# The power of property...



## Realist (18 September 2006)

Imagine you have $50,000 to invest...

You ask the bank to borrow money to buy shares or a house, they will lend you $100K to buy shares and $250K to buy a house.  

Then imagine they both go up 10% each year for 5 years.

You'll make more buying a house right?    

That is the conclusion of some stupid woman called Karina in this morning's Daily Telegraph who wrote the book "The power of property".

This irks me how so much disinformation goes out to the public by morons who probably made a little money during the last property boom and think they are experts.....

Dear oh dear....    

My thoughts...

First of all leverage works both ways, and in most cases for most people it should be avoided with both shares and investment properties. Sure there are times it works in your favour but you need to be very careful especially if interest rates are high.

Secondly if your property goes up 10% each year and you are paying 7.5% interest on 84% of your asset, as well as stamp duties, agents fees, repairs, rennovations, empty time, rates, body corporate fees, water, insurance, advertising, capital gains tax then against inflation you will make bugger all.

Thirdly history shows that shares (including dividends) increase significantly more than property and once bought have zero costs involved, few problems like bad tenants, places you can't sell easily and a well diversified fund in foreign and ASX shares is safer than having one property as Sydney owners have found recently and Perth owners are about to discover. 

Finally there is contention about whether the ASX and resource stocks in particualr are overvalued.  There are arguments either way and the solution is to be diversified and have overseas shares as well.  There is virtually no argument that property is overvalued though, if you are expecting 10% gains each year for the next 5 years you are dreaming!!  10% is conservative after dividends for ASX stocks.


Anyone disagree??  (apart from tech/a)


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## Realist (18 September 2006)

Imagine you have $50,000 to invest...

You ask the bank to borrow money to buy shares or a house, they will lend you $100K to buy shares and $250K to buy a house. 

Then imagine they both go DOWN 10% each year for 3 years.


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## YOUNG_TRADER (18 September 2006)

Realist you have to accept the following fact

PROPERTY IS AN ESSENTIAL PART OF WEALTH CREATION!

You can't argue with over 3,000 years of history my friend, you just can't, find anyone who has a great fortune and you'll most surely find 3 common factors,

1. They Invest their money and make it work for them (Shares, bonds, funds whatever)

2. They own property

3. They own their own business


Those are the three golden rules to wealth creation,

You have to remember something property always has an actual fundamental demand behind it, being that people want live in houses and companies want to occupy office space

While you can say shares have a demand behind them, its more of a want to generate a return on money, rather than a NEED to have a roof over one's head.

You just can't ignore the fact that the goal for the mass public in life is to oneday own their house, not to rent forever

Also once your investment portfolio grows large enopugh, there's only so much money you want in the mkt (hence why I bought anohter property back in March)

So in short while you may think that property is not as 'good' an investment as shares, it is nevertheless an essentail component to wealth creation and protection.


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## Realist (18 September 2006)

YOUNG_TRADER said:
			
		

> 2. They own property




YT, of course rich people own property, they own a home they live in, why wouldn't they, they can afford to afterall.

Rich people own cars as well,  they own washing machines and tv's and a pair of jeans - does that make them rich, or do they buy them cause they are rich?

I am all for buying your own home. And with stamp duty exemptions, first home owner grants and no CGT taxes as such then it will usually be better off longterm financially than renting. Much like owning your own car is cheaper than leasing in most cases.

However I question the merit of property investing.  Stamp duties, CGT taxes, low rental yields, empty time, agent fees, high interest rates etc. all chip away at any profits.

If you are to make money on property investing you need to postively gear if at all possible, get good longterm tenants, and hold to reduce taxes. You also need to pick your time to buy, 70% of years are poor to buy from what I know.  Only 30% of years, so 3 out of 10 will you get significant captial gains.

Investing in highly profitable fair priced shares that pay dividends will give you far better returns.

People need to get out of this property never goes down, and shares are risky mindset.   The opposite is infact true IMHO.


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## YOUNG_TRADER (18 September 2006)

2 Things

*1. Real estate is the largest invesment asset in the world by trillions of dollars, nothing even comes close!*

*2. Real estate is the oldest investment asset class by far, nothng again comes close!*

You just can't dispute is power and influence

Also I wasn't saying rich people own property because they're rich, I was saying that alot of poeple I know have accumulated huge fortunes through following those *3 golden rules*, one of which included owning plenty of real estate,


Call me crazy but I chose to follow in the footsteps of alot these people as they enjoy the lifestyles I envy and drive the cars I want!


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## Realist (18 September 2006)

YOUNG_TRADER said:
			
		

> 2 Things
> 
> *1. Real estate is the largest invesment asset in the world by trillions of dollars, nothing even comes close!*
> 
> ...




What you say is correct.

People do make money from real estate. No doubt about it.

However my point is you will make more money from shares, and currently it is clear that real estate is generally overvalued and some people are losing money.

It is obvious you agree with me to some point, cause you are on a share site, not a property site..


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## michael_selway (18 September 2006)

YOUNG_TRADER said:
			
		

> 2 Things
> 
> *1. Real estate is the largest invesment asset in the world by trillions of dollars, nothing even comes close!*
> 
> ...




hehe what cars do u want?

thx

MS


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## krisbarry (18 September 2006)

Times are a changing though....

Young people are seeing less value in housing and more value in shares.

Its much harder to break into the housing market nowdays.

Never b4 has the average Joe blow been able to afford or have easy access to the share market.

The sharemarket has only ever been for the rich.  

Now days its a very different.

Hey I can even buy a parcel of shares for $27 in my underwear all in the privacy of my own home


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## Realist (18 September 2006)

YOUNG_TRADER said:
			
		

> Call me crazy but I chose to follow in the footsteps of alot these people as they enjoy the lifestyles I envy and drive the cars I want!





Oh dear, oh dear.

From what I know Warren Buffet, Ben Graham and Ingvar Kampstrad (Ikea) drove oldish boring cheapish cars.

And that says alot about them, and their lives to me...

No offence if you are a car enthusiast.... But it says alot about someone who owns a brand new high performance European car and drives around the city.

It says to me they are too status concious, they waste their money, probably know very little about cars, probably drive slow and incompetently and use about 10% of the cars performance, they probably owe alot of money, and probably think they are sh*t hot!

Shares are a great investment, property is a good investment, cars are a rotten investment.    


