I only need investments that cost less than one fifth of the price of the house I live in to generate cash income paid into my accounts that covers the rent. I'd need even less if I was only looking for the cash income the house would give me if I owned it ie. the rent minus the maintenance and rates. I have a great lifestyle and can save and invest more than half my income now that I effectively have no housing expense.
Give or take 20% hasn't this trade off always been the case ? I don't think much has really changed recently.
The recent share price falls have been cause for celebration in this household as we can buy more income for our investment dollar.
Well done, there aren't many like you who are willing to take on that risk.
As you say it is an irrational pyramid scheme. Nothing stops people from noticing and once they notice, it is clear that they are better off being among the first out than among the last out.
I'd disagree about if it's better to be the first out or last out (ask some here who sold years ago).
I too am a market timer, but only on the buy side. My view is to buy when I see good value (& I agree good value may be appearing soon in IP & ASX). However, timing selling a lot more difficult.... it's hard to judge when irrational behaviour will end. So by buying quality assets & never selling avoids 50% of txn costs & CGT & also the need to get into debates about whether assets are overly expensive.
So the rational and the irrational can coalesce as people both realise that they would be better off financially if they are among the early leavers of the pyramid scheme, and they see how much better off they can be, how much more house they can consume by using their capital efficiently and investing at high rates of return to rent at low rent yields.
Rational & irrational coalescing ?..... Hmmm not sure about that. The irrational bit is OOs owning their own dirt, something they control, their tangible own piece of Australia, somewhere to park their plasma & how much more wealthy they feel after the recent price increases. You've invested the difference between rent & P&I, I'd say most wouldn't do that. Most OOs project the recent past into infinity and see their houses going up forever, why would they sell & invest elsewhere (not stocks.... haven't you heard they're going down to $0
). Inertia is another one - most are too lazy to bother moving unless they have to. Stress - isn't moving the 3rd most stressful thing that can happen (after a family death & divorce). Prioritising - most put more effort into what's happening at the w/e, than planning the next 40 yrs of their life & never get around to it.
I'd say there is a miniscule part of the population who is smart enough, has sufficient motivation, investment skill & foresight and lack of desire to own to a PPOR to sell up, with the plan of either buying back later or renting forever!
Any particular demographic do you see doing this ? Possibly young, professional, single(?), no kids, little baggage ?
And what %age of the population do you see considering it as well as actually doing it ?
