The effect of compounding will allow you to accelerate the wealth much faster if you have multiple properties.

Say it took you 15 years to pay off 1 property completely.

Now, you keep buying properties from year 1, for 10 years, 1 property every 2 years (5 properties in all), and pay interest only on the loans.

By year 15, the cap growth over the portfolio would be enough to sell off say, 2 properties (the first 2 you buy) and retire all the debt over the protfolio.

You would now have 3 properties that you own outright, and the rent.

Paying off one property would accelerate the cashflow return more quickly, as you would owe less each year and the rents would go up, but I don't think the amount would be significant enough to stick at one property rather than doing the multiple properties.

I could care less what a newspaper says about the property market.

They are usually only interested in over-dramatising anything that they can which will sell more papers.

As a general rule, rents have gone up, but in typical fashion, the papers will focus on a few suburbs, which are in very high demand, as the yard stick for the whole country.

I know a guy here who is your typical high-powered yuppie. He is a nice guy, a bit of a poser, but he wants to be the guy in the executive ads you see on tv and "live the life". Nothing wrong with that, but this type of person is always attracted to a certain area. Aus is no different.

He applied for an apartment to rent in San Francisco a few months ago. There were 37 applications for the same apartment. Did he need to live in this location? Absolutely not, but like the others he wants to live in the trendy spot, so the rental demand is through the roof.
Unfortunately, for anyone looking to buy in that same area, the buy-in price is so high, that even with higher rent demands, the current rent returns there are woeful, and the average person couldn't afford to buy a place there.

 In other areas, you can get a place to rent in 5 mins.

The best place to buy an IP is where you can get:
1. good rent returns
2. good cap growth prospects in the mid-long term.
3. good "add-value" factors
4. good tax benefits and depreciation.
5. good location.
6. affordable for you.

This is the basis for a succesful IP.

Hey Devo,

I hear what you're saying, but I'm a fair bit older than you, and have seen a disproportionate number of older folk who lived life to the full, spent well and bought lots of toys, but still retired broke, on the pension and have no life quality. I agree with you that we shouldn't live on baked beans and own 3 IP's, but we all need to get more sensible about spending.

Younger people (I was one of these) tend to have the a bullet-proof mindset, think they have "plenty of time to invest later", and are generally voracious consumers; folowing whatever trend is in. Then, they get to 45 years of age, they still have the same money habits and aren't in a position to start preparing for retirement. People who are loose with money at 25 usually are the same at 45 from my experience and have higher living costs with families etc. They are now trapped.

I agree that you have to live your life, but my observation is that most of the population are mindless consumers. They spend almost all their income on doodads, and aren't too clever about how they buy them either. For example, what sensible human would queue up in the cold on the street the night before the shops open to be the first person to shell out several hundred for a WII, or an I-Phone? You can wait a few months and buy one from e-bay for 2/3's the price.

Also, ask all of your friends how many of them put aside at least 10% of their income for investing and wealth creation only. My guess is it would be less than 10% of the friends could say yes.

While you're there, ask them all how many of them are maxed-out on their credit cards. Ask how many have got more than one credit card.

The trick is to get a balance, and most people don't have it. I have learned to shop well, AND still invest a lot of our income, and live life well.

Things like cars; one of the worst financial decisions ever is for someone to buy a new car. I know you have done extremely well with your car, but that is very rare for most sheep. Even business owned leased cars is still a waste; it is still cashflow out of the business that could be used to grow the business.

The average sheep buys the new car, on finance, and after 1 year they owe more than it's worth and have high finance costs. If that same person was to buy the 18 month old version of that same car, the car is basically still new, 2/3's (or less) the price and the repayments are far less.

Now, that's not being tight. That's being financially smart. Same with any electronic product you can name. Same with golf clubs, clothes; even food. I remeber plasmas costing $10k when they first hit the shops. Now they are $2-$3k. Even cheaper on e-bay.

You can buy anything far less than retail all the time if you do it smart. This is not beign tight; this is thinking: "how can I buy this product, and still free up dollars for my wealth creation goals?"

This is how we live our life now. We have a good deal of nett worth now, a low LVR and we still do lots of travel, buy clothes etc. I don't spend money on cars. I don't have a need to try and impress anyone with my car; or anything for that matter. people only resent you for your success anyway when you display it, so why bother? I sometimes think it would be nice to own a porsche, which I can afford, but I am happy to drive a nice, but not new car and have more money for travel, golf, dinner etc. I can rent a porsche if I want to drive one.

I do all the shopping for our house, and I constantly look for the specials. I buy our water from those large dispensers in front of the super-market at 35 cents a gallon instead of the bottles of Evian at $2.00 a bottle. I don't need to do this, but we have to drink water, and if I can get it for 10 cents a 600ml bottle instead of $2.00, then my view is I have freed up another $1.90 with each one for more investing, travel, school fees, petrol in the car etc. I don't need to be seen with an Evian bottle in my hand, and if I want, I could buy one Evian bottle and repeatedly fill it with my el-cheapo water and have a double win – still be a poser with a high-end bottle of water in my hand, AND have some investing money.

