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DinoWeb
Member
@dinoweb
Join Date: 2003
Post Count: 59
October 22, 2003 - 4:40 am
Ok, summary of my last, very long post.
$30 dollars is a lot of cash for me to invest in a book that I may or may not get any value from.
Buying a book on investing is not the same as buying a novel. It is an investment, not only in money, but more importantly in hope. If people don’t understand the message, or it tells them something they didn’t want to hear, then it is only natural that they will be upset.
I bought and read the book, but I felt it didn’t tell me what the marketing lead me to believe it would. I can therefore understand why some people are disappointed and post negative comments.
It did however open my eyes to several things, and has acted as a catalyst with many of my other life experiences to show me a new direction that my life might take. For that, it was $30 well spent.
Now I just have to learn to do and see things a different way.
Thanks again for giving me a different point of view, even if it took me a little while to see it.
Dino
“If you don’t know where you are going, every road will take you there.”
DinoWeb
Member
@dinoweb
Join Date: 2003
Post Count: 59
October 22, 2003 - 4:08 am
Jim,
Sorry, didn’t mean to frustrate you. I agree with everything you have said, and I’ve read many of your posts, not just the ones here.
I am looking just from a straight maths point of view.
Fudge seemed to be suggesting that it is best to pay off the loan quickly because it saves you money. This is true.
But from my point of view, investing is not about saving money, it is about making money.
From his last post, he says that capital gains will give him an extra $170,000 over ten year,
Assuming this is true and a consideration in his strategy, my strategy would be to buy four similar properties from the initial 3 year $158,000 outlay. This way in ten years I would have a capital gain of $680,000 from the same investment.
Finance really is an area where 1 + 1 can equal what ever you want it to be.
Dino
“If you don’t know where you are going, every road will take you there.”
DinoWeb
Member
@dinoweb
Join Date: 2003
Post Count: 59
October 22, 2003 - 1:43 am
I think that I/O is fairly simple, it is just the amount borrowed times the interest rate.
eg $100,000 @ 6.5% = $6,500
I have an I/O loan and the interest is added at the end of every month.
From the above example for October the amount should be $6500/365*31 = $552.05.
This may not be 100% correct but should be close enough.
Dino
“If you don’t know where you are going, every road will take you there.”
DinoWeb
Member
@dinoweb
Join Date: 2003
Post Count: 59
October 22, 2003 - 1:29 am
Now I’m upset.
I got the answer right, but just typed the interest rate wrong in my post.Grrrr![!][!][!]
Funny thing is, I lost more marks in school for exactly the same thing than I could ever count. (With my hand writing, it is sometimes easy to mistake 4’s for 9’s etc).
That’s why I use a computer today, and never do maths on paper.
Still, the maths is correct even if the numbers aren’t.
Dino
“If you don’t know where you are going, every road will take you there.”
DinoWeb
Member
@dinoweb
Join Date: 2003
Post Count: 59
October 21, 2003 - 11:41 pm
Ok Fudge,
I am only new to this myself, but I see it the following way.
The issue is not, which is the better way to get the most out of this investment.
The issue is, is this a good investment.
First of all, forgetting all about depreciation, inflation etc and all those other complicated things that may or may not change during the next 25 years, you are absolutely correct that you will make more money long term if you pay out the loan as quickly as possible. This is due entirely to the hugely reduced amount of interest you have to pay. In 3 years you will pay roughly $14,700 while in 25 you pay $151,700, or $137,000 more.
In example 1 you have allowed 1 week per year of non-occupancy. If this is two weeks per year, you actually lose money. Either way, all it really does is break even. Return on your $40,680 outlay – 0%.
In Example 2
Initially outlay = $40,860
Repayments 3 years = $50,391 x 3 = $151,173
Other expenses 3 years = $2,655 x 3 = $7,965
Total expense 3 years = $199,998
Income @ $280/wk x 50wks x 3 years = $42,000
Total outlay = $157,998
From this point
Rental Income = $280 x 50 per year = $14,000
Expense = $2,655
Profit = $11,345
% Return = $11,345 / $157,998 = 7.2%
This is after 3 years of no return.
Return after 10 years – ($11,345*7 / $157,998) / 10 = 5% / yr
Quickly checking the NAB web site, term deposits for this sort of money are running at between 4.7% to 5%.
