maybe the smart people are buying at above average return, what do you think?
Yes. Everyone here is above average
RBA Chief Unworried About House Prices: No bubble= Lower Interest Rates
- Thread starter meconium
- Start date
Yes. Everyone here is above average
Nice post.
Interesting how people keep stating that a TD is as good as an IP investment.
I know in our case, since 2000 when we moved in to our last PPoR - it was bought for $305k with cash from a previous PPoR sale. In fact, every move of PPoR I have made so far has been as a result of a sale and funds from it used to jump up to the next one. The last one allowed us to go the other way; move to a cheaper area and pay for a decent place outright.
Now, our wages back then were only average, and in 10 years there is no way known we could have saved enough after-tax income in TD's or any other savings account to generate a nett worth of 5 times that PPoR - which we have done.
To some this will be a big achievement, to others; no big deal. But it is what it is, and a TD wouldn't do it.
It was done through property, and leveraging of the equity in that PPoR.
So, when people talk about nett returns as a comparison between the two, you also need to look at how much actual CASH you are putting in to get that return. In our case, all we have done is invest using equity and try to decrease the debt through a normal savings plan (as extra payments into loans).
The only cash actually put in was the extra payments we could scrounge as we went.
TDs are a useful comparison as they are a risk-free return. Given the risk involved in holding a property asset, in a rational environment return from holding property would be materially higher than a risk-free deposit.
I'm not sure whether you can use a margin loan to buy Gold equivalents on the ASX, but of course there is the CFD option if you are looking for leverage, not that I would recommend buying that way.
Given that Gold doesn't have a return you wouldn't value Gold like you would other income producing assets. Different people will give you different answers, but I would suggest you should think of Gold like a currency, it will swing from overvalued to undervalued and back again (in a cyclical nature) against stocks, oil, property and other assets. The ideal situation would be to buy when undervalued against these other assets and sell when overvalued.
That's not what I said. I suggested a TD had performed around the equivalent of an average Sydney house over 2010.
I would say at the moment and for short/medium term a term deposit will outperform property as I see further downside risk in property prices. Over 10+ years property will probably outperform cash, but that's still not a good enough reason to buy now if there is likely further price weakness likely in the short to medium term.
Yes. Everyone here is above average
Actually Token Funder, i think this is a pretty silly and naive statement by you.
Personally i am negative on residential property, but that opinon is partly based on the fact that i am no expert when it comes to buying property.
Instead of being an expert in one asset class, i prefer to become a 'reasonably competent' investor in several asset classes. To overcome my lack of specific 'expert' knowledge in a particular asset class i demand a greater margin of safety to compensate me.
But this is a property forum, with some members who have been around along time. If their focus is just on residential property, then it would appear logical to me that some of those members would be able to achieve 'greater than average results'.
Yes quite agree with you on this point Token Funder. To compensate for the risk the return must be significantly higher.
Given that residential investing involves high levels of leverage, then the return from residential investing needs to be more than significantly higher.
I would also remind people that past results are not indicative of future performance. People invested in shares have learnt this the hard way, unfortunately the current cycle residential property investors have yet to learn this lesson (and whether this lesson will be taught in this cycle or a future cycle i have no idea).
There is a traders idom that is priceless:
The market is a fickle mistress and she always demands a high price for the cost of her tuition
The key being have residential property investors paid their tuition fees lately.
Token Funder rolled eyes to the suggestion that everyone here is above average, you are saying that some members could achieve greater than average results... your views don't necessarily contradict so not sure how you came to the conclusion TF's view is naive.
Somersoft will have some above average housing investors, some average housing investors, some below average housing investors. The question is whether Somersoft's average investor beats that of a random sample of non-Somersoft property investors... I have seen it inferred that there is a higher standard of housing investor on this site than elsewhere, but I doubt there is any way to quantify such a claim.
From being on this forum for the last several years i would say that the average Somersoft investor is well above the average 'residential' property investor.
This is just based on personal observations of comments on this forum and comments i hear in personal life, so obviously not scientific.
Remember we are just talking about residential property investment here, not alternative investment classes.
And look back into the the link threads. Some people on this forum will continue to do well in residential property regardless of the overall movements in residential property as a whole (barring armageddon type scenarios)
Some member are long term, successful landlords. By and large - and at the risk of offending - I consider that the membership at SS considered as a group would be at best average.
It is over-represented by punters with little experience prior to the mid-nineties and much experience in the seminar caper. It is under-represented by what in my experience is the most successful class of landlord - old persons of Mediterranean descent (more fans of concreting than the Internet, I suspect).
