If property doubles in value every 7-10 years, do rents double approx every 10 years?

[alexlee]

I still hold to my theory. For a given property, yields fall over the long term. Until it gets redeveloped, when the yield resets (but usually involving a lot of extra money put in so you can almost call it a 'new' property).

On the other hand, if it doesn't, and rental actually rise as fast as prices, then heck I'll be doing even better than I planned.
Alex

 

[BayView]

All I've ever heard from people are complaints about how expensive food and petrol are, while no one ever mentions tax cuts even though they obviously increase our take home pay.
Alex

The problem with a tax cut is that it is usually so pathetic it is dismissed instantly by everyone. What are they usually; a couple of dollars? WOOHOO!

And don't forget; as soon as the sheep get some freed up cash, what do they do with it?

Spend it on more stuff that has just gone up in price, so the price rises are kept in the front of their mind even more.

 

[alexlee]

The problem with a tax cut is that it is usually so pathetic it is dismissed instantly by everyone. What are they usually; a couple of dollars? WOOHOO!

And don't forget; as soon as the sheep get some freed up cash, what do they do with it?

Spend it on more stuff that has just gone up in price, so the price rises are kept in the front of their mind even more.

And the same people can't see how saving $50 a week can turn into a multi-million dollar portfolio.
Alex

 

[yieldmatters]

I still hold to my theory. For a given property, yields fall over the long term. Until it gets redeveloped, when the yield resets (but usually involving a lot of extra money put in so you can almost call it a 'new' property).

I think you are right. The takeout for me is it's important to find a property that has many possibilities for future development. Even if you're not prepared to redevelop yourself somebody else might and you can sell to them.

 

[alexlee]

I think you are right. The takeout for me is it's important to find a property that has many possibilities for future development. Even if you're not prepared to redevelop yourself somebody else might and you can sell to them.

Also possible. You'd make more money if you redeveloped it yourself, but over the long term you'd still make good money just selling a decrepit old house (but on a desirable block) to a builder or renovator.

As for a property that has many possibilities..... obviously the bigger the land the better. However, when the location improves people will be willing to work with even badly located small blocks (if it's in Bondi).

Personally, I think just buying ordinary old houses on subdividable blocks in areas that have transport is good enough. Especially if I buy a lot of them.
Alex

 

[BayView]

And the same people can't see how saving $50 a week can turn into a multi-million dollar portfolio.
Alex

Actually, I think the figure was even lower. I remember reading in John Burley's book "Money Secrets of the Rich" he talked about this 18 year old daughter of a friend.

He told her to invest $50 per MONTH and would be a millionaire by the time she was 40.

But yeah; the average sheep's ciggy and VB quota would serve them well in a mutual fund.

 

[alexlee]

He told her to invest $50 per MONTH and would be a millionaire by the time she was 40.

But yeah; the average sheep's ciggy and VB quota would serve them well in a mutual fund.

If you actually gave the average person a big tax cut (especially if it's paid in a lump sum) what are they going to do with it? Buy a car, buy a TV, go on a holiday, etc and be no better off.
Alex

 

[alexlee]

Going back to the topic, though. So, CairnsInvestor, what do you think of our theories about yields and rental growth? Comments?
Alex

 

[FHB]

Therefore, if an IP today rents for $200pw, then you should be raising the rent around $20 each year to catch up with inflation? Is this correct?

For the older folk here (I mean younger, younger folk ), were rents half they are today 10 years ago? Ie: 1997 the rent would have been $100pw in the above example?

Seems the thread went a bit OT for a while, it is a bit hard to prove if rents will double in the next 10 years, but I doubt incomes will, unless the RBA gets it badly wrong.

Even allowing for the impact of the location of a specific house becoming more attractive over a 10 year period. Sure you could redevelop it and double your rent, but I don't think this is what the OP is asking. The question seems to be asked from a macro POV.

Some investors may have experience with rents in the past doubling over a 10 year period, but looking back to pre inflation targeting, incomes also doubled over 10 years, in some cases less. In 1971, the average full time income was $4.5k, it was over $9k by 1976. This combined with the fact households were gaining multiple income earners and I'm hardly shocked that both rents and house prices doubled over such short periods. Explains why house prices were static at about 3-4 times income for so long.

