Nah. Couldn't. Have to go work tomorrow.
More bubble debates in the media
- Thread starter ashalim
- Start date
Nah. Couldn't. Have to go work tomorrow.
I'll give you some time off from work if you ask nicely. Be sure to hang your pinny up behind the kitchen door, though.
what....like the rest of us?
no!
amazing what armchair critics use an an excuse/reason to not do something.
I'd make a horrible waiter. I am far too tall.
Beebop
This is a forum for property investors about property investing. It's not a forum to discuss how to buy a house like someone did 50 years ago. It's not even a forum to discuss how to buy a PPOR particularly (although the subject still gets dealt with every so often in passing).
It's a forum to discuss how to make money from buying property and renting it out and all the associated issues and techniques along the way.
Is this of any interest to you?
If not, why are you here? Just to annoy people who have this interest? I just don't get it....?
This is a forum for property investors about property investing. It's not a forum to discuss how to buy a house like someone did 50 years ago. It's not even a forum to discuss how to buy a PPOR particularly (although the subject still gets dealt with every so often in passing).
It's a forum to discuss how to make money from buying property and renting it out and all the associated issues and techniques along the way.
Is this of any interest to you?
If not, why are you here? Just to annoy people who have this interest? I just don't get it....?
A Ppor Is An Investment !!!!!
But it's not a yield (income) generating investment until such time as when you sell it, at which time it will attract a capital gain however because it's been a PPOR won't incur taxes normally linked to revenue generating sources (businesses) as such as those that house paying tenants. So in terms of "investments" as an overall revenue generating (cash now) type venture, a PPOR ain't one of them.
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A debatable point. The ATO don't agree with you for good reason - it doesn't provide an income! Avoiding a personal expense (in this case personal rent) does not an investment make. I can avoid the expense of my bus fares by buying a Lamborghini but that doesn't mean I'm investing.
I view a PPOR as personal lifestyle expenditure. Like a car or a boat - just likely to be financially better for you.
An investment provides an income and the interest on borrowings to purchase it is therefore tax deductible. Completely different kettle of fish... borrowing to fund a real investment is "good" debt (ie tax deductible) and borrowing to fund a PPOR is "bad" debt (ie a personal expense and therefore not tax deductible).
If someone argues a PPOR should be classified as an investment, I would argue that it's at least such a bad one (relative to real investments) as to not be worthy of the name...
it is not classified as an investment, but it makes money. no different to owning and selling multiple investment properties but with less risk and no capital gains, esspecially if you are a FHBer, 7k grants, plus stamp duty exempt.
And it does provide income, you offset the rent you would have paid, and you rent out the rooms to ppl if you buy a value for money place as oppossed to a shitty unit no one would live in.
and did i mention zero CGT !
If you bought as little as five years ago you could have easily made yourself 2-300k in CG and cashflow, not bad to go to nothing to 300k. even if you still need to rent, you can rent a real nice place with 300k in savings and a 90k a year wage just waiting for your next calue for money PPOR.
And it does provide income, you offset the rent you would have paid, and you rent out the rooms to ppl if you buy a value for money place as oppossed to a shitty unit no one would live in.
and did i mention zero CGT !
If you bought as little as five years ago you could have easily made yourself 2-300k in CG and cashflow, not bad to go to nothing to 300k. even if you still need to rent, you can rent a real nice place with 300k in savings and a 90k a year wage just waiting for your next calue for money PPOR.
So someone offers you a $100k a year job and you quit at the first sign that hard work might be required.
Tsk, tsk, tsk.
Although I don't consider my PPOR an investment (because I have to live somewhere), there are some people who try to make money based on your points above. It works OK in a fast rising market, but for the other 2/3 of the cycle it's a tough battle.
No CGT is one thing, but there are still costs involved in buying and selling, which is one of the reasons property is fairly illiquid.
Sure you can say the ATO does not treat a PPOR as an investment but from any pragmatic view of it spending 500k on something you are hardly going to treat it like the purchase of a new boat or car?
On this I agree with Beebop.
I may be overly analytical in my thought processes around purchasing my first home but I think many make the mistake in buying their first home and treating it like it is buying any other consumer good, due to emotion buyingn, rather than anything else. Sure emotion plays a role but 2 or 3 years down the line if you could have bought better you are going to regret it...
I have a good rule when negotiating deals in the hundreds of thousands more generally, where I am the one holding the money so to speak and the other party does not operate a monopoly. If you close the deal at the point they are ready to walk away from the table then you have pushed hard enough. If they are happy and still like you, you have really burnt a sum of your money or in negotiations speak "left money on the table." Sure I don't act like a **** head (well at least I like to think so anyway...) but I certainly push the boundaries on the other party or I am just not doing my job.
My advice to first home buyers; go hard. You actually have an advantage in that there are no subject to sale issues etc and if you can get pre approved finance you should be able to go hard on the right place.
