If a person straight out of uni is earning 100k, then they are doing very well. Most people out of uni wouldn't be earning near 50k a year.
2 Bedroom House - Inner City Melbourne
- Thread starter Invest1
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Yep that's true too, I completely agree.
And the just smart simply go out and use the 100k salary + 300k savings to get several houses in several decent suburbs.
Decent is all relative, of course. DeeHwa and you think that Toorak is decent because it offers boasting rights (and a crippling mortgage).
I think Elwood is decent because it is a lovely place by the sea. *shrug* I really don't care about boasting rights because I will be strolling along the beach.
Do you really think people who buy houses in Toorak borrow up to 80%? Most today are either those from Mainland China who pay the $10 or so million in cash upfront, or those with a large proportion of equity in their Toorak houses. Do you really think the guy who bought Miegunyah went and got a loan from Aussie Home Loans? Did you really think the businessman went and got a multi-million dollar loan on that Albany Road mansion last year which was purchased for over $18mil? Oh, not to mention Avon Court, Hawthorn. Surely not right?
I agree decent is relative, but there comes a point where it is undeniable. For example, Toorak and Brighton are undeniably premium suburbs of Melbourne no matter how subjective you can be. It is like saying Jennifer Hawkins is undeniably hot! However, you will get those suburbs, such as Ivanhoe for example, where you either love it, or just consider it ok~ish. Just like how I view Miranda Kerr, I personally just think she is ok~ish.
Btw, using Miegunyah as an example, the absolute capital growth since 1990 was $1mil growth per annum and this sort of absolute growth is reflective of many houses in Toorak, past and current anticipated. If you went and bought 20 houses in Werribee back in 1990 (and not something like Miegunyah) and assume each house is $300K now, that would only be worth $6mil. Pales far in comparison to the $23mil fetched. Rental income would be quite negligible in terms of the numbers we are dealing with. This is of course a very simple illustration, but you get the point.
If you bought one house in Toorak or 20 houses all over the place, you would want the capital growth in Toorak to be higher than the 20 houses all over the place as investing all ones egg in one basket is riskier than spreading the risk and buying 20 properties in different locations.
The vast majority of people can not afford to invest in Toorak. Should the vast majority of people be discourged from investing in property just because they can't afford the best (and assuming Toorak offers the highest growth?) We invested in Frankston North and are very happy with the results at the moment. Assuming a one bedroom unit costs 400k in Toorak, we weren't willing to get a loan for 400k at this stage of our lives. Should we have waited until we could afford Toorak (and thus the GFC would have been over) to invest?
Well I don't know if that's a fair way to look at the optimal risk portfolio theory.
Sure, the one house has more unsystematic risk. But it's probably more to do with the structural integrity of the house and similar issues.
I would've thought it's still too similar a class of investment to warrant a higher rate of return just because you have one house in one place vs twenty houses elsewhere.
Put another way, I wouldn't have thought the growth of one $800k house in Flemington should be higher than 2 x $400k terraces in Flemington just because you've increased your unsystematic risk in relation to structural faults etc. That's what insurance is for.
Sure, the one house has more unsystematic risk. But it's probably more to do with the structural integrity of the house and similar issues.
I would've thought it's still too similar a class of investment to warrant a higher rate of return just because you have one house in one place vs twenty houses elsewhere.
Put another way, I wouldn't have thought the growth of one $800k house in Flemington should be higher than 2 x $400k terraces in Flemington just because you've increased your unsystematic risk in relation to structural faults etc. That's what insurance is for.
DeeHwa said:
I guess that, like us, some do take 80% mortgage and and some don't... if you think that 100% of Toorak dwellers don't, is there a link to support that statement please?
...
DeeHwa said:
20 years of rental income in each Werribee house would mean that all of those houses are fully paid-for, and the landlord is sitting pretty on a tidy monthly income.
Miegunyah - how much was it sold for, and what is the estimated rental / mortgage repayments on that?
You have just admitted that buying one property with the same procceeds increases ones risk rather than buying 2 properties with the same proceeds. Why shouldn't one expect a higher return for buying one property rather than 2 with the same funds to deem the investment a success?
Well ... he's just saying his opinion, that's all. It's like education. Going to certain schools yields better results than going to some other schools.
I don't know what deehwa's view is but as I said, my view is just because reality is like that doesn't mean you should change your life to accomodate for that. It's your life and diversity of opinions are great.
The problem with some of the posters here are that they readily dismiss people who have fundamentally different investment principles/views and do nothing but make cheap comments. No wonder the Christians and Islams are at wars for so many years.
I know someone that had a really good house in Templestowe. They got a house in Toorak so thus sold Templestowe. While they were building there dream house in Toorak they were renting. Guess what happended. They had a mortgee sale on the property. An uncomplete built house sold for over $7 million however now they are renting a small place in the area (Malvern)
My point is some people over extend themselves to get into Toorak and it has dire consquences.
