Post to Facebook on 8/8/2018 at 12:21 AM
Commenting on “‘FOMO’ to become ‘FONGO’ in a falling property market”
https://www.domain.com.au/money-markets/fomo-to-become-fongo-in-a-falling-property-market-20180806-h13l8z-756589/
There is no certain in any form of investment. Many real estate investors go from "fear of missing out" FOMO in last few years to "fear of not getting out" FONGO in recent time.
On Sunday 5 August 2018, I met the young couple who wanted to sell their apartment because they were afraid of its price would continue to fall and they might not be able to sell it later or even make a big loss.
Different owner has different financial circumstances, and for these young people, they should hold the property and ride out the downturn.
Like many property owners, they procrastinated when I advised them to sell their property when the prices in the real estate market were about or began to fall but before the news media went frenzy in declaring the coming of the doomsday.
The young couple acquired the property several years ago, and the property is tenanted. They still owe the bank a small amount, and the rent is more than enough to cover the loan repayment.
Besides the fear of falling prices, there are a couple of maintenance items which cost about two thousand dollars.
What most property investors forget is that nothing stays constant, and expenses fluctuate. No property investor should be that optimistic to think that their property can be tenanted 100% all the time. If it is not tenanted, there is loss of income.
When the tenants vacate, there is a chance that it needs freshening up, additional items to repair or maintain, advertising for property available for rent, and new leasing fee.
If a property is generating positive profit after tax over a number of years, then divide the extra maintenance outlay over the number of years, and adjust the past few years investment profit. If the return is still sound, then the property should not be sold in a panic.
I generally use a factor of 0.75 to multiply the annual rental as my projected average rental income. This is used to estimate my rental income over 5 years period.
Obviously the decision is in their hands. I did remind the young couple that I only get a share of the selling commission if the property is sold. The fact that I advised them NOT to sell it and sacrificed the commission, I was doing this with good intention.
Thank you for reading.
Commenting on “‘FOMO’ to become ‘FONGO’ in a falling property market”
https://www.domain.com.au/money-markets/fomo-to-become-fongo-in-a-falling-property-market-20180806-h13l8z-756589/
There is no certain in any form of investment. Many real estate investors go from "fear of missing out" FOMO in last few years to "fear of not getting out" FONGO in recent time.
On Sunday 5 August 2018, I met the young couple who wanted to sell their apartment because they were afraid of its price would continue to fall and they might not be able to sell it later or even make a big loss.
Different owner has different financial circumstances, and for these young people, they should hold the property and ride out the downturn.
Like many property owners, they procrastinated when I advised them to sell their property when the prices in the real estate market were about or began to fall but before the news media went frenzy in declaring the coming of the doomsday.
The young couple acquired the property several years ago, and the property is tenanted. They still owe the bank a small amount, and the rent is more than enough to cover the loan repayment.
Besides the fear of falling prices, there are a couple of maintenance items which cost about two thousand dollars.
What most property investors forget is that nothing stays constant, and expenses fluctuate. No property investor should be that optimistic to think that their property can be tenanted 100% all the time. If it is not tenanted, there is loss of income.
When the tenants vacate, there is a chance that it needs freshening up, additional items to repair or maintain, advertising for property available for rent, and new leasing fee.
If a property is generating positive profit after tax over a number of years, then divide the extra maintenance outlay over the number of years, and adjust the past few years investment profit. If the return is still sound, then the property should not be sold in a panic.
I generally use a factor of 0.75 to multiply the annual rental as my projected average rental income. This is used to estimate my rental income over 5 years period.
Obviously the decision is in their hands. I did remind the young couple that I only get a share of the selling commission if the property is sold. The fact that I advised them NOT to sell it and sacrificed the commission, I was doing this with good intention.
Thank you for reading.