Over 12 months, if you put the cash into each, this may be true. Managed Fund FP's love to use little windows like that to emphasise their argument.
But over a period of 5,10 or more years, and with leverage of equity....
This is where you can't possibly compare the two, other than to see what your returns can be with property if you compare them to doing what the level 2 investor (saver) does.
If you are only a saver, then property would always win. If you are a level 3 or higher investor, a TD is not an investment; it is somewhere to park the money until you find an investment vehicle to put it into.
You can only buy a TD with cash.
You can buy any property with equity from other properties. The returns on money using this strategy can be infinity.
In fairness, if you use the cash in a TD and leverage it into property, then you can get comparable results - but you are still moving away from the TD and into property.
In 1993, I bought a block of land for $60k cash in Blackburn. I have continued to leverage that $60k into over $2.5mill of property with an LVR of about 40% today, and a business purchase (which in the bank's eyes is worth next to zero as a security).
What would I have achieved with my continual roll-over of the $60k in TD's all this time?
Assume an annual average interest rate of 6% (being generous), and an PAYE tax rate of 33%.
I'm not saying don't use TD's, but this is a property investing forum, and I would assume we all reckon that a TD is not gunna cut it to make us rich - even if it does beat Sydney property for a year.
Sounds like 90% of Dromana.
They all have a holiday house which is made of bits and bobs, nothing spent on them for 20 years, full of fruit trees, all drive around in spotless 1986 Commodores, only use cash, don't have a mobile phone or a phone at the H/H and are super-tight.
They would be great value here most likely...if only they owned and knew how to use a computer.
quoted for truth.
you cannot compare apples and oranges. if you can derive an income out of a asset, you immediately remove it from comparisions.
haha...i agree with you here. Most of them wouldn't be able to calculate a rental yield or havent a clue what a depreciation schedule is.
Yet, they become wealthy through owning property with a lot of common sense.
And they normally offload their properties to the kids when its time fro the pension.
Yet, they become wealthy through owning property with a lot of common sense.
And they normally offload their properties to the kids when its time fro the pension.
Sounds like 90% of Dromana.
They all have a holiday house which is made of bits and bobs, nothing spent on them for 20 years, full of fruit trees, all drive around in spotless 1986 Commodores, only use cash, don't have a mobile phone or a phone at the H/H and are super-tight.
They would be great value here most likely...if only they owned and knew how to use a computer.
Hell yeah. People like this have a wealth of knowledge. I'm fortunate in that several members of my wife's extended family fit this bill, and are happy to talk to me about investing.
What's interesting is that although they have done very well, they can be VERY set in their investing ways. Trying to talk about 'cashflow positive investments' was like heresy! Still, I got a lot out of talking to them. The main theme they talked about was picking properties that seemed 'unnaturally cheap', and holding onto them for a long time. Buying good location was also a very strong theme. These people weren't interested in 1 year rates of return, but 10 year rates of return, and some of them had held the same properties for literally decades.
I would not have said that at all? Maybe I am thinking of an older generation again though, not baby boomers, which I expect your inlaws would be, you being 35 odd?
Not of the European variety, but older people I have known (some who are long gone even) who have invested in the 50s 60s and 70s etc were looking for investments that made money not cost money. Cash flow positive was not a term they would use but would look at an investment into something that cost money as the unnatural thing or at best something akin to buying stocks with bank money in 1932 because everyone else is making money from it...
Somewhere in the 90s this opportunity became more scarce but in fairness I have seen many examples here where it can and has still been done.
Many of the older set came through the depression where if you had capital the tail end was an opportunity of a lifetime. If you were not getting 10% to 20% on your capital you were having a shocker (Sure in Weimar then post nazi Germany they might have a different storey to tell?).
Why would you employ capital into anything that cost you money to hold if you have an example of where that can lead? The old buy stuff with banks money for future capital gains was a mistake many learnt not to make, and learnt by example at the front end of the same depression which later led them to th eopportunities of the late 40s and 50s... I don't think it is a mistake many would have repeated in their lifetimes.
Bit like the USA now. This is one of the times you can make money in a market, when capital is scarce and you have some. Sure it is not scarce for the merchant banks in the USA but they are not deploying it into all asset classes one being residential housing, this is then where the opportunity lies.
So I could not see many of the pre baby boomer generation getting carried away with cash flow negative investments, most had the hard landing of the depresssion to teach them where that can land you.
Similar threads
