# Kudos to this young man



## Timmy (12 July 2009)

18-year old buys a house.  I like his attitude and his gumption.
How I bought my first home when only 18


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## jbocker (12 July 2009)

Yes good on him. A healthy asset and should set himself up well, hope he doesnt forget to have fun too. It is far better to see this than some dead kid in the papers.
Some 'boys' at this age are far too interested in an overvalued car and do their best to destroy it, themselves and others, driving with their balls and not their brains. (apology for my crude but apt description )


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## matty2.0 (12 July 2009)

Silly boy. House prices will fall. I feel sorry for him.
His equity value will fall. 
I like his motives and enthusiasm however.


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## jbocker (12 July 2009)

matty2.0 said:


> Silly boy. House prices will fall. I feel sorry for him.
> His equity value will fall.
> I like his motives and enthusiasm however.




Maybe in the short term, what do you think the house will be worth when he is 28. I have difficulty seeing him having less equity then. If you know something let me know, I have a few and dont want to be siting on big losses.


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## matty2.0 (12 July 2009)

jbocker said:


> Maybe in the short term, what do you think the house will be worth when he is 28. I have difficulty seeing him having less equity then. If you know something let me know, I have a few and dont want to be siting on big losses.




28? On average most people who invest in residential tend to move every 5 years or so. I think that's way too long a projection. 
In the meantime, if he loses his job, or takes a pay cut, or his expenses go up, or he sells anytime in the next 5 years he is going to be in trouble. 
I'm assuming that his 20K deposit represents a loan to value ratio of somewhere in the 80-90% range, especially if the house is worth 200K+ ... so his mortgage is a very high risk loan. 

Interest rates will more likely rise from here on in. Well done to the bank who has got him on the interest treadmill.


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## nomore4s (12 July 2009)

matty2.0 said:


> Silly boy. House prices will fall. I feel sorry for him.
> His equity value will fall.
> I like his motives and enthusiasm however.




lol, what happens if you're wrong? What happens if we see a period of high inflation after this period of deflation?



matty2.0 said:


> 28? On average most people who invest in residential tend to move every 5 years or so. I think that's way too long a projection.
> In the meantime, if he loses his job, or takes a pay cut, or his expenses go up, or he sells anytime in the next 5 years he is going to be in trouble.
> I'm assuming that his 20K deposit represents a loan to value ratio of somewhere in the 80-90% range, especially if the house is worth 200K+ ... so his mortgage is a very high risk loan.
> 
> Interest rates will more likely rise from here on in. Well done to the bank who has got him on the interest treadmill.




Alot of assumptions there, you don't know his personal situation or his goals . I'm willing to bet he is going to be alot better off then any of his mates in 10 years. 

There is no such thing as a risk free investment, the fact is at his age even if he does get into trouble he has plenty of time to recover but if it comes off he will be miles in front. IMO having a crack is better then sitting on his hands hoping for a crash - he could end up wasting 10 years.


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## jbocker (12 July 2009)

matty2.0 said:


> 28? On average most people who invest in residential tend to move every 5 years or so. I think that's way too long a projection.
> In the meantime, if he loses his job, or takes a pay cut, or his expenses go up, or he sells anytime in the next 5 years he is going to be in trouble.
> I'm assuming that his 20K deposit represents a loan to value ratio of somewhere in the 80-90% range, especially if the house is worth 200K+ ... so his mortgage is a very high risk loan.
> 
> Interest rates will more likely rise from here on in. Well done to the bank who has got him on the interest treadmill.




Yes there is risk. 
All the more we both admire his motives and enthusiasm. You call him silly I will call him brave. Maybe he is both, but good luck to him. 
I wouldnt normally suggest it, and have only sold one investment house in under 5 years, in fact it was 14 months. Bought $400K sold at $765K.


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## cutz (12 July 2009)

matty2.0 said:


> Silly boy. House prices will fall. I feel sorry for him.
> His equity value will fall.
> I like his motives and enthusiasm however.




Good on the kid,

He probably isn't too concerned of the state of the property market, i was also quite young when i purchased my property, must say it's nothing unusual, and i'm glad i did when i did.

What's your story matty2.0, is property ownership something that's been out of reach ?


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## Julia (12 July 2009)

matty2.0 said:


> 28? On average most people who invest in residential tend to move every 5 years or so. I think that's way too long a projection.
> In the meantime, if he loses his job, or takes a pay cut, or his expenses go up, or he sells anytime in the next 5 years he is going to be in trouble.
> I'm assuming that his 20K deposit represents a loan to value ratio of somewhere in the 80-90% range, especially if the house is worth 200K+ ... so his mortgage is a very high risk loan.
> 
> Interest rates will more likely rise from here on in. Well done to the bank who has got him on the interest treadmill.



