Forum Replies Created
unmester,
Wow, what a report. Lots of theory a bit hard to understand, but very interesting.
Its interesting that it takes into account the house size increases and improvements to older houses in its calculations. I remember reading an article once about house price increases, it mentioned price of purchase and price at sale years later. It looked like he had cleaned up, but after the price of improvements, buy and sell charges, inflation etc was taken into account and then looking at investing his deposit and renting over the same period – he was worse off. But, off course its all relative to what is happening over those years with house prices and stock market, interest rates, taxation, your wages, etc etc.
In other words, there is no direct answer to what is the best strategy to increase your assetts, it depends on so many factors. Which is why if you try to get an answer from an investment adviser on what should I do to improve my position, they will tell you to fill in a 20 page document with all your details and then come in for an hour or so one on one interview.As for the original question about house price increases over 10 years. I think you can prove anything with statistics, its just a matter of what statistics you use, and whether you take into account inflation, taxation, other investments, running costs of property ( you don't have with shares ), personal interest in property ( do you worry about tenants, lack of tennants, etc – can you sleep at night ). For me. Its been a good ride, I'm happy.
whiteknightoz,
I think the general opinion of most is now is not the time to buy.
You only buy if you can get capital gains and an income to cover your expenses. Do you think you will get capital gains at the moment…. most likely not. Will your rent cover your cost of borrowing…..most likely not.If you have some money then put it in cash and get 8% instead of buying a property and loosing say 5% .
Wait a few months , your cash will increase, properties will decrease, you cannot go wrong. Or put your cash into an offset account on your last loan till you can see property prices increasing….this may take a while…
Good luck whatever you do.
Harb,
Well, if it is. You have to respect his decision to put words into actions!Wealthyjvd,
Just a few comments.
Magazines like to cover stories that are spectacular – so don't think that is the norm.
Most people build their wealth over time, one property at a time, as duckster says – it 's time that matters, rents increase ( but so does costs of holding ) so you slowly build up extra cash, thus eventually your houses become positive cash flow.Sometimes I read those property magazines and wonder how people do it so quickly, I think "what am I doing wrong/", but, you have to take your own circumstances into account – everyone is different.
Also the people with 50 properties don't work for the council or mow lawns, they are the doctors and solicitors.So do lots of reading and have a plan that suits you and your salary and life expectations, that you will be happy with.
Scott No Mates,
You are not quite correct on flats and townhouses. I believe it is the total land divided by the number of units or townhouses. Thus most townhouses etc have less chances of land tax . Please correct me if I'm wrong?LnM,
Hi, and welcome to the forum.Steve's book were written a few years ago now. So don't think that things stay the same, you will not get 10% returns in capital cities nowadays ( or course there are some exceptions ). I would suggest you do a bit more reading of other books and even this forum before jumping in, so you can get a feel of the market etc.
With regards to your structure – I suggest you keep it simple for you first investment property, start out small and see how you go for a year or two. Read up about Tenants in common and Joint ownership first.
Just keep it simple for a start in case you decide its all too hard and tenants drive you mad.
Good luck
s michie,
I think you are very brave to jump into the Sydney market at the moment, but fortune can favour the brave.
I don't know your personal details or how you get your figures etc, but I personally would be trying to pay off some of your loan at the moment and get that 95% LVR down. I have worked on mine for the last 4 – 5 years and its now down to about 25%. I am now waiting to jump back in as the bottom is coming soon.
Try not to get too carried away with your investing, property is a slow as she goes, gradual growth over many years process, with some spectactular years along the way.
Good luck.
Hi mixedup,
I agree with above.. excel is easy to use, most people know how to use it, no need to study manuals etc just start up your sheet and refine it as you go. Each time you use it you improve it, and eventually you have it just the way YOU want it.
I use excel sheets for each property and also run an excel sheet for my year on year financial statement. Thus is easy to see your day to day capital gains, share investments, wages, etc whatever you wish to put on the sheet.
I recommend you start a financial statement sheet straight away, it gives you motivation to improve your worth year on year ( or month on month if you are keen ).
Hop to it.
Sponge,
I agree with stargazer and tonyB, now is not the time in your position to jump into IP.
Whilst you may be ready to jump in and try and buy at the bottom to make money, I think personally for you the best tactic is to use you 20K to offset your existing loan and save as much as you can.
When you get a larger deposit, probably in 6 -12 months, then look at the IP option. Remember the loan on your PPOR is not take deductible, you effectively get the 6.95% tax free from your loan. Even if you got 8% by saving you need to pay tax on it probably 30% thus only get about 5.6% in hand.
Also will never know when the bottom of the market is till we pass it. Thus best to buy just as the market starts rising, this could take a while. In the mean time you are putting money down a big hole if you buy now for no reason.
