Percentage of Pop. who buy IP's

I have read the statistics from a number of sources that, in terms of home ownership:

Aus/NZ home ownership highest in the world at around 70%, thus 30% of people renting.

That around 13% of the population buy an one investment property.

That around 6% of THOSE 13% buy more than one.

That strikes me that hardly anyone buys more than one property, and even less people buy more than one investment property.

People at work (yes still working) cannot understand the 'risk' I take with investment property.

Do people out there on this forum experience similar 'resistance' in the way people think?

Tim

It used to bother me that when I talked to colleagues about property, they were so toally negative. It doesn't bother me any more. I don't talk about property to my colleagues any more.

That's where it's really good to find people who are doing similar things, and to learn from (and to teach) them. Freestylers, msn, or local Cashflow games can be good sources for networking. Even the chat room.

Property Portfolio

Does anyone think that an optimal amount of properties or a certain amount in a property portfolio is within their reach fairly easily.

For example, you really need to own outrigh a minimum of $1M worth of prop at retirement, preferably $2m, to generate adequate cash flow.

Is that what people out there are aiming for?

Tim

Hi Tim

To get different results you have to do things differently. Many are happy with the standard result and thats great for them.

The idea of the 40 40 40 plan doesnt appeal to many on this forum. The forum is sort of a haven for the "financially overliterate".

Ta

rolf

40 40 40

Sorry Rolf,

you'll have to excuse me for potentially misinterpreting your moderated comment.
I am not sure what you mean by 40 40 40, and different results, and I would appreciate an explanation.

I have noticed a lot of basic queries on this forum, and any requirement for financially overliterate particpants is not clearly defined on entry.

Tim

40 40 40

I'm not completely sure about 40 40 40 either. Does it mean work 40 hours/week for 40 yrs to retire on 40% of your wage?

Doesnt appeal much to me.

I'm thinking 40 10 100

TheBacon

Or maybe it means retire at 40 with 40 properties on 40% LVR?

Lotana

Hi Tim

The Bacon has it right, though I love Anatol's idea.

40 hrs a week for 40 years on a 40 % allocated pension if you are lucky.

The reference to the overliterate was in jest, but perhaps not really. Many people that think differently when it comes to money suffer under helpful relative and work colleagues because they are out of the norm.

My definition of overliterate is anyone that wants to take control of their own financial future and takes steps toward it. By that definition any poster here, and many guests falls into that category.

Therefore this forum is for anybody be they babes in the woods or zillionaires because each can benefit from the other.


ta

rolf

Okey Dokey

Rolf,

thanks - I get the picture now.

yes I have to agree, hardly anyone strivers for financial literacy (fault of schooling?), but this forum is a pretty amazing place to increase it, and very interesting.

Thanks,

Tim

Hi Tim,

In response to your initial post I am finding the opposite at the moment. Pratically every second person I know has or is planning on buying an IP. It seems to be a favoutrite topic of conversation in social settings too. And I believe some recents stats (sorry can't remember where I saw them) had around 30% of properties purchased now are for an investment and not a PPOR.
I think there are a few reasons for these changes.

Lily

G'day

Apparently 4.5% of those who own one property own two properties, 1% own three, and .5% own more than three, a total of 6% of all property owners.

Some of the 4.5%, when they sell their one extra property, do not replace it. However, this 6% remains fairly constant, varying slightly depending on stock market and other general economic conditions.

Given that less than 70% of the population own property, then only 4% of the population in real terms own two or more.

Lily, many people are 'gonna' do something, and as the auction / renovation / investor TV programs are popular light entertainment, then many more people are 'gonna' do it, too!

Someone said to me the other day "Kristine, you are one of the very few people I know, who will talk about money" by which they meant finance, economics, how to fund and finance, tax, investment, development etc


The following excerpt is from the AusStats website, reporting on results from the last Census. It makes fascinating reading, presenting insights into the patterns of behaviour in Australia today.


I was intrigued to read that some 22% of 2nd property owners actually inherited their most recent rental property. So they became investors by accident, not design.


URL is http://www.abs.gov.au/ausstats/[email protected]/0/05DC1D64F51F55F7CA2568A900136299?Open


QUOTE .......
Media Release

8711.0 Household investors in residential rental properties
EMBARGO: 11:30 AM(CANBERRA TIME) 16/06/98

Jump to: Related Links

In June 1997 there were 584,200 private household investors with rental investment property and most investors owned or partly owned one rental property only, according to results of a survey of Australian households released today by the Australian Bureau of Statistics.

The private rental market provides housing for 20 per cent of Australia's households. Private household investors own over 50 per cent of residential rental properties.

