Max Carnage

Don’t buy into housing bubble ‘bulls**t’, says property tycoon Nathan Birch

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"HE’S got a $35 million property portfolio at just 30, makes half a million dollars a year in rental income, and thinks talk of a housing bubble is “bulls**t”. His message for struggling first home buyers is simple: stop whingeing and do something about it."

http://www.news.com.au/finance/real-estate/dont-buy-into-housing-bubble-bullst-says-property-tycoon-nathan-birch/story-fndban6l-1227433934754?pg=2#comments

Interesting to see an update on this dingleberry. Thoughts?

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“This country has seen the GFC (global financial crisis), nearly double-digit interest rates, low rental returns and high unemployment come and go and the property market hasn’t dipped through any of that. Why should it now?”

 

Then later:

 

“But look at other markets such as Brisbane, where those prices are still cheaper than post GFC, so there is still room for growth even if its not right in your own backyard. "

 

So prices are cheaper than they were 7 years ago, but the market hasn't dipped hmm?

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Max,

Its good to hear from you.

Sadly you bring us another story of a someone who has drunk the cool-aid.

I work out from the article that Nathan is paying close to $1.5m on $11million worth of loans and property expenses.

This at a time of lowest interest rates ever in this country.

I also read at another point that all his loans are interest only. No reduction in the principle so he is not currently paying anything towards the capital cost of purchase.

I am guessing he is relying on equity in the homes to achieve that, when he decides to cash out.

However, my calculations based on a 10yr loan to pay off the mortgages would require $1.3m per year. This is at 4.5% interest rate. So the remainder of the $1.5m would be property costs.

I wonder then if he has an exit strategy, because even a 1% or 2% rise in interest rates, could severely curtail his $500,000 income available.

He could easily find himself living on zilch/nothing/zero. But he will still be a rich man and I'm sure he would be able to live in one of his own homes.

Because if (heaven forbid) interest rates rise 5%, or house prices fall 5% I would suggest he will be severely underwater.

I suggest that he will then be forced to reduce his portfolio simply to keep pace with his loan repayments.

What I have found over time is that it can be difficult to liquidate a house, at the timing and price you require.

Which I would think would be a downward spiral in regard to available income......

I'm no accountant and as many of you know on here, I'm a bit of a dumbo with mathematics, but I would be gravely concerned for this young man's future.

I also feel for his mum and dad, who will probably have to pick up the pieces if it all ends in tears.

I'm assuming he knows what he is doing however and will probably avoid such a scenario, because in Australia, house prices always go up and land always increases in value.

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G'day Solomon,

 

You've spotted something odd. He's getting a (claimed) 5.7% yield, which is about twice the norm, and yet his costs (including loan servicing & maintenance) are equivalent to paying 13.6% interest on his (claimed) debt.

 

I suspect there's either a mistake in the stated debt, or his creditors are vastly different from traditional ADIs.

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