Car enthusiasts are excepted.... (just)


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## Realist (18 September 2006)

Stop_the_clock said:
			
		

> Young people are seeing less value in housing and more value in shares.
> 
> Its much harder to break into the housing market nowdays.
> 
> ...





Excellent point.

It used to be easy and wise for young people to buy a house, and too difficult to buy shares.

Now the opposite is the case..


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## chansw (18 September 2006)

How about LPT (Listed Property Trust)? In that way, you are investing in property (office, industrial, hotel, ... etc) but still have the feel of investing in shares.


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## Realist (18 September 2006)

chansw said:
			
		

> How about LPT (Listed Property Trust)? In that way, you are investing in property (office, industrial, hotel, ... etc) but still have the feel of investing in shares.




Westfield!!


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## chansw (18 September 2006)

Realist said:
			
		

> Westfield!!



Westfield is a good one. In Jan Somers's book "More wealth from residential property" (2001. p.63), she mentioned if someone invested $1000 in Westfield shares in 1960, they'd worth $109 million today (with all the dividends reinvested). On the other hand,if someone bought a small flat on the outskirts of Sydney, it would probably be worth only $100,000 today. Please bear in mind the book was published in 2001. Her point is you can do well in both property and shares if you buy the right one. I think both shares and property should be in any one's wealth creation portfolio. If you cannot buy your house at this stage, maybe buy some LPTs first. The average return of LPT in the last 36 years (from 1971 to 2006 30 Jun) is 14.9% where the average return of Australian shares for the same period is 13.3%. (According to The Vanguard Index Chart 2006)


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## Realist (18 September 2006)

Were Westfield shares listed and available to the general public in 1960?   

Either way yeah I wish I had bought some in 1960 (many years before I was born).

I have DBR as well, has done me nicely.  DB Reef trust..


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## chansw (18 September 2006)

Realist said:
			
		

> Were Westfield shares listed and available to the general public in 1960?
> 
> Either way yeah I wish I had bought some in 1960 (many years before I was born).
> 
> I have DBR as well, has done me nicely.  DB Reef trust..



The following is from the history section on Westfield web site. Westfield listed on Sydney Stock Exchange in 1960.   


1960-1969
1969
 Miranda centre purchased
Doncaster Shoppingtown opens

1968
 Hornsby centre enlarged to four times its original size

1967
 Toombul opens

1966
 Burwood opens

1965
 Figtree opens

1963
 Centres built at Yagoona, Dee Why and Eastwood

1961
 Hornsby Shoppingtown opens

1960
 Westfield Development Corporation lists on the Sydney Stock Exchange


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## watsonc (18 September 2006)

According to the 3 golden rules to wealth creation, i need to quit being an economics teacher and start up my own business. But what to do is the problem! Maybe a fish n chip shop!!!! haha


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## dr00 (18 September 2006)

car enthusiasts should be exempted only through disability... it is a disability and a very costly one  

and fish and chip shops arent such a bad idea... i worked in one in my (even) younger days and the owner did VERY well. built the business from nothing, worked bloody hard, made a **** load of money and then sold it for ~$300k after about 7 years.


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## cogidubnus (18 September 2006)

YOUNG_TRADER said:
			
		

> Realist you have to accept the following fact
> 
> PROPERTY IS AN ESSENTIAL PART OF WEALTH CREATION!
> 
> ...




Some are sugesting that many boomers close to retirement will sell off their business and investment properties to take advantage of the new supa incentives. This coupled with another rate hike or two, leads me to believe property will suffer dearly over the next 10 or so months.


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## Jay-684 (18 September 2006)

Realist said:
			
		

> No offence if you are a car enthusiast.... But it says alot about someone who owns a brand new high performance European car and drives around the city.
> 
> It says to me they are too status concious, they waste their money




Realist,

I seem to remember you saying on another thread a few months back how much you enjoyed spending your money on going to clubs, fine restaurants and wagyu beef....

all of those things come under conspicuous consumption. The same can be said for sports cars, and I'm sure going out every weekend to Sapphire Lounge, Dragon Fly, Havana Bar, Ruby Rabbit etc will cost you just as much per year as a lease on a European car.

People who enjoy cars like to spend money on them, just as those who want to get from A to B only buy a Huyundai/Kia. Not all of them are status concious idiots.

BTW, youngtrader, you gotten that new car yet? Sold the M3 yet? PM me if you dont want to post it up


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## YOUNG_TRADER (18 September 2006)

Lets see, I'll try and reply to as many posts in this one,

Realist: I agree, anyone who owns a high performance car like a Porsche (ALL Models except standard boxster and Cayenne), Merc SL 55AMG SLK 55AMG, BMW M3 M5 M6 and AUDI RS4 and doesn't drive it like it was meant to be driven annoys the **** out of me, just buy the standard models, if you ain't going to use it don't pay for the extra power and handling   

Michael S: Lambo Gallardo or big brother Murcielago, Porsche GT3 or Turbo, Ferrari 360 Modena or Spyder (All of them preferably)

Watsonc: I hear brothels are very very profitable, something to do with demand and supply, elasticity is in there some where and I've heard it helps if you have a large surplus   

Jay: Haven't sold yet, money has been going into business, property and *shares*

What a funny turn this thread took, lol


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## tech/a (18 September 2006)

*UN* Realist



> This irks me how so much disinformation goes out to the public by morons who probably made a little money during the last property boom and think they are experts.....




*From a guy who's never bought a property in his life!*



> Investing in highly profitable fair priced shares that pay dividends will give you far better returns.




So youve been to the bank and are now trading your $150K or so???
Or just theory as usual?

*Stop*



> Never b4 has the average Joe blow been able to afford or have easy access to the share market.
> 
> The sharemarket has only ever been for the rich.




Of course it has,if you seriously have to worry about brokerage then you shouldnt be buying shares just as you wouldnt be in the position to buy a house. 


Do you guys really believe that people who have done OK in life have *NEVER* been in the position you 2 are or *WORSE*??

*Difference is THEY'VE DONE SOMETHING ABOUT IT!*

Are you guys genuinely intersted in bettering yourself???
(What are you doing here???)
Or are you just here to bitch about those greedy rich people??


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## Jay-684 (18 September 2006)

couldnt agree more tech/a

sure real estate in general is in bad shape right now, and sure the changes to super legislation means the property investment market may slump, but so what? Its like the AMP slogan "There is always a property boom somewhere in the world".

