Humid, humid Brisbane

The City of Sweat

I'm staying in Brisbane tonight, on the northern side, not far from the Bruce Highway. I can just hear the cars, the trucks, the slightest echo of travel wheezing by at breakneck speeds, wondering what important places people need to be at this time of night.

The thing is, I like this place. It's handy to everywhere, the house is small but nice and it's been a place we have visited over and over again for almost 16 years now. What I don't like is the humidity.

Every time we come here, it feels like a sauna. Not that saunas are bad; I love to sweat now and again and I love the feeling that comes with cooling down after such a sweatfest. I do however hate sleeping in the heat and Brisbane unfortunately gets to the uncomfortable humidity level more often than not.

Yet many many people choose to live in this city. Do they like the weather? Do they like to choose to either sweat continuously until they become a sticky mess, or, choose to rather pump air con which, let's face it, is killing the planet. Neither really appeal to me, and it's times like this I love Toowoomba again.

I then get confused as to why houses prices are so much more here than in the town I call home right now. The climate, in my opinion, is 10 times better in Toowoomba, you can actually see four seasons and really, it's quite an awesome place. But obviously this isn't a factor for most, as if it was, Toowoomba would be the capital by now. So the obvious conclusion is that climate, while important for some people, has no bearing on house prices.

In other news, I think finally conditions might be right for a bit of movement in house prices in Queensland. The recent rate drop, the strength of the job market, the flatness in real estate all point to a buying frenzy. I do hope it happens, the markets need a bit of a boost.

Brisbane Property Market: The Outskirts

And the winner is: Housing Commission House of the Year, 2012

Recently I've had a fascination with trying to secure a cheap property in one of the fringe suburbs of Brisbane. When I mean 'fringe', I mean fringe. I mean 'fringe' like Caboolture, Moronfield, Kingston or Woodridge. These aren't technically "Brisbane" but they are not far away. It's the type of suburbs that are chosen by those who couldn't be bothered; just a place to live, no McMansions around here. 

And the entry prices are dropping. I mean $220,000 dropping. This is good news for me, as I'm in the 'couldn't be bothered' category at this stage of my life and I live in a Toowoomba suburb in such a house. So the question is, should I buy? Are these properties worth it? Is an investment NOW in one of these 'burbs  going to pay dividends in, let's say, 5 years? 

All very tough questions with unfortunately ambiguous answers. Stay tuned, I may be reporting a new acquisition soon.

Are prices getting cheaper or are we paying too many peanuts?

When it comes to house prices across this great brown land, there are many sources of confusion in today's mad media world. Are prices going up, are they stagnant, are my farts stagnant? Unfortunately there are contradicting thoughts coming from different commentators and nothing is as clear as they were lets say 10 years ago.

Prices get an erection, prices go limp...

The suburbs that I'm watching are no help either. One suburb in Tasmania seems to be on the up up and away, yet another suburb in Brisbane is probably THE definition of 'stable'. Reading into these two suburbs is a bit silly, it does however show that different markets still operate amongst not only our states, but within our cities and even sometimes within a suburb on different streets. 

If I try to sum up all that is going on with buying an investment property right now, I would say do A LOT OF RESEARCH. I don't mean like hours and hours on the internet, I mean days and days and weeks and weeks until you realise that you are doing the "haven't had a shower for a while and the skin on your arse is starting to rot from your computer chair" type of research. 

There are bargains out there everywhere at the moment, it's just a matter of picking the right suburb to go with it for future growth. 

Happy hunting.

RBA keeps rates the same and at the same time, becomes boring as batshit

News that the Reserve Bank has kept interest rates exactly where they have since the start of the year is no surprise, and in doing so, have shown how 'safe' the RBA has been over the last little period. Although many of our shares investor cousins are doing it tough (although the smart active ones probably making a lot of dough), the RBA continues to hold the rates. I am beginning to think they are so fixated on keeping inflation at bay, that they are not actually looking at the rest of the data. Of course you'll 'hear' reports that they are, but currently the markets are, in my opinion, looking so negative, that this should have pre-empted a drop in the cash rate, and if this doesn't then what does? For property investors, this continual inflation minimisation policy that the RBA have in place is bad news; we need inflation to help boost our capital gains, but for the immediate future, its not look positive.   

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!

Buying a PPOR - emotional stuff.

The time has come to buy not a house, but a home. A place that we will live in for a while, a place that we can shape and mold over the years to make it our own. To give you an idea, I'm already looking at iPad wall mounts for our kitchen so that Melinda can use it as a recipe book. THAT SERIOUS.

