# Don't buy a house. Buy shares. $20,000 to $7,400,000 in 30 years



## Realist (14 September 2006)

Don't buy a house. Rent. Put the money you save into shares..

Start with $20,000 in your Account in highly successfull large companies that are near monopolies, they make large increasing profits and pay good increasing dividends and have a good future ahead of them.

Westfield, Fosters, Brambles etc.

Diversify, and avoid selling if you can purely for tax reasons, let what you owe in tax compound for you not the government.

Each year you buy $20,000 (+ $1,000 for each year) worth of shares . So on the 10th year you are adding $30,000 etc.

Reinvest dividends.

After 1 year you should have $20,000 + $21,000 +$2,400 = $43,400.
After 2 years you should have $70,608.
After 30 years you should have $7.4 Million.

Then move to Bermuda....    

If you wanna tinker try and pick house price spikes before they happen - or if you can postively gear some investment properties go for it. I'm not against property but by using this method you will be alot wealthier than a property investor without all the effort.

Thoughts?


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## krisbarry (14 September 2006)

You are asking for trouble posting this thread....watch the headstrong property gurus get stuck into you now....

The filthy greedy property hoarders who see nothing wrong with buying up stacks of property (a basic human need) are coming after ya...better run and hide


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## Realist (14 September 2006)

Ohooh

 :hide:


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## It's Snake Pliskin (14 September 2006)

Stop_the_clock said:
			
		

> You are asking for trouble posting this thread....watch the headstrong property gurus get stuck into you now....
> 
> The filthy greedy property hoarders who see nothing wrong with buying up stacks of property (a basic human need) are coming after ya...better run and hide




I am sick of your negative commo attitudes. If you are so disadvantaged go to China.


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## tech/a (14 September 2006)

Realist.

Im very suprised,you can actually think outside your shoebox!

Excellent.


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## moses (14 September 2006)

The people who make real money out of property are developers who borrow, subdivide and sell of sections of the property for as much or more than they paid for the lot; they repay their loans and now have an asset which cost them zilch. They then use that asset as a deposit to leverage their next property, and so it goes on; leverage par excellence.

The bigger developers have the added advantage that there is little competition for really large properties (say $20-100M), and when these properties are broken up into bite sized pieces for smaller developers the wealth generated is nothing short of astronomical.

Well, I'm not there yet, but just recently I purchased a property for $300k which is now in the process of subdividing. Development costs are expected to be in the order of $100k, and final gross value somewhere between $640-720k depending on the state of the market. At very worst, a fire sale should deliver $500k and leave me with a $100k profit minus interest payments, at best I'll make $300k. Its not the greatest example either; I personally know other developers who pay peanuts and make millions; it is a matter of being in the right place at the right time and knowing value and seeing opportunities that most people miss. But I'm starting where I can.

What makes this story significant is that I had no money; I haven't actually put a cent into it. This is not unusual; most property developers I know started with nothing, and learnt the skill of making something out of nothing.

So how does one raise the cash for the deposit? How does one raise another $100k for development?

Easy.

If you have shares or property, then leverage the deposit off either. I do, so I could.

If you don't, your friendly developer may offer to fund your deposit; naturally the price will rise artificially, but that isn't necessarily a bad thing because it establishes a higher market value on your properties anyway. The developer will then defer payment of your deposit. If the developer is a friend, he may even forgive you the debt, and write it off. At the end of the day, a property is worth what the market will pay anyway. Then when the DA is approved, the value of your property rises again substantially, and the bank will be happy to fund the development costs, including the interest payments in the mean time.

All of which sounds terribly high risk...and it can be...but, providing the end returns are there and you have done your sums correctly, it can be a relatively safe fast way to build equity and wealth from nothing. As a rule of thumb, it probably isn't worth doing if you can't reasonably expect to double the purchase price, the aim being to double the money applied.

When you have nothing, you have nothing to lose by trying something.


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## krisbarry (14 September 2006)

Snake Pliskin said:
			
		

> I am sick of your negative commo attitudes. If you are so disadvantaged go to China.




Just booking my ticket to China as we speak...LOL


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## krisbarry (14 September 2006)

Yes ...I guess I am so sick of greedy behaviours that have become the social norm, and yes greed is owning way more than you need, or your family needs.


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## Realist (14 September 2006)

Yes, but are you telling us how to be a property developer fulltime?   

