Invest in property…looks like a dud to me.

arrowsmith,

You are asking good questions and that is the best way to learn. Only fools rush in. Take heed of what others are saying, but know what you want and what is good for you. Everybody elses opinion is good only for them and their situation, so get to know yours. Uitlise the market for what you want and get from it what you can, and that can mean waht it is willing to give.

Currently every assest class, in the western world that I have researched is overvalued. For the first time since 1929 we have never been so over leveraged. We have over committed markets of over committed companies of over committed consumers. This is a ‘bubble’ of debt. The paradox is there has been a commodity ‘boom’ created. Remember Japan 1989, it collpased because of over investment, and the country had a surplus. The US now has a deficit.

I agree that you can still find good property deals, hell you can even create them, and yet the yields are historically low. I am with you pal why bother? While the majority is out there killing themselves for a great deal the odds have never been more on your side to do NOTHING. Investing is not in the buying or the selling it is in the waiting, ironically I have made a lot more money doing just that…

Patience is a virtue, if it wasn’t everybody would be a saint. Learn the current investment environment, it is about to change. Which way and when is anybody’s guess.

Ciao

arrowsmith, ctaing
You guys are wise to weigh up the pros and cons, risk and benefits of an investment and the alternatives.

I hope that I didn’t mis-represent property for newcomers. It is not difficult, you buy a desirable residence in a good location, and keep it. As long as people want to live in it, you will make money!

Some of the more advanced methods of making money from property, are sometimes hard-work and sometimes complicated, but you don’t have to do these things. If you do, you will make even more money!
this hard work that you speak of, has made me 10 times more money per hour than my regular job pays me per hour.

Property has a lot of benefits,
* generous tax deductions,
* the ability to borrow a lot of money from the bank(although lending for shares is much better).
* is a good stable component of a diversified portfolio (yes, there are other good investments)
* less likely to crash (compared to sharemarket)
* you have a lot of control over the property, you can paint it for instance to get more rent and have the bank revalue it and then borrow more money for more property.

If you do buy property as a buy and hold, you have to keep a long term view 5 years at least, so the capital gain overwhelms the entry costs.

There are stocks that contain property. ALE Group for instance. These stocks do quite well too. Commercial Property Trusts are good earners too with annual returns of 15-30% common.[thumbsup2]

One thing with property that is great is when the property goes up in value, you can borrow money against it for personal or lifestyle expenses. This is virtually tax free cash. If you have enough property, you can live of this money year after year.
The great thing with this is that you become richer and richer because your properties continue to appreciate at the same time!!! howzat? [thumbsupanim]

DLPP,
The closer to the CBD the better, however new home owners will live in the outer suburbs just to get a start in the market. This can be an hour drive or longer.
The South Eastern and Bayside suburbs are generally more desirable Brighton, Elwood, Caulfield, Sandringham are a few examples.
The North and Western suburbs are little more difficult to get to in some cases, a crash or truck broken down on the WestGate Bridge causes Havoc in peak hour regularly.
However there are really nice suburbs dotted all over the city.

Lifexperience

Wow, thanks for posting this question/thought process arrowhead..I too ponder this alot.
The problem (well one of them [biggrin]!) we have is that we tried to find somewhere to rent (we own our own place- but need somewhere bigger) but there’s nothing out there- we are now looking for somewhere to buy (its all very hard to find something affordable- and stamp duty is an issue- as we might be moving interstate in a few years).

One thing I am worried about is if we rent and bank the amount we receive for our place- that will attract- tax. So I am wondering if we should find a place to buy (which should in theory go up in $ or at least not down) and cop the stamp duty. I mean is it a disadvantage to “opt out” of the buying market and rent?
Can you get back into it if you rent (and save) or is it better to have property as “equity”?

Bluemist.

Bluemist.

Chris,

Plenty of experts will tell you, perhaps at a party, that if you buy an IP then you lose the FHOG. The legislation is quite clear on this. If you buy an IP after June 2000, and not use it as your home, then you can still get the FHOG when you do buy your home.

Look it up yourself to confirm it.

Even rea lexperts get this wrong and I know Mortgage brokers and accountants who didn’t believe me until I showed them the legislation in black and white.

See for yourself. Follow the links on my website to your State’s body that oversees the grant. There you can read it for yourself.

Cheers,

Simon Macks
Residential and Commercial Finance Broker
[email protected]
0425 228 985

Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.

Hi Arrowsmith,
The comparison between property and shares is usually made with the exclusion of one very important factor – how much of your own money do you put in AT THE START. This is then the basis of your CASH-ON-CASH RETURN. In otherwords; how much do you get back on what you have put in?
You can buy a $100k of property with around $10k of your own money.
With shares you cannot. You may be able to get an unsecured personal loan for them, but the risk is very high – if the shares collapse where is your security? Can you insure your shares? I doubt it.
With a property you may have a correction (not if you buy well located and correct price – none of my properties have gone down in value since the 2003 ‘crash’ ), but there is still the house as security; and it’s fully insured.
Any cash account in a bank is only going to return you roughly the rate of inflation or less, then after you pay tax your net return is usually not worth the bank statements’ paper. Also, it is ALL your own money that is deposited.
I have bought 4 properties over the last 5 years using only the rising equity in my nown home. My own money was never used for any of these purchases and as I said; they have all gone up in value. So my C-O-C return is infinity.
After I add debt redution to the loan, the return is even better. Now that’s good!
One last thing; if you think Melbournians are getting ripped off with stamp duty then check out L.A.
The cheapest ‘fixer upper’ house in greater L.A is around $800k. The agents get around 5-6% commission, and the yearly LAND TAX is 1.1% of the property VALUE. At the moment there are people having to sell their houses because they can’t afford the tax anymore! Rent returns on houses are around 1-2%, but there are people still buying!
My advice; buy the best property you can afford in the area of your choice RIGHT NOW while the market is still relatively ‘flat’. Then, put as much of your considerable disposeable income into debt reduction over the next 2 years and assuming the market recovers by then, you will have enough equity to buy another great performing property for free! You’ve gotta love it!
I wish I had your money and knowledge when I was 30; I started late at 40 but am making up for lost time. Get into it.
Cheers,
Marc