Read up lots in the mean time and keep looking, you may find a bargain if you are not rushed.
Scamp
Your theories are fine and you have based your predictions on many good facts. I agree that the world property prices are and will continue to fall over the next few years.
Reading this article ( takes a few days ) has made me think – I think back to when I was young. Back in the old days ( not so good old days ), I battle to think of anyone back then talking about buying investment properties, shares, etc. This was reserved for the rich people – people we never knew.
Then as ime went by, we all went to school , got jobs and then the 70's come along and money started flowing to the workers, inflation took off, more money, young people buying new houses in new landcom estates, paying like 3 or 4 times their yearly wages for houses. Then getting pay rises, excess money, paying off houses, buying new cars etc etc.
Then we start talking about shares, shares go up, superannuation becomes compulsory, people put lots of money into super and shares etc. House prices rising as more young people buy houses etc.
Wow time has passed, we now all talk about making money with super, shares, houses.
But, suddenly the world starts to change, bosses get huge pay rises, workers pays are fixed to small increases, cost of living skyrockets with water, fuel, electricity, food, interest rates rises. Suddenly the average person is headed back to the bad old days of not having money to spend, credit cards are used ( not heard of in the 60's ). One must now think we are going backwards not forward for the next few years at least.
I guess I am starting to get lost with my thoughts, but seriously, we all need to take a look around us and think about at least the next 10 years of property growth. I think it depends on inflation and wages growth obviously but the multiple factor of 10 times wages is unsustainable, it must come back if there is going to be any possibility of young people every getting into the housing market. Lets hope it happens for the sack of our kids and a future of fairness for all.
We can still make money with our property investments, but hopefully not at the expense of a future for the following generations.
Hi,
Yes , I said the wrong thing.
What I ment to say was the the trust can distribute the CGT whichever way it wants. Thus if you have a few people in the trust, you can give the CGT to the person who would be able to absorb or partially absorb the CGT.
But yes I said it wrong … sorry. I think I was thinking about superannuation….Thanks all.
Digian,
Maybe you should give a good long thought to how many investment properties you wish to have in 20 years time.
A trust maybe your best starting point, maybe do a bit of reading first. If you wish to retire one day with lots of properties in your trust, then you can sell them with no capital gains tax. But if you just wish to have a few properties then putting them in your own name maybe the best and especially for your first, so you can get the FHOG and no stamp duty. Just do a bit of reading about trusts before continuing too far into the property collection business.Don't rush into buying as prices will fall for a while yet, best to buy just after they start to rise to make sure you purchased at or near the bottom.
CHIS,
Yes, and
"The best time to buy real estate is yesterday, the next best time is now and the worst time is tomorrow"but maybe they are only true for the past, and the future may not be the same as the past!
CHIS,
No one can predict the future, experts get it wrong just as much as the novice.However, a lot of people and many on this forum including myself are expecting housing to fall over the next few months or even years. It's not hard to see ( which is something most people do not ) that inflation of good and services is getting away from peoples salary increases. Oil is very expensive and feeds back to most items we use in modern society. Businesses are cutting back of expansions and profits falling ( except maybe in the mining – but its only 7% of GDP ).
Just look at the sharemarket – most people do not understand what is happening to their superannuation until about August when their statements come out and they find its gone down 10% from last year. Thus another year or two or working before retirement, people do not see things coming until its happened, all these 5 year cheap loans are starting to mature and they are going from 6% to 9.5%, how are they going to pay the extra few hundred dollars a month?If you are thinking of buying now – forget it – just wait and see the prices falling.
Sounds like Katies007 needs to do some reading !
You shouldn't jump into investing or any other plan without first doing some research.
Good advise by posters. As stated its very hard to explain in a few words how negative gearing, tax matters etc work, that's what the text books are used for.
Not so lucky,
Agree, you are unable to get the grant.
As above, if her first house was investment then no grant. If she lived in it for 6 months then should have been able to get. And maybe stamp duty rebate also?
Are you married or just good friends? Government can check up if you lived together, they don't like to give away money!Cairns Investor,
Excel is OK as long as you improve your basic spreadsheet each year. Its hard to beleive you haven't access to it. You can usually get a free download of spreadsheets off the internet that are very similar to Excel or get it very cheap from a shop or …. you know.
Above suggestion by Scott is probably the best choice, but just have a check on prices, they can vary dramatically for specialised software.Mini,
Are you leaving the country? Going to live with your parents? Need to let us know this before we can follow up.
Regards the paperwork ? Not really much to do. Just get a licenced valuer to give a price the day you leave, but again depends whether you are going to move back in within 6 years or have another PPOR etc.
Have you a long term plan?
