Hi , Im am new to all this stuff and think I may be suffering from information overload influenza. How does one go about comparing the effects on cashflow of say buying a property using debt finance vs interest bearing funds? Things like capital gains, interest payments lost, interest rate rises, capital growth and basically what the bottom line might look like each month. Not to mention when, where,how and why..
Trying not to scare myself silly..
ta
jj
I think you are trying to cover lot of ground at once. Maybe try to understand each step by step in little pieces. Ie. If you want to know what is you casflow situation if you invest in property make a little spread sheet with IN on one side and OUT on the other. Start with 1 year sums and dont go crazy with too much variables for starters. For example I would start with something like this:
Property purchased for $300,000 with 20% deposit and 7.5% p.a. interest only loan renting for $300 per week.
Yearly rental: $15,500
Less yearly interest: $18,000
Less other expenses (maintenance, body corporate fees, council rates etc.) $3,000
Yearly cash return: – $5,500And than you can keep adding on as you go eg. based on your tax rate deduct the depreciation amounts, include a reasonable capital gain to help you with the bottom line. Just remember that with more variables (especialy the ones you "assume" based on the past performances) come higher potential for error
And in same manner you can play around with all the cash coming in or out if you invest in the fund (or any other asset).
Try to keep it simple because, even though some may not make it sound this way, investing is a very basic algebra where your only aim is to come out the end with more dough than you went in
The argument about what is better – shares or property, rages every day and has been covered here already, but I don't mind putting in my 2c worth.
Historically when you look at average returns the share market wins. But not every factor is considered when the numbers are crunched.
Leverage is the big difference between the two, and when this is applied you would have to say that property is better in my opinion.
$20k cash can be leveraged more through property than it can be with shares, with more side benefits such as depreciation and the fact that you control the investment. You can add value to property where you can't with a share.
Having said that, you need to settle on an investment vehicle that you feel comfortable with, and can understand. Both vehicles are good and will make you wealthy if you commit to educating yourself and taking action with safety.
Find a niche and a system and become very good at it;
I know 2 brothers who bought a house in Torquay, Vic. They did it up, subdivided the block and sold the whole lot at 100% profit. Then they did it again with 2 houses, then 4 and so on.
They only deal in Torquay and have done very well.
If you keep comparing the opportunities or the opportunities lost, you will go mad.
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