What negativity!   I reckon if he's done as well as this by age 18, if he were to lose his job, he'd very quickly have another.
Most employers will be keen to have a kid with that sort of initiative.

Seems like the sort of boy who will set his targets and just find a way to reach them.  Wish there were more like him.


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## beerwm (12 July 2009)

matty2.0 said:


> Silly boy. House prices will fall. I feel sorry for him.
> His equity value will fall.
> I like his motives and enthusiasm however.




i agree,

I dont know why he is building a house - seems like alot of extra expenses.
-- article implies he wont rent it out.

who knows if he will be able to cope with repayments if he loses his job/interest rates rise.

//

risky.....


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## Aargh! (12 July 2009)

Ah, it will all go down hill for him when he loses his virginity


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## data (12 July 2009)

Good pick Timmy. I bought my first in my early twenties and I still have it in my portfolio which I now rent back to myself with a positive gearing. I now balance the positive gearing with some negative geared property.

leverage works in the property market too. . As I bought my first place for an expensive at the time 128k I have since refinanced 4 times and bought 3 other homes. With a current book value of 1.5mil on a 600k fixed mortgage. I have plenty of equity.

Financial diversification is more necessary as a risk management tool. Asset management is key when building a strong portfolio.


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## matty2.0 (12 July 2009)

Julia said:


> What negativity!   I reckon if he's done as well as this by age 18, if he were to lose his job, he'd very quickly have another.
> Most employers will be keen to have a kid with that sort of initiative.
> 
> Seems like the sort of boy who will set his targets and just find a way to reach them.  Wish there were more like him.




That's what they said during the height of the housing bubble in the US, when people were lending to the low-income earning latino or african american in the south. "Home ownership is great ... wonderful!" they said. Then what happened?? The property market crashed, and all the equity turned into negative equity ... and now those very homeowners who were duped are blaming the banks for their predatory lending and the government for not helping them. 

That sort of lending and buying was the very cause of the GFC. 

Seems like an all too familiar story. Seriously, the FHB grant by the govt. has got many people, especially those who are vulnerable, in a bubble like mentality ... that "quick buy now, before it's too late, we'll miss out!!!" mentality .... whenever someone invests with that sort of mentality it is always dangerous. 

Let's hope the markets here don't crash as bad as it has in every western country. UK, USA, Spain, Canada ... almost every country that has had low interest rates and a run up in asset prices has seen a resulting fall in property prices. I'm not saying that our market is exactly the same, however ... ours hasn't fallen at all!! Something's gotta give.


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## Mr J (12 July 2009)

Julia said:
			
		

> Seems like the sort of boy who will set his targets and just find a way to reach them.




The real world doesn't care about character or determination. He's an 18 year old construction worker who took out a $430k loan, and he's already maxed out hours-wise.



> I reckon if he's done as well as this by age 18, if he were to lose his job, he'd very quickly have another.




He hasn't really done well. The difference is that he's going to build a house rather than buy and modify a car. Yes, the house is an investment and the car a depreciating asset, but he is still likely very overstretched. You say he'll quickly find another job - what if the construction industry slumps? He may find work elsewhere, but 56 hours worth? I'm going to guess that he's reasonably stretched and that working lesser hours will see him struggle or fall behind. 

It seems he's relying on the future not to throw him a curveball, and in my opinion that is unwise. Many seem to think that one must take great risk for great returns, but I say that is rubbish. He's young and likely has plenty of time. No reason to jump into the deep end.


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## Knobby22 (12 July 2009)

Maybe he has a backup plan Mr J.

The other good thing is that he is young and he goes bankrupt he has plenty of time to start again.


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## Mr J (12 July 2009)

He may, but nobody here seems to care. He's getting a slap on the back and promoted as an example to others. Seems we've already forgotten the US housing market situation.


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## warezwana (12 July 2009)

Mr J said:


> It seems he's relying on the future not to throw him a curveball, and in my opinion that is unwise.




I work in the construction industry and YES it is/has slowed, up till xmas 08' I was working 52-56 hr weeks.. now, well lets just say now my typical week has gone from spending 50+hours at work and about 40hours or so a week on trading/learning to now sometimes NO hours at work in a single week and 80+ hours playing trader student.