Even if you don't have pre approval; I laughed at another thread where people said they would not show an agent their bank account details now they occaisionally ask due to sales falling through in the finance approval stage. I would show them in a heartbeat so they know I could afford what I was looking at! It is only going to mean the owners are more likely to accept your offer even if it is below the odds. How is this going to disadvantage me? I am still only going to offer what I want to offer on the place, not some higher amount because they think I can afford it.
Sure if there is only one house to pick from in your eyes (more likely your wifes!!!) you might not want to risk it, but hell where I live there is over 100 I would cop for the right money and another 100 I would not like so much but could accept if they were a very motivated seller.
Go into each and every one you look at and go hard till you jag one, sooner or later you will jag one in the current market, even if every real estate agent in a 10 mile radius cringes everytime you walk in... "here we go again..."
You are talking about likely tens of thousands of dollars off the purchase price buying well rather than buying poorly. Make it count as this will have a potentially profound impact on the next 25 years of your life...
EDIT: Finally you hear about it currently being a buyers market. You are not taking advantage of this if you are buying at what appears to be the market rate. So don't read the paper and go, oh its a buyers market I should buy then. The idea is take advantage of it and squeeze untill the pips squeek if you want to buy... Otherwise you might as well have purchased in early 2010 when things were running hot. In aggregate prices are nearly the same now but the opportunities are very different. Even if it then takes you many months to make a purchase, you will be surprised what opportunities present along the way from earlier offers. Had freinds buy a mortgagee in possession sale for nearly 50k less than an offer the owner had rejected 12 months earlier! This was not an expensive property!
On this I agree with Beebop.
I may be overly analytical in my thought processes around purchasing my first home but I think many make the mistake in buying their first home and treating it like it is buying any other consumer good, due to emotion buyingn, rather than anything else. Sure emotion plays a role but 2 or 3 years down the line if you could have bought better you are going to regret it...
I have a good rule when negotiating deals in the hundreds of thousands more generally, where I am the one holding the money so to speak and the other party does not operate a monopoly. If you close the deal at the point they are ready to walk away from the table then you have pushed hard enough. If they are happy and still like you, you have really burnt a sum of your money or in negotiations speak "left money on the table." Sure I don't act like a **** head (well at least I like to think so anyway...) but I certainly push the boundaries on the other party or I am just not doing my job.
My advice to first home buyers; go hard. You actually have an advantage in that there are no subject to sale issues etc and if you can get pre approved finance you should be able to go hard on the right place.
Even if you don't have pre approval; I laughed at another thread where people said they would not show an agent their bank account details now they occaisionally ask due to sales falling through in the finance approval stage. I would show them in a heartbeat so they know I could afford what I was looking at! It is only going to mean the owners are more likely to accept your offer even if it is below the odds. How is this going to disadvantage me? I am still only going to offer what I want to offer on the place, not some higher amount because they think I can afford it.
Sure if there is only one house to pick from in your eyes (more likely your wifes!!!) you might not want to risk it, but hell where I live there is over 100 I would cop for the right money and another 100 I would not like so much but could accept if they were a very motivated seller.
Go into each and every one you look at and go hard till you jag one, sooner or later you will jag one in the current market, even if every real estate agent in a 10 mile radius cringes everytime you walk in... "here we go again..."
You are talking about likely tens of thousands of dollars off the purchase price buying well rather than buying poorly. Make it count as this will have a potentially profound impact on the next 25 years of your life...
EDIT: Finally you hear about it currently being a buyers market. You are not taking advantage of this if you are buying at what appears to be the market rate. So don't read the paper and go, oh its a buyers market I should buy then. The idea is take advantage of it and squeeze untill the pips squeek if you want to buy... Otherwise you might as well have purchased in early 2010 when things were running hot. In aggregate prices are nearly the same now but the opportunities are very different. Even if it then takes you many months to make a purchase, you will be surprised what opportunities present along the way from earlier offers. Had freinds buy a mortgagee in possession sale for nearly 50k less than an offer the owner had rejected 12 months earlier! This was not an expensive property!
CGT on your PPOR is not taxed, primarily because of political reasons. No govt would be brave (or silly) enough to tax it.
I sort of agree, it is a lifestyle decision, but it can be an investment decision aswell. I don't think they have to be mutually exclusive.
for someone so young, you sure sound like my old man - he's 55 and just realised he needs more in super. tighter lending criteria, tighter timeframes for lending - now he's in a pickle becaus ehe had the same mindset as you - "property is too expensive, it has to come down" and all the while watching everything get more and more and more expensive.
oops.
The main point of my post was to highlight the fact that many FHBers give themselves a massive hill to climb over the minute they decide to load themselves up with non-deductible debt right at the beginning of their investing career, stretching themselves financially to the max to get into the home of their "dreams" - to the point where for the next ten years at least they just battle to get the mortgage down - real investing becomes an unattainable dream as a result.
If one wanted to follow a better financial path, then finding a cheap rental to live in (not very hard) while leveraging with fully deductible debt into a much greater exposure to high yielding property assets is eminently achievable.