Although there was no typical investor, survey results showed that couple families represented a significant proportion (75 per cent) of total household investors in residential rental property. Many (70 per cent) of these couple families had two income earners, and 62 per cent were within the prime working age group (one partner aged 35 to 54).

The reasons for investing varied, although two thirds of household investors were looking for a secure, long-term investment. Other important motives were negative gearing, rental income or to use the property as a possible future home. While most investors specifically purchased the property to rent out, a quarter were renting out their former homes.

The average value of the rental properties, as estimated by their owners, was $146,000 although this was considerably higher in NSW ($190,000), reflecting the high real estate prices in Sydney. Just over 60 per cent of rental properties were separate houses and 26 per cent were flats or apartments. The average weekly rent was $172, although again this was considerably higher in NSW ($205).

Further details are in Household Investors in Rental Dwellings, Australia June 1997 (Cat. No. 8711.0) available from ABS bookshops. A summary of its findings is available from this site.


.......UNQUOTE



and Rolf -

shouldn't it be 40/50/30 ? I started work at 15 at Coles in The Mall, West Heidelberg, on Saturday mornings. That means I've already been in the workforce for 37 years. If I work until 65 (my eligible retirement age), that would be 50 years.

Judging by my parents example, they retired on about 30% of their last working income. And apart from my first full time job as a Spectroscopist, I have never worked a regular 40 hours per week.

However, as I have no intention of ever retiring, I would rather operate on the 60/70/$multiple ratio. It's really a lot more fun!

Cheers

Kristine

On the other hand ... I'd really love a cruise on the QE2!

Hi Kristine,

I take your point (about the gunnas) however, just from my own experience, I would not be surprised if the statistics have changed since 1997 - after all that was 6 years ago. I believe the recent boom in housing prices, along with the depressed state of the stock market, has meant a shift towards property investment. Some people now think they can't lose with property (after seeing their PPOR's double in the last 3 years) so are starting to invest there. Dangerous stuff of course.

It also seems to me that people are more aware about their retirement etc than a few years ago. And yes I think the TV shows ('Money' etc) are a large part of it.

Anyone know of some more recents stats of the variety that Kristine kindly provided?

Lily

Lily House, it will be interesting to see how many actually hold on to their properties when the market does actually change for the worst. Same sort of thing happens in the stockmarket nowadays, when it is going well everyone starts investing or saying they are going to invest then..........ahhhhhhh, quick sell get out. They buy at the top and sell at the bottom, typical and very unfortunate.
Actually you saying that all your friends are saying they are going to or just have bought tends to make me think the downturn is about to happen even more. I am sort of looking forward to it abit actually, wouldn't mind raising the rents abit for better yeild results (getting together a bit of cash for a deposit (if equity doesn't make the grade) on another in a buyers market would be good too )

It really doesn't surprise me that MOST 'property investors' only ever buy one IP.

Buying ONE IP is not usually that difficult. In fact if you already have your own home and choose to do it through various companies it can be an extremely simple process TO BEGIN WITH. Keeping it, dealing with with the various management/maintenance/finance/tenant issues etc. and ensuring the product you purchased is actually rising in value is more difficult....

Successfully handling the above but then juggling all that is involved with TWO properties is rapidly turning into WORK. Hmmmm.........finance structure is now becoming more of an issue, DSR's, rental reliance, cross-collateralisation etc etc.

Then of course there is the third, fourth etc.

I guess what I'm saying is that I think a lot of people get that first IP as a result of a newspaper article, bbq or dinner party. Know what I mean? They've just heard how someone made a quick $100,000 out of property and think that this looks such an easy ride they'd better jump on as soon as possible. NB. Only problem with many of these first time investors is that they have all been to the dinner parties during a property boom and they're all jumping on the same ride But I digress.....

I guess what I'm saying is that post 1st IP Settlement.........REALITY SETS IN!

"Oh....I didn't realise I'd have to put up with 'tenants' as part of this process!", "Oh no.......they left marks on the carpet.....what will we do?", "We never thought about interest rates rising 3% in 2 years!", " It's been vacant now for a month.......perhaps this whole IP idea wasn't such a good idea".

Anyone ever heard the above types of comments too?

Why don't most people have more than one IP? Because it involves a reasonable amount of work, management, committment and certainly a modicum of patience at times...... and quite frankly most of the population are not willing to add all this to earning a living, raising a family and paying the bills. If you can time-mange it the rewards are there for you.

