There’s better investments now than property

Hey Westan,

I haven’t really followed Lowey et al. But I suspect that their billions weren’t strictly from property investing (in the context that we here practice property investing) either. It is also in the practise of running a business, publically listing, development and other corporate toings and froings.

This is also a path littered with the rotting corpses of those who have failed. I believe the failure rate of property developers is somewhere above 90%. (Quoting from memory only)

There are no share “traders” in the rich list because sooner or later you run into liquidity problems trading great size, most particularly in australia.

Also trading isn’t really investing. It is a business. A trader removes profit from his account for living expenses etc, limiting the full compounding effect.

I don’t think anyone aspiring to the “rich list” would choose trading in any case. Not my cup of tea. I could think of nothing worse than living that lifestyle (except perhaps abject poverty!!)

A few hundred k a year would do me just fine!!

http://www.tradingforaliving.info

LOL! I surrender!

I can’t posibly compete with anyone who can write a post that long!!! Hahahaha!

Sharetrading is crap, it’s gambling, causes grey hair, ulcers, divorce, diabetes and baldness!!!

UNCLE!!!!

http://www.tradingforaliving.info

Mini,

I am sorry to say that it take too long to read your posted and I gave up halfway, no 1/4 of the posted.

Share will crash tomorrow or should I say sideway trench?
Share? Yes or NO only

Property………..?……….still thinking? Love it or hate it? Yes or NO only.

Kind regards

Jet Dollars
Retire Young, Retire Rich . . . REALLY? . . . I didn’t know that!

Hi all,

Picked this article up in one of the national papers in January of this year – thought it might add some statistics to the debate.

Cheers

2004: property or shares?

January 25, 2004

Richard Webb looks at whether stocks or housing will come out on top this year.

For the past five years, Australian property has outperformed shares by a country mile.

House prices have risen at an annual rate of 17 per cent while shares produced an investment return of less than half that: a little over 7 per cent when you add in dividends.

This house price boom attracted investors and resulted in a disproportionate amount of investment money going into property. By last year, almost half the houses sold were bought by property investors – a record level.

Yet, research by AMP Henderson chief economist Shane Oliver shows that since 1926, the performance of these two investment asset classes has been almost identical – property has risen at an annual rate of 11.9 per cent, while shares gained on average 11.8 per cent.

Further, Dr Oliver found that property had sneaked ahead of shares only in the past couple of years because of the latest property bubble.

As we entered 2004, there were clear signs the housing bubble may have started to deflate – auction clearance rates began to slump, the number of people seeking housing finance started to fall, and the spruikers of highly speculative inner-city apartments all but disappeared.

Derek
[email protected]

Property Investment Support Available. Ongoing and never stopping. PM welcome.

Hi Westan,

This was the critical comment (for me anyway) which indicates that both investment vehicles, over the long term, are effectively ‘neck and neck’ albeit each will have their time in the sun and that each has their relative advantages and disadvantages.

There are no doubt some weakness in the data used to arrive at the final result which could be used to still maintain a shares v property position.

At the end of the day an individual will invest in their preferred area/s – and ultimately it is their expertise, or otherwise, that will largely determine the degree of success they enjoy (or not)

Derek
[email protected]

Property Investment Support Available. Ongoing and never stopping. PM welcome.

I agreed with Derek, it’s base on individual prefer in their investment situation. I believe property will provide equity in long term which can be use for other investment vehicles such as the sharemarket, business or just continue investing in property if they prefer. There are so many opportunity for people in this country to invest in whichever area they like.

Good luck with your investment arena….

Take Care

Kind regards

Jet Dollars
Retire Young, Retire Rich . . . REALLY? . . . I didn’t know that!

“At the end of the day an individual will invest in their preferred area/s – and ultimately it is their expertise, or otherwise, that will largely determine the degree of success they enjoy (or not)
“

well said derek.

my enormous amount of words was me just saying basically ‘my individual preference is for property.’ – and my reasons why, which come down to my experience, guidance, interests, risk profile, personal and financial goals, and successes. it is my “expertise” that means that *my* properties will outperform shares *for me*.

With two of my properties now showing 24 percent cashflow yields and add to that values now 70 percent higher than the cash I put in the deal, I’ve outperformed the ‘average’ shares or property investment several times over.

If I had leveraged the properties to 80 percent I could have got 15 properties instead of 3, and if they’d all gone up 70 percent in value, the leverage would probably mean that my cash on cash return was something stupid like 35 times my money back in a year.

