crisis - i've cracked

[willair]

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The lower the share prices go, the faster I'll get there, as my cash and reinvested dividends will buy so much more. I'm very happy that some of my best companies have fallen the furthest.


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I like the way you think,plus it's just like a Tax free loan from the ATO you only pay the bill when you sell,just keep on milking the div's,and the fully franked tax credits are just another income to be reinvested or spent,most of the equities we control pay between 9% -- 27% fully franked..
willair

 

[austini]

What do you mean by "the power of share dividends"? I confess that I look at 2, 3% dividends and think "big deal"... but I'm guessing that you're alluding to some strategy or perspective that makes that few percent actually worth a lot more than would first appear. Are you able to elaborate, please?

No, there's no special strategy or get rich quick scheme. The real power lies in the dividend growth over time that grows much faster than rent which on overage only rises in line with inflation. Add of course there's the franking credits. There are quality companies out there paying much more than 2 - 3%

Anyhow even if the income returns of shares and IPs were similar the main reason for prefering shares is that once I buy shares (not to mention bugger all transaction costs) the only attention from me that they require is to smile when the dividends hit the bank account twice a year. No wasted weekends out tromping through properties, dealing with imcompetant PMs, r/e agents, rouge tenants, ongoing repairs, landlords insurance, land tax, rates, slack site managers, water and sewerage, compulsory fire alarm checks etc etc. I now spend my time on more important things such as enjoying life and fishing etc until it comes time to decide what to do with the next round of dividends.

I don't want to turn this into another shares Vs property debate. For me it's more of a lifestyle decision in that as I continue to age I want a growing passive income stream that requires the least amount of my time and effort to maintain and administer etc. I've seen it time and time again that whilst we are younger we accumulate higher maintanence assets (in some cases along with complex strutures) which turn out to be a burden when you are older and maybe somewhat more conservative and have more important things to do rather than tend to IP issues et.

Cheers - Gordon

 

[oasis1frog]

I've seen it time and time again that whilst we are younger we accumulate higher maintanence assets (in some cases along with complex strutures) which turn out to be a burden when you are older and maybe somewhat more conservative and have more important things to do rather than tend to IP issues et.

Cheers - Gordon

Gordon, couldn't agree more, I can't see myself in future when I am old and frail, walk with a crutch still worry about leaking taps & blocked toilets, do you still have IPs ?

 

[austini]

deleted duplicate

 

[Perp]

The real power lies in the dividend growth over time that grows much faster than rent which on overage only rises in line with inflation.

Do you mean that dividends remain a fairly constant percentage, but because of CG of the shares, the dividends are larger each year? Isn't the same generally true for property, we're just out of synch at the moment? CG has been much higher than rental growth for a few years, causing yields to drop very low (unsustainably low, IMHO), and thus I would anticipate that over the next few years we'll have bigger rent increases and lower CG, causing yields to stabilise back at the long-term average. I'd be interested to hear others' thoughts on this, though - I may be completely wrong

Anyhow even if the income returns of shares and IPs were similar the main reason for prefering shares is that once I buy shares (not to mention bugger all transaction costs) the only attention from me that they require is to smile when the dividends hit the bank account twice a year. No wasted weekends out tromping through properties, dealing with imcompetant PMs, r/e agents, rouge tenants, ongoing repairs, landlords insurance, land tax, rates, slack site managers, water and sewerage, compulsory fire alarm checks etc etc.

That's sounding very attractive after the average 3 repairs per week I've had requested the past 4 weeks... (This is atypical; 13 tenants have moved in for the first time after refurbishment, so lots of "teething problems" and should sort itself out soon. Still a pain in the *** though )

I don't want to turn this into another shares Vs property debate.

Wouldn't dream of asking you to go there, Gordon

 

[oasis1frog]

Do you mean that dividends remain a fairly constant percentage, but because of CG of the shares, the dividends are larger each year? Isn't the same generally true for property

I think in general the dividends from quality blue chip companies are fairly reliable & net, whereas if you have cheaper IPs just one big repair (replacing the entire roof etc) will reduce your rental income for the year to a big fat ZERO.

