Terry – what we reeeeally want to know is whether you:

1. Read the investment books yourself before you give it or

2. have an arrangement where the recipient gives your book back as a present the next Christmas/birthday

The second approach is win-win as the recipient doesn’t need to dig into his pocket for presents to you and you get to keep the book [] And the morality is impeccable; give and you shall receive.

If you’re looking for a nice wrap (for the book, silly!), you can’t go past newspaper, especially the RE and/or personal sections []

Hey, how about a new thread ‘saving money without being miserable this Christmas?’

Peter

‘Hi Mini – just one question – what is GV?’

Duh – just read the answer a few messages up.
So easy to skip the little posts!

Peter

G’day Drew

I can’t comment on that course, but I’ve read Fitzgerald’s ‘7 Steps to Wealth’ book and suppose the course would be similar.

It is based solely on buying houses (not flats) for capital growth and heavily negatively gearing them. This means properties near the CBD.

The example is made of Logan (Brisbane) as being an especially bad place to invest due to it being a low growth outer suburb. Yet in the few years after the book came out Logan has done well.

When you retire the idea is you sell off some houses to pay debt. But what there’s been less than required capital growth? Also if you’re unemployed or have a salary drop the heavily -ve properties can reduce current living standards.

The main critics of the Fitzgerald/Wakelin growth approach are Margaret Lomas and Steve McKnight who focus on yield and cashflow.

Read all these books and devise a third strategy that’s best for you.

Peter

This would mean that we should distrust stats derived from auctions (eg average prices and clearance rates) as they may give a misleading impression being skewed towards the more expensive properties?

This is apart from the issue of properties passed in at ‘vendor bid’ prices.

I would suspect that auction results would be even less representative in cities like Perth where they are much less common.

Peter

Hi Fudge: though the families that I mentioned before might have a marginal tax rate of 30c in the dollar, their effective marginal tax rate is much higher if they recieve most forms of health or family benefits.

This is because as their income increases their benefits are clawed back. Thus they might keep much less than 70% of the extra income they earn.

Let’s say someone’s income increases by $1000. The tax rate is 30c so they actually get $700. Now let’s say that the benefit that they’re on decreases by 40 cents for each extra dollar they earn (this is hypothetical – it might be more, it might be less). So there’s $400 more gone. Thus from that original $1000 increase the person is left with only $300. That’s an effective marginal tax rate of 70% and above than that paid by top income earners.

Of course to fix this by making the benefit universal would mean much more ‘middle class welfare’ and higher taxes for all, so one has to draw the line somewhere.

And it’s not just families either who have high EMTRs. Daryl Dixon was on the radio last night talking about the new super co-contribution for low income workers.

If you are earning up to $27k/year and put in $1000 then the government would also put $1000 into your super. If your income was above this the amount the government put in would drop until it was zero at $40k.

Sounds good, and it is, but it further increases the EMTR for people in the $27-40k range.

Peter

I doubt that the people who pay the highest marginal tax rates are necessarily those earning above $62501.

Instead they are most likely to be 1 or 1.5 income families earning somewhere between $20 and $40k PAYE especially where the children are teenagers.

There’s heaps of benefits that cut out, including concession public transport fares, health care cards, cheap pharmaceuticals, rent assistance, Austudy, the new superannuation top-up, etc.

I wouldn’t be surprised that when these are taken into account their effective marginal tax rates approach 80-100%.

Regards, Peter

Like Kay Henry, I too have wondered about the application of various strands of postmodernism in property investment (especially + cashflow).

I’ve decided that postmodernist architecture is pretty irrelevant for us. Most post-modern pads are in the swank suburbs of capital cities. Definitely heavily negatively geared right now. And even if you were into negative gearing, they might not yet meet Monique Wakelin’s requirement of ‘timeless architectual appeal’. Also when people get a choice (eg when building their own home) they’ve gone for retro-styles like Federation and Tuscany with lashings of heritage green. Po Mo doesn’t win the people’s choice either, narrowing its appeal to tenants.

Then there are post-modern perspectives of truth and objective reality, as aluded to before. This can be a real problem. Po Mo strips words of their objective meanings. Now wouldn’t HK love that!

The meanings that are ascribed to them depend on how the sayer is feeling at the time. You might have a PM, but if the tenant who hasn’t paid his rent this week tries some pomo wordplay on you, by saying that he did, then you’re stuffed!

And without objective reality or truth, the allied concept of integrity comes under attack. About the best you could do is to pursue shared meanings and hope for the best.

But bad Po Mo (if there is such a thing as I am making a moral judgement) can be a pain in the pocket if you don’t get the rent.

What about po mo in style? Modernism was about LeCorbusier tower blocks with straight hard edges thrusting into the sky. It was a counter-reaction to the fussy baroque and Victorian frills.