Of course they make money. Everyone who works fulltime makes money.

I make money turning up to work each day. I'll make millions over many years, what is the difference?

The beauty of the sharemarket is it aint work. It is fun!!

Property development is painfull IMHO.    If you wanna do property development why not get a job as a gib rock plasterer on all your weekends and some nights - you'll make $200,000 over 3 years.  It is the same as working on rennovations on your own property isn't it?


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## Milk Man (14 September 2006)

$7.4 million? I want *$74 million*! (100 actually) Oh well, better get back to tradin'. :


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## Julia (14 September 2006)

Realist said:
			
		

> Don't buy a house. Rent. Put the money you save into shares..
> 
> Start with $20,000 in your Account in highly successfull large companies that are near monopolies, they make large increasing profits and pay good increasing dividends and have a good future ahead of them.
> 
> ...




Given your buy and hold philosophy, Realist, what will happen to your plan if we have several years of bear markets?   I gather you don't short, so how would you manage that scenario?

Not trying to be picky here, as basically I agree with your post, but you can't bank on all your shares going up all the time.

Julia


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## ice (14 September 2006)

One obvious problems with these projections is that these are not normal times. 
It's easy for those who came into the market in the last 3-4 yrs to assume that stocks will continue to make massive annual gains in perpetuity. 
Why not if it's all you've ever seen?
However history says that's unrealistic. 
Markets return to the mean. 
In order for this one to, there either has to be a substantial fall or 5-10 years of flatlining, neither of which will be much fun for shareholders.



ice


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## tech/a (14 September 2006)

Moses.

Well done.I hope all goes well with the subdivision.

Realist its a gip rock fixer.Your not even close to understanding Moses and the likes.
Some of us ( and Im not sure about Moses) develope property as part of our business.
Even some retirees do it on a small scale.

Stop.

How much is enough?
At what level do you define greed?
$1500 Commodore or $85,000 BMW?
Owning a house in Elizabeth or a house in Beaumont?
Being able to holiday in the Bahamas or holiday in Melbourne?
Jeans and T/Shirt or Suit?
Retire and take the pension or be self supporting?
Be in the position to make other people's lives easier when *true * need arises or sorry cant help cause Im not in the financial position to.

Or would a world all living in Byron Bay be your ideal?


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## Realist (14 September 2006)

For those that do not believe 12% p.a. is sustainable over 30 years please consider dividends.

Roughly 6% dividends, and a 6% share price increase is very conservative in my opinion.

No I do not short Julia, and yes I expect poor years, even losses. 12% is the average I would expect over the longterm though, there'll be very good years to offset the poor years.


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## Realist (14 September 2006)

tech/a said:
			
		

> Realist its a gip rock fixer.Your not even close to understanding Moses and the likes.




I wouldn't know, I don't do manual labour..


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## krisbarry (14 September 2006)

tech/a said:
			
		

> Moses.
> 
> Stop.
> 
> ...




Yes its all relative...but from where I am sitting you have more that adequate for yourself, your family and then some and some more and even more.

While turning on the tap reveals water and the flow in the Murray is still adequate enough for the tap, then there will always be ways to justify your position.  The argument still remains!

How much is enough?

There is self suffiecent (including family) then there is just pure greed.

I am sure you would struggle to feel happy and content in the company of people like Rupert and Laughlan Murdoch.


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## moses (14 September 2006)

Realist said:
			
		

> Yes, but are you telling us how to be a property developer fulltime?




Developing property needn't be any more difficult than paying someone to draw lines on a map. But you're right to a point; it might mean work. Or does it? The key is value adding, and the more you value add the higher the return. Value adding usually requires work of some sort, but then...any serious property developer pays someone else to do the work, which gets filed under "development expenses". The idea is that these are paid for out of the development's potential, seen very soon after some new lines are drawn on the map.

So its just as T/A says; its about thinking outside the box.


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## moses (14 September 2006)

tech/a said:
			
		

> Moses.
> 
> Well done.I hope all goes well with the subdivision.
> 
> Realist its a gip rock fixer.Your not even close to understanding Moses and the likes.




thanks.

and btw, it "Gyprock"


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## tech/a (14 September 2006)

Realist said:
			
		

> I wouldn't know, I don't do manual labour..




Thats evident.




> I am sure you would struggle to feel happy and content in the company of people like Rupert and Laughlan Murdoch.




