RBA says 'Merry Christmas", but banks say 'Humbug!"

So it looks like the RBA has done the nice thing and dropped the rate again, in what seemingly is a wonderful boost for the average mortgage owner's hip pocket, but wait.....there's a catch. The banks, well, the four majors, have not moved yet, and, as has been the practice over the last year or so, they are waiting until 'the board meets' and as a result, they will still pocket an extra few million just for their troubles. PS. please CBA, just flick us 1 mil of this, I'd be very thankful. In fact, CBA, just pay off my mortgage and I'll never say another bad thing about you ever again...promise.

Anyway, so the reality is, this early 'Christmas present' that is spoken about, in fact, will not be a Christmas present at all for many of us, as once the respective boards meet, it's then at least another week or two before it comes into effect, and the next time your will actually see your interest repayments go down will be at the end of January (all assuming the banks do lower their rates).

In other financial news, I am almost at the stage of switching to UBank. I am not overly happy with the ever growing gap between what I am being offered from CBA and UBank is starting to look tasty. The only problem is, I have absolutely NO IDEA, whether they'll lend for another investment property. This is a bad thing and a major one as to the decision of why I am holding off the switch. I think maybe once everything has been consolidated and I'm left with a tiny mortgage, it may be time to do it, but unfortunately it looks like a distance away before this comes to fruition. 

Oh well, CBA it is. 

Property Investing in 2011

I have been wondering for a while whether investors in 2011 are active. As no doubt you know the market is having a breather and there are A LOT of properties for sale. So, I posed the question on Somersoft and here are the results:

As you can see, 11% of people who have read my post are still buying, and not just one, but multiple properties. In fact, some are buying whole complexes and one investor has bought 14! He is an exception, but 44% of respondents have purchased already up to June. This does mean that 56% are either sitting on their hands, consolidating, offloading, or going bankrupt.

There is much to read into this data. If we do in fact have almost half the investing population still active, this should echo the sentiment of real estate agents, who, as far as I've experienced in my investing regions, are all saying the market is flat, only JUST becoming a little bit busy. So now I'm confused; is the market flat, or is the market busy, and perhaps more importantly, is the market moving ahead?

While I don't tend to analyse this area too much (as I believe property markets move ahead for medium to long term investors, which I believe I am), if the market is flat, now is the time for investors to pick up bargains. Now is the time to see if, even at 7% interest rates, you can find cf+ properties. Now is the time to see if an investor can try to penetrate inner city, or exploit regional/rural areas. It makes sense for cashed-up investors to be active, to put in ridiculous below market offers to see if they can catch a beauty.

Until next time!

Shhh!!!! The market is sleeping....

Property investment land is a funny place. One minute, you are running off to KFC, blabbering off about how well everything is going, the next, dark clouds gather, the day turns gloomy and you wonder if you will make it through the day with a cent to your name. The market has been very very (and just in case you missed it the first two times, VERY) quiet. A few of my real estate buddies are reporting quiet times and in Ingham, where there are 6 agencies, re.com.au is only indicating TWO SALES PER MONTH!!! I wonder how long before a few of them will shut.

I do see light at the end of the proverbial tunnel. If interest rate rises finally stop this month, investors will jump. Yes, the share market is up the shit, but who cares? It's volatility is having an impact but investor sentiment regarding property should be high, especially after seeing how the market battled through the GFC strongly.

So one day, it's sleepy and not a lot of action, the next, perhaps after an interest rate announcement, KAPOW!!!, things will move again. It's the up and down tipsy turvy world that is property investing.

A bit of action around the two cheepies I have for sale, but I don't count sheep until they're in my bank account.

Ciao...

Uncle Glen...do you have to???