What am I doing tomorrow? Standing by the mailbox reading my 'Trend Trading' book while I wait for my AmiBroker book to arrive, will I have work at all next week.... Who knows, but not so far! Construction sucks 

*So to this young guy!!!* , good on him for throwing everything into the wind so young and hoping for the best. I guess it's like the lottery, you have to be in to win. Good luck with it, but maybe just maybe his back up plan includes his parents wallet, it can always be rented while he lives at home... but I hope he also allows for the x factors... work slowing and most guys know this one. Its the one that strolls into your life and takes all you have worked your ass to the bone for and age has no limits on this one. Well actually I think the more you have early on the more you have to lose 

One good thing is he is mature enough or smart enough to just go out to socialise, rather than getting **** faced and getting into fights and or doing dumbassed things that young n dumb kids these days seem to do so commonly... smart kid for that.


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## theasxgorilla (12 July 2009)

Julia said:


> What negativity!   I reckon if he's done as well as this by age 18, if he were to lose his job, he'd very quickly have another.
> Most employers will be keen to have a kid with that sort of initiative.
> 
> Seems like the sort of boy who will set his targets and just find a way to reach them.  Wish there were more like him.




Exactly, we want more kids who are this determined!


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## theasxgorilla (12 July 2009)

matty2.0 said:


> That's what they said during the height of the housing bubble in the US, when people were lending to the low-income earning latino or african american in the south.




Unfortunately, extreme arguments are always the weakest Matty.  Besides, this is Australia, aka GFC Safehaven Ltd .  And I'm only half joking there.


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## johnnyg (12 July 2009)

Being only reasonably young myself ~ 23, I purchased my first home when I was 20 1/2. Since that time house prices in my town I would say have come down perhaps 10-15% where in this time my own home has risen 30%+ from my initial purchase price. In saying that I picked a house that needed work (18 months renovations  in one of the best areas.

What worries me about this young bloke, and as some others have alluded to earlier in the thread is the possible over extension on the amount he has borrowed.

On 450K he'd be looking @ repayments of ~$2650 dollars a month or close to ~$600 dollars a week. What happens if he looses his job? If his hours get cut back? That's a fair sum a week just to meet the repayments. 

But goodluck to him, it seems he has a very good work ethic and I've always believed that those who are willing to work, can do very well in life.


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## JimBob (12 July 2009)

Good on the guy for buying a house at such a young age, but I think you still need to have a life when you are that young.  Being 18 is also about having a car and going out partying on weekends and getting all that stuff out of your system and finding your place in the world.  I think if you dont get that stuff out of your system when you are younger, you will try and do it all later in life when it has more consequences.  Each to their own though, good luck to him.


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## warezwana (12 July 2009)

johnnyg said:


> In saying that I picked a house that needed work (18 months renovations  in one of the best areas.
> 
> What worries me about this young bloke, and as some others have alluded to earlier in the thread is the possible over extension on the amount he has borrowed.



18 and going into nearly 1/2 mill loan.... ouch! Now if it's a new development that is about to take off then ok he might do ok in a few years or more but that's a good chunk to put on tick.

There's a saying..... 'buy the _worst house_ in the _best street_ you can afford'...

As an ex developer it holds a lot of truths so you can ride the improvements and rising values of the dearer properties in the street.... unless the markets booming then you can get away with new homes  some how I doubt todays market is something i'd count as a boom


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## refined silver (12 July 2009)

Mr J said:


> The real world doesn't care about character or determination. He's an 18 year old construction worker who took out a $430k loan, and he's already maxed out hours-wise.




Thats the crux of it.

The first principle of personal finances is save some by spending less than you earn. He's a good kid who has got that much better than most. 

The second principle is invest carefully what you save. Its on this point I feel he's in trouble. $430k debt for an 18 yr old. Plus potentially near the top of the cycle. Why not buy a 1 bedroom apartment and rent it out?


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## matty2.0 (12 July 2009)

refined silver said:


> Thats the crux of it.
> Its on this point I feel he's in trouble. $430k debt for an 18 yr old. Plus potentially near the top of the cycle. Why not buy a 1 bedroom apartment and rent it out?




Unfortunately there has to be some losers in the system we have. Just like the tech boom, like the resources boom ... there were eventually losers that bought at the top. That's what makes a market after all ... 

Who says he's necessarily getting ahead? If house prices fall, he'll have to put up more equity or risk default, since he's on a very thin margin of safety. That means all those years of saving will be for nothing since the equity component of the mortgage will be almost worthless. 
I would have rather just saved it and left it there, or better yet ... spent it on a car and some booze and had fun ... rather than sitting on the interest treadmill and being a slave to the bank. lol ...

All payments he's making will be pure interest payments for the first couple of years. If he loses his job at all he's in big trouble. 
And there are people who are encouraging him to do this?? lol ...


