Reading Time: 3 Minutes
ARGH!!!
“Shakes head vigorously”
Brrr, bloody real estate.
Really doing my head in.
You see guys, I’ve got too much choice available at the moment.
After our latest hunting trip back from the West Coast, I’ve drawn up about a dozen or so properties which I aim to make offers on.

Mind you, not to acquire a dozen, I reckon one, hopefully two max.
The problem at the moment is that with choice, I don’t really know where to begin.
It doesn’t help that the bargain hunter in me is wanting to low ball the Baby Jeebers out of any deal…
In fact, I’ve already blown two out of the water, making some ridiculous offers.
Hmm, looking back – it’s a bit laughable actually.
One which was asking “300’s” and here I go offering $220,000.
Or another one wanting $185,000 and me submitting $115,000.
Yeah I know, I know – a waste of time right?
SO FRUSTRATING NO ONE WANTS TO SELL AT FIRE SALE PRICES. WHY IS LIFE SO HARD.
Although it did work for us last time, grabbing something for $210,000 when comparable value is probably in the low 300’s (read here).
Just have to keep on plugging away.
Truth be told though, I’m a little bit scared.
Why?
Because I think the market will turn, and turn soon.
This differs from my outlook 6 – 12 months ago, when it was very much doom and gloom (but I was SO happy, oh you should have seen me guys, API AS LARRY. Could NOT stop grinning like a Cheshire Cat).

You remember right? Labor to win the federal election, negative gearing to change, credit conditions near impossible, banking royal commission etc. etc.
Fast forward to now, and well… they’re all just media headlines and forgotten memories.
Man! You make money when there’s blood in the streets, and I can see the blood slowly drying at the moment. DAMNIT.
Oh and there’s a few tailwinds coming through too!
Like?
Well rates are now at unbelievable levels – you’re seeing mortgages and home loans with a “2” in front of them.
What’s more, there’s the increasing likelihood of the Reserve Bank continuing to cut rates (which I think they will).
There’s also talk of negative interest rates (you will get PAID to borrow) and quantitative easing (when money is literally pumped into the system, LIQUIDITY YO).
I doubt we’ll get THAT far – but if we do, you just have to look at what happened to the US when it did.
A decade long bull market fueling stock and asset prices.