I was holding out for Glen Stevens to at least hold off for one more month before continuing to increase rates, but it seems he has finally decided enough is enough when it comes to property price rises, so he upped it. Hmmm...I wonder if he realises that raising interest rates is kind of a green light to raise rents, and, from an investors point of view, this is great. However, this does not negate the fact that rates are up and my holding costs mean even less chance for me to have KFC (which by the way, I have given up on until I drop to 80kg; 4 more to go). So, in summary, it's good and it's bad. Investors should see CG in the near future, as the economy is strong (so it seems), hence there is no need to panic. Will this rise impact on the current mini boom, especially noticeable in Melbourne at the moment, and to some degree, Sydney? Will this signal a change in sentiment, are investors going to shy away from the market? Time will tell, but for now, as we are constantly being reminded, we are still below "average rates"...

Ciao...

Taking a hit or two from Mr Stevens...or is it?

While it's old news that Glen has upped the anti once again for us investors with a 25 point interest rate rise, it won't be long before once again our heart breaks just a little bit more with news that our holding costs are going to go up again. It's interesting though, because either way, we win. If the rates do go up, it means the economy is going well and it justifies the rent rises that are looming for my poor tenants. If the rates stay low, it's easier to hold. It's win win and I LOVE IT! In fact, I want to give Glen a big hug, rub that shinny head and give him a kiss on the cheek, followed by getting taken away by security, because men kissing men is just not on in today's society. Or is it..???

Anyway, it appears that Glen has created a situation where we are all educated about why the bloody rates actually do go up and down. (I'll give you my simple explanation) We all know inflation is a bitch, so raising rates is good to counter that, and we know that lowering rates is a great way of boosting the economy if people decide to buy TEAC and Great Wall, instead of Panasonic and Audi. The RBA have to balance this situation.

Fortunately for us, as I mentioned before, we investors win win because people know house prices go up if rates go up, and hence renters know rent goes up as rates go up....in fact, let's just say as the RBA lifts rates, everything goes up, except inflation!!! Win for everyone. Except for renters.

If rates go down, we win because our cash flow gets a reprieve and renters "think" they have won because their rent isn't raised. But we all know they're losing. Sorry, renters are taking a bit of a battering in this post.

Ciao.

Watch out...the scary interest rate monster is hiding in the shadows...

Us property investors have been a lucky bunch of late. It seems that due to the financial news/data coming out of the US, those awesome blokes at the reserve bank have wisely kept rates low, in line with nothing else but......the US data. That's right boys and girls, the interest rates have correlated nicely with the share market mumbo jumbo coming from America, and if nothing else, we can see that the current speculative flat period in shares (has lasted about a month now) has meant the RBA are going to keep rates low....you see, the recovery is not in full swing yet, some of the looming troublesome countries/markets around the world has many thinking twice that we are out of the red and here in Australia we can see that property data, as far as I can see, is reflecting this mentality. Property prices are still stagnant, it seems that getting them to move is a bit like getting Kevin Rudd's hair to move, but ladies and gentlemen, nothing we do will change that. So as Kevin's "hair" remains firmly rooted to his scalp, so have house prices remained exactly where they were, nationally at least, the change has been almost non-existent.

I hope that for a few more months the uncertainty continues. Yes, I know it's bad for business, but for us property investors, it's just that little bit more of a breathing space to sort things out, to take stock and to put in safeguards before the interest rate onslaught is upon us. Listen to the warning my fellow countrymen, keep an eye on the American sharemarket, the likeness to our interest rate rises is uncanny...

Until next time bros and sistassss...

To invest, or not to invest?

More specifically, the question should be, invest in property alone, or diversify? Throughout the last 4 years or so since I began property investing, the returns have been good. I can't say great, because the 2008/2009 "slump" has put a bit of a dampener on things, but still, the value of our investments grew, albeit not as much as in 2006/2007, or the time period I like to call "the icing on the 2003 boom cake." So the current question circles in my mind, keeping me occupied, evaluating my financial position and thinking about what I should do next. After much much thinking, the answer has been shares and online savers. It's a bit of a no brainer, but I really had to re-calibrate my approach of "property only" after the last few years. So here I am, nicely tucking some bucks away into UBank, but also keeping an eye on the share market, some of those blue chips are starting to look tasty.