It rings true for every investment class.

I prefer to look at what is performing now (and invest in it) and what can/will perform in the future (and plan to invest in it)

Realist, you KNOW that property is such a poor investment right now, so why harp on it continuously and start new threads on the failure of property as a viable investment vehicle every week?

Put this wasted time into researching more on what YOU THINK will make you money and I'm sure you'll be much better off.


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## nioka (18 September 2006)

Realist said:
			
		

> Oh dear, oh dear.
> 
> From what I know Warren Buffet, Ben Graham and Ingvar Kampstrad (Ikea) drove oldish boring cheapish cars..



Think I read in the fin review today about Warren Buffet selling a Lincoln because they are going out of production and ordering a new caddy.? 
Doesn't Harvey Norman drive an old Holden.


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## Julia (18 September 2006)

Jay-684 said:
			
		

> couldnt agree more tech/a
> 
> 
> Realist, you KNOW that property is such a poor investment right now, so why harp on it continuously and start new threads on the failure of property as a viable investment vehicle every week?
> ...




Jay,

Realist has openly conceded before that he just loves an argument.
That's why he continues to restart this tired argument.
As long as everyone bites and contradicts him, he has achieved his purpose.
Fine with me.
I find it all very entertaining.

Julia


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## clowboy (18 September 2006)

O look,

Another spinoff property thread


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## Realist (18 September 2006)

Well I apologise for another proprty thread, but you must admit they are popular, it is a hot topic.

No, I have not bought a property, something which I am proud of.  I was thinking of buying in Sydney 4 years ago.   

No, I have not ever got a margin loan, something I am proud of. I was thinking of doing so in 1999 with tech stocks..   

Yes I like to 'waste' a bit of money on wine, restaurants and clubs, but only every so often, you need to live your life and enjoy it.  If you truly love cars and truly love driving a new Merc then by all means do so on the understanding you are wasting money, but that is what money is for.  If you just buy a new Merc to impress other people think again!

I do spend many hours researching what will make me money and at the moment I believe there are many ASX stocks that will perform better than property, I like to discuss it though as over the next few years there will be a time to buy property, I'm interested in others opinions and there'll probably be a time to sell some shares. Now is not the time though.


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## Realist (18 September 2006)

tech/a said:
			
		

> Do you guys really believe that people who have done OK in life have *NEVER* been in the position you 2 are or *WORSE*??




I'm not in a bad position at all, and I hold no grudge against anyone profiting off recent property booms, I do feel for poor people that have lost money because of it though - generally by entering too late and being too leveraged. And I do somewhat resent so called experts telling people to leverage themselves to the hilt to make money.

The first rule of investing should always be "don't lose!!"...


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## tech/a (18 September 2006)

> And I do somewhat resent so called experts telling people to leverage themselves to the hilt to make money.




I believe closer examination will find the word *SENSIBLE* used in abundance when I refer to leverage.



> I do spend many hours researching what will make me money
> I was thinking of buying in Sydney 4 years ago.
> I was thinking of doing so in 1999 with tech stocks..




You'll actually come to the realisation someday that you actually have to *DO SOMETHING.* 

Youll be patting yourself on the back for being so clever problem is opportunities will pass you by as those above did because you failed to do anything.Too much fear!!
*Those who succeed also fail.*




> I do feel for poor people that have lost money because of it though




Well thats comfoting so you'd have had compassion for myself when I lost a House and a Marriage.3 large commercial properties when interest rates went to 18% and I got slugged a further 6% on default back in the early eighties,when my tennents went broke faster than they could be replaced.
Back then it was around $1.8 million I lost---that was the un realised profit I had to sell to avoid bankruptcy plus the house $120,000--peanuts. Started again with no house and total cash of $5k,rented a 2 bed unit and slept on a been bag.That was all I had Oh yeh my Datsun 1600.



> The first rule of investing should always be "don't lose!!"...




Learn how to lose!!!!!!!
Cause youll lose often!!!!


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## Realist (18 September 2006)

tech/a said:
			
		

> You'll actually come to the realisation someday that you actually have to *DO SOMETHING.*




Is not putting the majority of my money into shares in highly profitable fairly priced blue chips that pay dividends, some of my money in trading 'punts' like CQT and MTN and leaving some money in the bank not doing something?

What would you recommend I do instead??    



> Learn how to lose!!!!!!!
> Cause youll lose often!!!!




I have lost in the past, I do not want to lose again thank you very much!!

Graham and Buffet are right, DON'T LOSE!!


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## clowboy (18 September 2006)

Realist,

Funny how the popularity of the thread seems to have more to do with the arguing than property itself, the same crap is just rehashed over and over again.

It would probably help your cause if you could show some degree of consistancy as well.  One moment all you eat is homebrand tuna and the next you are lashing out on wine.  Make your damn mind up.


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## Realist (18 September 2006)

clowboy said:
			
		

> Realist,
> 
> Funny how the popularity of the thread seems to have more to do with the arguing than property itself, the same crap is just rehashed over and over again.
> 
> It would probably help your cause if you could show some degree of consistancy as well.  One moment all you eat is homebrand tuna and the next you are lashing out on wine.  Make your damn mind up.




Rubbish!    

Stop the Clock eats homebrad tuna, I certainly do not, never had it even once. Never even mentioned it before.


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## Sultan of Swing (18 September 2006)

Realist said:
			
		

> That is the conclusion of some stupid woman called Karina in this morning's Daily Telegraph who wrote the book "The power of property".




I think this may be the 'Karina' you're talking about. This is the first post in a thread from another forum where she kindly shared her story with us. She's a gutsy young lady who bought 23 properties in 5 years. Not bad for a stupid woman......   

I could post a link to the whole thread if Joe allows it. Obviously, it's a property investment forum.   

This was posted on 7th July 2005. Values have risen a lot further since then in WA and QLD.

This post and the whole thread for that matter is truly inspirational. 



karina said:


> Hi everyone,
> 
> I had a request in a previous post to post my story so here goes.
> 
> ...


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## Realist (19 September 2006)

Yep, but if you try it now you will get smashed. She got her timing right back then anyway.

Has QLD not dropped in the past year?


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## Realist (19 September 2006)

> 3. Buying houses instead of units (land appreciates,, buildings depreciate)




An old but incorrect theory.

The next boom may very well be Sydney apartments...

