-auctions-20180603-h10wgc/

That’s it. The time has come that vendors are no longer having the upper hand. Buyers are not bidding, because they are concerned that the auction property is overpriced. This also applies to private sale properties.

If you have been following my blogs, I have said several times that most properties are likely to be 20% overpriced, and some may be as high as 50%. I think this is benchmark discount you should consider when negotiating when you come across a property that you like.

In accounting, an asset is something of value, in the present and future. Property is an asset. It is not about what is or are on the precious land now. It is, in fact, the land itself is of real worth.

If one pays high price for a property being renovated recently, constructed rather tastelessly or just follows the current trend, all these trimmings will soon lose their flavour and no longer command a premium price. It will be back to square one, that is, the worth of the total package is really predominantly the worth of the land.

Timing is everything. One must prepare to sell in a hot market, but refrain from buying at the same time. Unfortunately, many agents or representatives advise otherwise. DO NOT sell and buy in the same market condition.

When the hype is over, cash is king, and prepare to sharpen your tongue and really negotiate hard.

I think I have been giving you the right advice all along. I do sincerely hope that you will buy your first home soon.

Thank you for reading.