Remember that people grow Companies the success can be steam rolling and I hope your not suggesting that the true entrepeneurs of the world stop and retire at a figure which isnt considered obscene by people like yourself.

The world wouldnt have Vehicals,or Computers or medical science,or infrastructure.Really it is a rediculous position.
My "Greed" as you call it employes many who believe me have their greed!!not long ago I had to sack half my staff for theft---not though necessity (The theft) on their part,pure greed.

What your proposing certainly cannot be supported in the western world.
Looks like to be happy you will need to move to a socialist society.
But then you'll be controlled by big brother,just like we are but with absolutely no way to gain reprieve.


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## tech/a (14 September 2006)

moses said:
			
		

> thanks.
> 
> and btw, it "Gyprock"




So it is.


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## Bloveld (14 September 2006)

Stop_the_clock said:
			
		

> You are asking for trouble posting this thread....watch the headstrong property gurus get stuck into you now....
> 
> The filthy greedy property hoarders who see nothing wrong with buying up stacks of property (a basic human need) are coming after ya...better run and hide




You put your money into super.
Does your super fund hold any property trusts, bank shares, mining shares, or really any shares in companies that supply goods and services to society. Because if you do you are a part of the greedy circle.


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## robots (14 September 2006)

hello,

i dont do manual labor 


robots


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## Magdoran (14 September 2006)

tech/a said:
			
		

> Realist.
> 
> Im very suprised,you can actually think outside your shoebox!




So Funny!!!! - Wonder what size shoes: 5?


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## wallyt99 (4 August 2008)

What about the $15,000 a year you spend on rent?


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## brty (4 August 2008)

Hi,

I know the thread is 2 years old, but the simplicity of the argument defies belief.  If we look at this strategy over the last 30 years, it puts things into perspective.

My understanding from Realist is that you put in $20,000 in year 1, $21,000 in year 2, etc, all the way up to year 10.

So to get to $7,400,000 by 2006, you had to put in $20,000 in 1976, $21,000 in 1977 etc (and reinvest all dividends).

Sounds do-able, until you realize that $20,000 in 1976 was 60% of the value of a median priced house in Melbourne at the time. It was also about 3 years worth of average wages. You then had to find MORE money the next year, and the one after etc.
Only very few people could have afforded to do this at the time.

Another aspect overlooked is what constitutes good long term shares. If you were buying between 1976 and 1986 then you would have a lot of companies like Bond Corp, Bell Resources, Elders IXL, Adsteam and Quintex. Luckily you would also have some BHP.

With an assumption that you would spread your money around 20 stocks over the 10 year initial investment period, you would have put about $12,500 into BHP in the late '70's. It has been a 40 bagger since then. This equates to ~$500,000 today, yep good investment.

However can anyone name 4 other top stocks from the late '70's that would have made good investments, without the benefit of hindsight???

All these easy to long term wealth strategies that use long term averages to 'prove' there point are riddled with inconsistencies in regard to reality.

brty


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## white_goodman (4 August 2008)

quintex was scase wasnt it?


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## brty (4 August 2008)

WG,

quintex was scase wasnt it?

Sure was.

Just played with some numbers about investing in houses instead of the market as suggested. If they were in Melbourne, the amount invested each year would give enough for a huge deposit on a house, 60% deposit in 1976. 

You could buy one house each year, of median value, and be cash positive to boot. Using Melbournes median house price of the time, you would own 10 houses by 1985 for a total cost of $468,000, of which you put in $245,000 and had total loans of $223,000.

By reinvesting the cash into houses every couple of years when you had built up a 30-50% deposit (being really conservative), then by now you would have  at least 20 median value houses, a loan of no more than $1,000,000 plus a positive cahflow of over $120,000 a year.

20 median houses in Melbourne would be worth $9,000,000+. If you take off the loan of $1,000,000 then you still have a net of $8,000,000+, and of course the first 10 houses would have a CGT excemption!!!

brty


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## tech/a (5 August 2008)

Nice work brty.

Ofcourse who do you know who trades with as much as most investors in Property invest. Even one IP would equate to a few 100K on loan.

While there is the opportunity to outperform both the market and property very very few do it.
99% including myself are in comparison to my Property holdings trading with spare change.
Certainly now since closing all long term positions 12mths ago.


