The RBA says you're probably better off renting..

Couple of observations with this debate

1) Often people say rent increases with inflation and assume property prices rise more than inflation. Can you have prices rising at say 8% pa and rents at only 3% pa over the long term? I don't think so. Either real rents will go up or real prices down over the longer term to bring these two fundamentals into line. Yield.

3) Anything the RBA says do the opposite. They are just trying to jaw bone the exuberance out of the property market.
 
No, never said it would. As Sanj mentioned, no one disagrees with that.

That's why the masses stay poor though. Conventional wisdom is sometimes not wisdom at all.

I think I have been looking at this from a different angle, from the masses perspective, and I still think they are better off entering retirement with a house paid off rather than still having to rent without an income, because like it has been said a large portion of the population are hopeless with money.
 
Funny thing is if you took out a personal loan of $28k (price of a new V8 commodore in 1991) invested it in CBA and just paid off the loan and did nothing else it would be worth a little over $1.1m today.

And you carried those payments on and invested them as well you'd have round $1.7m, and last years income would be around $1500.00 - 1600.00 per week after tax.

Just because they are paying a house off does mean they are any wiser with money, they can and do still get into trouble.
 
Funny thing is if you took out a personal loan of $28k (price of a new V8 commodore in 1991) invested it in CBA and just paid off the loan and did nothing else it would be worth a little over $1.1m today.

True mate. But real easy call with 20-20 hindsight. You don't get many CBA floats in your lifetime :(... which stock today would you borrow "new car price" (say $50K) ...and bet on ??.. LL
 
STW or VAS.

hmmm..both are etfs. STW was created prior GFC and still trades at a loss to it's opening price. Not good. Both STW and VAS trade pretty much parallel, so you may as well just invest in one and save transaction costs. On a 5 year comparison chart neither come close to CBA's performance :)........next. LL
 
Ha. Thanks for the education LL. Sounds like you have it all sorted :) the question is which stock would you borrow and bet on..my answer is the index.

Now reinvest those dividends and tell me the story....
 
Ha. Thanks for the education LL. Sounds like you have it all sorted :) the question is which stock would you borrow and bet on..my answer is the index.

Now reinvest those dividends and tell me the story....

Index funds are safe for sure. But you won't find MFGs and GEMs in them. :(
Re-invest the divvys ?? Hey, this is all with borrowed money ...so then how do you service the loan ? LL .
 
I'm talking from now going forward. You want to look in retrospect from the eve of the biggest index fall in a generation and then bag the index for not recovering in 6 years. It's a long play LL which I am sure you will agree with :) in the meantime you would have been negative gearing like many prop investors. PS. I'm long on both CBA and MFG in smsf :)
 
Erko, You're making the wrong argument with an 'old dog' here. And you're tinkering at the fringes in the wealth creation game.

Just ask yourself this. Take your Vanguard index fund portfolio to a bank and ask how much they will lend you on it ...with only the index fund as security ?

Now .. do the same exercise with a "dumb old" two bed unit.
Game over ! It's all about maximising your leverage and using OPM in a conservative way to increase your IRR. Nobody on this planet ever 'saved their way to wealth'. LL
PS Read Jan Somers books. She explains it much better than me.
 
Yeah but but but .... put that in context ... we SOLD our first house (In Brissy) in 1979 for $33K ... so in those days $40K was serious money. We bought in Syd for $72K . Yes, thats $72K folks ... !!! LL

Yeah i hear ya,did ya keep the syd prop?

Btw LL i'm only going by the OP's figures as an example.

I'd still like a GT ho phase 3 though :p

I was talking to the neighbor across the road who is a teenager in his 60's :p

Anyhow 1 example he had was he bought a torana(typo)and he bought it with a few km's on the clock.

He later found out it was only 1 of 3 made :p
 
No, we didn't keep the Syd prop. (It was our PPOR) . Didn't know about this 'equity magic' thing then, and was totaly impoverished anyhow. But rolled it into a Melb PPOR which has turned into a 10 bagger and that one (equity maaate !!) became the cornerstone of "the empire" that now feeds us. So no complaints at all overall with the 'Jan plan'. One smart lady to whom I owe a lot.
Yep .. Aussie iron. If only we'd known. I recall well the first oil crisis in the 70's ( that was the first time the world was running out of oil ....:rolleyes:...) and the car-yards could not give away the V8s ....sigh ..... first lesson in ignoring the f'n experts ( including the RBA with respect to this thread..) Just swim the other way :D !! LL
 
Yeah but but but .... put that in context ... we SOLD our first house (In Brissy) in 1979 for $33K ... so in those days $40K was serious money. We bought in Syd for $72K . Yes, thats $72K folks ... !!! LL

I love these stories
Our last primary residence we purchased in 1993 Perth for $185,000 big $ for us at that time, lived in it for 16 years sold it 5 years ago (2009) for $1.325M.... naaaaaaaaah don't buy property, just rent;)
 
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