澳洲Australia property Young investor getting scared off. | Sydn


在澳大利亚 The pool at of an IP needs to be resurfaced (or so the pool doctor says), the cost was estimated to be $10K ($10,000), after recoverying from my impresssion of a cat coughing up a fur ball, it just seems far too much. Its just a standard poo I need some advice regarding a property purchase. Property - semi-detached house Bedrooms - 2 Condition - average needs internal reno to modernise Street - one of the best in suburb Location - excellent Close to schools - yes Transport - 50m


Hey guys.

With all this talk of the RBA raising IR to try stop falling affordabilty rates for home buyers, and talk of IR hitting double figures in the next 2 years, im sort of being put off getting another IP.

Im nearly 23, and purchased my first IP last December, and was starting to have a look at purchasing another over the next 3 months. If its true that rates are going to skyrocket over the next 12-24 months, should i hold off to wait until prices drop?

Im very keen on getting another IP, but do not want to get myself in trouble if rates jump to 10-11%, and the price of my IPs drop considerably.

I find it hard to believe rates will keep rising so much over a short period. From what i remember, rates are risen when the economy is growing too fast. I dont really see it growing too fast atm, especially when housing affordability keeps dropping as rates skyrocket.

What is it some of you suggest i do? Wait it out 6-12 months and see where the market goes? By now, but account for a few % IR rise?

A little about me:

Nearly 23, living at home with no real expenses apart from phone, gym membership, car expenses and chairties i sponsor. Current IP cost about $70-80p/w to hold. Wage roughly $55-60k yr.

Thanks  

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You have to make your own decisions on how high interest rates will go. Other people will have different levels of resources to you, and have different views on interest rates.

One question I would ask myself is, let's say rates really do hit 10%, could you afford it? If you don't think rates will go that high, you're making a decision to take that chance.

With risks come the rewards, if you survive.  

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alexlee said: ↑
With risks come the rewards, if you survive.Click to expand...
Yes. You have to be in a risk position to gain. Doesn't matter which asset class. Rising rates may hurt property growth but also the ASX and small business.

So where you gonna stash your cash? Property, shares, private business? All will suffer with high IRs, but what if you don't hold any of these and rates don't get that high? You can just hold cash, but then low risk equates to low gains.

As alex said, run the numbers at 10% rates, see how it looks.  

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alexlee said: ↑
One question I would ask myself is, let's say rates really do hit 10%, could you afford it? If you don't think rates will go that high, you're making a decision to take that chance.

With risks come the rewards, if you survive.Click to expand...
Alexlee is spot on with this.
Only you know your financial position.
If you are buying with the hope that interest rates dont hit 10%, but if they do you will be in trouble, you are playing with fire.

If you are buying because you believe it is intelligent to do so, you have analysed with facts of the potential property purchase and it stacks up on intelligent criteria, you dont believe interest rates will hit 10%, but if by chance they do, your financial affairs are structured such that you can 'bear' the interest rates, then you are still investing intelligently.  

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I'm looking to buy in about 12-18 months time, so if rates are heading towards 10%, at least I'll have more of an idea of how the market is responding to it. I can appreciate your concerns IFBB, the idea of me borrowing $300K at 10% interest rates is pretty scary on top of what I have at the moment, which is very comfortable, even if they did reach 10% (as fortunately I have my biggest loan fixed until 2014 at 5.19%). Adding a third property would not be so pretty however, variable at 10%.

However, investing I believe is about taking calculated risks. Some people never invest because they always think worst case scenario... what if interest rates hit double digits, I'm unemployed, the house is untenanted and I get sick and have to spend all my savings on medical bills etc. Ok, that is possible, but you'd have to be pretty damn unlucky. So those people who think like that, don't invest, and never really get ahead.

I wouldn't be trying to predict if property is going to go up or down over the next year or two. The things I would be considering is, how much equity do you have in your first property? IF interest rates did hit 10%, can you afford it? It won't be forever, so if your cashflow allows it, even if things are a bit tight for a little while (especially seeing as you're still at home) I wouldnt' let it put me off. The rates will come down again. If you have enough equity in the first property so you're not cutting yourself too fine and can ride out a tough period, and have yourself a nice cash buffer then I'd be looking out for a good property at a good price. I certainly wouldn't be rushing into it though, but would be on the look out.

