Hi all,
I thought I would start this thread in response to Sim closing the thread on the average Joe becoming a millionaire in 10 years. Yes he was right, with 270 posts the thread had gone all over the place, so hopefully we can start here where we left off.
I often get accused of being too negative, especially when I ask some hard questions. I rarely get the answers to the hard questions. So before we go any further, I will reiterate some posts that I have made in the past about what I see as positive investment.
For property.... This is what I posted several months ago..
"I am a fan of Jan's method of time in the market as proposed in the book "More Wealth from Residential Property".
But there is more to it than just buying and holding, it's in the book!!
With apologies to Jan, the quick summary goes as follows.
1/ Save deposit, buy PPOR.
2/ Accelerate payments to pay off loan in short period of time.
3/ Buy IP (when you can afford it!!)while continuing to pay same % of wage off loans.
HINT HINT HINT "If you have paid off your PPOR, guess which loan now gets paid off!!!"
4/ Buy further IP (when you can afford it!!!). Keep putting in % of your wage to reduce debt.
If prices go nowhere for 5 years, your equity has still increased by reducing your loans. Eventually even with stagnant prices, due to inflation, rents will rise and so will your wage. The property/ies will become/go even further cashflow positive. You will then be able to purchase further property as you can afford it.
The only timing involved is when you can afford it!!"
For shares.....
1/ Get yourself educated as to what works, this will involve lots of reading and studying.
2/ Look for value.
3/ Buy what is going up in price, not down.
4/ Have an "uncle point" where you will get out of a losing situation.
....
That is my style of investing in a nutshell that I have learned from both experience and research. The experience comes from first investing in shares and commodities in 1981, and investment property in the 80's. As I was a slow learner I made plenty of mistakes that cost a lot of money over the years.
I have actually learnt from my mistakes. The best lessons I have learnt are probably best summed up as...
1/ Have a "margin of safety".
2/ Cut your losses.
Both are in just about every investment book you read, but most people tend to ignore one or both because of a "special situation".
Anyway, too much about me, I'm already off topic
I hope Sim doesn't close the thread down so soon.
The topic.
We get various "experts" from time to time on this forum who make all types of claims about how you can get rich. They they trot out numbers from the immediate past and then project them for the next x years.
We also get the opposite, people who claim there is all doom and gloom, property is overpriced, it's going to fall 50% in the next x years as there is no value in it, get out while you can.
To the gloom and doomers, I seem like an all out bull. To the the get rich quick and easy merchants, I am just a negative doom and gloomer. I don't have any trouble being the inquisitive one.
So, down to some specific questions.
1/ Does anyone see any problems created by having a large(and growing)proportion of the population moving into "retirement"? Something that we have not experienced in the past. With respect as to how this will affect investment markets.
2/ Can cap growth in the average residential property continue to grow at 8% pa while inflation stays low? Will yields continue to fall to say 2% in 10 years and then 1% in 20 years??
3/ If yields rise in the next 10 years will this be due to higher inflation, lower cap growth or a combination of both?? Perhaps by some other mechanism??
Questions 2+3 were what I was asking of Peter Spann in the other thread, in response to some numbers that he produced, perhaps he could post his answer here.
Astro boy, Am I leading people to ruin?? please explain??
Brenda,
You have done brilliantly well, you saw value and took great advantage of the situation. The type of property you bought, at the prices you paid, will leave you well off no matter what happens. If we get inflation your rental returns will go up rapidly, and your ability to cope with the corresponding increases in interest rates will be easy.
If we continue to get the high cap growth with low inflation as some suggest, then the property that you may have bought for $60k, that is now worth $150k, could go to $300k in 10 years. And yes if from this level with a very low yield(because of the low inflation), the price could "collapse" say back to $150k.
Acey, "You're long on opinion but short on facts.
I suggest you - and everyone reading the thread - review my post on what happened during the Japanese bubble (http://www.somersoft.com/forums/sho...highlight=Japan)
We don't have anywhere near the same situation in Australia, nor are we at the start of a run-up like that."
Do you not see that if we continue to have high cap growth while yields fall, that we are heading in that direction?? Because this country has huge foreign debts compared to the Japanese surplus, I agree we wont get anywhere near that level. It probably also means that the pullback/crash that we suffer would not be as great.
TGP, I'm no guru. I'm not trying to sell anything. My advice to everyone is always to get yourself educated, read lots, and don't expect any path to riches to be as easy as is too often portrayed. And always ask the hard questions.
And thanks for the encouragement.
...