So we've been looking around Toowoomba and to tell you the truth, house prices haven't changed much since we put a contract on a rental back in 2007. Luckily the sale fell through, I doubt we could get much more for it now. We're in the market for a 4 bedroom place, not a big yard, somewhere near a park and easy commute to my work. We are also thinking that this may still be a 'transition' house; a house that we will be in for about 3-4 years, before buying something even more to our liking.

I have made peace with one aspect of my current stage in life. I do not want a big back yard. Not now. I am busy enough. I have other stuff to do on the weekends, rather than spend countless hours gardening (even though I do love it).

So this one decision has taken a huge factor out of buying a house; the size of land.

We will most likely end up on a 600 square block, which, now, is fine with me.

Shaky start to the year

The start of 2011 has been an interesting time, with floods and cyclones, the housing market is looking a bit worse for wear. What will this mean for property prices for this year, after all, 2011 is supposed to be the "recovery" year many were predicting, finally getting out of the shadow of the 2008 GFC.

Melinda and I are in the process of finally selling our biggest cost investment property, a 3 bedroom brick home in Ferny Hills in Brisbane. For the first time, we have tried an open listing and currently have three agents on the case, two of them very actively trying to sell it. Strangely enough, of all the properties we have on the market, this one has attracted the most interest and it looks like an open listing is going to sell it. Yes there has been some communication issues and I'm sure the tenant is feeling hassled by all the open homes they keep requesting, but it's working, we should have a sale soon. It helps that it's priced right.

I also wanted to let you know I have taken the big step of setting up a trust, a family discretionary trust to be exact. Why it has taken so long is a bit of a puzzle, but for a couple of hundred bucks, we are finally learning to "set up structures" that should benefit us come tax time. Trusts such as this allow flexibility and really, I should have done this sooner.

That is all for now, I keep saying I will try to post more frequently, it's just that life is getting busier and busier as the days go on. Oh I almost forgot to ad, I have a new job and we have moved back down to the south-east; opportunities await.

A few months later....

Well, once again I have left this blog sit here, do nothing, just begging me to write about the turmoil that is the current housing market in Australia. There seems little hope on the horizon for us investors, with rates going skywards and house prices standing as still as a seagull who has just seen a wild cat lurking underneath the branch it's sitting on.

The markets I have my properties in are performing.....shithouse. There is little movement in Queensland as the market has finally realised that thousands and thousands of houses for sale can not be a good thing and the people have spoken. I know, I know, you will say, yes Andrew, but it's just the time of the investment clock, the part where interest rates go up (as do wages), houses prices are stagnant, it's just like the last time when all of a sudden the market went crazy.

While that's all well and good, I have an uneasy feeling that something is different this time. Perhaps it is the number of houses on the market, or the indicators in one suburb at least, that investors are offloading, and they are doing it in a big way.

It's exciting times, but not in a positive way. I have to offload, at least one, if not two, and if that's the case for me, I would hate to see how the big investors are going.

Good bile.

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...

It's enough to make me vomit!

It's been a hectic few months for property journalists and the inevitable has once again happened. When house prices go up as they have in the last quarter, we get the typical "The Aussie Dream is Over!" and "First Home Buyers priced out of the Market!" and "Affordability Worse Then Ever!" and "I Have to Come Up With a Controversial Title!". Example here.

This sickens me to my core (unlike KFC, which now is sickening me in my stomach). As you are probably aware, Melbourne is going through the roof, house prices climbing everywhere, but most noticeable in the inner city. Yes, of course your typical buyer or investor will not touch these properties. Wealthy businessmen, overseas investors (Chinese, American and English from what I hear) and cashed up investors are snapping these up like my grandma snaps up plastic containers at Crazy Clarks. But who reads the papers??? Yep, typical blue and white collar workers, wanting to purchase their own special little piece of Austrelya (pun), perhaps first home owners. Unfortunately, people who write these stupid articles are using this segment of the population to inadvertently boost the prices and create an emotional landscape that ultimately drives people to buy as close to the MCG as they can. Hmmm....counter-productive anyone?

In many of my posts I have already discussed why first home owners need to get their feet wet in the burbs. I still can not fathom how a first home owner, perhaps earning the average wage of 60K-ish, is looking at 400k+ homes. I still can not understand why people are so against driving an extra 20 minutes, or 4 or 5 train stops further from work, but are renting. When will common sence prevail. When will youngens realise that they can still buy a house, sub 200K even, just by moving an extra 200km away. Wow, two hours of driving to see mates etc (who rent by the way), to set you up with the "Australian Dream". Plus, has anyone heard of up-sizing? It's not rocket science... beggars can't be choosers.

