The end game

[geoffw]

The original topic is about getting to the end game. My view is that the end game should consist of a good PPOR, that is either paid off or can easily be paid off from other assets/income stream. I think that the thread may be being derailed by reverse snobbery - Mt. Druitt dwellers justifying the joys of their Mt. Druitt subsistence and annoyed when anyone suggests that anything outside Mt. Druitt must be no good.

Not one of the last 30 posts or so has been about getting to the end game. It's been about why where you live, or want to live, is better than anywhere else, and nowhere else is worth a pinch of salt.

Back on the original topic. I would maintain that, in the absence of a high flier income, it's better to buy and have a mortgage than rent and save to buy outright. I've suggested this previously, with figures, but that has been ignored. I strongly suspect that buying IPs before one's house is paid off would be even more advantageous. That's providing a modest rise in prices over a longer period of time- and if this did not happen, even owning your own home unencumbered would not be worth while doing.

In regards as to where one chooses to live. Peter Spann used to say that the upper end of town was far more susceptible to economic cycles than many other places. When the stock market is flying, people who make a lot of money spend it in expensive places to live- and vice versa. So these sorts of places go higher in an upturn, and lower in a downturn. This may be why China has lost value in the place he has bought. A place in such an area would be a good buy if one were to be able to pick the cycle ahead of time. In the meantime, many other areas lower in value (not necessarily in desirability) are more likely to have a much less volatile movement in price, making a more secure investment- to live in or to invest in.

Please stay on the topic of the End Game- not on the areas you think are desirable and which ones you think are not.

 

[china]

Back on the original topic. I would maintain that, in the absence of a high flier income, it's better to buy and have a mortgage than rent and save to buy outright. I've suggested this previously, with figures, but that has been ignored. I strongly suspect that buying IPs before one's house is paid off would be even more advantageous. That's providing a modest rise in prices over a longer period of time- and if this did not happen, even owning your own home unencumbered would not be worth while doing.

In regards as to where one chooses to live. Peter Spann used to say that the upper end of town was far more susceptible to economic cycles than many other places. When the stock market is flying, people who make a lot of money spend it in expensive places to live- and vice versa. So these sorts of places go higher in an upturn, and lower in a downturn. This may be why China has lost value in the place he has bought. A place in such an area would be a good buy if one were to be able to pick the cycle ahead of time. In the meantime, many other areas lower in value (not necessarily in desirability) are more likely to have a much less volatile movement in price, making a more secure investment- to live in or to invest in.

.

This is exactly what I have been saying many times over before the thread was hijacked. But with a good income, may as well just buy outright - why pay interest on a mortgage.

 

[natedog]

We are all different....

We all have different attitudes toward things...and while we tend to think that there are right and wrong viewpoints...they are all just different.

I think in some way we need to recognise that some of this (what some call) "snobby" attitude does go toward pushing the price of real estate higher in certain areas of our capital cities.

Thinking about it more.....I am actually thankful that there ARE people out there happy to pay high $$$ for houses in "exclusive" areas i dont personally care about.

It just helps the real estate markets wheels continue to turn, based on supply and demand/ fear and greed...and ripple effects are created thanks to demand/snob factor,

Nath

 

[geoffw]

This is exactly what I have been saying many times over before the thread was hijacked.

No, you were saying that it's better to buy a house outright. I am saying that it's better to buy and have a mortgage rather than to save and buy outright much further down the track.

 

[natedog]

We are all different....

We all have different attitudes toward things...and while we tend to think that there are right and wrong viewpoints...they are all just different.

I think in some way we need to recognise that some of this (what some call) "snobby" attitude does go toward pushing the price of real estate higher in certain areas of our capital cities.

Thinking about it more.....I am actually thankful that there ARE people out there happy to pay high $$$ for houses in "exclusive" areas i dont personally care about.

It just helps the real estate markets wheels continue to turn, based on supply and demand/ fear and greed...and ripple effects are created thanks to demand/snob factor,

Nath

...which then gives me a market to operate in which helps me get to my end game

back on topic

 

[china]

Most north shore kids are also spoilt brats with an overwhelming sense of entitlement.

what about mt. druitt kids? What about kids with blond hair? Any generalisations on those?

 

[geoffw]

what about mt. druitt kids? What about kids with blond hair? Any generalisations on those?

Regardless of what has been said, please get back on topic.

 

[china]

No, you were saying that it's better to buy a house outright. I am saying that it's better to buy and have a mortgage rather than to save and buy outright much further down the track.