 

[nonrecourse]

Property investors as opposed to property or share traders

I think in general the dividends from quality blue chip companies are fairly reliable & net, whereas if you have cheaper IPs just one big repair (replacing the entire roof etc) will reduce your rental income for the year to a big fat ZERO.

I'm really beginning to wonder about this site. We are property investors full stop. Our SMSF holds commercial real estate and our trusts also control property. The reason we "invest" in property is because we control the asset not some faceless board who dictates to the shareholders how many pennies they will pass around. Yes you can make a lot more money with shares if you pick the right one. But that's the problem unless you have insider knowledge that is illegal you are relying on other people to give you the correct financial information.You have no real control over your share assets other than the right to sell out quickly.

Most share holders are not investors, they are share "traders" and speculators. For every Warren Buffett investor there are tens of thousands of traders.

The advantage with property is you can gear without a margin call. When ever I get into a debate with a share speculator they always get upset about the undeniable fact that banks will happily give you 80% of the value of a property based on the LVR with the property and your personal guarantee. With shares often the interest rate is higher and a margin call occurs when the shares drop in price.

With property you can claim depreciation on the building while in shares you are given franking credits. If the company you hold shares in is run by fools you either lose your money or if your lucky and you know someone involved in the running of the company you sell out. With property if you have a bad tenant you move them on. No investment is without headaches. What we like about property is the ultimate control.

Unless you purchase a property that is on an unstable cliff or flood zone you have an asset to sell. Go back to the 1960's and look at the top 50 companies on the asx and look at how many of them lost all or most of the share holders money.

 

[oasis1frog]

QUOTE=nonrecourse;385151]When ever I get into a debate with a share speculator they always get upset about the undeniable fact that banks will happily give you 80% of the value of a property based on the LVR with the property and your personal guarantee. With shares often the interest rate is higher and a margin call occurs when the shares drop in price.
[/QUOTE]
There are structured products will lend 100% LVR for share and no margin call.
Property or share, OR property & share, horses for courses. Property is great for building equity, but the more -ve properties you got the more you need the 9-5 job. The goal of most people on this forum is financial freedom, whatever it takes. I know which asset class I would like to hold when I'm closer to retirement.

 

[jingo]

Yes yes, I am such a visitor and jingo has shown that he has recognised me with a few nicely woven oblique references. I'm happy to accept lizzie's implied definition as 2 million without debt and a passive income of 100k after tax as rich. I like that, and will be there in well under ten years even if you take my rent off the passive income.

The lower the share prices go, the faster I'll get there, as my cash and reinvested dividends will buy so much more. I'm very happy that some of my best companies have fallen the furthest.

Anyway, I did not declare my visitor status, because I simply wanted to suggest another way to lizzy without offending. It's pretty clear it could work well for you as you are already so well off from both the income and net equity point of view.

Sorry if I appeared a bit of an insect to you jingo. Just trying to help. You seem like a nice enough person lizzy and the answer to your dilemma seems to me to be right there in your posts.

Please don't let me stop you from doing whatever is best for you. You are clearly coming to it anyway.

All the best.

Dear Aunt Conic,

I was too hasty with my earlier comments, and I apologise for these. Re-reading your posts carefully, I found many objective comments that indicate that you are genuinely concerned for Lizzie and her current situation.

As Alex and others have outlined, there are many roads to build wealth. Property is but one of them.

I am interested to learn more of your strategy if you are willing to share? Which companies are you currently looking at buying into in the share market at the moment? Do you have a certain % set aside as a cash buffer?

What are your thoughts on the future direction of the property market?

I hope that I haven't asked too many questions all at once.

Looking forward to hearing from you again.

Regards Jason.

 

[nonrecourse]

QUOTE=nonrecourse;385151]When ever I get into a debate with a share speculator they always get upset about the undeniable fact that banks will happily give you 80% of the value of a property based on the LVR with the property and your personal guarantee. With shares often the interest rate is higher and a margin call occurs when the shares drop in price.

There are structured products will lend 100% LVR for share and no margin call.
Property or share, OR property & share, horses for courses. Property is great for building equity, but the more -ve properties you got the more you need the 9-5 job. The goal of most people on this forum is financial freedom, whatever it takes. I know which asset class I would like to hold when I'm closer to retirement.[/QUOTE]

Yes I've seen these so called structured share products they are very expensive and again are more about speculating than investing. Again you have no control over the investment as you are dependent on a management board who may or not be up to the task.