Topsy turvy scenario this is.

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...

Cash Flow Positive, or should I say "The Yeti???"

Be on the lookout for a big, hairy beast, lurking in the bushes, very hard to spot and ultimately, very hard to convince people that you've found one. Yes, that's right, I'm talking about cash flow positive investment properties, the elusive beast that lurks in our suburbs, in the regional areas (the bush) and often disguised as something else.

Many many people are on the lookout, many many people troll through countless websites, newspapers, listening intently during IP convos (conversations), and ringing real estae agents feverously. There have been sightings, and in fact, towards the end of 2009, there were many, some even confirmed, but now once again, it is difficult to find these beasts. Perhaps a bit of KFC will lure the hairy ones out....

Good luck in the search....I'm looking, picking up the scent, looking for footprints, listening with sound enhancing devices...they MUST be out there!

I'm back...

Property investing has taken a backward step for a while, as my wife and I welcomed our first little one into the world. It's interesting how perspectives change with some of live's important moments. A visit to see grandmas in Brisbane allowed my a chance to check out how the tenants are keeping my Ferny Hills property, a 3bedroom house, positioned ideally in the north-western Brisbane suburb.

Well, to be perfectly honest, it's sort of what I expected. From the outside, nothing had really changed, it's still a typical highset, leafy amongst other similar houses. On the inside however, it was a different story. There were holes in a few places, carpet in living room was virtually ruined, the main bedroom had a slight smell of cigarettes and the downstairs rumpus room was empty, but the storage room next to it was so chockas full of crap, I couldn't even get to the rear access door. It wasn't all bad though. The kitchen was neat, the pool (usually the bane of rentals) was kept absolutely spotless and the yard was kept neat. The little doggy that used to inhabit the place too was gone. So overall, I was.... neutral. I'm thinking of replacing the carpet for them, as a courtesy, especially for keeping the pool so neat, but I'll have to see if I have the funds first.

My main concern is if I have to put it on the market in a hurry. If this was the case, I'd have to spend a fair few thou, fixing up this and that, and, perhaps most importantly, getting the outside rendered. That would bring the place up a treat and no doubt we'd get a premium price. It lends itself so well for an extension, blocking in the carport to create a master (ensuited) retreat, and for an extension of a triple garage out the front. This would cost, let's say around $40,000, but would make the house 4 bedroom, double bathroom, triple garage, all integrated and rendered. I think it would add about $80,000 extra onto the selling price....sweeeet.

Oh well, only a dream for now...but you never know...

I've been watching the market intently over the last few weeks. Agents are calling me saying investors are getting busy, which is great for my properties that I want to sell. I am concerned about the prices though....there seems, and I repeat, seems, to be a great amount of low end listings. Is this a sign of investors offloading low end stock, or is it something else??? Something else disturbing....

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....

Start of November Ramblings....

Real estate in Australia has come a long way this year. By this I am inferring that a lot of soul searching has occurred amongst investors, home owners and renters alike, a lot of "is grass greener on the other side" type of thinking. Should I buy a house at these low rates? What should I do with the spare cash I have available now that rates have dropped? Should I continue paying down my PPOR, or is now the time to jump onto the investment bandwagon? 2008-2009 has indeed been a turbulent time for us all and the head scratching no doubt will continue deep into 2010 and beyond. House prices this past year all of a sudden became a mystery, mainly due to stupid doom and gloom predictions and silly hype created by the media. It seems that, in some cases, nothing has happened. The "average" 300K-500K segment has remained solid, with some growth over the period, but this is coming off a very productive 2007 and was expected anyway. Those in the upper million/s certainly felt the pinch, but the bottom end of the market remained strong and performed well. My cheapest investment for example rose 16% from when I bought it last year (roughly), whereas my most expensive made a modest/crappy 1-2%.

A lot was learned in this period too, I myself am slowly becoming more and more aware of the impact of sentiment, of confidence, and the associated mindset of watching house values and rates go up and down. But it has been one hell of a ride. For the first time in my property investment life, I felt a strange sensation, something peculiar....I think people call it stress. Now, I'm not a stressful person, in fact I am the least stressed individual I know, but the looming rate rises and my purchases earlier this year are starting to create a little bit of, dare I say it, stress. The "sleep at night factor" or SANF as we like to refer to it in the heady world of investment circles, is slowly getting worse, although, I don't really have trouble sleeping, I guess it's more that it's in my mind. My SANF, or my stress, related from property investing, has just eased a little this past week and I think I will once again lull back into my usual care-free self once again.