And all the while in the (considered) lowest risk asset class.

cheers-
Mini

joy to the world

>My personal
> believe is that for a passive investor, property is usually better, because of
> leverage. Most who buy shares usually buy them outright, whereas most who buy
> property usually borrow to do so. Whilst the underlying investment (I’m
> talking buy & hold – not trading) over a 5-10 yr period will perform
> similarly, the property investment will come out ahead due to the leverage.

Hi Rod,
so we both have our personal preferences and both have given reasons,
so far so good –

> Comparing buy & hold property investing to share trading is foolish, they are
> two different things.

Yeah, but buy and hold let’s say compares to blue chip, IPOs to off the plan deposit bonds (speculative) and trading, well, compares to property trading.
I get that much….

>B&H property investing is more akin to long term holding
> of blue chip shares (diversified) and I suspect the returns are similar
> without taking leverage into account.

That’s where I disagree, because I have found a niche market within the asset class ‘buy and hold properties’ where I believe returns outperform blue chip buy and holds. Part of the reason is that you can manage your investment and make it better, i.e. you have control. Buy and hold blue chip shares, the only control you have is to sell them. With a property you also have that control, and many many many others.

You can effect how that investment performs.
Man, I sound like Dolf De Roos 101.

So here’s my niche market, which is in NZ currently, though I expect it can be found all over the world. It’s: buy undervalued, (on a global scale, that is how many x the annual rental yield to get to the purchase price. In Australia it’s currently 58, with a long term average of 31. In NZ, we are buying for 6’s and 10’s!! A long way to go (upwards.)
Call it fundamental analysis, if you like…!!!

So. Then, within an entire undervalued property market ( a country or region or area) I have targeted lower priced properties as I believe that demand for them is sustained in all economic climates. Inflation alone means that each year houses will go up, even if there is ‘zero growth’ in real terms, forcing ever-downward pressure on the market.

There is an excitement for a lower-priced property that there just isn’t for a higher priced one, and I’ve seen this over and over again.
And it’s no coincidence that it’s the lower-priced properties that show excellent rental yields.

Add to this the pure potential you have with a property deal that you just don’t have with shares – and I’m sold. Why, i can renovate (lots of emotional satisfaction here, passed on to the tenant as appeal – turning your property into an in-demand one, and thus an even better investment. You cannot subdivide, renovate, put a bathroom heater into (etc) a share. You cannot ensure the priority management of your property by your property manager with a share. So I also enjoy the degree of control.

I also enjoy the passive long-term nature of the investment (once it gets going! Before that it is anything but passive!)

>However shares do require more
> “monitoring” and this where property comes out ahead for the average punter,
indeed

> active share investor (not a trader) can use this to their advantage and
> easily move from one share to another, a property investor cannot do this

and this is actually a backwards advantage to property. It means you can be a bit slower to respond and still get away with it. The boom doesn’t start on friday and by the end of the weekend it’s bust. it doesn’t even start in february and end in october. It’s years. This is why experts can’t even tell whether the bubble has burst, is bursting, or won’t burst. If a suburb is hot and number one this year, it will be number one, two or three next year. It won’t be number 127 like what shares can do.
It’s the s-l-o-w ness of the peaks and valleys that gives investors with a finger on the property pulse ample time to react without having to watch it all the time. less time spent watching an investment, more quality of life…

>and
> the average share investor doesn’t either (they just watch their share value
> plummet and complain about the market or their broker).

Yes, but why are you allowed to say this but when I point out bad things about shares, it’s criticising?

> You have clearly done very well with your investments over the last year or
> so, but you don’t seem to acknowledge that there were risks involved in your
> investments

I soooooooo did!!! on another thread though, here:
http://propertyinvesting.com/forum/topic/12108.html
I talked about the risks and what they were I’d worked them out to a dollar amount. My Dad is an accountant and he made me work out my worst case scenario (100 percent vacant) and how much that would cost me. It turned out to be around $20 per week worst case, which I could handle. That wasn’t actually realistic. Realistic worst case was 1/2 the current rental, or 50 percent vacancy. look the properties all would have still made ten percent yields on only 50 percent occupancy – i,e, I was purchasing 20 percent yields. THAT was my risk mitigation and another way was not leveraging to reduce holding costs instead. I also mitigated risk of vacancy by perfectly maintaining and decorating my houses to ensure appeal. It Worked!!! And that was when interest rates were low and everyone was buying like mad, so you’d think that rental demand was not as strong then *and it still worked!* Now rental demand is even stronger.

>and that just because your returns are good now they may not
> always be so.
too right, they’ll be better!
rents are indexed for inflation. If rents have still gone up in years where everyone is buying (such as when interest rates were low) why won’t they go up even more when nobody is buying (cause interest rates are rising and property prices have risen) – My little example of a 1991 purchase for 5K rented for $20 renting for $130 now and worth $50K – that’s 13 years, and well over the length of a property cycle. Why shouldn’t I expect my returns to get better and better over time?