From what I have seen, the PPOR dream is the one mainly responsible for the poor financial position of the majority of the population. Sure for most at least the PPOR is most likely their only "growth" asset but it provides no income or tax effectiveness. It may be better than nothing but that's not the point - imagine their financial results with five or more high yielding properties instead that they could easily afford with the same level of repayments. Buy properties with enough cashflow with this strategy and there is no limit to the results that can be achieved...
But the financial reality is not what most people - they prefer to pretend that a PPOR will provide the security of tenure to their own residence they personally crave (I know the feeling but it's not a financial driver - just a personal one) and be a good investment all at the same time. It's not - the personal benefits of a PPOR come at the expense of financial results - you only have to look around you at all the people chained to their mortgage to see that.
If one wanted to follow a better financial path, then finding a cheap rental to live in (not very hard) while leveraging with fully deductible debt into a much greater exposure to high yielding property assets is eminently achievable.
From what I have seen, the PPOR dream is the one mainly responsible for the poor financial position of the majority of the population. Sure for most at least the PPOR is most likely their only "growth" asset but it provides no income or tax effectiveness. It may be better than nothing but that's not the point - imagine their financial results with five or more high yielding properties instead that they could easily afford with the same level of repayments. Buy properties with enough cashflow with this strategy and there is no limit to the results that can be achieved...
But the financial reality is not what most people - they prefer to pretend that a PPOR will provide the security of tenure to their own residence they personally crave (I know the feeling but it's not a financial driver - just a personal one) and be a good investment all at the same time. It's not - the personal benefits of a PPOR come at the expense of financial results - you only have to look around you at all the people chained to their mortgage to see that.
That is an argument for the case that people should view the purchase of a PPOR in the same light as any other large financial decision, maybe just as conveniently as an investment. If you get it wrong it will effect at least the next 25 years of your life...
You cannot untangle the effect of a PPOR on a families prosperity so why treat the purchase of one any differently to any other large financial transaction.
I know I am, and while that has led me to wait for longer than most would at least I am buying the home I want to live in for the next 25 years while my family grows up rather than making the mistake you mention in your post of levering up into a PPOR too early and a shitter one at that which then leaves you hamstrung potentially for over a decade to move up the ladder.
The irony is in my opinion it is possible buying a PPOR too early actually impedes your chances of having the nice family home when you have kids etc rather than helps it. By the time you add in buying and selling costs the property ladder is a perilous ladder to climb bit by bit IMO.
Better as you say rent cheap save up and buy what you want to buy first up.
If you want exposure to property to keep in the game during this period of saving then as you say buy an investment property with max LVR while you save any surplus and deduct it from your income and let the tennants partly pay it off.
I still think the decision around the PPOR is as important as one around an investment prop as to a persons success over their investment timeline [edit: and you actually point to all this reasoning in your post but then claim it is not an investment decision.]
We bought our family home first up, but living very simply for a few years to save a good deposit.
Fortunately for us, when we bought property was still fairly cheap.
These days I would recommend buying property that the individual/couple can comfortably afford, and try to pay it off a bit quicker than the standard rate.
Just want to share this, sorry if it's out of topic here.
We bought our family home where we live in now on April 2009, at at time when GFC was still hot and the "critics" were so sure AU property market will follow the US's bubble burst style.
As a young family (IT professionals + 1 kid), we went over the possible scenarios and had back-up plans on top of back-up plans, loads of "if this happens, we do this..." etc. We also set some rules:
1. We won't spend a dime on renovations for the first 4 years atleast.
The house is on a liveable state as it is, though not exactly "new" looking or in the "color or style" of our dreams.
2. No new furniture or appliances (imagine a 32 inch tv and a 2+1 seater on a big lounge) for the first two years, unless something breaks and need immediate replacement.
3. Postpone plans of owning and maintaining car. We didn't had a car to start with as we've always lived on a central area when we were renting. The house is not as "central" location wise but still has good public transport.
Now two years down the line we're happy, there's been a pretty good CG on the property especially that we bought it at a time that very few people would commit on a 500K+ mortgage - the price was a bargain IMHO.
As the old adage goes, "if there's a will, there's a way".
We bought our family home where we live in now on April 2009, at at time when GFC was still hot and the "critics" were so sure AU property market will follow the US's bubble burst style.
As a young family (IT professionals + 1 kid), we went over the possible scenarios and had back-up plans on top of back-up plans, loads of "if this happens, we do this..." etc. We also set some rules:
1. We won't spend a dime on renovations for the first 4 years atleast.
The house is on a liveable state as it is, though not exactly "new" looking or in the "color or style" of our dreams.
2. No new furniture or appliances (imagine a 32 inch tv and a 2+1 seater on a big lounge
) for the first two years, unless something breaks and need immediate replacement.3. Postpone plans of owning and maintaining car. We didn't had a car to start with as we've always lived on a central area when we were renting. The house is not as "central" location wise but still has good public transport.
Now two years down the line we're happy, there's been a pretty good CG on the property especially that we bought it at a time that very few people would commit on a 500K+ mortgage - the price was a bargain IMHO.
As the old adage goes, "if there's a will, there's a way".
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