So, are people worried about interest rates? Am I worried about interest rates? Yeah, of course we all are, it's not very nice watching your money fly away in interest, only to see SOME of it again at tax time, but for me, it's a little bit less of a problem, for the time being.

On a bit of a side note, I wonder what the Australian market has in store in the next five years. I have now been investing for 5 years and during this time have seen, a slump after a boom, a slow mini boom and then a larger steady boom, followed by a stagnant period. I have made SOME money, not as much as I would have liked (has anyone?) and have learned a hell of a lot. What will the next 5 years bring? Will it be fortune? Will we see 50% increase in prices during this time? Will the average cost of a house in Brisbane break the 500K???? It's all possible, it's all ahead of us and most importantly, I'm in it. If you're not in it (property investing) you'll watch from the sidelines, probably complain that they're too expensive already and that you're waiting until they become cheaper. I laugh at you...I laugh at you heartily....

Are investors back?

a turbulent month folks we have had. Apart from me starting this post with Yoda speak, the Reserve Bank, or as I like to call it, GOD, has not only began lifting the reserve rate, but is warning of a volatile year ahead with as much as 5 consecutive rises in the next 6 months if you believe some of the media reports. This is not new news though. GOD has warned people not to be too greedy, to take it easy, but no, just like Adam, many people were not listening. I for one. So now I'm in a pickle of some sort, having to sell at least one property before the repayments get out of control and I'm left eating tripe, which, as I'm sure many of you know, is a bargain for only $7/kg from Woolies.

Saying this, I would surely love to keep all my properties, since all signs are pointing to a boom, or more realistically, a tiny spark compared to what we have enjoyed for soooo long. I mean people are getting all too excited over a 20% increase in three years, as has been reported for Sydney, and a 10-15% for most of Australia. But come on, 3 years? My first IP bought in 2004 went up approximately 80% in three years, and that was bought immediately after the all so sweet 2003 price sillyness. The market seems similar to back then, especially in Brisbane. A lot of houses on the market, at cheapish prices in the middle ring and quite a few bargains in the outer ring right now. It was similar in 2004, it's just that we were young and naive, thinking it was going to be really hard to pay back a $172,000 loan, instead of picking up a massive bargain int he mid 200s. We have learned now though, that the Brisbane "rings" behave in a very funny way. In my opinion, the inner ring does not start the price jumps anymore, since it's so over heated. No, the price rises now begin in the middle ring, the typical leafy suburbs of Indooroopilly and Corinda, and up towards the Grange, this are the real indicators, the real kings of property booms in Brisvegas. And right now, these are the type of suburbs that the first home owners have began devouring and, investors are starting to play here too.

Anyway, if you're interested in a property in Toowoomba or Launceston, send me an email.

Ciao

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. :)

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...

I feel false positivity....still, it's positivity.

Well after the last few weeks I have become more and more confused by, what else, but the lovely media reporting an overwhelming number of positive news about property prices. While this in essence is fine and is finally showing a leaning towards positives rather than doom and gloom, there is one eency weency tincy little problem. I am STILL NOT SEEING IT!!!! The Brisbane suburb that I watch (where I have an IP) called Ferny Hills, as well as Ingham in North Queensland, where I live, property is ticking along.....stable, not earth shattering, not idle, just moving.

What I am noticing is the number of stock coming on the market. In Ferny Hills for example, A LOT of houses are coming on the market and are hanging around for a while. They are your typical, highset built in underneath neat 3brm base stock houses. This is unfortunately doing something to our market, it's keeping it low. These are the entry properties, people flogging off stock, it's not the type of properties that are overpriced, the type that usually drive up the suburb profile.

I can conclude two things form this scenario. Either people are seeing this as an opportunity to get out, in fear of the interest rate rises, OR, investors/owners are ready to upgrade and are flogging off stock to open up cash for upgrading. For months, hardly any activity and now, it's all on all of a sudden. I hope this scenario is not being repeated around Australia, as I see it as detrimental to future prices. What I do like though, is how neat these places are inside, it's quality lower end stock.

Ingham, while being a very different market is doing a similar thing. Lots of lower end stock available, quality a bit low but acceptable, but there is also a small section of expensive, overpriced houses that are being listed. This gives me hope.

So yes, while the long term does indeed look rosy for investors/home owners, currently I wonder whether the interest rate rises we are heading towards are keeping prices low. Oh well, back to my ponderings....