Put your money in the bank on compound interest for a lot less risk, effort and heart ache.
Look for things that will generate cash flow substantially better than bank interest on your outlay.
Dino
“If you don’t know where you are going, every road will take you there.”
DinoWeb
Member
@dinoweb
Join Date: 2003
Post Count: 59
October 21, 2003 - 1:28 am
Ok, in a poor attempt to get back some much needed credibility, I actually have a real best score of 40.
I’m still blushing from my previous mistake.
Oh well, back to work.
Dino
“If you don’t know where you are going, every road will take you there.”
DinoWeb
Member
@dinoweb
Join Date: 2003
Post Count: 59
October 21, 2003 - 1:16 am
In five days on this forum I’ve proved twice that I didn’t understand a problem as well as I thought.[]
Like my signature says, “If you don’t know where you are going…..”
I hate it when people tell me I’m wrong, particularly when I thought I was so clever and had it right.[!]
Put my pride away, and think about things more, not just jump in when an “obvious” answer presents itself.
Guess that’s why I was never real good at chess.[]
Dino
“If you don’t know where you are going, every road will take you there.”
DinoWeb
Member
@dinoweb
Join Date: 2003
Post Count: 59
October 20, 2003 - 11:11 pm
Ahhh! Golf!
Now there is a topic I wish I was better at, and got to do more often.
Dino
“If you don’t know where you are going, every road will take you there.”
DinoWeb
Member
@dinoweb
Join Date: 2003
Post Count: 59
October 20, 2003 - 11:06 pm
Assuming that the interst is compounded annually.
Annual Interest = 1.105
After 15 years CV(15) (Current Value 15th period) = $2,000,000
CV(14) = CV(15)/Interest = 2,000,000/1.105 = 1,809,954.75
Repeat 14 more times.(ie CV(x) = CV(x+1)/Int)
Answer $453,412.92
Dino
“If you don’t know where you are going, every road will take you there.”
DinoWeb
Member
@dinoweb
Join Date: 2003
Post Count: 59
October 20, 2003 - 12:56 am
Ok.
So how foolish do I feel – it says it at the top – HIT THE DOT.[][][]
Here I was just clicking away and not realising that the minus sign meant a bad score. So the best I have done is 93 clicks in 30 seconds.
New best score 35.
Dino
“If you don’t know where you are going, every road will take you there.”
DinoWeb
Member
@dinoweb
Join Date: 2003
Post Count: 59
October 17, 2003 - 7:27 am
New best score – 87!
wait….
wait…
new best 93. Yeah.
I can go home to my family now thinking that I have had a productive day at work after all.
Dino
“If you don’t know where you are going, every road will take you there.”
DinoWeb
Member
@dinoweb
Join Date: 2003
Post Count: 59
October 17, 2003 - 7:23 am
First try – 75
Best – 84 []
I always new twenty years of working with a computer would come in handy.
Dino
“If you don’t know where you are going, every road will take you there.”
DinoWeb
Member
@dinoweb
Join Date: 2003
Post Count: 59
September 19, 2003 - 4:53 am
I live in a large rural center.
10 years ago, metropolitan investors “discovered” our town and drove prices up (20-40% increase in 18 months).[]
Shortly after, investment dried up. Metropolitan investors still came, and still payed above market prices. The reality was though, some asking prices stayed high, but sales prices to locals, who knew the true value, dropped.
I bought a house last year from an “out of towner”, which was less than the price he had payed for it twelve months previously, and which was less than the price the previous owner had paid seven years before that.
Today, I read with interest that prices in town have increased 20% due to out of town purchasers. My property is now worth at least minimum $35,000 more than I paid for it. Big deal. I live there. It is perfect for me and my family, and I will not be selling it (at least until I become a property tycoon and can retire to a better lifestyle).
I’ve been interested to read in this forum how travelling to IP’s becomes such a grind (Can’t see it myself. Long distance travel is a part of rural life). I’m sure that most of the metropolitan investors will get sick of the travel. In a couple of years these investors will leave again, prices will settle down, and rents will catch up with prices that were overdue to rise anyway.
I’ll buy positive cash flow properties then, and wait for the next wave of my savvy city cousins to come and take advantage of us poor country boys[].