Won’t it create a bubble?
Umm… probz yeah, depending on what the banks do with their credit.
Ain’t that dangerous?
Umm… probz yeah.
BUT, and it’s a big but, my own personal strategy is to buy inexpensive properties in metro areas with decent yield and amortize (pay down) the shit outta them.
Making hay while it shines people!
If the market booms and pops… well, here’s hoping we’ll have sufficient equity to buy more, buy buy BUY, BOOM SHAKE SHAKE, SHAKE THE ROOM!!!
Ahem… sorry, got carried away thinking of an economic downturn.
Also, here in Oz, most of us like shares, but all of us LOVE property.
Doesn’t matter if you are a renter, owner or investor – you cannot get away from the housing conversation.
A nation of property nuts, one side wishing for prices to drop so they can get in. The other side wishing for prices to rise so they can buy more.
Kinda sad when you think about it.
So?
So coming back to poor old me… I don’t fare well when times are good.
You can’t low ball when times are good.
You can’t have agents telling you what to offer when times are good (read here).
And you can’t bloody make money when times are good.
The big money in real estate, like every other asset class, is made when you buy, not when you sell.
This is especially true when you factor in compounding, 30 year mortgages and differing interest rates.
Huh?
What I mean by this is, let’s say you purchase a property for $400,000.
A standard 80% loan is $320,000.
Interest rate at 3.5% on a 30 year mortgage.
Here is the nitty gritty:
Apart from noticing the font and table variations (if you are an OCD sufferer, please forgive me, it is past midnight and I need sleep ZZZzzz), you’ll notice that total interest is a touch over $197k with total loan costing $517k.
Now let’s say you purchase the same property in a rising/heated market for $450,000. A $50k increase.
Assuming same 80%, loan amount is now $360,000.
And the numbers:
Assuming rates stay the same and you don’t refinance it and make minimum repayments yada yada yada…
The key note though is that the total cost of the loan is now about $65k more expensive, on top of the extra $50k which you had to fork out.
All this for the SAME property.
And that’s what is really funny about real estate.
The physical property itself does not change. Just a bit of bricks and mortar.
But the sentiment does.
And sentiment affects prices.
And prices affects wealth.
And wealth affects sentiment.
Shit.
I best get a move on then.
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P.S. If you want to find out more about how to invest in property – check out this article written by my good friend Si from the UK!
30 Comments
Elly
I learn a lot for Real Estate, lovely post glad to read.
The Frugal Samurai
No problemo, thanks for reading it!
Slavica
Interesting post! It gives a different perspective on real estate.
The Frugal Samurai
Thank you for saying so!
Luna S
Wow it sounds like a lot to deal with! I bet Real estate can be pretty stressful.
The Frugal Samurai
It bloody well is!
Chesz D
It’s better to be patient and have enough cash to buy a property or wait for the right timing.
I once had a conversation with a relative. Her friend is selling her property for like only $15,000 but since she doesn’t have that money, so she “passed”. Then later someone bought the property for $200,000.
So sentiments might not have something to do with it, probably timing or opportunity? Investing in real estate is still one of the top investments.
The Frugal Samurai
Did you say $15k to $200k ?!?! WTF that is an incredible multiple! Yeah I think timing-wise, picking the right moment is definitely the way to go!
Ruchi Verma
This is such an insightful post I came across covering so much about real estate!!
The Frugal Samurai
Thanks for reading about it!
Simon Starchevsky
Perception is king when it comes to pricing and that also includes real estate. And nothing is as stubborn in terms of influencing perception than sentiment.
The Frugal Samurai
WOW, that is insightFULL. And 100% correct.
Renata
Interesting read. I never considered buying property since I’m a travel blogger and don’t focus on a steady home. This gave me insight into a world completely new to me.
The Frugal Samurai
Oh no problem, that’s what we are here for right – to share!
aisasami
Is this based on US real estate prices or on a worldwide average?
The Frugal Samurai
This is actually based in Australia, being an Aussie blog!
D'ondra M Howard
I feel you on this…I remember when we were first looking, it was pretty stressful. I had to walk away for a little bit or not look everyday because I kept seeing the same homes. I’m hoping it gets better from here for you.
The Frugal Samurai
Thank you! Yes I feel a bit like that now, eyes are going all googly shaped with all these properties! Hope it got better for you too 🙂
Arun Dahiya
Definitely the sentiments , the proper timings set the mood for real estate. It sure affect the economy. Thank you for such an insightful post.
The Frugal Samurai
No problem, thank you for reading!
Polly
I’m amazed that this also happens in the Philippines . 4 years ago, I purchased a lot (house construction is still on going), when I spoke with an agent, he was surprised that I was only able to purchase it at x price and comparing it now, the price is now 3x more expensive.
The Frugal Samurai
You’ve done AMAZING! Whoa, 3x your money in only 4 years? Fantastic returns there, big congrats!
Bindu Thomas
Oh yes..Real estate can be real stressful. Add loan into the picture and you are fit to pass out.
The Frugal Samurai
Yes! It’s so crazy right now here in Australia, trying to obtain a loan is harder than robbing a bank!
Akriti
Very useful information for people new to real estate.
http://www.itsasweetsweetworld.com
The Frugal Samurai
No problem, keep up the travel!
Be Back After
Real estate seems to be quite volatile in many markets around the world. Knowing the ins and outs of it though definitely helps to make the right calls at the right times. Thanks for sharing
The Frugal Samurai
No problem, thanks for reading – like any market, it’s all about cycles!
Adventures with Shelby
This is interesting!! Real estate is something that always seems over my head
The Frugal Samurai
It doesn’t have to be! Though 100% agree, it is pretty daunting sometimes!