Have Manhattan apartments or Utah land appreciated more over the past 200 years?

Location....


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## lesm (19 September 2006)

Just as a matter of interest, as most of the repetitive discussion is around residential property.

Has anyone considered commercial properties, as opposed to residential?

Cheers.


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## tech/a (19 September 2006)

*Lesm.*

Yes I currently have 2,been smashed in Commercial before.

*Unrealist*
Karina's story is amazing.
Yours,dull,colourless,un inspiring,repetitive and boring.

There are many ways of profiting from R/E even in these times.
I'm doing it as well as many others.We arent leveraged to the bejesus (Currently 37%) and yes Joe Average can and is doing what I do.

You'll be one of those guys who look back on life and be an absolute expert in what you should have done.



> An old but incorrect theory.
> 
> The next boom may very well be Sydney apartments...
> 
> Have Manhattan apartments or Utah land appreciated more over the past 200 years?




Do you ever think before putting both feet in your mouth!

Position and Scarcity of land will determine price.

Put an apartment in Manhatten and the *same one * in Utah,which will sell for the highest $$$s.----and why do you think that is?


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## cogidubnus (19 September 2006)

Realist said:
			
		

> Rubbish!
> 
> Stop the Clock eats homebrad tuna, I certainly do not, never had it even once. Never even mentioned it before.



What is wrong with home brand tuna? I like it especially the one in spring water. It is cheaper than John West and is of same quality. Some homebrand is good, like tinned tomatoes. Their sardines are not nice, I buy brunswick sardines. Homebrand baked beans are tastless but their red kidney beans are very cheap and nice.


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## professor_frink (19 September 2006)

realist said:
			
		

> If you are to make money on property investing you need to postively gear if at all possible, get good longterm tenants, and hold to reduce taxes. You also need to pick your time to buy, 70% of years are poor to buy from what I know. Only 30% of years, so 3 out of 10 will you get significant captial gains.




If you positively gear a property, then trying to time your purchase isn't anywhere near as much of an issue. It pays for itself, so you can comfortably hold through periods of slow or negative capital growth.




			
				realist said:
			
		

> Investing in highly profitable fair priced shares that pay dividends will give you far better returns.




What good is earning a slightly better return on your investment if you aren't going to use any gearing?

An example-

You and I both have $100 000.
You buy shares with no gearing, and earn 15%
I borrow $200 000 and buy a positively geared property and make 7.5%.

Your return is twice as good as mine, yet I come out ahead.

When people talk about making lots of money about property, it isn't really the "power of property", it's the power of leverage combined with a little commonsense.

It's all well and good to say that shares are a better investment because they return slightly more over time, but it doesn't actually translate to you making more money over time when everyone else uses leverage to buy property and you don't use any to buy shares.


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## Sultan of Swing (19 September 2006)

cogidubnus said:
			
		

> What is wrong with home brand tuna? I like it especially the one in spring water. It is cheaper than John West and is of same quality. Some homebrand is good, like tinned tomatoes. Their sardines are not nice, I buy brunswick sardines. Homebrand baked beans are tastless but their red kidney beans are very cheap and nice.




I was reading that and thought, 'Hmmmm, my wife is posting on this forum under the name of cogidubnus'.  :


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## Realist (19 September 2006)

professor_frink said:
			
		

> An example-
> 
> You and I both have $100 000.
> You buy shares with no gearing, and earn 15%
> ...




Oh dear, oh dear, no you do not come out ahead.   

I have $100,000 and I buy shares hold them for one year then sell, I pay $1000 in brokerage, and after tax I make $7,000.

You buy a $200,000 property that is postively geared (good luck finding one) hold for a year then sell.  You borrow $100,000 at 7% interest. So you pay $6,000 in stamp duty, $7,000 in interest, and you pay insurance, rates, water, repair/rennovations, advertising, empty time (no rent), agents fees, body corporate fees, then capital gains tax.

after 1 year you've spent alot of time and effort and you've made nothing


Now what happens if houses and shares drop 5%.  YOU LOSE MORE.

So the one alternative left is we hold for 20 years.

If I invest $100,000 for 20 years at 15% I end up with $1,400,000.  If you do not believe it is possible please refer to W Buffett.

If you invest for 20 years in a house you are not going to end up with 1,400,000 because houses do not appreciate as much as shares do.  If you think some crappy $200,000 postiviely geared (ie middle of nowhere) house will go up to over 7 times its value in 20 years you are dreaming.

There is no scenario where you are better off leveraging and buying a property, if so please list how it works on the proviso you include all fees, motrtgages and taxes and houses do not appreciate as much as shares (especially country town positively geared houses).


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## tech/a (19 September 2006)

If you invest for 20 years in a house you are not going to end up with 1,400,000 because houses do not appreciate as much as shares do. If you think some crappy $200,000 postiviely geared (ie middle of nowhere) house will go up to over 7 times its value in 20 years you are dreaming.


Your a laugh!!!

Reynella 7 Jessamine Avenue.In Adelaide.

I bought this in 1983 for $32,000.
I noticed it sold for $265K in Feb.

No I didnt still own it but you get my point.

My deposit was $5000.
So $5k to $200K (conservative).

Push that lid off your shoe box!!


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## Bloveld (19 September 2006)

I asked Buffet, and he said you have a snowflakes chance in hell.
And he wants you to eat only dolphin safe tuna.


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## professor_frink (19 September 2006)

Realist said:
			
		

> Oh dear, oh dear, no you do not come out ahead.
> 
> I have $100,000 and I buy shares hold them for one year then sell, I pay $1000 in brokerage, and after tax I make $7,000.
> 
> You buy a $200,000 property that is postively geared (good luck finding one) hold for a year then sell.  You borrow $100,000 at 7% interest. So you pay $6,000 in stamp duty, $7,000 in interest, and you pay insurance, rates, water, repair/rennovations, advertising, empty time (no rent), agents fees, body corporate fees, then capital gains tax.




Sorry Realist, I should have made my example a little clearer. If I have a $100,000 and borrow $200,000, then that makes $300 000. 





			
				Realist said:
			
		

> after 1 year you've spent alot of time and effort and you've made nothing




Do you not understand what positively geared means?




			
				Realist said:
			
		

> Now what happens if houses and shares drop 5%.  YOU LOSE MORE.
> 
> So the one alternative left is we hold for 20 years.




