best places to buy property in melbourne, page-47

re: best places to buy property for goblin Kincella,
You say a $300000 property in melbourne is returning 30000 a year I doubt that very much.
Just did a search on Melbourne properties and average yield per year is around 3.5%
So if you had a $300000 property it would return to you in rent just over 10000 per year.
Your repayments on $300,000 at 7% would be around $25,000.

So average joe buys a property for 300000...he gets stung with stamp duty of $10000, coveyancing fees, bank fees etc etc for a total cost of around $12000.

His expenses on the property are rates and possibly body corp...rates are usually about 1% of the block value so we'll say rates come to $1300 a year, we'll forget body corp unless you are talking units and instead add on extra for things such as maintenance and upkeep and you could even put an extra on for times of not being able to rent the property.
Lets say expenses come to $2500 a year.

So far its looking like this..

$300,000 loan giving a return of $10000, then we have interest repayments of $25,000.
We are already losing $15,000 per year...add on expenses of $2,500 = loss of $17,500 per year.

So your $300,000 loan is losing you around $17,000 per year and cost you around $10,000 per year to let this happen.

Now why would you get into this position, because you think that property will rise year after year.

You wake up one morning and realise you were a little naive in your thoughts and want to sell cause you need the money.
When you sell the agent will take around 3% or another $10,000 and then you have the tax man.
So your one year investment cost you a total of $27,000.

Sure you might not sell your property in 1 year, you might have bought it in 2003 and want to sell it in 2007.
Over this 4 years you have lost around $60,000 from rent/interest which is great if you are negative gearing.

Now my thinking is that economy is running at 100% now, I cant see things getting any better, unemployment at 40 year lows, interest rates at prolly 30-40 year lows, stock market booming and money awash everywhere.
I can only see either of these 2 things happening from here over the next few years.
The economy keeps running at these levels and interest rates are 9% by 2007, peoples repayments rise 30-40% per year and banks not lending anywhere near what they are now, businesses hurting due to higher repayment expenses needing to lay people off and the property market falls.
Or the economy cools off and the RBA needs to reduce rates further, if this were to happen I believe we would prolly be in a recession and property prices would drop due to unemployment and less money in the system.

I could be wrong here and would be happy to here others opinions on what they think will happen over the next few years.

Anyway back on track, many forecasters are looking for a pull back in property prices over next 3 or 4 years in Melbourne of around 10-20%.

So you bought in 2003...you lose $15,000 per year due to rent, you lose 15% on your property price when you sell = $45,000.
You lose 3-4% when you buy and 3-4% when you sell equaling around $20,000.

So you begin with a $300,000 loan and in 4 years your property has cost you around $120,000 and this isnt including unforseen circumstnces such as not being able to rent your property etc...on the flip side you get to offest somne of your taxes through the lsoees in your property eg negative gearing

What you are betting on is that in 4 years time you can sell your property at a capital gain to someone who is a greater fool than you and beleive the real estate hype that property always rises, sure it does but how long are you going to wait for it to rise and how much will it have cost you in the mean time??

I like propertyin general, but I dont like it now as investment.