All Forum Posts by: Praveen Kumar

I think deflation is a real possibility.

Deflation can result in property prices staying stagnant or even going down. Financial pressure on businesses and individual can result in increase in vacancy rates and will eventually result into reduced rentals. This is definitely not good news to property investors.

How will deflation affect the property market and what should an investor do if it does brew its ugly head?

Why are economists talking about deflation when so much money is being printed by governments all over the world in order to revive the world economy?

The burst of the housing bubble has created wealth effect in reverse. People can no longer use their homes equity as ATMs by taking out lines of credit or refinances their homes to fuel consumption. The reduction in equity is destroying wealth at a much faster rate than any money supply that governments are pumping into the economy. This is creating a very powerful deflationary pressure.

Deflation is much worse than inflation for property investors. I will appreciate some views on the subject as it is very current.

Praveen Kumar

I agree with comments made by Phil above.

During hyper inflation you make more money with your assets if you are leveraged as long as you can manage your cash flow to meet your loan repayment and expenses on the property. A leveraged property will create more wealth than a debt free property. You should have some cash reserves to see you through the critical phase during the initial part of the inflation when mortgage rates move up and there is a time lag before rents and property prices start to move up.

Praveen

As the inflation starts to rise banks raise interest rates to curb inflation. The wages and the rents do not rise in the same proportion as inflation. There is also a time lag in increase of property prices and rent with inflation. This period of time lag is very critical for investors. If your mortgage is not locked in you can find yourself in a severely cash starved situation.

The news gets better with time. As the values of properties start to move up your equity to loan ratio goes up dramatically. You can now borrow against increase in equity of your property to pay for any increase in mortgage rate. Alternately you can sell a few properties (in case you have more than one) to reduce your debt liabilities.

Someone inquired about my name. My name if Praveen (Colin) Kumar

A very interesting article on where USA is heading. But I believe in the resilience of Americans to get their house in order.........they have the best economists and brain power. Greece was a case when the government failed to reveal the true state of their finances.

Is there a serious risk of hyper inflation happening with trillions of dollars of printed money being pumped into the world economy by governments around the globe? Historical evidence shows that when too much money chases too few goods-and-services it invariably results in inflation.

What should an investor do if hyper inflation does occur. I will appreciate your comments on this very important topic.

Colin
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If you are starting out always buy cash flow properties first. Go for capital gain only after you have more than adequate cash flow to fund a negatively geared high capital growth property.

My experience is that even high cash flow property give you good capital gain in the long run if they are bought in good locations.

One of the best places to invest in is without doubt New Zealand.

It is the only first world country where there is no capital gains tax, no stamp duty, very liberal depreciation and tax laws. The country is not only green & picturous but also free from crime and terrorism.

It is a paradise for property investors.

What makes a good investor is his knowledge and experience.

An investment property is seen with the mind and not with the eyes.

Thousands of people will pass a property and will see no any value in it. It takes an investors mind to spot a great property. Like anything in life preparation is the key.

Thanks for bringing a very important article to our attention. The concept behind owning a house is excellent. It gives a sense of pride, security and financial benefits through savings and capital appreciation.

The problem occurred due to greed were over priced properties were thrust on to unsuspecting home owners. Availability of easy finance broke financial disciple and bankers helped in creating the property bubble that had to burst.

The concept of home ownership is great but it has to be executed sensibly.