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## Temjin (5 August 2008)

Realist said:


> For those that do not believe 12% p.a. is sustainable over 30 years please consider dividends.
> 
> Roughly 6% dividends, and a 6% share price increase is very conservative in my opinion.
> 
> No I do not short Julia, and yes I expect poor years, even losses. 12% is the average I would expect over the longterm though, there'll be very good years to offset the poor years.




You will find that your estimates are far away from being conservative. Financial planners use 7% return p.a. for a really really long term investment. And what about capital gain and income taxes? While it is possible that there may be no capital gain if this was within a superannuation tax structure and that one rollover their account into an pension income stream, income/dividends earned will still be taxed.

Plus not to mention about not taking inflation into account. $7.4 million could well mean little in 30 years time.

And also, the "volatility" of returns over 30 years (even if it comes out to an average of 12% per yeaR) can have quite a significant effect on the portfolio balance at the end of that 30 years. Try a monte carlo simulation to look at the effect of the portfolio (taking volatility into account) and you will find it tough to get an account balance above $7.4 million.


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## Tysonboss1 (5 August 2008)

Realist said:


> Yes, but are you telling us how to be a property developer fulltime?
> 
> ?




Frank Lowy is a property developer,... The whole westfields empire is based around developing properties then renting them out.

I am pretty sure he made more than 7.4M in his first 30years as a property developer.


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## Tysonboss1 (5 August 2008)

Realist said:


> I'm not against property but by using this method you will be alot wealthier than a property investor without all the effort.
> 
> Thoughts?




why do you believe that a property investor investing in property for over 30years  putting in $20,000+ of fresh capital each year won't have a portfolio worth over 7.4M after 30 years.


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## nomore4s (5 August 2008)

Tysonboss1 said:


> why do you believe that a property investor investing in property for over 30years  putting in $20,000+ of fresh capital each year won't have a portfolio worth over 7.4M after 30 years.




lol, firstly this is an old thread and I haven't seen Realist around for quite awhile, so I don't think you'll get an answer.

And secondly Realist had quite a few odd theories that in reality didn't always pan out or take all the factors into consideration.


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## SenTineL (5 August 2008)

7% return for really long term?

Why bother seeing a financial planner? Term deposits give you better than that!


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## So_Cynical (5 August 2008)

SenTineL said:


> 7% return for really long term?
> 
> Why bother seeing a financial planner? Term deposits give you better than that!



Not over the last 7 years.


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## Temjin (6 August 2008)

SenTineL said:


> 7% return for really long term?
> 
> Why bother seeing a financial planner? Term deposits give you better than that!




No, it's just a conservative value they use to "estimate" long term growth (including dividends) in equity. If someone can accomondate his retirement with X amount of income per year for X number of years by assuming his current superannuation account balance to grow at a rate of 7% over X number of years, then one can say with good confidence that he has a "better than average" chance of NOT outliving his retirement account. Any extra return is considered a bonus he/she can use to pay for luxury stuff. 

It would be unethical (and probably illegal for a financial planner) to base future performance on past performance and assume one's portfolio to raise by 20%+ over the next 30 years using a buy-and-hold strategy. 

Of course, nothing is certain in the future and who knows the stock market can go negative or stagnant for the next several years. (just like after the 1920 depression)


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## jonojpsg (6 August 2008)

I think if we take a look at this situation from now over the next thirty years we might get a different picture.

$20k is maybe a deposit on a median Oz house (Median $350k?).  Would have to borrow $330k plus costs so back up to $350k.  At 8.5% (best loan rate) have interest costs of $572 per week.  Definitely NOT going to get that in median rent ($350 per week?).  So it would cost you $220 per week to own the house ($11k per year).  Assuming 8% average capital growth gives $28k growth or $17k net growth in capital position.

On the other hand if you put $20k into solid blue chips (CBA, BHP, Westfield, others??) now and leveraged 50% (conservative) with a margin loan as well, giving $40k total) where would that put you?  Assume 12% capital growth plus 5% dividends, gives 17%, or $6.8k capital growth.

From this it looks pretty clear that property will always beat shares if you are looking at buy and hold type strategy with blue chips vs median type houses.  Of course, moving away from that into speculation will change things as there are few property deals that will get you a multibagger  in the short space of time that spec shares can, or alternatively few properties that will self destruct and lose all their value


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## Junior (6 August 2008)

jonojpsg said:


> I think if we take a look at this situation from now over the next thirty years we might get a different picture.
> 
> $20k is maybe a deposit on a median Oz house (Median $350k?).  Would have to borrow $330k plus costs so back up to $350k.  At 8.5% (best loan rate) have interest costs of $572 per week.  Definitely NOT going to get that in median rent ($350 per week?).  So it would cost you $220 per week to own the house ($11k per year).  Assuming 8% average capital growth gives $28k growth or $17k net growth in capital position.
> 
> ...