I never look at investment property or for that matter investment in anything as 'a free ride'. Usually it takes a degree of work and commitment. If I'm at a bbq and people want to talk about the 'free and easy' ride of property, while not discouraging them, I try to give some input on ways to minimise the problems as well as highlite some potential danger areas. I'm never negative, but I'd just love to see some of these people I'm talking to get two, three, four, five or more IP's........not one that they will wear like an anchor around their necks.

Hi Alan


I think the reason that most investors get only one IP is because they negative gear.

The term positive gearing has only been around for the last 18 months in common use circles.

There is also the mantality that one should pay less tax rather than work smarter so that one earns more money.

spooky

Hi Tim,

Regarding what you said :

>People at work (yes still working) cannot understand the 'risk' I take with investment property.
>Do people out there on this forum experience similar 'resistance' in the way people think?

As someone who is 31 years old and now have 6 IPs (and on a fairly average salary I reckon), YES!!!! Definately people look at me and wonder why the heck I do this, and quite often think of those "60 minutes" episodes where they see the "Tenant from Hell" kicking the place down etc.

The way I figure it, I would rather contribute towards MY OWN retirement MY OWN WAY rather than just hand over money to some superannuation company which probably won't even be in business by the time I retire, and if it is, will have eroded my money through fees and crap investing anyway! I shake my head and consider myself LUCKY when I see all these reports in the papers stating how badly super funds have done etc. etc. and I'm just glad I'm doing it all for myself.

Quite simply, I see no reason other than fear, and maybe a confidence issue for other people at my work to do the same as what I have.

Andrew.

Hi Alan,

you raise some very valid points and agree 100%.

I'd like to add, that most people do not view their property investing in the business manner in which it should be viewed.

People become too emotional about their investment properties, the tenants, the carpets, the paint, the pets etc etc.

If people started viewing their investment activities more like a business, there would be far less hassels and heartaches for them, and the whole process will then seem that much less daunting.

And so so many people fail to research properly, as we all know. I wouldn't go and open a business without doing relevant research, so why would I go and buy a property without knowing exactly what I'm getting myself into. It's more than just buying a property and then sitting back to relax and watch things happen.

People make it harder for themselves than it really needs to be, and that's probably why most don't get past the first one or two.

G'day

Point taken, Lily, regarding the age of the statistics. It will be very interesting to see the results of the most recent census, and whether profiles in the population have really changed that much at all.

We were out to dinner last week, and all three couples had, or had had, properties other than the PPOR.

However, one couple sold their previous rental, which had been their original PPOR and which they had kept when they bought PPOR #2. But when flash & fancy PPOR#3 came along, they sold the original house. So back to sole property owners.

The other couple bought a small unit specifically for investment about 12 months ago. So far, so good.

And we've been around for a bit and have accumulated a few barnacles on the hull and are in the .5% category and have been for some time, disregarding the two which I bought in the last twelve months specifically to renovate and redevelop.

So, out of this small sample, the number of active investors who have made a choice to be investors has risen.

(Footnote edit: My husband has now told me that the other couple actually did not buy the investment unit. It went to auction and exceeded their arranged funds. And they haven't done anything since. So the status quo remains unchanged)



I have read that the 50+ generation, on finding themselves the beneficiaries of their parents' estates, are tending towards the 'retirement' property ie house at the beach, in the country etc and not necessarily a for-the-purpose investment property. (Disregard the put-it-in-superannuation brigade, the buy-shares group, and the lets-take-a-trip-before-its-too-late mob [I wish])

When I was selling in Melbourne CBD, the bulk of the enquiry came from the 50+ group, but most of the sales were to under 30s. The old 80/20 rule.


Perhaps when we birds flock together, it is easy to think that the whole population is thinking and acting the same way. However, from my dispassionate observation of human nature, the shift in and dispersion of real wealth has been slight, and has a lot more to do with the emancipation of the serving class following WW1 and the more recent deregulation of the banks, than it has to do with any real motivation from the 'bloke & blokess in the street' to create independent wealth for themselves and for their families.

I am happy to be proved wrong.

Cheers

Kristine

Off to take some muscle relaxant after a hard day oil painting the trims. 232 metres of skirting boards, plus an indeterminate amount of architrave, quad and other fiddly bits, not to mention 17 doors double sided plus two louvre doors. (No, no, not all today!)

If anyone has any really good tried and true methods of getting oil paint on with slightly less elbow grease than I'm using, please open a new thread in Added Value and I will be your slave for life. On second thoughts, what did I just say about the serving class?

Oh well, of all the gin joints in all the world, she has to walk in to mine!! The drink of the evening is gin & tonic with ice and a slice. Perhaps I better go now? Believe me, it is the oil fumes, I haven't even sipped the G&T yet!!

