Do you think NAB will keep the home loan interest rate low?
- No (78%, 7 Votes)
- Yes (11%, 1 Votes)
- Don't know (11%, 1 Votes)
Total Voters: 9
Start Date: April 17, 2012 @ 2:19 pm
End Date: No Expiry
What is your view on property price across all Australia's capital cities in 2012?
- Decrease more than 5% (37%, 11 Votes)
- Decrease less than 5% (30%, 9 Votes)
- Increase less than 5% (30%, 9 Votes)
- Increase more than 5% (3%, 1 Votes)
Total Voters: 30
Start Date: December 22, 2011 @ 2:58 pm
End Date: No Expiry
Where you would buy an investment property: Sydney or Melbourne?
- Sydney (52%, 54 Votes)
- Melbourne (31%, 32 Votes)
- Other capital cities (10%, 10 Votes)
- Canberra (8%, 8 Votes)
Total Voters: 104
Start Date: April 1, 2011 @ 9:55 pm
End Date: No Expiry
Popularity: 1% [?]
It’s really a lot more practical to just buy an established property than to build your own from the scratch. But of course if you have the budget, you shouldn’t hesitate to build a good property investment that would satisfy you.
Melbourne homes have lost $200 in value every day for the past nine months to September 2011.
The value of property sold in Victoria in the past financial year plummeted almost 20 per cent – the biggest drop in a decade.
Melbourne’s median house price is now about $551,000, down $50,000 from its peak last December.
This makes sense that to buy an established proeprty in Melbourne as investment.
The percentage increase does not include the cost of renovation/upgrades.
Sometimes these cost are in excess of 100-300K
I applaud the sentiment of this post (trying to protect unsuspecting Aussie investors) but the author may not appreciate the fundamentals of the U.S. property market as they currently stand.
First, we agree that anyone who isn’t a U.S. citizen and doesn’t live there day to day should use caution when considering an investment in U.S. Property. Why? Well, the laws are different, the purchase and sale process is different (eg title insurance is something most non U.S. people have never experienced), banking can be difficult and above all the TAX situation will be complex. In short, you don’t know what you don’t know! What you need is less hype and more facts.
Now to address the author’s statement
“Ask yourself an obvious question. If these American properties are such a good deal, how come the locals aren’t buying them?”
As a U.S. citizen, with twenty years of experience and hundreds of deals under my belt I can tell you why locals aren’t buying: They’re scared, they don’t have any capital, banks won’t lend to them, and lastly some cities are haemorrhaging population and probably will never recover.
Each point briefly:
My personal property portfolio of about 8 U.S. properties lost over half its value in the GFC. When that happens to you, you’ll be scared too. Once bitten, twice shy. Now apply the same shock to a family who thought their personal residence was worth say, $600k and they owed about $350k on a mortgage. After the GFC, instead of having an asset worth a quarter of a million, they now owe more than the house is worth. Oh, and I forgot to mention, millions upon millions have lost their jobs, and their health insurance. If this was you, do you think you’d be brave enough to invest?
Second, where are they going to get the capital to put 20-30% down on an investment property? Their assets have just lost half their value (the stock market went down too!). As I just mentioned, they have lost any equity in their personal residence so borrowing against that is a non-starter.
Third, banks just aren’t lending. They got burned badly by the subprime meltdown and now that old adage attributed to banks ‘you have to prove you don’t need the money before we will make a loan to you’ is truer than ever. And, if you apply for a loan and they see you owe more on your house than it’s worth…what is a banker to think? Of course that presumes you haven’t fallen behind on your mortgage payments because you lost your job or your variable interest rate loan spiked.
Fourth – which city to invest in. As someone who was born in the suburbs of Detroit, I can tell you first hand, why property there is super cheap… because no one wants to live there (I live in Brisbane now. Much nicer!). The same is true for many cities in what’s often referred to in the U.S. as the ‘rust belt’ states. On the other hand, the baby boomers are retiring in droves and moving to sunny places in the Southeast and Southwestern USA. When the author refers to’ locals’ in his argument, it makes it sound as if the U.S. is a homogenous market. Trust me, it is anything but.
The bottom line is that locals are buying U.S. real estate (if they are cashed up). I know because I’m one of them. Also, many bigger players are now buying tens or hundreds of houses at a time with venture capital. These smart people see the opportunity of contrarian investing at a time when you can get a 30 year fixed invest loan (yes you read that right!), at around 5% or maybe even less.
So, if you’re prepared for a steep learning curve and you have a tolerance for some risk, the U.S. property market may be your ticket to a lifetime of positive cash flow and extraordinary capital gains.
Learn more at Propertygeek.com