I think you've oversimplified it a little.  With the property scenario you've got $350,000 invested versus shares $40,000.  Also the property has other costs associated with it.


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## Tysonboss1 (6 August 2008)

Junior said:


> I think you've oversimplified it a little.  With the property scenario you've got $350,000 invested versus shares $40,000.  Also the property has other costs associated with it.




That is one of the strengths of property, you can borrow far more than you can agianst shares so you can by more $$$ of investments, while not being exposed to the risk of margin calls, property loans also have a lower interest rate than margin loans.

Property and shares both have strengths and weaknesses, are portfolio that includes both property and shares will always out perform one that focuses on one or the other.

Even if your only property investment is your own home, you will still benefit from properties strength, and offset the weaknesses in shares.


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## ROE (25 October 2008)

Realist said:


> Don't buy a house. Rent. Put the money you save into shares..
> 
> Start with $20,000 in your Account in highly successfull large companies that are near monopolies, they make large increasing profits and pay good increasing dividends and have a good future ahead of them.
> 
> ...




I'm year two and I have 200K already  maybe 400K by end of next year the way thing going at bargain basement hahahah.

No joke I use similar techniques but not as simple as that hehe ...


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## ROE (25 October 2008)

Tysonboss1 said:


> That is one of the strengths of property, you can borrow far more than you can agianst shares so you can by more $$$ of investments, while not being exposed to the risk of margin calls, property loans also have a lower interest rate than margin loans.
> 
> Property and shares both have strengths and weaknesses, are portfolio that includes both property and shares will always out perform one that focuses on one or the other.
> 
> Even if your only property investment is your own home, you will still benefit from properties strength, and offset the weaknesses in shares.




Property based on debt and you counting asset will appreciate each year.
come the time like now when things are de-value and debt is on the down turn. If you lose your job, you are F**K cos you cant keep up the repayment and you could be wiped out completely.

Not many people think of that scenario but a lot fall into that traps

the way you invest debt free is you safe regardless if you lose your job or not and you survive in all circumstances... you even get an income from it.

leverage is 2 edges sword and not one way street.

hundred of year ago investment is for people who actually has money in hand..and want an adequate return for their money....now through financial engineering they give you a massive debt and they called that investment or the most famous lot equity is your home, use that asset to buy shares and more property..yikes they just give you more debt haha..


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## ROE (25 October 2008)

jonojpsg said:


> I think if we take a look at this situation from now over the next thirty years we might get a different picture.
> 
> $20k is maybe a deposit on a median Oz house (Median $350k?).  Would have to borrow $330k plus costs so back up to $350k.  At 8.5% (best loan rate) have interest costs of $572 per week.  Definitely NOT going to get that in median rent ($350 per week?).  So it would cost you $220 per week to own the house ($11k per year).  Assuming 8% average capital growth gives $28k growth or $17k net growth in capital position.
> 
> ...




Dont assume anything, just invest with the money you have and debt free and it turns into a snowball .... it fun to calculate but at the end of the day you are predicting the future so don't assume anything

I assume 4% yield and 7% capital appreciation but that just something I aim for I don't actually expect it to go that way and

then again it doesn't matter cos I ain't got no debt so aren't worry about income to pay the bank


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## lakemac (3 December 2008)

Rather than guess, lets do a spreadsheet.

First some base figures:

For real estate -
House price = $330,000
LVR = 90%
Therefore deposit = 10% of 330k = $33,000
Transaction or sunk costs = $10,000
Total cash required = $33,000 + $10,000 = $43,000
Total borrowed = 330,000 - 33,000 = $297,000
House starting asset value = $330,000

Income:
weekly rent @ asset value / 100,000 = $330,000 / 1000 = $330 pw
rent will go up each year as asset value goes up.
allow 2 weeks vacancy per year

Expenses:
Loan interest @ 8% Interest only on borrowed funds
Other costs @ 12% of rent (agents fees, land tax etc)
When expenses are higher than income this must be made up from other income sources - see note in share comparison.