True. Let me qualify my response. However, if you can buy a 400k house by age 30 with cash and many posters seem to be content with a 400k house, I think that it is better to buy the house with cash rather than taking out a mortgage. If you are a low income earner, then there is no choice but to take the mortgage because your savings will not outpace the rise in house price.

 

[Melbournian]

Agree to disagree.

Don't know those places but in melb would rather live on morington peninsula or Philip island over hawthorn, fitzroy, brighton , whatever. Job and ease of access to cbd aside.

Obviously not talking dandenong or broadmeadows !!!

mornington are mainly for ppl who are retired or working in that area. Lived in Mt Eliza for 2 years - the place is very unaccessible - with only the nepean highway if you need to get some where say take a flight to get to tullamarine etc.

 

[geoffw]

True. Let me qualify my response. However, if you can buy a 400k house by age 30 with cash and many posters seem to be content with a 400k house, I think that it is better to buy the house with cash rather than taking out a mortgage. If you are a low income earner, then there is no choice but to take the mortgage because your savings will not outpace the rise in house price.

If you can buy a 400k house by age 30 with cash, then you could have bought the house with a deposit and a mortgage perhaps by 22- when it was worth something less than 400k. For 8 years you would have been paying your mortgage and watching the price of your own house rise, rather than pay rent and watch the price of somebody else's house rise.

 

[china]

If you can buy a 400k house by age 30 with cash, then you could have bought the house with a deposit and a mortgage perhaps by 22- when it was worth something less than 400k. For 8 years you would have been paying your mortgage and watching the price of your own house rise, rather than pay rent and watch the price of somebody else's house rise.

At age 22, many may not be in a position to purchase, even with a mortgage. They may still be living at home, studying, partying etc. Then a high paying job comes along and if there is frugal living and hard work for a few years, then it is best to buy the house outright at an early age. Renting for six years may be cheaper than paying a mortgage. Furthermore, there is no guarantee that the price of the house has risen during this period - then you have lost mortgage payments as well as seeing the price of your own house drop rather someone else's. Many doctors, lawyers, bankers,brokers start earning 200k+ from their mid 20s so it is not inconceivable to buy 400k house in cash by age 30.

 

[geoffw]

At age 22, many may not be in a position to purchase, even with a mortgage. They may still be living at home, studying, partying etc. Then a high paying job comes along and if there is frugal living and hard work for a few years, then it is best to buy the house outright at an early age. Renting for six years may be cheaper than paying a mortgage. Furthermore, there is no guarantee that the price of the house has risen during this period - then you have lost mortgage payments as well as seeing the price of your own house drop rather someone else's. Many doctors, lawyers, bankers,brokers start earning 200k+ from their mid 20s so it is not inconceivable to buy 400k house in cash by age 30.

Or age 23 or 24 or 25. But if you're in a position at age 30 to buy outright- and not many people on an average income would be- you have been in a position to buy with a mortgage for some years before that.

Not many people are earning 200k+ by mid 20s. Your world is not representative of the rest of the world. Most of the real world wouldn't even be able to buy a house outright by age 40 or 50.

If you accept that the value of the house is likely to drop, then you should not even accept that buying a house is a good thing to do financially.

But probably 95% of houses- certainly any well located reasonable quality houses in a major city- would have gone up in value since say 2000- many of them substantially. While nobody is in a position to say what will happen in the future, for most ten year periods in the last 60 years, house prices would have gone up, and people who had taken the advice to only buy when they could buy a house without a mortgage would have been worse off for doing so. Granted that in the last two years, prices have gone down, and I have seen short periods before where this has happened. But house prices have gone in cycles, and the long term trend has been up for a very long time.

 

[china]

Or age 23 or 24 or 25. But if you're in a position at age 30 to buy outright- and not many people on an average income would be- you have been in a position to buy with a mortgage for some years before that.

Not many people are earning 200k+ by mid 20s. Your world is not representative of the rest of the world. Most of the real world wouldn't even be able to buy a house outright by age 40 or 50.

If you accept that the value of the house is likely to drop, then you should not even accept that buying a house is a good thing to do financially.

But probably 95% of houses- certainly any well located reasonable quality houses in a major city- would have gone up in value since say 2000- many of them substantially. While nobody is in a position to say what will happen in the future, for most ten year periods in the last 60 years, house prices would have gone up, and people who had taken the advice to only buy when they could buy a house without a mortgage would have been worse off for doing so. Granted that in the last two years, prices have gone down, and I have seen short periods before where this has happened. But house prices have gone in cycles, and the long term trend has been up for a very long time.