Well, obviously we hold for an extended period. We aren't trading property  



			
				Realist said:
			
		

> If I invest $100,000 for 20 years at 15% I end up with $1,400,000.  If you do not believe it is possible please refer to W Buffett.




We've had this discussion before, Normally it's you doubting the returns of us traders. I believe that's a quite reasonable target- it's why I used it in my example.




			
				Realist said:
			
		

> If you invest for 20 years in a house you are not going to end up with 1,400,000 because houses do not appreciate as much as shares do.  If you think some crappy $200,000 postiviely geared (ie middle of nowhere) house will go up to over 7 times its value in 20 years you are dreaming.




Now your sounding silly. What are you basing that comment on? Do you know what property has done in the last 20 years? Or do you think that we are going to have negative growth for the next 20?




			
				Realist said:
			
		

> There is no scenario where you are better off leveraging and buying a property, if so please list how it works on the proviso you include all fees, motrtgages and taxes and houses do not appreciate as much as shares (especially country town positively geared houses).




I'm sorry, but you expect me to provide you with a detailed analysis of why I think it could be done, yet you couldn't even understand the primary school example I gave you this morning?


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## clowboy (19 September 2006)

Realist,

Please accept my humble apoligy.  I did check the relevant post to make sure that I had the right person but in my dazed state last night I still managed to balz it up.

And for the record there is nothing wrong with homebrand anything, especially as it does not exist.  Homebrand is simply a label.  Next time you are shopping compare the tin or bottle or whatever to the name brands, the one that matches is the same product.


----------



## Realist (19 September 2006)

professor_frink said:
			
		

> Sorry Realist, I should have made my example a little clearer. If I have a $100,000 and borrow $200,000, then that makes $300 000.




Ok...




> Do you not understand what positively geared means?




I do indeed, and I find it very hard to think you can find a place that is positively geared in any major city in Australia at the moment.



> We've had this discussion before, Normally it's you doubting the returns of us traders. I believe that's a quite reasonable target- it's why I used it in my example.




Cool.

But how much will your $300K house be worth in 20 years?

Do not tell me a crappy place in Adelaide will be worth $2.1M in 20 years.

I suspect a $300K place in Adelaide will be worth $250K in 4 years time.    




> Now your sounding silly. What are you basing that comment on? Do you know what property has done in the last 20 years? Or do you think that we are going to have negative growth for the next 20?




Yeah, it has not gone up 15% per year on average that is for sure.


----------



## Realist (19 September 2006)

clowboy said:
			
		

> Realist,
> 
> Please accept my humble apoligy.  I did check the relevant post to make sure that I had the right person but in my dazed state last night I still managed to balz it up.
> 
> And for the record there is nothing wrong with homebrand anything, especially as it does not exist.  Homebrand is simply a label.  Next time you are shopping compare the tin or bottle or whatever to the name brands, the one that matches is the same product.




I do not do Homebrand.


----------



## Realist (19 September 2006)

tech/a said:
			
		

> Your a laugh!!!
> 
> Reynella 7 Jessamine Avenue.In Adelaide.
> 
> ...




What exactly is your point?

Had you instead bought $5000 worth of Microsoft shares you'd be a billionaire.     

Just because a house went up 8 times its value in the past does not mean they or it will do so in the future.  The same goes for MSFT shares, good luck making $1B out of $5,000 over the next 20 years with MSFT shares.

I expect that houses on average will triple over the next 20 years at best. Do you agree?


----------



## professor_frink (19 September 2006)

Realist said:
			
		

> Ok...
> 
> I do indeed, and I find it very hard to think you can find a place that is positively geared in any major city in Australia at the moment.




Maybe you should have named the thread "The power of property..... in a capital city at the end of a housing boom".

Then I probably wouldn't have commented.

The world doesn't end when you leave Sydney. And neither do investment opportunities.

If you understand what positively geared means, why the previous comments?





			
				Realist said:
			
		

> Cool.
> 
> But how much will your $300K house be worth in 20 years?
> 
> Do not tell me a crappy place in Adelaide will be worth $2.1M in 20 years.




If you had of told people in my area 20 years ago that prices will go up near on 10 fold in the next 20 years they probably would have said the same thing. They did move up by that much however. Not saying that it's going to happen over the next 20, but you get the point. 



			
				Realist said:
			
		

> I suspect a $300K place in Adelaide will be worth $250K in 4 years time.




Doesn't really make much of a difference when you talking about a long time frame. All that means is you could have timed your entry a little better.






			
				Realist said:
			
		

> Yeah, it has not gone up 15% per year on average that is for sure.




And it doesn't have to. Leverage takes care of the slight difference in returns.


----------



## Realist (19 September 2006)

We'll have to agree to disagree.   

One of the problems I find with property is that negative gearing is basically your only option in the cities at the moment. And capital gains are gonna be unlikely over the short term.

Positive gearing is an option in a country town, but you may have periods where you can not find tenants, and your chances of capital gains even over the longterm in what is the worlds emptiest country are suspect in my opinion.

Oh well, we need property investors, infact I like property investors, they pay my interest rates, body corporate fees, repairs, and I pay them a small rent in return, and put my left over money into shares, it works well!


----------



## Realist (19 September 2006)

professor_frink said:
			
		

> And it doesn't have to. Leverage takes care of the slight difference in returns.




Leverage works both ways Prof, there are now plenty of people in Sydney with neagtive equity.


----------



## petee (19 September 2006)

depends on the shares u buy..if dependable dividend payers then sure u will make money or plus capital gain and if strike rich on spec stock great but remember..property is needed for shelter and with a country like ours which will experience population growth beit not huge then property always in demand..also u have to take into account that most ppl who buy shares and dont own a house,they must rent a property and then they r subject to rises in rental..property will always rise whereas shares are subject to many condition..i remember 1987 for example where ppl jumping out office block buildings to their death..there was never such a downturn on the residentual property market


----------



## krisbarry (19 September 2006)

Oh my god... another property thread and the same old merry-go-round, with the same old people sprouting out the same old stuff  

Ohhh ...I need a holiday


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## professor_frink (19 September 2006)

Realist said:
			
		

> We'll have to agree to disagree.




C'mon Realist. I'm done trading for the day- Gotta give me something to do  



			
				Realist said:
			
		

> One of the problems I find with property is that negative gearing is basically your only option in the cities at the moment. And capital gains are gonna be unlikely over the short term.