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## jono1887 (12 July 2009)

matty2.0 said:


> Unfortunately there has to be some losers in the system we have. Just like the tech boom, like the resources boom ... there were eventually losers that bought at the top. That's what makes a market after all ...
> 
> Who says he's necessarily getting ahead? If house prices fall, he'll have to put up more equity or risk default, since he's on a very thin margin of safety. That means all those years of saving will be for nothing since the equity component of the mortgage will be almost worthless.
> I would have rather just saved it and left it there, or better yet ... spent it on a car and some booze and had fun ... rather than sitting on the interest treadmill and being a slave to the bank. lol ...
> ...




Oh come on, dont be so pessimistic... its not the end of the world for the kid. Sure, i'm 18, sitting on a similar amount of money and think its a stupid idea. But he's making an effort to seize an opportunity... if no one in the world did, we wouldnt have the entrepreneurs that are the billionaires of today...


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## Julia (12 July 2009)

johnnyg said:


> Being only reasonably young myself ~ 23, I purchased my first home when I was 20 1/2. Since that time house prices in my town I would say have come down perhaps 10-15% where in this time my own home has risen 30%+ from my initial purchase price. In saying that I picked a house that needed work (18 months renovations  in one of the best areas.
> 
> What worries me about this young bloke, and as some others have alluded to earlier in the thread is the possible over extension on the amount he has borrowed.
> 
> ...



Now there's a balanced comment.



matty2.0 said:


> Who says he's necessarily getting ahead? If house prices fall, he'll have to put up more equity or risk default, since he's on a very thin margin of safety. That means all those years of saving will be for nothing since the equity component of the mortgage will be almost worthless.
> I would have rather just saved it and left it there, or better yet ... spent it on a car and some booze and had fun ... rather than sitting on the interest treadmill and being a slave to the bank. lol ...



So that then you could have criticised him to the hilt about being wasteful, lacking direction, etc etc., criticism and carping seemingly being your main focus.





> All payments he's making will be pure interest payments for the first couple of years. If he loses his job at all he's in big trouble.
> And there are people who are encouraging him to do this?? lol ...



I'd feel pretty sure this kid has a back up plan or two, probably including supportive parents.


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## jbocker (12 July 2009)

Julia said:


> I'd feel pretty sure this kid has a back up plan or two, probably including supportive parents.




From the article..
_The youngest of four, his elder siblings all bought houses before they were 20.

"Mum and Dad gave us a lot of guidance. They helped out with choosing loans and where to buy,'' Mr Fritsch said. "I want to invest my money, build up a bit of equity and then buy another place."..._


Looks like good family experience and support is available to young Jason Fritsch. Go for it kid, it will be tough, but I reckon you have the attitude to see it through.


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## data (12 July 2009)

Ok I didnt read the article, till now.

Hurdle 1. (20k deposit + FHOG 21k)/450k is a 10.97% deposit.

Hurdle 2. LVR <20% LMI is required + (1-2% total loan value = 450k-41k is 409k) then add stamps and legals.

Hurdle 3. Length of employment is 2yrs stable with same employer - possibly no credit defaults.

Hurdle 4. If he is payg then standard credit rules apply and he is open to standard variable rates however if he is subcontracted then he will have to apply for a LowDoc or NODoc which incur a slightly higher interest rate.

Hurdle 5. Can he afford it on his salary? at $30 an hr, $87k per yr. Possibly depending on the bank and their lending criteria as each are very different.

On 87k he would be on about 6,720k per month and a monthly loan repayment of about 2900k at about 7ish percent. Giving him about $3800 per month to live on.

Provided he has no other loans or credit cards or outgoing expenses.

I would say a few banks would take his business one in particular might lend him about $670k which is scary. 

However this young guy is trying to get ahead. Markets go up and down and its up to each individual which way they go. Its always easy to scrutinize when you dont have a mortgage. 

My parents have a home loan of 15k with 550k of equity so what if the market goes down by 50% the thing is the longer you are in it the more it grows in value and the lower the repayments and risk is. The trick is to get in as early as you can. 

This guy has a home worth $450 now what will it be in 30yrs? Well according to the Matusik report (all Australian newspapers, all tv stations, many magazines and business use Matusik as a source of reference http://www.matusik.com.au/) predicts by 2030 the median house price in Australia will be around 18-23 Million. Dont laugh when you know house prices in the early 80's were 30k and now they are around 400-500.

Unfortunately it is typical of the Aussie mentality to drag anyone down who is trying to get ahead eg. if you know anyone with a Ferrari they are a wanker. I know a few wankers that are top blokes.

My opinion $450 is a lot for an 18yr old. I think the opportunity cost could have been spent more effectively with a different strategy.


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## awg (12 July 2009)

He is leveraging his skill into it, if he comes from a family of building contractors.

Many do this, and build the house for far less than could be done otherwise.

Then repeat the process.