Growth in house prices = 7% over 10 years


Now for shares -
Same investment = $43,000
We buy only Top 30 above $10/share and equal # of shares in each
So we might have a total of 15 companies that meet the criteria
Thus we have 15 lots of brokerage @ $20 per buy order < $10k
Brokerage = $300 and say another $700 for charting program.
Say average price is $15/share
Investable funds = $43,000 - $1,000 costs = $42,000
Margin loan = 50%
Total borrowed = $42,000
Share starting asset value = $42,000 + $42,000 = $84,000

Income:
Dividends = 4% of portfolio value

Expenses:
Internet service and data = $2,000 per year
Where expenses are greater than income this must be made up from another income source, however, because real estate investors have to put in quite a bit of top up from other income sources we will assume that the share investor puts in the same amount and invests that with a 50% margin loan.

Growth in share prices = 15% over 10 years


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## lakemac (3 December 2008)

Now lets compare:

House asset value growth over next 15 years @ 7% PA:


```
year       asset  rent/yr  int/yr   costs    tot exp    P/(L)   topup   cap gain    CGT  After tax  Cum P/(L) Nett$
0 	330,000 	16,500 	23,760 	1,980 	25,740 	-9,240 	9,240 	-10,000 			-9,240 	-9,240 
1 	353,100 	17,655 	23,760 	2,119 	25,879 	-8,224 	8,224 	13,100 	2,948 	10,153 	-17,464 	-7,311 
2 	377,817 	18,891 	23,760 	2,267 	26,027 	-7,136 	7,136 	37,817 	8,509 	29,308 	-24,600 	4,709 
3 	404,264 	20,213 	23,760 	2,426 	26,186 	-5,972 	5,972 	64,264 	14,459 	49,805 	-30,572 	19,233 
4 	432,563 	21,628 	23,760 	2,595 	26,355 	-4,727 	4,727 	92,563 	20,827 	71,736 	-35,299 	36,437 
5 	462,842 	23,142 	23,760 	2,777 	26,537 	-3,395 	3,395 	122,842 	27,639 	95,203 	-38,694 	56,508 
6 	495,241 	24,762 	23,760 	2,971 	26,731 	-1,969 	1,969 	155,241 	34,929 	120,312 	-40,664 	79,648 
7 	529,908 	26,495 	23,760 	3,179 	26,939 	-444 	444 	189,908 	42,729 	147,179 	-41,108 	106,071 
8 	567,001 	28,350 	23,760 	3,402 	27,162 	1,188 	0 	227,001 	51,075 	175,926 	-39,920 	136,007 
9 	606,692 	30,335 	23,760 	3,640 	27,400 	2,934 	0 	266,692 	60,006 	206,686 	-36,985 	169,701 
10 	649,160 	32,458 	23,760 	3,895 	27,655 	4,803 	0 	309,160 	69,561 	239,599 	-32,182 	207,417 
11 	694,601 	34,730 	23,760 	4,168 	27,928 	6,802 	0 	354,601 	79,785 	274,816 	-25,380 	249,436 
12 	743,223 	37,161 	23,760 	4,459 	28,219 	8,942 	0 	403,223 	90,725 	312,498 	-16,438 	296,060 
13 	795,249 	39,762 	23,760 	4,771 	28,531 	11,231 	0 	455,249 	102,431 	352,818 	-5,207 	347,611 
14 	850,916 	42,546 	23,760 	5,105 	28,865 	13,680 	0 	510,916 	114,956 	395,960 	8,473 	404,434 
15 	910,480 	45,524 	23,760 	5,463 	29,223 	16,301 	0 	570,480 	128,358 	442,122 	24,775 	466,897
```
So after 10 years in real estate you would have $207,417 profit after all expenses
At 15 years you have $466,897...

Thats not bad, but what about shares...


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## lakemac (3 December 2008)

Here are the values for shares growing at 15% average annual growth.