It's not a short term investment! If you have enough income to make up the difference for a couple of years then you're sorted. It won't be negatively geared forever. Granted you may have to wait longer if your buying an IP at the moment.



			
				Realist said:
			
		

> Positive gearing is an option in a country town, but you may have periods where you can not find tenants, and your chances of capital gains even over the longterm in what is the worlds emptiest country are suspect in my opinion.




When you go way out into hicksville, then I completely agree. There are places that people actually live in, that aren't capital cities. And they live there in fairly considerable numbers. Plenty of tenants.



			
				Realist said:
			
		

> Oh well, we need property investors, infact I like property investors, they pay my interest rates, body corporate fees, repairs, and I pay them a small rent in return, and put my left over money into shares, it works well!




I assume they like you too- your paying their mortgage.  




> Leverage works both ways Prof, there are now plenty of people in Sydney with neagtive equity.




Yes it does. Over the long term, it shouldn't be a problem. Unless your forced to sell at an bad time. Then again, that can still bite you on the backside if you aren't using leverage. And even with blue chip shares!


----------



## professor_frink (19 September 2006)

Stop_the_clock said:
			
		

> Oh my god... another property thread and the same old merry-go-round, with the same old people sprouting out the same old stuff
> 
> Ohhh ...I need a holiday




Well go pack up some tuna, don't put any of your money in super this month and spend it on a holiday then.


----------



## Realist (19 September 2006)

professor_frink said:
			
		

> C'mon Realist. I'm done trading for the day- Gotta give me something to do




Make any money?

I'm up a bit today..    



> It's not a short term investment! If you have enough income to make up the difference for a couple of years then you're sorted. It won't be negatively geared forever. Granted you may have to wait longer if your buying an IP at the moment.




timing is everything!



> When you go way out into hicksville, then I completely agree. There are places that people actually live in, that aren't capital cities. And they live there in fairly considerable numbers. Plenty of tenants.




Where?



> I assume they like you too- your paying their mortgage.




no, I'm paying only a part of their mortgage...


----------



## Realist (19 September 2006)

> Originally Posted by Stop_the_clock
> Oh my god... another property thread and the same old merry-go-round, with the same old people sprouting out the same old stuff
> 
> Ohhh ...I need a holiday




Go and eat some homebrad food, and leave us alone to discuss these important financial matters.


----------



## professor_frink (19 September 2006)

Realist said:
			
		

> Make any money?
> 
> I'm up a bit today..





Yes sir I did  







			
				Realist said:
			
		

> timing is everything!
> 
> 
> 
> Where?




South of Newcastle. 





			
				Realist said:
			
		

> no, I'm paying only a part of their mortgage...




In a few years it will be all of it  

I might go hit some golf balls. It's a lovely day outside


----------



## Realist (19 September 2006)

professor_frink said:
			
		

> Yes sir I did
> 
> South of Newcastle.




suburb?

The Central Coast is overvalued.

Are you talking about the Hunter Valley?



> In a few years it will be all of it




No, cause then I'll buy a house outright from all the money I've made off my shares!



> I might go hit some golf balls. It's a lovely day outside




    While I slave away here at work....    

Not for long though, I am free in a few weeks myself.


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## michael_selway (19 September 2006)

Realist said:
			
		

> suburb?
> 
> The Central Coast is overvalued.
> 
> ...




What area of work do u do may I ask?   

thx

MS


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## Realist (19 September 2006)

michael_selway said:
			
		

> What area of work do u do may I ask?




I sell software for a US software company.


----------



## Julia (19 September 2006)

Realist said:
			
		

> I sell software for a US software company.



Yes, well, as I've commented before, Realist, given the amount of time you spend on this forum, your employers are not getting much value out of your services.

Julia


----------



## Realist (19 September 2006)

Julia said:
			
		

> Yes, well, as I've commented before, Realist, given the amount of time you spend on this forum, your employers are not getting much value out of your services.
> 
> Julia




Thanks Julia, your comments are always usefull. Especially when you repeat them.


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## krisbarry (19 September 2006)

Hang on a minute I got another $2 to put in the coin machine....there we go, that should help keep the merry-go-round crankin' a little longer :


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## Julia (19 September 2006)

Realist said:
			
		

> Thanks Julia, your comments are always usefull. Especially when you repeat them.



Oh, Realist, you can do better than that!
If you're a supadupa salesman (which I'm sure you must be) you should have replied that it's the quality of your results not the time spent in achieving said results that is what counts!!

Julia


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## Realist (19 September 2006)

Julia said:
			
		

> Oh, Realist, you can do better than that!
> If you're a supadupa salesman (which I'm sure you must be) you should have replied that it's the quality of your results not the time spent in achieving said results that is what counts!!
> 
> Julia




Well my sales have been good, but the main point is I am leaving here in less than 2 weeks.    

Hell yeah I muck around on here too much, for good reason!!     :bananasmi


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## Bloveld (19 September 2006)

Stop_the_clock said:
			
		

> Hang on a minute I got another $2 to put in the coin machine....there we go, that should help keep the merry-go-round crankin' a little longer :




AAAhhh!
Go back to rummaging through Good Sammies bins.


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## professor_frink (19 September 2006)

Realist said:
			
		

> suburb?
> 
> The Central Coast is overvalued.
> 
> Are you talking about the Hunter Valley?




Na, in Lake Macquarie somewhere(I won't say where exactly  )

Overvalued. Yeah. Nowhere near as bad as Sydney though!





			
				Realist said:
			
		

> No, cause then I'll buy a house outright from all the money I've made off my shares!
> 
> 
> 
> ...




Sweet freedom! Weather getting good too- almost beach weather. Best time of year to not be working


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## Realist (19 September 2006)

professor_frink said:
			
		

> Na, in Lake Macquarie somewhere




What street and number exactly?

 




> Overvalued. Yeah. Nowhere near as bad as Sydney though!





Perception is 9/10ths of the law...

I think anywhere outside of central Sydney is overvalued, considering how much empty land there is in this large empty desert!




> Sweet freedom! Weather getting good too- almost beach weather. Best time of year to not be working




you got that right.

Beach, Ashes cricket, golf, a bit of dabbling on the stock market.   Ohhh man that is what life is all about!!   :bowser:


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## professor_frink (19 September 2006)

Stop_the_clock said:
			
		

> Hang on a minute I got another $2 to put in the coin machine....there we go, that should help keep the merry-go-round crankin' a little longer :




Kris,

Shouldn't you be off ramping LVL instead of posting photos of where you work in this thread?


