Tough Times - what is your plan

Hi all, given the doom and gloom of the property and share markets my questions are as follows :

*** What oppurtunities exist now ?
*** What are people doing differently ?

In my case ... I am heavily relying on the NavraFund for income and capital gains from my IP's and PPOR. Over the last few good years I have been regularly withdrawing extra equity from IP's and pouring into Navra units with a ML. This strategy has worked extremely well.

I must say last qrtr I was VERY concerned as I thought Navra would produce $0 income . I started breathing again when I found out this was not the case.

I am carrying also VERY heavy paperlosses. I keep thinking to myself that they are just that until you sell. Somehow this makes me feel a little better.

No doubt good times will come again soon and we will all be looking back saying "I should've done this or that".

Anyways ... I look forward to others replies/ comments/ opinions.

My wife and I have made an offer on a house in Hobart for 270k

AT

I have been looking to buy 1 more IP and I should make a move
soon because interest rates will start coming down in the near future and I don't want prices to start going up again.

I haven't bought any significant amounts of shares recently and I don't think I should change my position as yet.

I am thinking that perhaps after the Olympics could be a good time to spend some cash on shares.

Cheers

Hi AT

A very timely question, as similar thoughts are going through my head. Interestingly, my situation is almost identical to yours - we have several IPs, and (in addition to a savings plan) have periodically stripped out equity to invest in a Navrafund with a ML on the back of this.

We are, as the saying goes, heavy on property, and are considering selling an IP or two (or even three) to release some equity - however that's not a reaction to the current climate, rather it's to even up the balance a bit to get nearer to the suggested 5:2:1 ratio in the growth:shares:cash asset classes.

In relation to what I'm doing differently - not much, there's a plan in place and I'm sticking to it. I think you're dead right about paper losses, and cycles come and go, so if you sit tight the market has always come back. I'm in for the long haul, and (in the absence of a margin call) if I'm still getting distributions then falls in indices / unit prices can be ridden out. I've put some unmargined funds in recently as units look cheap imo.

And talking of saying "I wish I'd done this or that" with hindsight, I'd be interested in others' opinions on one aspect. One particular IP we've held for 7years has gone up about 50% - we bought for around $500k (it was originally our PPOR) and it's now worth about $750k. We think we bought well, and as a rough guide they say that it should double every 10 yrs, so I can see me kicking myself (and my wife...) if we sell now and miss out on the next boom if we follow the normal property clock cycle.

I note BV says he's looking to acquire, but then again others (for example, Ross Gittins article in today's SMH) contend that we're in for a prolonged period of declining property prices. What factors would people take into account when considering whether to hold or sell in this climate?

I'm seeing Navra in September and will ask them for their thoughts, but I'd be interested in others' opinions on the meantime.

KJL

Very similar to me at the moment.

Was also worried re the paperloss. As I take the distributions, I hope the holdings can climb back to original value (and more) over time as this will form a good portion of my income without having to rely on work income, a little way down the track anyway.

Am currently doing a refinance on one of the IP's, but that's about it of late

I am re-structuring my managed fund portfolio, and setting up a regular investment plan into them.

I'm diversifying into a few asset classes.

Australian Shares - Large Value and Small Value
International Shares - Large Value and Small Value
Global Infrastructure
Global Property Securities
Australian Direct Commercial Property fund. (recenty bough in at 17% yield)

All of these assets are running in different cycles, and I'm noticing the low correlation between them.

This will reduce my portfolio volatility and smooth out the ride as I continue to build. Now is not the time to stop investing!

I also have 1 IP (house) which I bought at the beginning of the year and am very happy with.

I'm just about to borrow another $100,000 to put in the sharemarket, everythings on sale!

Some great responses ... it's great to share ideas on a forum like this with like minded people.

It will be great to look back at these posts during the next boom...

I wouldn't drop in the whole $100k in one go, but definatly progressively put it in.

KJL

I don't share his view.
IMHO we can't have demand, peaked/falling interest rates and declining prices. I believe that demand for housing in certain markets will be increasing due to shortage of rentals & shortage of housing in general.

I am not buying in speculative markets.
Why buy now?
Because market sentiment is low so I have good negotiating power and because I believe we've hit the bottom for that particular market.
Yields are important to me so I aim to buy cheap for a suburb,
to add value and then lease it out at an increased rent.

I believe that interest rates will start coming down soon but they won't fall to 7% overnight so I don't believe that we will see big price increases for quite sometime.
This doesn't bother me, I will be happy with price increases close to CPI levels.
Gearing is working in my favour and overall, my IP holding costs are low so every fall in interest rates will be a bonus.

The share market is also an interesting 1.
A lot of people got badly burned in recent times and won't be going back straight away, but there is a lot of money floating around and people have to do something with it.
Soon interest rates will start to fall so savers will start looking for better returns and this makes me think that after the share market recovery period of 6 to 12 months there could be a steady upswing in share prices.

Cheers