Po Mo blurs the edges. It is more about the site of transition, the intersticies, than one thing or the other. It is neigher fish nor fowl, but a sort of chicken with gills or a fish with a beak.

There is also a different attitude to change. Rather than trying to avoid change or wearing down, it embraces it as an unavoidable fact of life. Indeed it is life!

For instance the bottom of a teenage girl’s trouser ends scraping along the ground. Rather than folding it and sewing it (so the trouser end retains intact for the full live of the garment) it gathers mud, dirt and the cloth frays. That’s the Po Mo way.

From trousers to toilets, trees and termites. If we extend the reasoning to landlording, it means a property that’s left to age and a negligent landlord. Ageing is a creative processs hey, and we can’t stand in the face of change. No that’s no good either!

Po Mo spurns judgement. But judgement requires discrimination. Discrimination is choice. Discrimination is bad, but choice is good, we all agree. But choice requires facts.

A house sold for $200k. That’s a fact. A house is nice. It might be or might not be. You and I may differ in our opinions.

I cannot see how the post modern approach can deny reality. Unless it goes down to things like ‘what is a ‘$’ or what is ‘200k’ or ‘what does sold mean’. It could either expose certain assumptions (eg houses in Canberra aren’t really sold at all) in which case it could be useful or it could degenerate into aimless wordplay.

Yes there could be interesting post-modern perspectives to property, even though those I’ve covered so far have been of dubious merit.

But can anyone come up with anything other than
‘I do it because it suits me at the time’?

Regards,

Peter

Another good info source is a town’s economic profile, as put out by shire councils or govt development agencies. These will often contain important ABS stats.

Some ABS stats are free but others aren’t. You should be able to get access through a uni library.

I’ve never tried this, but maybe talk a teacher into marking a supplementary assignment with questions that you’ve set (the stuff you were going to do anyway on demographics, population, income and housing!) and to ask for their assistance in getting the ABS stuff you need?

Peter

Dan76 wrote:

‘With all the respect I think that if you want to assess a situation/maket you should not limit yourself by relying on some old fahioned stereotypes.’

I agree. I was just pointing out that Europe isn’t exactly the population growth capital of the world.

http://www.unhabitat.org/habrdd/trends/europe.html

suggests that European population might have already peaked.

More detailed info by country appears at:

http://www.unece.org/stats/trend/trend_h.htm

That’s not to say that there are opportunities even while the population is dropping. But if population is dropping to such an extent that the number of households is also dropping then there may be more houses than people know what to do with. Vacancy may loom!

Urbanisation will create some opportunities as people move into the cities. Also what will happen to all those ageing apartment blocks? Will they be renovated or demolished?

Is there a growing middle class who will demand better housing? Will they mostly rent (as in Germany or Switzerland) or buy as in Australia or the US?

Then what about coastal, forested or alpine areas – though the population as a whole is dropping these areas might still grow for their lifestyle attractions.

The major Aust capital cities have had steady population growth for a century or more. Those that performed worst (Adelaide & Hobart) seem to have had more volatile gyrations than places like Sydney, Brisbane and Perth (according to Residex graphs). There is still an assumption that the Australian population will keep growing (at least in the major cities and coastal areas) and real prices will over the long term rise, or at least hold their value.

Property investing in an area where population is falling will be ‘interesting’. It might be cashflow positive, but the more the population is falling (and there’s uncertainty about the future) the more returns investors should demand before they buy to cover the risk. Add to that contingencies for current variations, and the returns would have to be pretty big for many to take the risk. But good luck to those who do!

Regards, Peter

Dan wrote:

quote:

---

Then if the rules are same in UK as there are in say Hungary how much more risk am I running into?

---

Good laws alone is not enough.

Some dictatorships had marvellous constitutions that ‘guaranteed’ the rights of all, but in fact individual rights were not valued.

The security of a nation for investing encompasses such things as:

1. Political stability
2. Rule of law
3. A sound economy
4. General respect for private property
5. An impartial police force, bureaucracy and judicial system
6. A comparatively stable currency
7. Political institutions and governments have broad legitimacy across society
8. A unified populaton without seperatist tendencies (which leads to unrest and terrorism)
9. Availability of infrastructure to manage the property (eg managing agents, banks and tradespeople) – no good if the heating breaks down in mid-winter!
10. A political system that has checks on government power
11. Laws that require fair compensation for property resumed

Then there are the usual due diligence things (plus some others like earthquakes for countries around the Mediterranean).

Note that some parts of Europe have negative population growth and a rapidly ageing population (more so than here).

I’ve never been to E. Europe, but my mind pictures cities full of hunchbacked elderly women in headscarves with few families or children. Their kids might have gone west.

This has implications for long-term occupancy rates and type of housing needed.

Regards, Peter