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## Judd (19 September 2006)

The alure of property is understandable.  Doesn't matter if the financials work out or not but everyone is an "expert."  They drive past it; it is in the newspapers; on TV; many own one or more properties or are paying one or more off; many a renting; many want to own a propoerty for the feeling of security it gives them irrespective of whether that security is real or not.  They can touch it.

Shares are different.  Generally all you see is a price, the yield and the Net Tangible Assets and maybe an annual report.  Unlike property you cannot actually physically touch and feel a share.  Traders, in general, care little about the company.  It's the price at which a particular share (or its derative) is bought or sold.  For others it is whether the company can sustain profits and dividends over the years and the income from the dividends.  By the way, I am now in the latter group.

You can discuss property or shares as much as you like but there is no right or wrong way to achive the aim of financial independance: each have to go their won way and as long as they accept the results of their decision, so be it.

PS:  We sold the last of our IPs some time ago (and I am so glad we did.  No tenant issues, no rates, etc, etc.), it allowed our mortgage to be discharged and the funds are now being directed according to our views on what constitutes share investing.


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## professor_frink (19 September 2006)

Realist said:
			
		

> What street and number exactly?




123 fake street  



			
				Realist said:
			
		

> Perception is 9/10ths of the law...
> 
> I think anywhere outside of central Sydney is overvalued, considering how much empty land there is in this large empty desert!




Yes there is alot of land in this country, but exactly how much of it can be lived on? 

Most of the good land is on/near the coast. And taken. 



			
				Realist said:
			
		

> you got that right.
> 
> Beach, Ashes cricket, golf, a bit of dabbling on the stock market.   Ohhh man that is what life is all about!!   :bowser:




Life is tough- I don't have tickets to the test in Sydney! A friend got some to go see the one day final in Melbourne, so I'm making the trip down for that. The rest will have to be watched on t.v, which should go down pretty poorly with the girlfriend


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## Realist (19 September 2006)

> Most of the good land is on/near the coast. And taken.




The Australian coastline is 36,735 kilometres long.

There are roughly 20,000,000 Aussies.

That is roughly 1.8 metres of coast for each person.

Now over half of Australia live in Greater Sydney, Melbourne and Southern Queensland.

And people on average share a house with at least one other.

There is enough room for every single Aussie that does not want to live in a city to actually live on the coast on a large property.  

Land is about as scarce as flies here....


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## professor_frink (19 September 2006)

Realist said:
			
		

> The Australian coastline is 36,735 kilometres long.
> 
> There are roughly 20,000,000 Aussies.
> 
> ...




Good point I'll rephrase- Alot of land that people want to live in is taken.

Actually I'll withdraw my earlier comment- why anyone would want to live in some of those estates out Kellyville way in Sydney is beyond me.


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## Smurf1976 (19 September 2006)

You can make a profit speculating in property as long as you get the timing and location right.

You can make a profit speculating in shares as long as you get the timing and stock right.

Whether either leads to the creation of genuine economic wealth is an entirely different matter. Simply paying more for the same asset, be it a house, shares or whatever, is transferring wealth but not creating it.


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## cogidubnus (19 September 2006)

professor_frink said:
			
		

> Well go pack up some tuna, don't put any of your money in super this month and spend it on a holiday then.



Dinner tonite consists of sausages potatoes carrots and peas. I am happy eating this. The meal cost me about 1$. I am also drinking some mid strength beer that I bought at 26$ for a box of thirty cans. Tommorrow I go on holiday in my bus. I have 500 litres of biodiesel that I made thanks to the local fish and chip shop. It cost me 30 cents a litre. I will travel for some months and contemplate life. My trip will cost me very little as I have bought tins of tuna for 1.89, tomatoes at .86. 
I have fishing rods and net and crab pots. I will fish. I have a gun. I will shot wild pig. The adventure will be good. My solar panels will provide power for my computer and where I can i will get wifi signal.
I will make money on POG and POS aND SHARES.


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## juddy (19 September 2006)

professor_frink said:
			
		

> 123 fake street
> 
> 
> 
> ...




Get on a boat and leave Freo (pack plenty of beers). Travel north to Geraldton (it'll take a while). Keep watching the coast. Every now and then you'll see a small settlement (eg Leeman), even less often you'll see a big settlement (eg Dongara). Of this beautiful coastline between Freo and Gero I'd estimate less than 1% is inhabitated, the rest is prime and beautiful coastal land just waiting for development. 

There is heaps of it.


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## cogidubnus (19 September 2006)

juddy said:
			
		

> Get on a boat and leave Freo (pack plenty of beers). Travel north to Geraldton (it'll take a while). Keep watching the coast. Every now and then you'll see a small settlement (eg Leeman), even less often you'll see a big settlement (eg Dongara). Of this beautiful coastline between Freo and Gero I'd estimate less than 1% is inhabitated, the rest is prime and beautiful coastal land just waiting for development.
> 
> There is heaps of it.



Thank Juddy I will travle there


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## niknah (19 September 2006)

If you compare property vs shares, shares win out most of the time.

If you compare "top tax bracket income job + property" vs "top tax bracket income job + shares", property wins out especially if you've brought it with a big mortgage.


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## nioka (19 September 2006)

cogidubnus said:
			
		

> Dinner tonite consists of sausages potatoes carrots and peas. I am happy eating this. The meal cost me about 1$. I am also drinking some mid strength beer that I bought at 26$ for a box of thirty cans. Tommorrow I go on holiday in my bus. I have 500 litres of biodiesel that I made thanks to the local fish and chip shop. It cost me 30 cents a litre. I will travel for some months and contemplate life. My trip will cost me very little as I have bought tins of tuna for 1.89, tomatoes at .86.
> I have fishing rods and net and crab pots. I will fish. I have a gun. I will shot wild pig. The adventure will be good. My solar panels will provide power for my computer and where I can i will get wifi signal.
> I will make money on POG and POS aND SHARES.



That is the power of dreams, not the power of property. Dream on and have a good time.