>Many investments have shown great returns one year and negative
> the next.

define ‘great’ and explain this. Because I want to check what you mean before I debate it!!

> You are clearly knowledgeable in NZ regional investing and have helped many on
> this forum with information on NZ (I have NZ investments as well and I’m
> grateful for your contribution).

cool

>Why do you continue to criticise share
> investing

OK. I have a friend who inherited 200K and didn’t think she had ‘enough’ to buy a property to live in in Sydney. OK. (i know, buying a place to live is not the only option, you can borrow, etc etc) – So she thought, I can afford to buy shares. Invested in shares and recently lost 30k of it. (don’t ask me how, through a broker or what.)

This is TYPICAL!!! Even Wayne’s site has articles there that say something like ’75-95 percent of people lose some or all of their capital’ (on the stock market). Casinos??? “all but a tiny percentage of gamblers eventually lose” – is a tiny percentage around 5 perhaps?

So I – when I am financially free which I can see quite quite clearly – don’t want to be alone on my rich island with all my mates broke and lost all their money on dodgy investments they didn’t have the time or skill to do well at, or the control. So why not ‘evangelise’ on what I believe to be a no-brainer passive stable easy low risk strategy?

I want to try and help the 75-95 percent. I am not so concerned about the 5 percenters (obviously Wayne is one of them.) !!!!

So now you know why I ‘criticise’ shares (no differently than you have just been ‘criticising shares’.

>Australian property investing (compared to NZ) when you admit
> your knowledge is thin on both?
As to why I criticise Australian property investing, I don’t criticise *Australian property investing* per se, I criticise the intelligence of buying a property in a market for cashflow where the rental yields are too low. And I also criticise the intelligence of negative gearing for capital gains in a market which is *currently* overvalued and might go down in value. Surely that would be lose/lose? Lose money holding the property (negative cashflow) and lose money with capital loss potentially? All with an asset you can’t sell quickly, like a share?

I’m *sooooo* going to be buying in to property in Australia, but I’m building up my wealth in a different market (NZ) while this one goes down a bit more.

That’s just an opinion of mine of course, but even if it stays flat that’s OK because meanwhile while it’s flat here I am getting 24 percent cashflow returns ‘over there’.

Don’t say I know nothing about the Aus property market, because as you know I spend a lot of time here, and I live here. I probably travel around Australia more in one year than most Australians who have lived here their whole life.
I’ve lived in each capital city for weeks or months, I’ve driven all over – taking in places like Traralgon, Bathurst, Gympie, Lorne, Ballarat, Goulburn, Cooma, Yallingup, Alice, Gove, Bundaburg, Mackay, Marg River, Darwin. And that’s only a tiny fraction of the places I’ve been to in Australia. And of course I always look at real estate prices, locations, yields. remoteness. Amenities. I’ve visited national parks, several offshore islands, tasmania. I know the best place to get a coffee from Rockhampton to Fremantle. I’ve driven the hume highway, the great ocean road, the ‘end of speed limit’ road out of Darwin heading South. The only place I haven’t had a lot of experience in is the ‘outback’ because I have mainly been to places where there are actually people. i.e. properties. Plus, I know plenty of Australian investors. I get the magazines….I know Australian bird-dogs who I keep in close contact with to compare notes. (And they’re specialists. but where do you think they are buying at the moment???)

> The real value of a forum like this is for members to contribute knowledge
> about those areas they are familiar with, not just to bag things which don’t
> appeal to them.

So – hang on, I’m confused. By bagging someone who’s doing something that doesn’t appeal to you for bagging something that doesn’t appeal to them, aren’t you….ahm,,, never mind…..

Oh and a final irony. If the title of this thread had been ‘there’s better investments now than Australian property’ I would have written ‘yeah – NZ property!’ and maybe left it at that. The whole property vs shares thing I think is a red herring, because most people I think would be talking about ‘AUSTRALIAN property investing’ vs shares.
Do you think that is a fair assumption?

cheers-
Mini

joy to the world

It seems this thread is very Subjective.

Does not matter which is beter – do whats best for you.

There is alot of static out there in the world from stock brokers, financial consultants and the superannuation industry who benefit from commissions and management fees on shares bought and sold.

Trying to be objective. The main benefit in my view is that with Property you can LEVERAGE. Provided you have a deposit $10k and an income to support the loan.

By leveraging you can build a substantial property portfolio which can result in an accumulation of wealth and income.

Comments on leveraging please.