I think perhaps more importantly, I took stock of my portfolio. Although I was aware of the situation, I am now thinking I have to change the negative gearing situation. Yeah, sure, the capital is increasing and I'm "silently" making money, but my cash flow is taking a major hit. With interest rate rises almost a certainty (although we have heard that before), a few more hits to the cash bottom line, and things will get very interesting very quickly.

As such, I am looking to sell, and I am looking at offloading the poor performers, or, as I am increasingly noticing, my non-performers. I have two blocks of land, sitting idol, doing nothing, growing very slowly, but not making any major headway and definitely doing nothing for cash flow.

The situation has also opened my eye to doing things differently. Being a wage earner is fine, but it's not the way things should be. I absolutely love my day job, but it has strings attached...I HAVE to be there, I drive 25 minutes each way every day, I put in a few hours more than I really should. With a business, I can employ someone to be there, to do the work. With a business, I can look at data and make a difference to operations with cash benefits, at my job, there is no such thing. So, taking the Rich Dad, Poor Dad approach, I am going to start something new, something risky, but more importantly, something that will result in some learning.

Ciao for now...

A few weeks later in investment land...

Not a lot has happened in terms of my portfolio this past few weeks and it seems not a lot is happening across Australia, with loan approvals down and from my perspective, a lot of houses sitting idol. This begs the question, if, and I do mean, IF we have an interest rate rise in February/March, will property totally stall? It's possible....demand seems to have dropped, albeit I think on a psychological level more than anything.

I am now constantly thinking of downgrading my investments. At the moment, I am shelling out a fair amount of cash in meeting repayments, insurance costs, rates and the occasional maintenance on my IPs. I know, I know, it's negatively geared, but I'm starting to get a bit sick of it. In the 5 years or so since I started on this journey, at no time have I felt that my efforts are so worthless. At no time did I think of "offloading" property just to increase cash flow. Could it be me, have I changed? Have I listened to the media too much with the doom and gloom predictions? Yeah, sure, Brisbane seems to be going ahead, but my other investments, for example the one in Toowoomba that I am trying to sell, is static. The block of 28 acres I have 40 minutes form the Hobart CBD has not moved an inch since the GFC. I suppose I'm feeling a new feeling, a period of no growth, of uncertainty, except now with interest rate rises.

I have also noticed that I no longer have an urge to bring up the topic as much as I used to and people are not as interested to pick my brain about the topic. This is a good and a bad thing....I always get into the downward spiral of fighting mini battles with hypocritical people who don't invest and then continue on to tell me that houses are too expensive. On the other hand, I like discussing property investing with people because often I get a little insight into someone else's head, someone else's mindset about money and property.

Anyway, I hope everyone has a Merry Christmas and a Happy New Year, I have a little baby on the way, so I probably won't be posting as frequently as I have in the past...

Ciao...

OMG...rates are climbing faster than I thought..

Before I could even finish my favourite 2 piece feed from KFC, interest rates have jumped by a MF HUGE 75 base points. The fact that rates are on the way up does not in itself pose a real issue for my portfolio, or the portfolios of most investors I assume, but the rate of the increases is alarming. Three consecutive rises, three more attempts to subdue the good old inflationary influences and already, people are beginning to question the market. Are we heading for a mini USA (dare I say it) "sub-prime-like" offloading? Possibly...I am looking at discounting one of my properties, just to free up some cash flow, but still....people are buying...the new trend feature on realestate.com.au (which as an investor I absolutely love) is showing increased interest in properties across Australia. So a dilemma....should I wait, with minimal cash flow, or discount and sell....just to have better SANF.

Meh...I'll leave the thinking till after Christmas I think....

Bugger...it has begun!!!! October, 2009. The month the rates began making a smiley face.

The talk about interest rate rises is no longer idle chit chat, as, I'm sure all of you are aware, a 25 point rise has finally occurred. AND it appears we are going to very quickly head back towards the heady days of the average mortgage being in the 7-8% range.

