Again an example of the difference between gambling and investing
Example
9 years ago a friend invested in a property in Perth $ 640,000 through SMSF prior to GFC (2006)
You should have heard the crowd at auction "never get your money back" I believe was what he was told
1300 sqm property which he subdivided and built 4 individual town houses and renovated the original house cost of project including land $ 1.8 mil on completion
4 years later 2010 2 years after GFC sold 3 and paid out loan and left change for holiday
Leaving two town houses no loan
2 years later 2012 sold one for $ 720,000 and other 765,000
At age of 40 his investment has secured his retirement as he is still employed and contributing to his super.
To an individual who has invested not gambled the short term real estate cycle is neither here nor there
The mining boom created a disconnected artificially inflated rural real estate market which rose over night
You will see the reverse occur over time as a disconnect between rural and city prices occurs and a balance is found , the investor will take advantage and the cycle will turn again
On the other hand , an individual who goes out to a "sh_t creek town and spends $ 1000000 on a house that otherwise under normal conditions would sell for $200,000 all because there is a cyclical mining boom maintaining an artificial real estate market is not an investor but a gambler
The real estate agent or property advisor who has made this recommendation to the purchaser needs to be fined and jailed for not disclosing the risks involved
To make one point clear and 11 or even 20% downturn in real estate is neither here nor there on an investment that has doubled and tripled in value over the time.the investment
The only time it has any meaning is if the investment is cashed in as profits or losses are only crystallised at that point
Real estate has always been cyclical and as the saying goes "it all in the timing" "do the home work reduce the risk"