The option to rent out sounds like it is always there, he has a supportive family.

If the housing market falls over, or interest rates rise a fair bit, he will do it tough, but he wont be alone


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## skyQuake (12 July 2009)

Why does this sound disturbing like using a $40k margin loan to buy $400k worth of shares?


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## jono1887 (13 July 2009)

skyQuake said:


> Why does this sound disturbing like using a $40k margin loan to buy $400k worth of shares?




Shares are far more volatile that properties. You wont see them move +/-10% on a daily basis. And over time, there will definitely be a increase in the market... its probably alot safer than buying 400k worth of shares with only 40k


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## weird (13 July 2009)

Good on him, but Sydney transportation is sadly lacking in areas around Kellyville, so I guess he works around there.  I have a work mate in Kellyville, and it is a major and long effort to get into the city by public transport.

I didn't realize it was so criticised,

http://en.wikipedia.org/wiki/Kellyville,_New_South_Wales#Public_Transport_Deficiency

I would rather see tax dollars effectively being spent on things like this, that is improving public transport.  From what I hear the buses to the Northern beaches are also a joke.


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## matty2.0 (13 July 2009)

jono1887 said:


> Shares are far more volatile than properties. You wont see them move +/-10% on a daily basis. *And over time, there will definitely be a increase in the market*... its probably alot safer than buying 400k worth of shares with only 40k





Australia is just getting started.


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## Largesse (13 July 2009)

Still waiting for you over in the credit spread thread Matty2.0....


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## Mr J (13 July 2009)

jbocker said:
			
		

> Looks like good family experience and support is available to young Jason Fritsch. Go for it kid, it will be tough, but I reckon you have the attitude to see it through.




I would guess the best support the parents could give him, given that they have other kids, is to let him move back in and allow him to rent the place out. Attitude doesn't count for much if we can't make the repayments. We can have the best attitude possible, but still fall flat on our face. 



			
				Julia said:
			
		

> I'd feel pretty sure this kid has a back up plan or two, probably including supportive parents.




I would bet that it only goes as far as moving back in with them. What could his backup plan be? It's obviously not a lucrative income, and I doubt his parents are willing/able to make the repayments themselves. If it does go pear-shaped, he's put them in that position and effectively receiving a bailout. Doesn't sound responsible to me. He's working hard for his money, and then putting it all on red.



			
				data said:
			
		

> This guy has a home worth $450 now what will it be in 30yrs?




You may want to factor in inflation, which is no doubt responsible for much of the increase of property values. 18-20 million doesn't help when it's the price of a standard home. Really, the only thing property has going for it is that it is in limited supply in populated areas. Theoretically it should increase in value because of the slowly rising population, but not anywhere near the extent to what people think.



> Unfortunately it is typical of the Aussie mentality to drag anyone down who is trying to get ahead eg




I'm not dragging him down, just saying that he has put himself in a dangerous position. Working 56 hours at 18 and taking on a 450k loan obviously takes determination, but it is also highly irresponsible in my opinion. There is both positive and negative, thought most people here seem to only want to look at the upside. I would think on a site like this there would be more consideration of the risk.



			
				avg said:
			
		

> If the housing market falls over, or interest rates rise a fair bit, he will do it tough, but he wont be alone




I'm sure that was slightly comforting to the men stuck on the Titanic :.


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## data (13 July 2009)

data said:


> On 87k he would be on about 6,720k per month and a monthly loan repayment of about 2900k at about 7ish percent. Giving him about $3800 per month to live on.




This still gives him substantial residual income to survive on.

Provided he has no other loans or credit cards or outgoing expenses.



data said:


> This guy has a home worth $450 now what will it be in 30yrs? Well according to the Matusik report (all Australian newspapers, all tv stations, many magazines and business use Matusik as a source of reference http://www.matusik.com.au/) predicts by 2030 the median house price in Australia will be around 18-23 Million. Dont laugh when you know house prices in the early 80's were 30k and now they are around 400-500.




Thanks captain obvious inflation in the median house price market is based on an exponential forecasting model (1+r)^n and is only 1 of a myriad of external influencing factors that affect the end result. I have used his source of data for government presentations and I assure you they are accurate and accepted in the wider business community.

And why wouldnt 18-20million help? Its simple set and forget. Pay 41k on a leveraged investment and get 18-20million back in 20years. This is only 1 investment strategy. It works really well when you have more than 1 and you are invested in other areas. 

Portfolio management isn't just about trading. Try a covariance and correlation formula to balance your risk analysis in defining what you pick as a valid investment strategy. http://investing.calsci.com/statistics3.html

Trading alone isnt substantial enough in a balanced portfolio.