I have read that the 50+ generation, on finding themselves the beneficiaries of their parents' estates, are tending towards the 'retirement' property ie house at the beach, in the country etc and not necessarily a for-the-purpose investment property. (Disregard the put-it-in-superannuation brigade, the buy-shares group, and the lets-take-a-trip-before-its-too-late mob [I wish])

Click to expand...

Kristine,

A good post (as usual).

And I think the paragraph I've quoted hits the nail on the head formany.

I'm almost in the 50+ generation. And the only way that many people around me (at this age group at least) see to be able to retire is to inherit from more frugal (and perhaps more astute) parents. It's their only retirement plan, apart from the government pension.

But my parents are too healthy for this to happen. Around 75, and on annuities- so the longer they continue to enjoy life, the less the inheritance. That's quite cool. I'm here because I have a retirement plan.

Parents with assets are a copout for many.

Hello, Geoff

Ta for the feedback.

Regarding the complexities of the human psyche and the Big C - I think it has more to do with Committment than with anything else. Of course, sitting on the fence can get to be a tad uncomfortable, but after a while your btm becomes numb and you don't notice it any more. Neither the numbness, nor the btm.

I know people who have seen the value of their superannuation drop by nearly 1/3rd, and yet not content with their employer's compulsory contribution, they continue to funnel voluntary contributions into the scheme. That's good.

I know people who bought lots of Telstra shares. That was pretty good, too.

I know people who, in order to claim the pension, deliberately spent almost all their lifetime savings of superannuation on a new car and a trip to Europe. Their assets, apart from the PPOR, are now below the threshold for the pension. That's pretty good, huh?

So why??? don't and haven't people bought property, other than the PPOR and perhaps the cement sheet cottage 'at the beach'?

Because of COMMITTMENT.

If you put a lump sum into super or shares (ignore the trip), it is a one off event. You don't have to back your judgement and take out a loan. If the fund improves in value, the investor feels smug and congratulates themselves on their good judgement. If the investment falls in value or fails completely, the investor can blame someone else, and apply for the pension, or more pension. Either way, their parent - the Government - will look after them.

Assuming, of course, that the economy doesn't fail, and that there is enough in the tax kitty to keep dishing it out.

So I shall draw a long bow here:

Are investors the mature people of society?

Are investors prepared to make mistakes, to take responsibility for themselves, their loans, and for their tenants!

Are investors the 'parent' types? What would Freud have to say about this?

Instead of envying the perceived good fortune of others, are we more inclined to watch and observe the successful Captains of Industry and those who came off the boats with two pound in their pockets and two words in English, and went on to provide for themselves, their families, and to employ other people and to move proudly into retirement, knowing they never put their hand out to anyone else for their entire adult life dating from before the age of 15?

And are investors more inclined to seek industries where the individual, by dint of hard work and perseverance, but perhaps without formal education, can succeed in a country full of amazing growth and opportunities?

Yes, I know that George Miele, musing in the laundry one day after he had retired from his career as an engineer, reflected that there must be a more efficient way to launder clothes than filling a bowl with water and detergent and agitating the clothes over a number of changes of water.

It is a matter of record that he then went on to invent the Miele washing machine, which dipped the clothing through small quantities of water thus achieving significant economies of water and detergent.

And that Miele then went out on the road himself to doorknock the sales of his machines and IN HIS RETIREMENT he built up an empire which to this day manufactures high quality domestic appliances.

But the truth remains ... very few of us will invent a cure for cancer, or a triple charged turbo washing machine, or a left handed tea cup

But ...

We can all buy another house, present it to the best of our ability, provide shelter and accommodation to another family, and in so doing, make provision for our own old age and the benefit of our successors against the uncertainties of governments and economies to the best of our ability.

So ...

It's easy!!

All we have to do is lose our fear of ridicule, our fear of envy, but most of all, our fear of committment.

And for most people, that's very hard.

So Geoff et al, it is one thing to preach to the converted, and certainly there has been a certain ground swell in awareness, but I remain convinced that the change in supposed perception has not reached the change in reality.

In my humble opinion, oh venerable and honourable forumites, the percentage of the population who deliberately buy income producing investment properties has not changed in a significant manner for the last ten years although I concede that it may change in a small way during the next ten years.

So my hot non-property investment tip for the week, is buy shares in the major recreational, tour and travel companies, in anticipation of the once-in-a-lifetime trip which all the baby boomers are about to take to celebrate their retirement!

And with the profits from the sale of the shares (sell on the rise because the demographic will not be longer than five years), buy more small investment properties in the regional 'nesting' suburbs.

Cheers

Kristine