Articles - Graeme Fowler

[eri]

well said Graeme

[Beano]

Very true about the buying Graeme .
I can't ever recall a time when i thought properties were cheap so i rushed out to buy them ...i always thought properties were either fully priced or overpriced

[sidinz]

Maybe not for established investors, but the LVRs have made the cycle have an impact on starting out investors.
A rising market means that they are more quickly going to have the equity to purchase their next property.

A falling market means that they have to rely on savings or adding value. And you'd have to add a lot of value these days to be able to recycle a deposit.

So while I get the main thrust of what you're saying, it's not that black and white for all of us.

I bought a rundown property with the classic intention of renovating, revaluing and recycling the deposit for the next purchase. Only while I was renovating the new LVRs came along. As the equity gained from the renos is not enough to allow me to refinance to 40% equity and have a deposit for a new purchase, I'm stuck waiting for an equity gain via rising house prices or savings from my day job (which will take years).

So for me and others like me, the cycle is not so much about whether I should buy but more whether I can buy.

[Beano]

Maybe not for established investors, but the LVRs have made the cycle have an impact on starting out investors.
A rising market means that they are more quickly going to have the equity to purchase their next property.

A falling market means that they have to rely on savings or adding value. And you'd have to add a lot of value these days to be able to recycle a deposit.

So while I get the main thrust of what you're saying, it's not that black and white for all of us.

I bought a rundown property with the classic intention of renovating, revaluing and recycling the deposit for the next purchase. Only while I was renovating the new LVRs came along. As the equity gained from the renos is not enough to allow me to refinance to 40% equity and have a deposit for a new purchase, I'm stuck waiting for an equity gain via rising house prices or savings from my day job (which will take years).

So for me and others like me, the cycle is not so much about whether I should buy but more whether I can buy.

Have you taken into account the principal repayments?
Is that enough for you to fund a couple of average priced properties each year ?

[Wayne]

Maybe not for established investors, but the LVRs have made the cycle have an impact on starting out investors.
A rising market means that they are more quickly going to have the equity to purchase their next property.

A falling market means that they have to rely on savings or adding value. And you'd have to add a lot of value these days to be able to recycle a deposit.

So I can summerise this as a rising market makes it easier to gamble in than a falling market.

[Don't believe the Hype]

So I can summerise this as a rising market makes it easier to gamble in than a falling market.

Well said -

beyond that, any guru who tells you how to make money in a bull run (of any asset class) is deluded... You need to dig into the results, if the market went up 10% in a period of time did this guru achieve above 10%? If not then their expertise is simply buying into a growth asset.

I'm far more interested in learning from someone who made money is a flat to declining market, this shows that they have an ability to deliver value by listening and delivering on the needs of their target market and (I assume) can make the same growth compounded by natural market growth when (if) the market starts to grow again.

[sidinz]

So I can summerise this as a rising market makes it easier to gamble in than a falling market.

If you mean on the basis that any IP purchase is a gamble, then yes. Other than that, I don't see why buying in a rising market is more of a gamble than buying in a falling one.

Have you taken into account the principal repayments?
Is that enough for you to fund a couple of average priced properties each year ?

Not even close. Two average-priced properties in major provincial cities would cost around $400K or more. Deposit required = $160K. For a newbie investor, principal repayments on an existing property or two is only going to be a sliver of that.

[Bluekiwi]

What’s The Real Estate Market Doing!!!!????

If you’ve ever played the board game Cashflow 101 or 202, you will know that in order to win the game, the first thing you need to do is get out of the ‘rat race’.
The ‘rat race’ in the game is a circle where you keep going around and around and around until you are able to get out onto the ‘fast track’. This is where the game suddenly gets fast, exciting and a lot more money is made, but first you need to escape the ‘rat race’.
How do you get out of the ‘rat race’? You do so by getting to the point where your monthly cashflow without your job (passive income) is greater than your monthly expenses. There are a several ways inside the game to be able to do this, buying investment property is one of them.

You will notice the game is called ‘Cashflow 101’, not ‘Capital Gains 101’.
The ‘capital gains’ game is a game that most people who invest in property want to play.

But they get the cash flow, after first making Capital Gains, don't they Orion

[orion]

No, not necessarily at all Paul.
Cashflow could be from rising rents, trading and then using profits to pay down debt etc. My cashflow hasn't come from an increase in house prices at all, just means the lvr is reduced slightly.

[Beano]

But they get the cash flow, after first making Capital Gains, don't they Orion

Graeme is right CF+ has little to do with CG
Compression of yields and lifting of land prices don't generally affect cf .
In a heated market the normal high yielding poor quality properties yields become close to the blue chip properties
In a weak market the yield difference widens.

[Bluekiwi]

No, not necessarily at all Paul.
Cashflow could be from rising rents, trading and then using profits to pay down debt etc. My cashflow hasn't come from an increase in house prices at all, just means the lvr is reduced slightly.

The "Game" Graeme, not you.

[orion]

Yes, that's true Paul.
Maybe we should invent a game which is based more on how things really are 😀

[Allblackrugby]

Hi Graeme,

I haven't seen you write re. security i.e. banks requirement to have security over not only the house being financed but also at least part of another.
Has this not been an impediment or issue for you?
If banks require security over more than one house for every one we buy, there's a limit to how many can be bought!

[orion]

Hi Graeme,

I haven't seen you write re. security i.e. banks requirement to have security over not only the house being financed but also at least part of another.
Has this not been an impediment or issue for you?
If banks require security over more than one house for every one we buy, there's a limit to how many can be bought!

Can you give me an example of what you mean?
No, haven't had that issue, but may be not understanding your question fully.

[Nick G]

Basically if you have lending with a bank and buy something else with them the bank will want to have everything you have with them as security for everything else. It gives them the most protection. Property A can be security for B, C and D... not just B. Ask your bank or broker for specifics.

I think that's what the question was. I've benefited from splitting my banking to two banks so that a policy or personnel change at one doesn't stop me in my tracks.