What needs to be taken into perspective is this: how will you be able to afford a home in 20yrs time when they are at the 18-20mil mark? if you did buy it back in 2009 at 450k and you own it out right you would have at least 18mil in equity at yr 20.



data said:


> My opinion $450 is a lot for an 18yr old. I think the opportunity cost could have been spent more effectively with a different strategy.




Nuff said there.

The US housing market is vastly different to ours Mr J you're a little out of touch. I'm not interested in an argument I just think a comment like that shows the knowledge base in this area is diminutive. I am a practicing MFAA broker and I am in contact with this information daily and the most obvious difference is that we are regulated and the US were quasi-regulated until recently. Apples and oranges my friend.


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## Mr J (13 July 2009)

data said:
			
		

> Thanks captain obvious




I assume this is directed at me. It may be obvious to some, but most people are completely oblivious to inflation. They think that the dollar value increase in their property represents a rise the in true value of their property. It may be the case, but it may not.



> And why wouldnt 18-20million help?




Never said it wouldn't.



> Portfolio management isn't just about trading.




Yes it is, just not limited to the financial markets.



> Trading alone isnt substantial enough in a balanced portfolio.




Perhaps not for you, but I am certain it is for some.



> What needs to be taken into perspective is this: how will you be able to afford a home in 20yrs time when they are at the 18-20mil mark? if you did buy it back in 2009 at 450k and you own it out right you would have at least 18mil in equity at yr 20.




The true value won't have risen nearly that much. I will pay for it with my trading profits, which will have achieved far greater growth than real-estate and inflation. I'm not suggesting this is the best approach for everyone, but it is for me.



> It works really well when you have more than 1 and you are invested in other areas.




Never said it wasn't a great way to make money, *if* it is done correctly.



> The US housing market is vastly different to ours Mr J you're a little out of touch. I'm not interested in an argument I just think a comment like that shows the knowledge base in this area is diminutive. I am a practicing MFAA broker and I am in contact with this information daily and the most obvious difference is that we are regulated and the US were quasi-regulated until recently. Apples and oranges my friend.




I'm not sure to what you are referring. I didn't compare the aussie market with the US market. Are you sure you have only replied to my post and not the posts I quoted? However, I do know that markets experience corrections, and that if this kid goes through one he could be in for a world of hurt. I don't know how this suggests a limited knowledge base, but if so then I'd prefer to be stupid and be risk-averse than be 'informed' and think giving 450k loans to 18 year old kids in an expensive market is a good idea.


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## alwaysLearning (13 July 2009)

data said:


> This still gives him substantial residual income to survive on.
> 
> Provided he has no other loans or credit cards or outgoing expenses.
> 
> ...




If the average house is going to be at the 18-20 million mark in 20 years, how much higher will the average wage go up? What would your typical person earn per year?

Is this analysis a mistake? Just because something on a chart moves in a particular direction for 30 years does not mean that it has to go in that direction for another 30 years without significant retracement, does it?

Population increase, yes. But it's not like we have a shortage of land here in Australia to build houses. If they want to release more land for houses then they can do that right? We are in a deleveraging environment.

Debt needs to be paid. The US is in trouble with it's debt. 

If inflation rises as  you say, you could still get a situation where houses become so unaffordable that they 'have' to fall in price.

In the UK the so called experts said that the demand for housing could keep prices high and higher still. We know what happened to the UK housing market now.

I'm not an expert like you but would like to hear some more of your thoughts on the subject.


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## LeeTV (13 July 2009)

If he holds on to the house till the market has another boom in years to come, reinvests the profits in to shares and waits another few years. When he finally gets married, to settle down with his new found wealth, then divorced a few years later, his ex-mrs will have made quite the investment :


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## data (13 July 2009)

My apologies Mr J. The responses weren't directed all to you. 

You have a very strong understanding in Trading and it would make sense to develop your portfolio in that area. You are right not everyone falls into the standard deviation when it comes to a balanced portfolio but you are the exception to the rule. 

However I think that if you were to develop your investment knowledge in property and business to be as strong as your trading skill you would be miles ahead. Boy how good could you be?

Personally I balance myself in businesses, properties and trading - leveraging them all.


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## jonojpsg (14 July 2009)

Can we try and keep the maths right please people!!??  A median increase from 30k to 400k between 1982 and 2009 corresponds to approximately 10% compound per year which carried through to 2030 would imply a median house price of around $3m, NOT $18-20m!!!!

If you assume a more conservative 7%p.a. increase, median prices will be $1.6m.  Still if he manages to make it through, he will have paid about $300k interest and made a $1.2m capital gain so that looks pretty reasonable IMO.