This is from Yahoo Finance, its American but very interesting. Good read. Suggesting our whole suburban lifstyle is going to change.
- Very Good (568 Ratings)
- 3.998234/5
Posted on Monday, March 31, 2008, 12:00AMHousing prices dropped by over 11 percent at the beginning of this year, the largest drop in the 20 years that such data have been collected. Thank goodness.
Restoring Financial Sanity
Why are plummeting real estate prices good news? Because it's the first sign that sanity is returning to the market. And a sane real estate market — one in which sellers recognize that they won't get as much for their house as Al down the street got two years ago — is a precondition for a broader economic recovery.
Recessions, or any economic downturn, are always caused by the same thing: Something goes wrong. That may sound overly vague, but it's rarely the same thing that causes a shock to the system. In an agrarian society, it might be a bad harvest or a failed monsoon season. In a developing country, it might be a slump in the global price of a major export, such as coffee or copper.
In the United States in 1929, it was the stock market collapse. In the early '80s, it was the recession deliberately engineered by Fed Chairman Paul Volcker to break the back of inflation. (The Fed held interest rates high enough for long enough that the economic pain persuaded workers to stop asking for higher wages, and firms to stop raising their prices.)
Bad to Be Good
In all these cases, the recovery begins when either: 1) Conditions get better — the rains come, the price of coffee rebounds, or consumers stop worrying about another terrorist attack. Or, 2) Things don't get better, but we adapt to the new reality. Coffee prices don't rebound, so farmers start growing something else.
The only route out of our current real-estate-bubble-inspired economic malaise is the latter — a new real estate reality. Property owners must recognize that some of the prices we saw over the past couple of years were an anomaly, just like Internet stocks in the '90s.
The problem with the housing bubble wasn't just that prices got out of whack for a while. The bigger problem was that those crazy prices sent erroneous signals to the rest of the economy. Artificially high housing prices caused developers to build things that shouldn't have been built; consumers to spend money that they didn't really have; banks to loan money to those developers and consumers; and Wall Street to bundle those shoddy loans into products that most of us still don't understand.
Feeling the Heat
Normally, the beauty of a market economy is that prices convey important information. When starting salaries for engineers go up, more college students major in engineering. When the price of gas gets to $4 a gallon, people drive less (or buy fuel-efficient cars).
But the housing bubble sent bad signals all over the economy. It's as if we had a broken thermometer telling us it was 30 degrees, and now we're all standing outside in 90-degree weather wearing sweaters and ski parkas. The important thing is what we do next: We can either stand there hoping the weather gets much colder, or we can recognize that it's 90 degrees and start taking off the layers.
Falling real estate prices tell me that sellers are finally starting to do the latter. I recognize the pain. A lot of people are going to lose a lot of money; some will lose their homes. But realistically that's already happened. If buyers are only willing to pay you $300,000 for a house you bought for $400,000 two years ago, the $100,000 difference is already gone.
For What It's Worth
Listing the house for $400,000 and leaving it on the market unsold isn't going to get the money back, either. That's essentially just living in the house and hoping it'll appreciate in the future. The "For Sale" sign out front is decoration, something to keep the mailbox company.
Look, I bought 50 shares of Bear Stearns stock at $90 a share. There's nothing stopping me from putting a sell order in with my broker at $90. I can keep that sell order open as long as I want, just like the permanent "For Sale" sign.
But the market reality is that JP Morgan Chase has an offer on the table for $10 a share. If I really want to sell my shares, it'll have to be at a price someone is willing to pay — which, sadly, has nothing to do with the $90 I paid in the first place.
True Value
If this were just about the price of real estate, I wouldn't care at what price people tried to sell their homes, or how long those properties stayed on the market. But it's bigger than that. Falling prices will help put the "market" back in the real estate market; it'll get us back to a point where sellers are asking prices that buyers are willing to pay.
We'll know the real value of real estate in different markets around the country. That'll give banks a sense of what their loans are worth. It'll also be a signal to buyers that they don't have to wait any longer for the deals that they know are coming.
Both will help stabilize the credit markets so that they can get back to the business of making sane loans based on realistic property valuations. And healthier credit markets will allow Wall Street to price the mortgage-backed securities that will remain illiquid as long as we have no idea which mortgages are likely to go into default and which mortgages aren't.
The Bottom Is Near
What good news am I looking for in the future? Another significant drop in housing prices, albeit smaller, say 4 or 5 percent. That would signal to buyers, sellers, banks, and Wall Street that the bottom is near.
Things have to get worse before they can get better. We're making progress.
JL,
Thanks for info. I have been back to visit a few times – due for next trip ( good for tax claims ). Don't forget the strand , its fantastic. One downside along the coast near south townsville is the flooding on king tides – which should get worse as global warming sets in?