----------



## professor_frink (20 September 2006)

juddy said:
			
		

> Get on a boat and leave Freo (pack plenty of beers). Travel north to Geraldton (it'll take a while). Keep watching the coast. Every now and then you'll see a small settlement (eg Leeman), even less often you'll see a big settlement (eg Dongara). Of this beautiful coastline between Freo and Gero I'd estimate less than 1% is inhabitated, the rest is prime and beautiful coastal land just waiting for development.
> 
> There is heaps of it.




Point taken. That's why I rephrased the question  


			
				professor_frink said:
			
		

> Alot of land that people *want* to live in is taken.



Why are these types of areas not being developed so that people can live there?


----------



## clowboy (20 September 2006)

Professor Frink

No offence but that just makes me laugh.

It is getting developed and that is what scares me.

Drive 2-2.5hrs north of perth and you will hit the "Boom" central of the north coast, called jurien bay.  It's a great little seaside town, just the kind of place you might want to retire, now I only ever went there about 3 months ago so I don't know what it use to look like but given that everything looks brand new (roads, shops, kerbs, footpaths, everything) I said damn this place is really booming.  Now if you had nothing to do with your time and could travel back to the big smog at a pins drop and didnt mind that there is only one supermarket (a big deli) and a couple of other shops you would probally love living there.  But with a population of a couple of thousand and a 2+ hour drive back to civilization I shudder at the asking price of a block of land.  Ocean views demand prices in excess of 500k(and Im being conservative here).  Sure the views are nice and all that but that is a heck of a lot of money for a slab of dirt in the middle of next to nowhere.
Hell drive another 1-1.5 hrs and you will hit dongara where there are land releases coming out of there but's (at least it is less than an hour to gero) and the price tag's ar'nt much cheaper.  Everthing in between is doing pretty much the same, only on a lesser scale.

I mean the joke in perth these days is that if you go to the most northern suburb your in south Geraldton.  while it is,nt quite that bad it is pretty bad.

Also what isn't getting developed is still farm land.

What's my point?

Well basically I think to myself wouldn't it be nice to live in a place like this (if you are able to, eg retired), and I answer yes, then I ask myself, I a block of dirt 2hrs from perth really worth more than $500k?  I don't think so.  If things turn around and my 350k property 6km's from the CBD becomes worth 250k, what will that 500k block of dirt fetch?

Probally I could trade my place for two or more blocks of dirt.


Anyway that's just what I think, could be that China and commodities are stronger for longer and those blocks end up fetching 3-4 million each.


----------



## Realist (20 September 2006)

professor_frink said:
			
		

> Why are these types of areas not being developed so that people can live there?




Because living on an empty coast is completley overrated. And despite what everyone thinks, few people actually want to live on the coast. People want to live near people, jobs, excitement, friends, events, etc.

Most people in the world live in large crowded cities, despite there being ample coast that is empty.

If you built a massive new Island, with room for 10M people and you put 1M people on it, I suspect 900,000 would cram together at one corner, 80,000 would live near them but not with them, and 20,000 would spread out to the empty spots and they are probably the old buggers ready to die. Later as it grew another city would form but 90% of the land would remain unused.  If you added many more people they'd build towers - still not using the empty land.

People and animals in general like to live together.  Hence a crappy part of Sydney is still worth more than some empty coast which in most peoples opinions is much nicer.

1/4 of NZ live in Auckland, 1/4 of Australia live in Sydney or Melbourne, alot of the US live in the worst part, the north east.  etc..


----------



## professor_frink (20 September 2006)

clowboy said:
			
		

> Professor Frink
> 
> No offence but that just makes me laugh.




 Glad I'm entertaining you  
Which part in particular made you laugh? I've posted a few things in this thread. Which comment are you talking about specifically?



			
				Realist said:
			
		

> Because living on an empty coast is completley overrated. And despite what everyone thinks, few people actually want to live on the coast. People want to live near people, jobs, excitement, friends, events, etc.




And that's why I rephrased my earlier comment. Not that many people want to live too far away from the major cities. Hence land that most people want to buy is limited.


----------



## Realist (20 September 2006)

The question then is Prof Frink, where to buy next as an investment?

And my thoughts are Sydney.

Because it was the first to boom, everywhere else has followed leaving bargain opportunities few and far between, it has been the first to fall (creating a bit of value and other places are due for a fall), the money and population are there, land is scarce unlike virtually everywhere else, and if a mining crash happens Sydney has the jobs. It has overseas buyers as well. 

And because it has gone down for the past 3 years, it is getting close to having some value properties.

Not yet though, but soonish...


----------



## clowboy (20 September 2006)

the not being developed part, only because I recently went travelling up the WA coast and the development is absurd.  No stop's complaining about urban sprawl over here.


----------



## professor_frink (20 September 2006)

Realist said:
			
		

> The question then is Prof Frink, where to buy next as an investment?
> 
> And my thoughts are Sydney.
> 
> ...



Personally, when it comes to property, I'd always look locally, or fairly close to it. That's just a personal preference, as I'd like to be fairly familiar with the area I would be buying in- I know 10 times more about areas from Sydney-Queensland border, as this is where I've spent most of my time. 
There's no way I'd be looking interstate, unless I'd been visiting there on a regular basis.

At least if I'm buying in an area I know, I can feel a bit more confident about any decision I make. Not sure if it would help the performance of the investment at all, but I'd feel more confident doing it that way.
Last thing I would want to do, is buy an IP in an area that turned out to be that area's equivalent of Lakemba/Redfern, or Windale(Newcastle)


			
				clowboy said:
			
		

> the not being developed part, only because I recently went travelling up the WA coast and the development is absurd. No stop's complaining about urban sprawl over here.



Sorry. I was just going on what Juddy said.


----------



## cogidubnus (20 September 2006)

Realist said:
			
		

> Because living on an empty coast is completley overrated. And despite what everyone thinks, few people actually want to live on the coast. People want to live near people, jobs, excitement, friends, events, etc.
> 
> Most people in the world live in large crowded cities, despite there being ample coast that is empty.
> 
> ...




You are correct. I am old fart and I do not like towns, because kids mug me when I go to the shop. They steal my money. Everyone moves quickly and noone cares about my well being. I am safer living in a smaller community or out in the bush. I can drive and not get hassled. I can play golf go fishing lawn bowls stroll on the beachetc.  Big cities are for young people who can defend themselves or have lots of friends to mingle with and are up and commings.. They enjoy living in small cramped places because they are gregarious like budgies. they need to communicate and spin **** to survive. Chirp chirp little birdies.


----------

