Post to Facebook on 5/11/2018 at 10:08 PM
Commenting on “Melbourne auctions see more investors opting out”
https://www.domain.com.au/news/selling-up-melbournes-auctions-see-more-investors-opting-out-780394/
If you go through all my posts, you should have come across that I have written several times about when the house prices will turn around for the better. Before this, the market is very turbulent, then bumpy. I also mentioned that it is time to wait, unless you need to buy urgently for your own accommodation.
It is always a nail biting experience, whether to wait or to buy now. Undoubtedly, every minute there are people making a profit or a loss in real estate transaction. The crux of the matter is how long does it take for such investment to achieve such outcome.
I have lost count in advising you the readers to buy within your budget, and make sure to add in all the costs and expenses during the initial purchase and subsequent ownership of the property.
When an investor buys a property not for own dwelling, it needs to be let out to generate an income in order to pay off the loan from the lender, unless he has plenty of spare money or property hoarding is his business, be the property a residential building, office, warehouse or even a car park.
There are far too many snake oil salespeople running free seminars, generally with ulterior motive. They give new comers and naive investors false hope of property ownership or making lots of money by flipping or developing, leading the unsuspecting to commit debts far beyond their earning capacity or repayment capability.
If an investor only listens to the attractiveness of negative gearing, and blindly buys a property which does not generate a positive bottom line even when it is let out, what will happen to the owner financially if the property is untenanted when the rental market turns sour, like now?
Apartment developers are very sleek in promoting and marketing their products. The marketing brochures show beautiful surrounds, parks, movie theatres, cafes, sports arena, but these are good for the eyes momentarily and the novelty will soon wear off. Obviously, the developers tend to leave out the actual eventual owner’s corporation fee.
Most developers also offer rental guarantee for a year or two at a return much higher than what the actual market can support. As there is no free lunch in this world, the so called rental guarantee is costed in, in effect, the apartment is not worth as much. Once the honeymoon period is over, the investor may not be able to let out at the suggested rent, except to reduce it, resulting in a lower or even a negative return.
First home buyers have been taking advantage of the attractive government incentives, and lured into buying properties they cannot afford, especially those hand-to-mouth wage earners. Many fall into the young or early family category, with rate of spending keeps going up on many fronts, and therefore the net balance to repay The mortgage continues to slide. To add to the wound, the interest rate in the foreseeable future is only up.
Many downsizes and upsizers make big mistakes of buying a property first without selling their own first. They do that because they fear of not having a roof over their head after they sold their property. Very likely, they believe ignorantly the appraised value of their property by some very enthusiastic real estate agents who just want to get the listing. When the time comes, they are short of money to settle the next property.
All the scenarios mentioned above are real, and now you understand why the hot market in the previous years cause more miseries than just housing affordability.
Time to let go and cut the losses. Someone’s misfortune is another person’s opportunity. Which side of the fence are you on?
Thank you for reading.
Commenting on “Melbourne auctions see more investors opting out”
https://www.domain.com.au/news/selling-up-melbournes-auctions-see-more-investors-opting-out-780394/
If you go through all my posts, you should have come across that I have written several times about when the house prices will turn around for the better. Before this, the market is very turbulent, then bumpy. I also mentioned that it is time to wait, unless you need to buy urgently for your own accommodation.
It is always a nail biting experience, whether to wait or to buy now. Undoubtedly, every minute there are people making a profit or a loss in real estate transaction. The crux of the matter is how long does it take for such investment to achieve such outcome.
I have lost count in advising you the readers to buy within your budget, and make sure to add in all the costs and expenses during the initial purchase and subsequent ownership of the property.
When an investor buys a property not for own dwelling, it needs to be let out to generate an income in order to pay off the loan from the lender, unless he has plenty of spare money or property hoarding is his business, be the property a residential building, office, warehouse or even a car park.
There are far too many snake oil salespeople running free seminars, generally with ulterior motive. They give new comers and naive investors false hope of property ownership or making lots of money by flipping or developing, leading the unsuspecting to commit debts far beyond their earning capacity or repayment capability.
If an investor only listens to the attractiveness of negative gearing, and blindly buys a property which does not generate a positive bottom line even when it is let out, what will happen to the owner financially if the property is untenanted when the rental market turns sour, like now?
Apartment developers are very sleek in promoting and marketing their products. The marketing brochures show beautiful surrounds, parks, movie theatres, cafes, sports arena, but these are good for the eyes momentarily and the novelty will soon wear off. Obviously, the developers tend to leave out the actual eventual owner’s corporation fee.
Most developers also offer rental guarantee for a year or two at a return much higher than what the actual market can support. As there is no free lunch in this world, the so called rental guarantee is costed in, in effect, the apartment is not worth as much. Once the honeymoon period is over, the investor may not be able to let out at the suggested rent, except to reduce it, resulting in a lower or even a negative return.
First home buyers have been taking advantage of the attractive government incentives, and lured into buying properties they cannot afford, especially those hand-to-mouth wage earners. Many fall into the young or early family category, with rate of spending keeps going up on many fronts, and therefore the net balance to repay The mortgage continues to slide. To add to the wound, the interest rate in the foreseeable future is only up.
Many downsizes and upsizers make big mistakes of buying a property first without selling their own first. They do that because they fear of not having a roof over their head after they sold their property. Very likely, they believe ignorantly the appraised value of their property by some very enthusiastic real estate agents who just want to get the listing. When the time comes, they are short of money to settle the next property.
All the scenarios mentioned above are real, and now you understand why the hot market in the previous years cause more miseries than just housing affordability.
Time to let go and cut the losses. Someone’s misfortune is another person’s opportunity. Which side of the fence are you on?
Thank you for reading.
