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From: Eric Snow


Robert,

I believe you are forgetting dividend imputation. Your rental returns are fully taxed. Your share dividends, in many cases already have the company rate of tax paid on them. A million dollar share portfolio paying dividends at 5% would provided a nice $50,000 income, more than enough for most people. You don't need millions invested.

My this is an enjoyable discussion.
 
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Reply: 1
From: Robert Forward


It is a good discussion yes.

No my issue with what you've stated is that you will $1m of "cash" held up in shares.

With property I can own $1m worth all by leveraging against equity. So I don't need to own $1m in cash. If I had $1m in cash I'd be extremely upset with a 5% return (understandable it's just from dividends not including capital growth of your shares).

My $1m of cash can buy $10m of property. And my cash return on this would want to be $200-400k pa so that's a 20-40% ROI. It's a matter of leveraging from my point of view.

Robert
 
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Reply: 1.1
From: Guy Wood


Yeah Robert,
I think a lot of people miss that point. With property the only money we have in the venture is that which my wife we put into gaining equity in our own house, all the rest is someone elses & capital gain.
 
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Reply: 1.1.1
From: Eric Snow


Yes, but that money you borrow has to paid for. There's no such thing as a free lunch. I have zero debt. I like it that way.
 
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Reply: 1.1.1.1
From: Apprentice Millionaire



>Yes, but that money you borrow has to paid for. There's no such thing as a free lunch. I
>have zero debt. I like it that way.

I used to be like that. No way I was going into debt! But I found that there is good debt and bad debt. And the good debt is where the outgoings are covered, and in particular, when they are covered by the asset producing income. So I aim for positive gearing, positive cashflow assets.

Cheers
Apprentice Millionaire
(aka Jacques)
 
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Reply: 1.1.1.1.1
From: Guy Wood


Eric,
My story just got better, or more terrifying if you see things your way. The Bank rang up today telling me I'm eligible for a loan in excess of $1,000,000. I've got a property in my sights, don't tell the bank, but I'll never pay the money back, just keep on renewing interest only loans every 5 years. Yep there's interest to be paid, but it's the tenants who will pay it, not me. And there's enough left in the rent to pay all outgoings, with several thousand left over each year for the kitty.
It gets better, the property is waterfront with it's own jetty. We had 22% capital growth last year, so I reckon we'll see a bit more growth this year.
How much have I paid for the capital growth that will occur on this property in the decades before I give it to my Grandkids?
Eric, slip out & set yourself up with a well researched property or 2 & we'll laugh about your posts over a drink one day soon :)
 
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Reply: 1.1.1.1.1.1
From: Paul Zagoridis


I suspect banks don't want you to ever pay it back. but then the political fallout would be enormous.

If they admitted it, they wouldn't be able to run adds saying "pay off your home sooner"

Dreamspinner
 
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Reply: 1.1.1.1.1.2
From: Dave :)


*grins*

Guy, that's great!
How do property investors get 'sucked' into buying poor performing
assets like that?

Well done.

Cheers,

Dave
:)
 
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Reply: 1.1.1.1.1.3
From: Eric Snow


Guy,

Kudos to you for finding such a high-yielding property. Finding a property where the rent exceeds the total outgoings is nice, but fairly easy now interest rates are very low. I suspect this forum will start to get much quieter as interest rates rise, as they inevitably will, and all those positively-geared properties start slipping into the red. I wonder how many people will boast about their positively-geared properties when interest rates hit, say 12%?

Eric.
 
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Reply: 1.1.1.1.1.3.1
From: Diane -


Eric,
Have you not heard about fixed interest rates on loans?
 
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