I thought the goal of this forum was about using the leverage available with property to gain financial independence. That is why Jan Somers wrote a number of books on the topic of investing in real estate and started this board.

When you purchase a property using negative gearing the short term goal is to increase your equity as soon as possible and then use that equity to purchase the next property and the next and the next. The idea isnot to have a string of negatively geared properties.

 

[yo yo ma]

hmmmmm based on people's comments, I just had a quick look into it, as I didn't realise it varies so much. Appears SA investors get the same raw deal with land tax as we do with stamp duty:

$500k value of IP land:

QLD $0
VIC $800
WA $825
SA $1,770 (lowest threshold of all, starting at $110k)
NSW $2,096

Steve
This post was copyrighted here... I will have to take you to the SS tribunal
I got a different NSW figure than you using the calculator

 

[yo yo ma]

Wow, NSW is more generous than QLD in that way - in QLD once you go above the threshold, the entire amount is taxable... So there's a big difference between a valuation just below (nil land tax) and just above the threshold (about $6K).

If you go to the Queensland OSR calculator, the land tax for $599,999 is nil. For $600k it is $1,200
http://www.osr.qld.gov.au/calculators/land-tax-estimator.shtml

 

[Perp]

If you go to the Queensland OSR calculator, the land tax for $599,999 is nil. For $600k it is $1,200
http://www.osr.qld.gov.au/calculators/land-tax-estimator.shtml

Thanks yo yo ma; I just noticed I put $6K Of course I meant $600K - oops! And yes, I have a property with a land value of about $620K.... But mine is in a Trust - and thus my land tax is $6,200 pa.

 

[yo yo ma]

I actually thought that is what you meant after I replied

 

[steveadl]

Steve
This post was copyrighted here... I will have to take you to the SS tribunal
I got a different NSW figure than you using the calculator

lol, caught me Steve!

I'll defer to your calcs. on NSW, probably my stuff up.

 

[kum yin lau]

Hi Aunty, I know your intentions are good but you obviously don't own any investment properties so I don't understand why you're on this forum at all.

Someone said much the same thing to me at Xmas. 'The more you have the more trouble it is.' Guess what? This person is on a pension & had to sell her house to move into an age care facility that's a tenth of her own home.

My response is, if I have the choice, I'd far rather choose to have than to not have. Even with the hassles & all.

I have plenty of friends & acquaintances who have high incomes who have lived very well & who cannot afford to retire.

Check out Milly & some others' posts for some comparison as well.

KY

 

[josko]

Unfortunately or is it now "fortunately", I bought my first couple of investment properties in NSW in our names. It wasn't until my fourth that I got a "good accountant who advised me to start buying in trusts. I now have 5 trusts.

These damn trusts have cost me so much money and so much time fiddling around with different bank accounts that I am unsure as to whether to buy my next property in a trust structure. I need to set up another trust but after my last loan and all the hassle I had with buying in a trust I've had it!

Guys no need to tell me the benefits of a trust. But the time and money spent in setting up, holding and maintaining is starting to bite. Any thoughts?

 

[skater]

the time and money spent in setting up, holding and maintaining is starting to bite. Any thoughts?

Yep! I'm in the same position as Lizzie & looks like you might have similar issues. I'm in the process of selling some of the Trusts assets. Having a Trust was definately NOT the answer in my situation.

 

[sash]

Yep! I'm in the same position as Lizzie & looks like you might have similar issues. I'm in the process of selling some of the Trusts assets. Having a Trust was definately NOT the answer in my situation.

Interesting.....skater.

Is the cost of the trust or the actual trust structure that is causing your to sell?

 

[lizzie]

i think skater is probably the same as myself ... because any losses get quarantened in the trust you can NOT claim them against any other income.

trusts cost a lot to maintain and there is no land tax threshold for properties held in trust ... so unless there is a very good reason to have a discretionary trust (high risk job) the only reason i would bother with one in the future was if the property was positively geared from the start and/or i bought a negatively geared property in a hybrid trust.