As the others have said, only you know your own position, you need to work out how much risk you are willing to take and ensure you have a plan to ride out the rough times. Now I'm by no means an expert, far from it in fact. Compared to many of the people on here I'm very much an ammature, but those are just my thoughts. From people I know in my life, the ones who do get ahead are the ones who do take the risks, but they have plans and buffers in place so they don't find themselves over extended and up ***** creek.  

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do any of the chartists have something showing IRs and house growth? (if we have to use median so be it)  

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The money that i am saving, is going into my offset account, so if im not using it to invest, its helping not down payments on my first IP.

Personally i dont think rates will hit 10% within 2 years, but i can see them rising gradually over the next 18 months, pehaps 8 - 8.5 at worst. In that case, or at 10%, i do believe i could afford another property, but am unsure whether now is the best time to buy, or in say 12 months when they have risen / market slowed?

5.19% locked until 2014 is an amazing rate, when i went in last December for my home loan, a fixed rate locked for 5 years was up towards 8.47%, thats why i decided to stick with variable.

Its tough to gage where its all headed, especially for a novice like myself. With the population increasing, housing affordability dropping (through high prices OR high interest rates), i see the rent market getting squeezed even more, with higher demand for more limited spots.

Does that sound on the right track, or am i way off :p?  

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IFBB said: ↑
Its tough to gage where its all headed, especially for a novice like myself. With the population increasing, housing affordability dropping (through high prices OR high interest rates), i see the rent market getting squeezed even more, with higher demand for more limited spots.Click to expand...
No one really knows what will happen.

If we see 10% IRs it will be because of inflation. Inflation puts upward pressure on both rents and wages. Higher rents lower property holding costs and may lead to higher property prices. Higher wages could also lead to higher prices as servicability improves. Inflation also eats debt.

For those holding property inflation doesn't look that bad apart from the higher IRs.  

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If you're looking to buy in 18 months, why not forget the stress, continue to stash away the cash in your offset account and look at in later? In 18 months, if interest rates are at 8% then you should be factoring 10% in your budget anyway.  

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RedCat said: ↑
If you're looking to buy in 18 months, why not forget the stress, continue to stash away the cash in your offset account and look at in later? In 18 months, if interest rates are at 8% then you should be factoring 10% in your budget anyway.Click to expand...
+1.


There's nothing worse than loosing sleep over investments. One should be controlling money not the other way around.

Having 1 IP at 23 you are already ahead of the majority of people- compounding of knowledge and money over life years - (dare say even more than some of the "big investors" around at somersoft! :) ).

Keep saving and buy one when you are comfortable with interest rate rises of an extra couple of % of what is currently possible (even though it might not get there but still). Putting money into offset account is already getting you 6% (or watever your loan interest is) tax free return.

So unless there is a super sharp rise you should be in a good position to pounce in whatever time you are ready in.  

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a fixed rate facility may not represent gr8 immediate value for money, but at least youd have a know outcome to dump the current risk posn.

Price drops per se are always possible, but historically not common

ta;rolf  

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IFBB said: ↑
Hey guys.

With all this talk of the RBA raising IR to try stop falling affordabilty rates for home buyers, and talk of IR hitting double figures in the next 2 years, im sort of being put off getting another IP.


IFBB - work out how much it would cost to buy, rent and hold property at say 8.5% for 10 years.

A little about me:

Nearly 23, living at home with no real expenses apart from phone, gym membership, car expenses and chairties i sponsor. Current IP cost about $70-80p/w to hold. Wage roughly $55-60k yr.

ThanksClick to expand...
IFBB

Work out your future plans! Where do you want to be in 1 year, 5 years, 10 years.

Eg. in 10 years time I want to living at home with parents with 3 IP's. Your parents may have different plans for you eg. Son to move out of home when 25 years old.

I tried to get my son to buy an Ip last year, but he dilly dallied and now the bank will only lend him 200K - if you can afford another IP then buy it.

Factor X - if rates go to 10% can you earn extra money from a second job?


Regards
Sheryn  

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Thanks for the comments.

For now, ill keep putting into my offset, but will also keep an eye out for a property which i think may be a good buy.

Personally, i dont think the parents care too much when i move out. It wont be in 10 years, but perhaps 3-4. In that time, id be hoping to have 3 IPs. Being in a strong Italian family, they support me in most things i do.

Currently, if rates do rise to 10%, i should be able to afford it, but im not taking into account any pay rises i may get in the meantime until it hits (if it does) that.

I have been a DJ since 16, playing in various nightclubs, so i could get back into that again for some extra cash. a few hours work could give me $200-300 extra if i put the effort in getting back into the scene... so i guess thats a way to get some extra cash.  

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