Now is the time to watch the market. What will happen, especially after the next rise? I predict that all of a sudden the market will be flooded with "investor offloads", followed closely (in about a year) with the "ops, I'm in too deep" first home buyers exodus.

So lets stay tuned. Lets once again tune our ears to the hype that will be created by the media, by real estate agents, by society. I can hear them now...."ha ha, told you house prices drop." Luckily, they will be from renters. Unluckily, they are going to find an increase in their weekly rent. :)

Property news a bit quiet....

Don't know about you, but news regarding property has become repetitive nonsensical (is that a word? Spellcheck says yes) rubbish, that, in real terms, tells us nothing about the state of the market.

I was having a chat with my mum and the topic of becoming a real estate agent came up again. Why should I become a real estate agent??? Well, the money is certainly good if you can talk the talk and don't mind wearing a suit in 40 degree temperature, but if you're like me and prefer to sweat in only boardies and a singlet then I suppose it may not be the job for you. However, there are a lot of these gentlemen and ladies trying to flog off overvalued property, sometimes I feel sorry for them, sometimes I want to play with their minds...you know, just because I can, making serious doe.

The money is certainly very good. Successful agents do well, 150K plus easy, but I bet for every one of these successful BMW drivers, there is a poor struggling agent out there as well, making ends meet to pay the bills and working his/her arse off.

I say good luck to these agents, I hope you don't get too many people playing with your minds...


In other news, I am going to sell a house in Toowoomba. I feel I need an "insurance buffer" for when the rates start to climb, which, like lotto numbers, are near impossible to predict. I will say that I believe it will happen early 2010, possibly February or March, after the Christmas and New Year rush has further restored our economic growth.

Till next time....have fun with your investments...do something nice for your tenants, send them a thank you card for not growing marijuana in your spare third bedroom.

Market Wrap August!

Well, another turbulent month has past with not much happening in my real estate circle, but apparently quite a lot is happening around Australia, especially West Sydney and Melbourne, two places which have figured quite prominently in the national media. We all know Sydney has had a bit of a slump of recent years, and Melbourne, especially around the CBD, has been quite stagnant. The rest of Australia seems to have been forgotten, in terms of media coverage anyway.

We are continually being reminded of the looming interest rate rises. There has been all sorts of outlandish claims, such as a recent one that claims we need a 2% adjustment within the next 18 months. I for one think this is just crap media hype. I mean seriously, the indicators are not looking too good for interest rate hikes. Yes, Mr Swan was creaming at the 0.6% growth of our economy, but seriously, unemployment rates are still on the up, the world economy is staying relatively stable (slowly coming out of it's slump) and inflation is rather low from what I hear. These factors ad up to the reserve bank rate being kept low, but sooner or later, the recovery will be lead by IR increases by the banks.

Now, this is going to hurt a lot of people, let's not kid ourselves about that, and I may even be one of them! But surely, we all have contingency plans in place, investors are looking for avenues for survival and we will march on, albeit in a drunken knock-to-the-head state.

I for one am getting prepared, at least mentally, to the interest rate rises eating into my disposable income and me having to live on rice and tea. Not yet, but soon my friends, soon this WILL happen. I've been there before....it's not pretty. For now, I shall enjoy my caviar...

Interest Rate Prediction

Hello all, well I finally have some time to continue blogging, so I thought todays topic should probably be centered around the recent interest rate rises. My personal opinion and prediction is that interest rates will continue to rise until mid 2010. Australia's prosperity is ongoing, the mining boom is still in its infantile stage and hence money into Australia is going to continue. We all know the RBAs strategy of lifting rates to slow inflation, so rates, as far as I can see, will continue to rise for a while yet. I am suggesting that people fix a portion of their loan (I am not a finance adviser) for 2 years.

What I am seeing is a slight downturn in the market, so if you can buy, the next 6 months will be full of bargains.

Bye for now...

www.ozpropertyinvesting.com.au