To me, this is not tight. I'm still drinking perfectly good water like the Evian poser. It's maximising my discretionary income for further investing, or for purchases of products that I need, but can't control the price of such as petrol.

This is also going to get me closer to retirement at an early age so I can do anything I want whenever I want while the average sheep is still slogging away until 65, and retiring with a measly super fund and a part-pension; or worse. We all assume there will still be a pension by the time we get to your retirement age; there might not be one.

If you knew the guy was going to cut down the tree after you sold it to him, and he didn't make a demand for it to be removed before the sale, would you still sell it to him?

The other concern though, is that say he signs the contract based on you agreeing to remove the tree, then reneges on the deal, now you still have the house and no tree.

Or, maybe he is a stooge for a neighbor who only wants the tree removed and this is a plan concocted to get it taken down (and maybe I read too many novels?).

This all seems weird to me. I would be tempted to offer the place at a discount to cover the cost of the tree removal and let the buyer get it removed. Either way it will cost you money, and this way, the tree removal won't be your doing; it will be the buyer's. He might simply take the discount and not remove the tree anyway, but at least you will be happy that the tree was not removed by you, or it stays, and you will be happy about that too.

Hleung,

I think it's called the "Laboral"  party now.

Jon,

I hope to God that our population never reaches 40 million.

Come over here for a while and see what a pain in the ar$e it is to be among lots of people everywhere you go, evey day, all day long.

And unfortunately, the majority of people are boguns; brainless morons, reproducing like rabbits, perpetuating the species with broke, apathetic burdens on society, while the wealthier, more educated folk retract further into their more wealthy enclaves, reproduce less, and acquire more and more wealth. The ever-widening gap between the have's and the have nots is also the gap in the number of people in that scenario. Less educated, employable, wealthy people; more and more "dumbed down" types who become a burden.

It looks as though Aus will follow the USA tend; the wealthy will pay for or have built a single, more unique type of house, in a nice area. They are also the ones who will be in a position to invest in property, and the overwhelming trend here is to buy up vast tracts of cheap land on the outskirts of growth areas, and slap up a huge estate of "Edward Scissorhands" type dwellings for the masses; all the same style, similar colours and very big houses on tiny blocks. They are disgusting, and makes me think of thousands of pigeons in thousands of holes. of course, for the developers who do them, there is enormous money in it,.

And I, as an investor looking to make money, will follow the same path, as many other investors are, but on a smaller scale; the 3 or 4 unit development on the existing family sized block etc.

Why? because there's more money in it than the single family IP with all it's associated headaches.

The ironic (and moronic) thing is, people queue up to buy them and pay top dollar, and don't think twice about the existence they are putting up their hands for.

So, while we can blame the developers for building these ugly estates and subdivisions, we should really blame the consumers (and investors) for being willing to buy them, and blame the Councils for allowing the developers to build them in the first place.

I wonder what the next money-making "scare" theme will be?

In a basic number crunch on a prospective investment, if the rent return is below the finance cost (interest) then it's already looking a bit shaky in my book.

I wouldn't buy any sort of property on a 3-5% rent return. Today's finance is at 8% roughly. There's a big neg cashflow there, and you don't know how much if any cap growth you'll get. Very risky.

But, as you said; the more you borrow, and the less you put in, the greater the Return On Investment (ROI).

So, a quick example for you:

If you bought a resi property for $200k, and only put in 10% deposit plus costs in cash (costs for resi property are usually around 6%) = $32k.

Keep in mind that often with Commercial property, you will be required to put in more deposit and often the interest rates can be higher. The good news is that the holding costs are usually lower as the tenant usually pays for things like rates and insurance.

Say rent is at 7%, and after all holding costs, all tax returns and depreciation are factored in you have a neg cashflow of $10 per week.

After 10 years the property has grown in value to $400k.

So, overall figure is:

Cap growth:   $200,000
Cashflow:     -$    5,200

Total  = $ 194,800

Divided by 10 years this is $19,480 per year.

Return on Investment is cash input, divided by total, multiplied by 100.

ROI =  $164.2% or $16.42% per year.

Not bad.

Capitalist is the word used by people who are not wealthy, and never will be, and know they won't be, and want you to feel as bad as they do.

This has been mentioned before (by me) on this forum;

This means that after you have factored in:
the rent,
the tax return and
the depreciation, or "on-paper" deductions, (must be built after 1987).

The property returns a positive cashflow after all outgoings; including the loan. It is after tax, so there is no tax to be paid.

Also include that the property has good "add-on" value in the form of renos, or subdivision etc.

You also need to go with an interest-only loan, and re-invest your tax returns back into the property every year, as well as use regular debt reduction as well.

Things like location, floor-plan and condition also add to the appeal for tenant and buyer demand if you should ever wish to sell, but the main factors are above.

These properties are still out there everywhere, but you still need to look harder than you used to have to.