I'm always happy to answer questions, so fire away. But I would prefer some answers to questions.
bye
I thought I would start this thread in response to Sim closing the thread on the average Joe becoming a millionaire in 10 years. Yes he was right, with 270 posts the thread had gone all over the place, so hopefully we can start here where we left off.
I often get accused of being too negative, especially when I ask some hard questions. I rarely get the answers to the hard questions. So before we go any further, I will reiterate some posts that I have made in the past about what I see as positive investment.
For property.... This is what I posted several months ago..
"I am a fan of Jan's method of time in the market as proposed in the book "More Wealth from Residential Property".
But there is more to it than just buying and holding, it's in the book!!
With apologies to Jan, the quick summary goes as follows.
1/ Save deposit, buy PPOR.
2/ Accelerate payments to pay off loan in short period of time.
3/ Buy IP (when you can afford it!!)while continuing to pay same % of wage off loans.
HINT HINT HINT "If you have paid off your PPOR, guess which loan now gets paid off!!!"
4/ Buy further IP (when you can afford it!!!). Keep putting in % of your wage to reduce debt.
If prices go nowhere for 5 years, your equity has still increased by reducing your loans. Eventually even with stagnant prices, due to inflation, rents will rise and so will your wage. The property/ies will become/go even further cashflow positive. You will then be able to purchase further property as you can afford it.
The only timing involved is when you can afford it!!"
For shares.....
1/ Get yourself educated as to what works, this will involve lots of reading and studying.
2/ Look for value.
3/ Buy what is going up in price, not down.
4/ Have an "uncle point" where you will get out of a losing situation.
....
That is my style of investing in a nutshell that I have learned from both experience and research. The experience comes from first investing in shares and commodities in 1981, and investment property in the 80's. As I was a slow learner I made plenty of mistakes that cost a lot of money over the years.
I have actually learnt from my mistakes. The best lessons I have learnt are probably best summed up as...
1/ Have a "margin of safety".
2/ Cut your losses.
Both are in just about every investment book you read, but most people tend to ignore one or both because of a "special situation".
Anyway, too much about me, I'm already off topic
I hope Sim doesn't close the thread down so soon. The topic.
We get various "experts" from time to time on this forum who make all types of claims about how you can get rich. They they trot out numbers from the immediate past and then project them for the next x years.
We also get the opposite, people who claim there is all doom and gloom, property is overpriced, it's going to fall 50% in the next x years as there is no value in it, get out while you can.
To the gloom and doomers, I seem like an all out bull. To the the get rich quick and easy merchants, I am just a negative doom and gloomer. I don't have any trouble being the inquisitive one.
So, down to some specific questions.
1/ Does anyone see any problems created by having a large(and growing)proportion of the population moving into "retirement"? Something that we have not experienced in the past. With respect as to how this will affect investment markets.
2/ Can cap growth in the average residential property continue to grow at 8% pa while inflation stays low? Will yields continue to fall to say 2% in 10 years and then 1% in 20 years??
3/ If yields rise in the next 10 years will this be due to higher inflation, lower cap growth or a combination of both?? Perhaps by some other mechanism??
Questions 2+3 were what I was asking of Peter Spann in the other thread, in response to some numbers that he produced, perhaps he could post his answer here.
Astro boy, Am I leading people to ruin?? please explain??
Brenda,
You have done brilliantly well, you saw value and took great advantage of the situation. The type of property you bought, at the prices you paid, will leave you well off no matter what happens. If we get inflation your rental returns will go up rapidly, and your ability to cope with the corresponding increases in interest rates will be easy.
If we continue to get the high cap growth with low inflation as some suggest, then the property that you may have bought for $60k, that is now worth $150k, could go to $300k in 10 years. And yes if from this level with a very low yield(because of the low inflation), the price could "collapse" say back to $150k.
Acey, "You're long on opinion but short on facts.
I suggest you - and everyone reading the thread - review my post on what happened during the Japanese bubble (http://www.somersoft.com/forums/sho...highlight=Japan)
We don't have anywhere near the same situation in Australia, nor are we at the start of a run-up like that."
Do you not see that if we continue to have high cap growth while yields fall, that we are heading in that direction?? Because this country has huge foreign debts compared to the Japanese surplus, I agree we wont get anywhere near that level. It probably also means that the pullback/crash that we suffer would not be as great.
TGP, I'm no guru. I'm not trying to sell anything. My advice to everyone is always to get yourself educated, read lots, and don't expect any path to riches to be as easy as is too often portrayed. And always ask the hard questions.
And thanks for the encouragement.
...
I'm always happy to answer questions, so fire away. But I would prefer some answers to questions.
bye