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## skyQuake (14 July 2009)

jonojpsg said:


> Can we try and keep the maths right please people!!??  A median increase from 30k to 400k between 1982 and 2009 corresponds to approximately 10% compound per year which carried through to 2030 would imply a median house price of around $3m, NOT $18-20m!!!!
> 
> If you assume a more conservative 7%p.a. increase, median prices will be $1.6m.  Still if he manages to make it through, he will have paid about $300k interest and made a $1.2m capital gain so that looks pretty reasonable IMO.




lol, cant believe no-one noticed that. Need 20% p.a. for 21 years compounded to be 18 Mil.
Obviously giving buffett a run for his money


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## Mr J (14 July 2009)

jonojpsg said:


> Can we try and keep the maths right please people!!??  A median increase from 30k to 400k between 1982 and 2009 corresponds to approximately 10% compound per year which carried through to 2030 would imply a median house price of around $3m, NOT $18-20m!!!!
> 
> If you assume a more conservative 7%p.a. increase, median prices will be $1.6m.  Still if he manages to make it through, he will have paid about $300k interest and *made a $1.2m capital gain* so that looks pretty reasonable IMO.




Most of which is inflation. The real benefit is that he's effectively paid rent to himself, rather than someone else, so it's more about capital preservation than capital growth. There are other potential benefits of course, but my point is that a house alone won't achieve much real growth.


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## data (14 July 2009)

jonojpsg said:


> Can we try and keep the maths right please people!!??  A median increase from 30k to 400k between 1982 and 2009 corresponds to approximately 10% compound per year which carried through to 2030 would imply a median house price of around $3m, NOT $18-20m!!!!
> 
> If you assume a more conservative 7%p.a. increase, median prices will be $1.6m.  Still if he manages to make it through, he will have paid about $300k interest and made a $1.2m capital gain so that looks pretty reasonable IMO.




You must be right. My math is way out.

I bought a home in 2004 for an expensive 138k (at the time), 4 bed 2bath, DLUG, 1100 sq block, <8k from CBD. Current val on refinance done in March 2009 by the bank  is 560-570. Maybe the growth is exponential. I dunno??


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## tech/a (14 July 2009)

Hmm

I dont know.

*He's a machine operator.*

Now I have 4 of these guys operating 4 of my machines.
For $150-200K he'll get a machine (excavator) which will return $120/hr without attachments and for another $30K $200/Hr with a Rock breaker.
All my machines work 45-55 hrs a week.

Anyone who does even a bit of homework and is experienced would have any of their machines working similarly.

His 20K down would have seen him with a potential $3/4000/week nett return on his small business.

Wouldnt take long to get in the position to buy a house with a far better servicability.


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## data (14 July 2009)

C'mon surely there are ppl here with some real life experience. Whats the point of flaming n flexing your just pissing in the wind.


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## johnnyg (14 July 2009)

tech/a said:


> Hmm
> 
> I dont know.
> 
> ...




I like this....


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## tech/a (15 July 2009)

data said:


> C'mon surely there are ppl here with some real life experience. Whats the point of flaming n flexing your just pissing in the wind.




Ke??????


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## jonojpsg (15 July 2009)

johnnyg said:


> I like this....




Me too - Great alternative tech and one that more people should be looking at, spread the joy (of making money for oneself rather than someone else)


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## warezwana (15 July 2009)

LeeTV said:


> If he holds on to the house till the market has another boom in years to come, reinvests the profits in to shares and waits another few years. When he finally gets married, settle down with his new found wealth, then divorced a few years later, his ex-mrs will have made quite the investment :




ha ha seems only you and I think of this (X)factor  
it should be called the '7 year factor'...

Y + ($ * yrs) = $ = 
(Y * yrs) + X = ... (enter 7year factor)
(X * ) + (Y * ) =  + 
(X = $) + (Y = ) = 


ok so the redbull breaks over with, time to get back to the books/AFL, stop playing around and see what interesting stuff is being posted...


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## kincella (15 July 2009)

so for my 2 cents worth....this kid seems to have the necessary determination to make things happen.....ie he is not sitting back waiting for the gold bag at the end of the rainbows.....
I would have preferred to hear him buying a much less expensive property...under the 250k...not the over 450 k.....

and the other side of the conversation....
the males who are unhappy the spouse might receive half of the assets...is because the same males do not believe the spouse brings any value to the home...
she can raise his kids, do all the housework and cooking, laundry aka do everything for him like a slave....without any value attached...by said male
put a dollar value on it...on call 24/7.....pay a lousy $15.00 per hour for all the chores....and in 50/50 of the cases....the spouse...female...has given up her job or career, to raise your children and look after you....

ask any high powered CEO...most say they could not have done their jobs as well, if it were not for the spouses, in the background, providing all the support...

and thats what the courts do....hence the splitting....
so maybe a pre nup would be better, if it stated the value attributed to the female for her housekeeping and child raising functions...on a year by year basis....say mv 50,000 pa with cpi increases.....for a start
food for thought


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## Mr J (15 July 2009)

Kincella, you assume the spouses are 'just' housewives? These days the parenting and household duties are more balanced, even if it's because neither parent is actually parenting (nanny/daycare, clearner once a week etc). 

