Forum Replies Created
Julian,
I understand where you’re coming from. And I too would be the last one to cast aspersions at Steve’s book or obvious success.
I agree though, that net worth is very important and shouldn’t be ignored in favour of pure cash flow assessment of investments. Jan Somers advocates calculating the Internal Rate of Return (IRR) of investments. I find this very easy to understand and obvious in its implications.
ie. If I invest $20K to buy a place that costs $100K for example, and it yields $2K a year in positive cash flow but no capital gain then my IRR is 10%. ie. $2K on $20K down.
If, however, the same investment yields no cash flow return (neutral) but 10% capital gain then my IRR is 50%. ie. $10K capital gain on $20K down.
I’ll take 50% IRR over 10% IRR any day. Even though this money isn’t “realised” as cash in the hand it is still earnings. It can be realised by redrawing to invest further or in the worst case by selling and profiting the balance after disclosing the mortgage.
To ignore equity when calculating investment performance is to do yourself out of a lot of dough. My philosophy is that cash flow allows for servicability of loans, but capital gain is where all the real money is made. This, of course, depends on which market you are investing in. And I am investing in capital intensive markets such as Sydney. If Steve wants to run a Mappers v2 I’ll happily put my hand up to be oneof his mentorees so he can convince me of the error of my ways. [biggrin]
Cheers,
Michael.Robert,
The question of whether the government should intervene or not basically comes down to a cost equation. If the cost of not intervening in lost future taxes exceeds the cost of intervening in terms of current funds redirected, then intervention is warranted. Of course this needs to be in current value, or discounted future cash flows.
In the “subsidise babies” case, the question becomes whether the money the government outlays today is less that that which they would otherwise need to outlay in the future. I think that any significant incentive that would genuinely induce more intrinsic population growth would have to be a wise investment. The problem is that the current taxpayers are then paying a dollar today so that future taxpayers (say in a decades time) don’t have to pay fifty bucks to fund healthcare.
i.e. Increase the taxable population and spread the burden. Might not sit too well with the current taxpayers who don’t see themselves paying tax in 10n years time. I’m only 34 so have quite a few productive years of employment ahead of me, so would rather the government acted TODAY to minimise the impact of increased health costs on the taxable base in the future.
I’m all for monies being distributed to support families. Of course, the question of means testing this comes in to play. My wife and I earn $200K+ pa salary plus investments. Should we be entitled to a little handout? Mind you, I pay more in tax than most people earn so I guess its just a small proportion coming back to me. [biggrin]
Cheers,
Michael.Steph,
Thanks for the well wishes. Kay and I had an absolutely awesome time skipping from island to island in our Seawind 1000 catameran. [biggrin]
Although it sounds cliche’d, I am glad to be home. The holiday was amazing and we’ll certainly be doing it again sometime, but there’s nothing like sleeping in your own bed…
Its good to post again too, this is a great little internet community we’ve got happening here. Happy new year all!
Cheers,
Michael.Howdy all,
I’m a Sydney boy born and bred. Now living with my wife at the nice sleepy beach side suburb of North Narrabeen. House is 800m from the beach and 400m from the lake.
Property here, like the rest of Sydney, is pretty expensive though and yields are miniscule. I keep checking my postcode medians (2101) and think anywhere on Sydney’s Northern Beaches is probably a good long term investment.
Ciao,
Michael.Robert,
It all comes down to human failings I guess. There’s those that realise that its dead money and that they should move, and others that just hang on through sheer stubborness or laziness.
Unfortunately, the smart ones probably researched there loan better and therefore are less likely to benefit from a mortgage brokers’ services. The ones on the expensive loan with a bank could most benefit from your services, but are also less inclined to do so.
Kinda ironic isn’t it…
Cheers,
Michael.PS I went to Cannex and decided on Gateway CU at 6.5% variable currently. Even though my CR card and DR account are with The National. I just have to allow 24 hours when doing internet transfers between institutions. I have a fully offset account at GCU so get my salary paid effectively straight off the mortgage. It sits there until the CR Card comes due and I pay it in full each month by funds transfer between institutions. Its too easy, I don’t know why more people don’t do it.
All,
I think Steph is on to something and its bigger than a lousy $3K baby bonus. If we are to reverse the fertility trend we need some form of intervention from the government. In economic terms you might consider children as a “merit good”. Governments intervene in free markets for merit/demerit goods when they believe the population can’t make the correct decisions for themselves. ie. tax Cigarettes and give concessions for babies. This is a clear case of a merit good intervention requirement.
Robert is right though that its a hard one to sort out. Its interesting reading his threads as he uses a lot of the same sort of terminology I used to use when I wasn’t planning on having a baby with my wife. We looked down on “breeders” and considered all sorts of family handouts as inappropriate given it was a personal decision. We’re heavy taxpayers and resent a lot of it going to things we can’t benefit from. Now we are planning on having children our opinions have changed slightly. I now respect “parents” for the sacrifices they make. This includes lost income and lifestyle.
Lets be clear, my wife and I will be financially much worse off after having a child. This is a decision we have made and accept this as a consequence. We don’t expect the government to bridge the financial gap, it would cost them hundreds of thousands, but some sort of merit good intervention is appropriate. I didn’t even know there was a $3K one off payment, its so paltry I wouldn’t even blink twice at it. What I’m talking about is some sort of legislation in the form of paid maternity leave. This would allow mothers to take a few months off without financial impact, then resume their job. The burden of this is met by employers, but admittedly in a free market this ends up being passed on to consumers dependent on the demand elasticity of the goods/services produced by the employer.
