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There're always numerous arguments to support both sides of the coin. Also no matter what numerical analysis we do, I can twig the assumptions until my point is proven. Do you want me to prove BHP is overvalued or undervalued? I guess my point is, it's all voodoo at the end and no one...

Yea please do. I'm hoping to get a good payrise, but somehow think it's just as likely I'll get fired hahaha...

Actually this is what Wikipedia says. Tongue-in-cheek occurs when your tongue pokes your cheek out.

Well said. Anyway that's one reason I am happy to look at 10-12 yrs doubling as that's long enough to ride out the other way in which yields go up ^_^

Look as I said, the reason I put the analysis up was to show people one way of looking at is is to predict for the worst. If you're comfortable with 14% ROE given 70% gearng, 7% interest rates, 3.5% yields and 12 years to double, then that's fine. However the only thing is I'd still say if...

wylie - I was asking the question generally... just getting people thinking. Anyway it's all about your assumptions and I think if you run your buy analysis on say 10-12 years to double that's alright. I'm not a big fan of people telling me it doubles in 7 years

Maths is maths and numbers are numbers, so let me try perhaps? Gearing = 80% Cost of Debt / Asset (ie real interest rate) = 6.4% (assuming 8% interest rates... for those confused, it's 80% x 8%) Rent / Asset (ie gross yield) = 5.0% Holding Costs = 2/0% (just making it up) Therefore...

I'll keep this short as I need to dash off to meeting in 2 minutes. BHP certainly has a large room full of guys analysing this stuff. They do prop trading on commodities so they obviously look at this stuff. Need to dash off to a meeting. Want to flick a model or two you think is the...

IRR is more a cashflow analysis which coincides with the phrase "cash is king". DCF is fine too but too many difficulties estimating WACC. Anyway I've always used IRRs when I'm looking at exits (as that's how I look at MBOs and LBOs) and where it's a going concern I use a DCF. Actually I...

That's precisely what an IRR analysis does. And to be fair, using your assumptions of 3% rental growth and 3% capital gains makes property a crap investment. But you know what, same with shares. Or anyting. A piece of rock that gives me 3% growth and 3% capital gains is also crap. Also to be...

What you're talking about is just real returns... If CPI = 5% Property Gains = 3% Real Gains = 1.03/1.05 = 98% The maths is easy. I guess the bigger question is this. Going forward, is property going to outperform inflation? If not then where are you investing your money? Is that asset...

Cost of most things have probably inflated by 4-5% pa. The only thing not inflating is salaries, which is dragging down the average inflation. Obviously at the end of the day governments need to maintain some sort of ruler over liquidity, credit policies and so forth. Things could go wrong...

Very good. Love your responses. Much better than the 'Werribee is the best' or 'never buy in inner city' discussions I've been having with some other members previously. I absolutely agree that capital on top of inflation is what counts. I think if you build a detailed model and discounted...

I ran a quick IRR return and cross-checked it with your formula. Obviously a few things to note. Perhaps the biggest one is you've used nominal CG of 3%. Yesterday there was an excerpt in the AFR about post-tax growth averaging between 8.5% to 10.5% in the last decade. Most commentators like...

Growth is obviously a combination of several factors. Can't be pin-pointed down to just loose credit, though I have no doubt that if credit was tightened dramatically the market would die. That said, surely if we had a diminishing population, the market would die too? Food for thought my...

Or you simply find your net return on equity and then adjust it for inflation to get a real return on equity. To complicate things your D&A and tax would be off a non-CPI indexed asset base. Also brings up the question of how do you value your investment. Cashflow-basis since that's...

The fact that you post suggests you do care whether or not people get what you're saying... but I usually don't like to take low angle shots like this, but since you don't seem to shy away from them... Anyway no I really don't get what you're trying to say. A lender is essentially an...

That's certainly not how I understand debt and it almost seems there's a confusion about the concepto f debt here... just because your property goes up in value doesn't mean you're 'cheating' your lender. Why would your lender care whether the asset goes up or goes down in value? Debt is a...

I live in blue chip east (ie Canterbury, Hawthorn, Hawthorn East, Kew, Camberwell, Toorak, Armadale, Malvern etc)... in fact one of them. Anyway I 'read' a lot about those sorts of falls. In my opinion a lot of it was also driven by a lack of expensive stock. I guess what I'm saying is those...

I don't know if that's true. There's a lot of talk about how they were 'hit' during the GFC. I personally live in what many would consider a blue chip suburb. Buying activity slowed down, but I certainly didn't feel any houses on my street were hit. People were pretty relaxed as most people are...