My point is some people over extend themselves to get into Toorak and it has dire consquences.
At that level (ie 1 house vs 2 houses), I would've thought the risk lies with things like structural faults etc. Insurance passes on the risk to a third party. That's the 'pooling effect' of insurance. Other than that, the riskiness of 1 Flemington house vs 2 Flemington houses is more or less the same to me.
But if you were to be precise, even across suburbs there's different risks. Some suburbs are riskier than others for whatever reason. Just like in stocks, my expected rate of return on holding BHP shouldn't be higher than holding 20 spec stocks.
Well of course you buy within your means.
But you sound like you have some financial background. If that's the case you can look at it another way. A theoratical way. High risk, high return. They took high risk. Didn't turn out well. Too bad. Nothing to feel sorry for because if they turned out well I'm sure they weren't going to share their proceeds with you.
There are several ways to view this.
1. The logistics of managing 20 houses would be a nightmare, even if you got property managers on all of them
2. I did say 20 houses in Werribee only, but still, this does not distort the argument because it could be expanded to 20 houses in relatively low median priced outer suburbs. Personally, I don't know how much diversification you can get, say if you went and bought 5 houses in Werribee, 5 in Epping, 5 in Springvale and 5 in Diamond Creek. For a more effective diversification, you would need to buy across different tier levels of suburbs, different property types etc....
I personally believe that diversification in property is HUGELY overrated in Australia. If you establish that property does not drop in value over the long term (it could theoretically, but lets assume it doesn't, which would be the general consensus of property observers), then there is no real case for such 'insurance'. In fact, the only reason supporting diversification is to achieve abnormal growth when one market is underperforming or stagnant. I am not saying diversification is not necessary, in fact, it is totally necessary, but just highlighting that unlike stocks which do fall and companies can go bankrupt, we shouldn't be putting a huge emphasis on it.
As I said before in a previous post, you should be targeting assets where the rich competes with the rich and not when bargain hunters compete with other bargain hunters. The former is obviously the ones which has historically reaped the greatest rewards from an investment perspective, just look at Toorak and Brighton, where buyers have no fixed or predictable price ceiling. It is not rocket science, just simple Keynesian economics 101.
I respect your opinion, but whoever said Point Cook was a **** hole (paraphasing but that was the jist) is also making cheap shots on someone that has a different investment philisophy. Point Cook may not be the best investment but to raise Toorak in a Point Cook discussion is the highet of arrogance in my opinion.
I guess my issue is that yourself (or someone with a similar point of view on investing as yourself, I can't tell the difference between yourself and some others that post) said that someone who is investing is postive cash flow propeties and has a few million dollars worth is not succesdul in investing. I think that's a load of crap.
Well that wasn't me. But anyway I'm calling it quits tonight. Still got to make a living tomorrow unfortunately.
I see your point. However I disagree with you that buying in Werribee is like buying a start up company. In the stock market there are many similar big companies like BHP, so with the same outlay one could buy 20 different top 100 ASX companies, but it's a lot harder to spread risk in buying in affluent suburbs like Toorak. TO spread risk in property investing one needs to look at the less desirable suburbs like Werribee. However buying 20 Werribee suburbs is risky. Should spread risk and buy in other areas as well.
Are you on Seven?
I don't know about you, but I know a lot of people who said 'I could have afforded that Toorak house many years ago, had I known'. Remember, the Toorak median house price in 1999 was just over $700K and yes, it was a hefty price tag then to enter the Toorak market, but definitely affordable to a lot more people than nowadays.
I am not saying people should only invest in the best. I invested in Brunswick, and by no means is that even near the best. What I am saying is to do a combination of things, which is the usual buy in good locations, relatively close to the CBD and buy apartments/flats/units if need be. It doesn't always have to be houses (which seems like what everyone seems to be doing on SS, considering 90% of the threads are discussion places like Werribee, Frankston, Melton, Point Cook etc...).
You never know, had you got that 1 bedroom unit in Toorak, it could be worth close to $1mil in several years time.
haha, obviously NOT!!!
Otherwise, I wouldn't be saying Miranda Kerr is ok~ish and I would be looking at semi-nude Jennifer Hawkins pictures instead!!!
Btw, I knew you were being sarcastic. Just playing along.
I find it hard to believe that the median house price in Toorak was only 700k in 1999.
If it was, not knowing what the median house price is now, it could be argued that Toorak is now overpriced.
I know Doveton was under 100k in 1999 and is now close to 300k today.
If it was, not knowing what the median house price is now, it could be argued that Toorak is now overpriced.
I know Doveton was under 100k in 1999 and is now close to 300k today.