House prices in Sydney have not gone up dramatically between 2004 to 2012 - that is an eight year period of stagnancy. So if what you are saying about ten year periods is correct, then we should see a major upswing by 2014. So then in this period, we could have paid a mortgage or have bought a house more cheaply by paying cash.

 

[DaveM]

Not one of the last 30 posts or so has been about getting to the end game. It's been about why where you live, or want to live, is better than anywhere else, and nowhere else is worth a pinch of salt.

Back on the original topic. I would maintain that, in the absence of a high flier income, it's better to buy and have a mortgage than rent and save to buy outright. I've suggested this previously, with figures, but that has been ignored. I strongly suspect that buying IPs before one's house is paid off would be even more advantageous. That's providing a modest rise in prices over a longer period of time- and if this did not happen, even owning your own home unencumbered would not be worth while doing.

Please stay on the topic of the End Game

Agreed, can we all agree to disagree or agree or whatever and bring things back on topic.

My end game.. retirement by age 45 (currently 33). IP's for me have to be neutral at purchase as I do not want a huge negative cash flow regardless of future capital value. Capital value for me is good for redraw and onwards investment at this time.

My end game needs to be supported by investment (residential and commercial, smsh, cash, shares/managed funds) and by building a business (4 years into this now) which can either be managed in the future and pay a dividend for early retirement, or sold and used to fund time off.

I left corporate IT in 2008 to go out as a self employed IT consultant, which has gone well so far. I do not have the desire to work making someone else wealthy till I am 60. I have built a business thats got some great blue chip clients and multinationals as clients, with good growth and staff.

I currently rent having sold my PPOR a couple of years ago. This was not a "fall from grace" as suggested, it was a matter of practicality having outgrown it and with my business premises and client base not being near my ppor. I have been able to divert the cash that would be a mortgage back into the business during its startup phase to ensure its viability, as well as into further property investment.

My next IP purchase (hurry up tax return!) will likely be a property I can use as a PPOR within the next 24 months.

Next steps in the end game are to refinance some loans made during the time when borrowing as a self employed worker was harder and not with currently favourable interest rates... but I bought and invested regardless and have made some great gains even taking this into account. I am also bringing in a business coach and consultant to ensure the business has sustainable growth and scales properly. I need to transition from being in the business to owning the business.

 

[geoffw]

House prices in Sydney have not gone up dramatically between 2004 to 2012 - that is an eight year period of stagnancy. So if what you are saying about ten year periods is correct, then we should see a major upswing by 2014. So then in this period, we could have paid a mortgage or have bought a house more cheaply by paying cash.

You've twisted what I said (again). I said that:
1. 95% of houses would have gone up since 2000
2. For most ten year periods in the last 60 years, house prices would have gone up.

So yes, there will be periods where house prices have not gone up in a ten year period. But overall they have gone up- and in a longer time frame, they have all gone up. Yes, it would be possible to find a period in which your scenario would have been a better way to go. But in Australia, over a longer period of time, it would have been worse. Even a modest 2% pa rise in values- would have been better for buying on a mortgage than buying outright.

 

[china]

You've twisted what I said (again). I said that:
1. 95% of houses would have gone up since 2000
2. For most ten year periods in the last 60 years, house prices would have gone up.

So yes, there will be periods where house prices have not gone up in a ten year period. But overall they have gone up- and in a longer time frame, they have all gone up. Yes, it would be possible to find a period in which your scenario would have been a better way to go. But in Australia, over a longer period of time, it would have been worse. Even a modest 2% pa rise in values- would have been better for buying on a mortgage than buying outright.

So it really depends on the time frame for getting to the end game and how much time you wish to spend playing the end game as to which strategy is better.

 

[geoffw]

So it really depends on the time frame for getting to the end game and how much time you wish to spend playing the end game as to which strategy is better.

95% of the time buying with a mortgage would have been better.

Without being able to predict the future, that's good odds to me.

Those odds get better with longer time frames.

 

[JIT]

Lock it up mods, thread going nowhere fast.

 

[MsAli]

China,
I feel you have little consideration that people come from different circumstances and background and the ability to buy a PPOR outright may not be possible for everyone.

Dave...well done!

Agreed, thread should be locked now.