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Thanks for your posts. Alternatively to general advice, I’m also interested in information as to how I could find a good accountant?
Interesting article, it didn’t touch on pricing of such a service though. I would expect it to be similiar to a seller’s agent?
Yes, DR. X you are right it is an inaccurate use of the term, P/E usually being associated with Gross Yields in regards to property. I meant to say median house price/median earnings, hence how I got p/e.
Hi, I live in the Blue Mountains, Wentworth Falls to be exact. I can tell you that the market here is quiet similiar to that in Sydney. Generally flat growth in the last twelve months and low yields, however the yields are a bit higher than sydney, but still very rare to see a yield of about 5%. Springwood is just as I described, there are some better yields as you head west over to say Lithgow, however obviously then you have little growth potential. To summarise I don’t think it is the time to invest in the Mountains quiet yet as the market is still flat and will remains so for at least a year or two.
I think now days the average age the Australian leaves home is 25. This is understandable that this age has increased greatly over time, to keep with changing conditions. Now days in Sydney, as an example houses are 10 times the median wage, it also must be taken into account that few young people straight out of school or uni earn figures near that median wage. Of course financial security is important to everyone, and if some people believe that they have a better chance of achieving financial security through staying with their parents to say 25, then whats wrong with that? Everyones situation is unique and there will obviously also be non-financial reasons behind such decisions. But in looking at this situation I dont think it can be interpreted that there are superior or inferior decision, its just that everyone is different.
There has of yet been no improvement on Benjamin Graham’s definition of investing. For those unaware of Graham he was mentor to Warren Buffet.
“An investment is an operation, which upon thorough analysis, promises an adaquate return and a margin of saftey, anything not reaching these expectations are speculative.
I believe the answer to your question will depend more or less on whether your property has good potential to appreciate. As you say this property will be negatively geared,as the yield appears to be no greater than about 5.5%, which doesn’t cover mortgage, plus there is other costs.
However if you believe this property has good potential to appreciate, not only will you make captial gains. But you will most probably be able to eventually increase rent to the extent that it will become cash flow positive.
Your other option is to sell after the period of 6 months (you only need to hold the property 6 months to qualify for FHOG). You may be able to make a capital gains on the property if you sell after this period, as you said that you did do some renovating. Here though you will need to factor in costs with selling (usually 1-3% of sales price) and of course you are exempt from CGT. This option is also preferable if you believe there are other opportunities out there with better cash flow and/or appreciation potential.
Hope this helps.wentworth falls in the blue mountains west of sydney
A fine post Dr.X
I find any such comments, as the ones you refer to come from those with some insecurities in their own life. Such comments are also often made without any real knowledge of the facts, they are based off ignorance. I also believe it to be almost impossible to make a great deal of money without helping people. People like Bill Gates and Karl Albrecht create huge amounts of jobs for people. In life we reward those in accordance to their contribution to society, those who are wealthy have a great positive impact on those around them.
You must also consider as to why such people have desire wealth, as very few people simply desire money. They may buy property to fund their retirement, or for charitable reasons, such as Steve Mcknight.
I for one draw great inspiration from Warren Buffett who is worth $US44 billion. Buffett has live nearly all his life in Omaha in the state of Nebraska. In the US the average American has about 20% of their net worth in their house. For Buffett this is the equivolent of owning Iceland and buidling a house on it. Instead Buffett lives in Omaha in a very modest house worth $700 000 (according to appraisal in 2005). Buffett spends very little money, he is the lowest paid CEO of any of the fortune 500 companies, and upon his death all his money will go to charity.
Now an ignorant person could look at Buffett and say “how can this person be so greedy”. Yet their ignorance gives them a completely wrong judgement of the situation.Thanks for the link Mortgage Adviser, thats an excellent site. An interesting point on the website states that this 6 month period begins after settlement, rather than after title transfer. So it is entirely possible to arrange a 6 month settlement period, to do up the place a little, then collect rent at the same time you start to pay the mortgage. Of course you would have to find a most flexible vendor first!
Also from some of the links off your site it is interesting to note that the FHOG has actually been changed a few times. On two occasions Howard doubled the FHOG to $14 000. He also did it in most peculiar times, when the property market was raging. So there was no real incentive needed it appears. Is it quiet likely that the FHOG at a national level will be altered again?
Thanks for the quick replies, which perfectly clarified everything. I suppose it is easy to get confused. Another more broad question in regards to first home owners. I know that in NSW you are exempt from all stamp duty. I also heard that in Queensland they give you a further $3 000 on top of the FHOG, perhaps this is wrong? Do any other states give such generous incentives?