It seems from this recent experience that incomes will have to out pace the RBA targets to get the balance back between property and incomes in the future, from a macro view.

 

[want2bewealthy]

It depends on location, demand, and your PM,
A unit of mine in a block of 20 has just been raised from $270-$295 per week but another unit in the same condition is being rented for $120 per week... riiiiight..

 

[Nullagine]

Actually, I think the figure was even lower. I remember reading in John Burley's book "Money Secrets of the Rich" he talked about this 18 year old daughter of a friend.

He told her to invest $50 per MONTH and would be a millionaire by the time she was 40.

But yeah; the average sheep's ciggy and VB quota would serve them well in a mutual fund.

Your memory is shot.

$50 / month would require a compound rate of return after all costs of 33% / year from age 18 to 40 from $0 to $1M.

$50 / day would require a compound rate of return after all costs of 8% / year from age 18 to 40 from $0 to $1M. 4.5% / year if contribution grows 4.5% / year.

 

[BayView]

Your memory is shot.

$50 / month would require a compound rate of return after all costs of 33% / year from age 18 to 40 from $0 to $1M.

$50 / day would require a compound rate of return after all costs of 8% / year from age 18 to 40 from $0 to $1M. 4.5% / year if contribution grows 4.5% / year.

yeah, could be right. I was sippin' a chardy/s when I posted. Maybe is until retirement; not 40.
If anyone has read the book lately they may be able to clarify.

 

[LynnH]

The girl concerned was Tiffany - she started investing at age 18. John Burley showed her how to invest $100 per month, and she would be a millionaire ar age 50. (Source: Money Secrets of the Rich, page 44).

Cheers
LynnH

 

[BayView]

Thanks Lynne.

I wasn't even close.

Where's my glass?

Incidentally; whaddya think of that book?

 

[Nullagine]

The girl concerned was Tiffany - she started investing at age 18. John Burley showed her how to invest $100 per month, and she would be a millionaire ar age 50. (Source: Money Secrets of the Rich, page 44).

Cheers
LynnH

Invest $100 / month from age 18 to 50, to go from $0 to $1M would require a 16.7% / year after all costs compound rate of return.

Increasing contribution by 8% / year would require a 13.5% / year compound rate of return.

Alternatively, $17,356 compounded at 13.5% would give $1M over 32 years.

 

[alexlee]

As if a million dollars would be worth much in 32 years...... It's always surprised me how superannuation presentations, etc. talk about how so and so couple can invest in a super fund for 30 years and get $2m or whatever in assets. And I'm thinking, what about inflation?
Alex

 

[LynnH]

Marc

First read John Burley's book about 5 years ago (I think) - enjoyed it very much at the time, and thought it put several other things I'd read about together in an easily understood form. Can remember making some changes to what I was doing at the time, but can't remember much of the detail of the book now (my girls call it 'old timer's disease'! )

BTW, what's in your glass, Marc? Is this a belated Christmas celebration, or are you getting in early for New Year??

Cheers
LynnH

 

[Nullagine]

As if a million dollars would be worth much in 32 years...... It's always surprised me how superannuation presentations, etc. talk about how so and so couple can invest in a super fund for 30 years and get $2m or whatever in assets. And I'm thinking, what about inflation?
Alex

$1M received 32 years from now is now worth $388,337 with inflation a constant 3%.

 

[myla]

hello,

anything is better than nothing

thankyou

myla

 

[BayView]

Marc

First read John Burley's book about 5 years ago (I think) - enjoyed it very much at the time, and thought it put several other things I'd read about together in an easily understood form. Can remember making some changes to what I was doing at the time, but can't remember much of the detail of the book now (my girls call it 'old timer's disease'! )

BTW, what's in your glass, Marc? Is this a belated Christmas celebration, or are you getting in early for New Year??

Cheers
LynnH

Usually "Yellowtail" chardy or shiraz, or sometimes from the "Sterling" vineyards from here in Napa.

Yellowtail is from Aus, and is cheaper here than in Aus. Work that one out.

And every day is a reason for a drink. At least that's what my wife and I tell each other.

We've got a bottle of Moet for New Year's Eve, which we'll crack out on the boardwalk in Monterey.