Also consider that the ruling will scale with the income, and not be static. You really think a housewife is worth 50% to a bigshot ceo? I'm not just having a go at women here, I make the same argument for husbands who receive more than their fair share in divorce settlements.



> so maybe a pre nup would be better, if it stated the value attributed to the female for her housekeeping and child raising functions...on a year by year basis....say mv 50,000 pa with cpi increases.....for a start




"I love you darling, and this is what you are worth to me...".


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## awg (15 July 2009)

tech/a said:


> Hmm
> 
> I dont know.
> 
> ...






Good post Tech.

Thing is I strongly suspect that his family have probably thought of this first.

As I mentioned in post #29, I have seen several families work in exactly this manner. ( he has 3 other siblings who have done the same thing)

example; Father is in Construction, sons are chippies, plumbers, elecs etc.

They build the biggest house they can, for capital gains free, and repeat.

sure you have seen this too

the only other observation is that, around here, construction equipment hire/work is rather difficult and risky to get a foothold into, as it is under the influence of some major players, and they squeeze the hell out of competition in some ways that would give the ACCC a heart attack:bandit:


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## kincella (15 July 2009)

its an incentive then, to stay married, do not divorce...look at Richard Pratt...with girlfriend and child....


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## Mr J (15 July 2009)

It's also an incentive to not marry at all.


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## kincella (15 July 2009)

of course...and choices....I was married years ago.....love my single life...of course I made most of my money after divorce...so I do not have to share...


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## awg (15 July 2009)

Mr J said:


> It's also an incentive to not marry at all.




Hi Mr J,

here's an idea for you.

marry a girl with more dosh than you

then if it doesnt work out, you can asset strip her!

seriously though, if you ever want to own the roof over your head, it really helps to have 2 wages, so a lady with professional qualifications is ideal.

Its older kids that really shred your wallet, or divorce.


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## Mr J (16 July 2009)

> then if it doesnt work out, you can asset strip her!




Not my style. I'd still leave with what is mine, and she can keep what is hers.



> so a lady with professional qualifications is ideal.




Many of these take their jobs too seriously, but I suppose my opinions are no match for when my brain starts releasing chemicals and doping me up .



> Its older kids that really shred your wallet




Yes, I'm guilty of that myself!


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## jono1887 (16 July 2009)

kincella said:


> so for my 2 cents worth....this kid seems to have the necessary determination to make things happen.....ie he is not sitting back waiting for the gold bag at the end of the rainbows.....
> I would have preferred to hear him buying a much less expensive property...under the 250k...not the over 450 k.....




He was on today tonite last night... I dont think he took out a 450k loan, I think its just for the land and he's building the house himself


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## Mr J (16 July 2009)

I don't imagine the materials to be cheap, and he's doing this on top of 56hrs work a week? If the land is $265, anyone care to guess other costs? It may not be so much of a risk financially, but burn-out appears that it could become an issue.


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## tech/a (16 July 2009)

Building it himself he would do it for around $700/ square meter.
For reasonable quality.

A project builder would do it for 650 ish for fair quality.
Work on 250 square meters for an average place and 300-400 for a more lavish ponderosa.


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## schnootle (16 July 2009)

He has balls i will give him that - but what bank lends an 18 year old with 20k that much money. This shouldn't be allowed. Such easy access to so much money is what has caused house prices to have so little correlation to any inherent value, not to mention the near destruction of the worlds financial system.


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## alwaysLearning (16 July 2009)

awg said:


> Hi Mr J,
> 
> here's an idea for you.
> 
> ...




I guess to make this into a trading equation we would need to look at the risk to reward ratios lol 

Also look at the probability of the marriage sticking holding together over time.

A stop loss would be handy too 

Too much trading on my mind all day every day 

edit: I think that I'll stay single


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## ojm (16 July 2009)

schnootle said:


> He has balls i will give him that - but what bank lends an 18 year old with 20k that much money. This shouldn't be allowed. Such easy access to so much money is what has caused house prices to have so little correlation to any inherent value, not to mention the near destruction of the worlds financial system.




The government's $32k builder-developer-fat-wallets-bonus or whatever it is for new houses helps. 

And his parents could go be guarantors (either asset, income or a combination).


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