Anyway, great posts and very interesting points made so far.
Cheers,
Michael.Steph,
Woohoo indeed! Today’s my last day at work too so I probably won’t be posting for a while. I’m off to the Whitsunday’s and my yacht doesn’t have internet access… [biggrin]
So, everybody have a great XMas and New Year and I’ll catch you all in 2005!
Merry Christmas!!
Signing off,
Michael.[xmas] [xmas] [xmas] [xmas]
PS. Phil, I like your last comment too. I think you’re spot on. I guess financial abundance tends to follow emotional and intellectual abundance…
Alex,
I agree. I don’t have any IPs now and I’m 34. But there’s still a few cycles left for me to hit my targets. I’ve already got about $1M in equity and I did this without investments!! Just worked hard, saved hard and bought my PPOR.
Can’t wait for a Sydney down turn. Bring on the doom and gloom!
Cheers,
Michael.Phil,
If everyone was a prudent investor that didn’t overstretch their finances, then where would we find the bargains when times are tough?
Don’t be so hard on the conspicuous consumption types. Its their naivity that funds my retirement. [biggrin]
Cheers,
Michael.Phil,
Like your 10 tips.
Its refreshing to see someone actually suggesting that getting a job and working hard might be the means to financial wellbeing. I get a bit put off when I read all these books that say the “poor dad” is the one with the good job, and the “rich dad” is the high school drop out who just bought up big in property. I think a job is critical to your financial future in that it gives you cash flow. Its hard to service investments without cash flow!!
I guess those with the good jobs run the risk of thinking that this, by itself, is the means to financial riches. Its not! But it does make it a lot easier to get there if they’re prudent in their investments.
If I read one more coaching style book which paints the well educated as the fool, then I’m likely to explode. Uni helps! It will get you a better job and give you more cash. Its what you do with it then that’s important.
Cheers,
Michael.Steph,
I agree, time for a new thread. I think Richmond will be the one to post first [biggrin]
Cheers,
Michael.Yep,
Saw the add on tellie last night. Looks like champagne all round…
A link to a transcript would be good. I won’t be home to catch the show tonight.
Cheers,
Michael.Robert,
He he, beat you by 6 seconds…
Michael.
Reasonable offer?
$100,000. If it was passed in at $110,000 then that buyer has gone and its all headed south at the moment. Give it a week and you’ll be able to offer them $90,000 and get away with it.
IMHO,
Michael.inez,
Unfortunately, I am breaking the golden rule of posting and that is, quoting another post I read on this forum (and not actually referencing as I don’t know where I read it [biggrin]). I read on the forum somewhere that Steve’s second book was written to allow for the fact that the market economics today have changed since he wrote his first book. A lot of Steve’s gains in “from 0 to 100” were maid from capital gain, even though he was buying for +ve CF. The warning is that you can not necessarily aim to replicate Steve’s achievements in today’s market. If you buy for +ve CF, then that may be all you get and potentially run the risk of -ve CG more than offsetting the cash flow. ie. you go backwards. In today’s market you need to consider the potential for -ve CG in any purchase decision whether you’re buying for cash flow or not. eg. Why would you invest $10K to make $10 a week on a property losing $10K pa in value? Sure you’re CF +ve, but in a years time you’re net worth has gone down by $9.5K. This is a really simple example with no real detail applied, just to illustrate the risk in today’s market.
IMHO, you always have to factor CG in to your purchase decisions. I think CF is all about servicibility, and you make your money on CG. You won’t get rich on 10 bucks a week on your $10K.
Cheers,
Michael.Richmond,
That is so cool. My heartfelt congratulations to you and your wife.
12 weeks is the rule eh? [biggrin]
Cheers,
Michael.PS Just read this article about the impact of workaholic parents which sort of bears out all the arguments you guys raised too. Doh!
http://www.smh.com.au/articles/2004/12/15/1102787145790.html
You guys have no idea how much I’m bighting my tongue right now… [biggrin]
Mr and Mrs MichaelWhyte might and I mean MIGHT have some very exciting news to post in the near future…
Oops, said too much already [blush2]
Steph,
You are so on the money!
I know my wife will make a great mum one day. We have a border collie and she dotes on him. She’s the one who always remembers to feed him, check his water’s full, give him hugs etc. She is maternal, I just don’t think she realises it yet.
I’ve also considered the option of taking a year off myself. But I’m right at a critical juncture in securing my career level as an executive. However, it is CERTAINLY something I’m thinking about. I know I’ll be a great dad, to be honest I can’t wait! We’ll figure it all out down the track for sure.
Thanks for the post, really appreciated,
Michael.Brown,
You can still buy positive property, and don’t have to wrap them to get positive returns. Its just you can’t pick them up as readily as you used to be able to. Be careful though, even Steve is now saying be cautious about +ve CF in the current market.
Cheers,
Michael.Phil,
Nice story! [biggrin]
I thought you were going to say that he had spent $20K as a deposit on an IP and that you were the mug. i.e. You’re slaving away for 60 bucks a day and your mate is making his money work for him (not the other way around).
Some people just never get it though… (lucky for us [biggrin]).
Cheers,
Michael.