To be fair to the share investors the additional topup amounts that real estate investors have to put in to cover their expenses is invested (less share investor costs) and dividends are also reinvested. Both of course are margin loaned at 50% so here are the figures:

```
year       asset  div/yr  int/yr   costs    tot exp    P/(L)   topup   cap gain    CGT  After tax  Cum P/(L) Nett$
0 	84,000 	3,360 	3,360 	2,000 	5,360 	-2,000 	7,240 	0 			-2,000 	-2,000 
1 	113,252 	4,530 	3,939 	2,060 	5,999 	-1,469 	6,754 	14,772 	3,324 	11,448 	-3,469 	7,979 
2 	145,775 	5,831 	4,480 	2,122 	6,601 	-770 	6,366 	33,786 	7,602 	26,184 	-4,239 	21,945 
3 	182,282 	7,291 	4,989 	2,185 	7,174 	117 	6,089 	57,562 	12,951 	44,611 	-4,122 	40,488 
4 	223,630 	8,945 	5,476 	2,251 	7,727 	1,218 	5,945 	86,731 	19,515 	67,217 	-2,904 	64,313 
5 	270,850 	10,834 	5,952 	2,319 	8,270 	2,564 	5,959 	122,060 	27,463 	94,596 	-340 	94,256 
6 	325,182 	13,007 	6,428 	2,388 	8,816 	4,191 	6,160 	164,475 	37,007 	127,468 	3,851 	131,318 
7 	388,128 	15,525 	6,921 	2,460 	9,381 	6,144 	6,588 	215,100 	48,398 	166,703 	9,995 	176,697 
8 	461,501 	18,460 	7,448 	2,534 	9,982 	8,478 	8,478 	275,296 	61,942 	213,354 	18,473 	231,827 
9 	550,226 	22,009 	8,126 	2,610 	10,736 	11,273 	11,273 	347,064 	78,089 	268,975 	29,746 	298,721 
10 	658,688 	26,348 	9,028 	2,688 	11,716 	14,631 	14,631 	432,980 	97,421 	335,560 	44,377 	379,937 
11 	791,143 	31,646 	10,199 	2,768 	12,967 	18,678 	18,678 	536,173 	120,639 	415,534 	63,056 	478,590 
12 	952,775 	38,111 	11,693 	2,852 	14,545 	23,566 	23,566 	660,448 	148,601 	511,847 	86,622 	598,469 
13     1,149,894 	45,996 	13,578 	2,937 	16,515 	29,480 	29,480 	810,434 	182,348 	628,086 	116,103 	744,189 
14     1,390,182 	55,607 	15,937 	3,025 	18,962 	36,645 	36,645 	991,762 	223,146 	768,615 	152,748 	921,363 
15     1,682,994 	67,320 	18,868 	3,116 	21,984 	45,335 	45,335 1,211,283 	272,539 	938,744 	198,083 1,136,827
```

So 10 years in the share market gives us a nett gain of $379,937
That compares to the real estate gain of $207,417
The share market has given us an extra $172,520

After 15 years the difference is even bigger:
Stock market nett gain = $1,136,827
Real estate nett gain = $466,897
A whopping advantage to the share market of $669,931

But that's not all...


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## lakemac (3 December 2008)

The real advantage of shares comes in retirement.

What is the advantage of shares over real estate?
You can sell a small part the portfolio if you need to draw it down.

With real estate you have to sell it all at once.
And pay Capital Gains Tax (CGT) all at once.

For example in our calcs after 15 years you sell the house and you pay $128,358 in tax and this is the killer - at the top marginal rate (why because the gain is so high you are way into the top bracket).
So now you are left with $466,897 with which to live on (maybe you should invest it in shares???)

For the share portfolio you only have to sell what you need at the time, in little chunks. So two things work in your favour:
1. your tax will be at a much lower marginal rate (say 30c in the dollar)
2. you still have $1.68M of asset (less what bit you sold) working away for you. You have deferred the tax bill...

So for real estate the tax man grabs his chunk and you then don't have it working for you.

With shares only that which you need to draw on is taxed, the tax man is still waiting for the rest. Whilst he is waiting it is earning you dividends and increasing in value...

By the way, although I have checked my figures it is worthwhile double checking them in case I have mis-calculated.

So that's why I don't invest in property.

There is a caveat in all this.
For those of you who have read Steve McKnight's books and have worked out how his system *really* worked (the trick is in the infusion of OPM - other people's money) then in a fast rising property market the purchase of real estate can out do investing in the stock market.

To make that work you have to be good at selling the houses quickly. And spending a lot of time looking for real estate to buy as well as dealing with banks etc etc.

Personally I like to keep my weekends to myself and spend time with my family. Similarly spending money on pest inspections legals etc for properties that I may not buy is also a cash drain. Rather I prefer to sit at my laptop and click a buttons now and then...


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## lakemac (3 December 2008)

And as a closing thought, the share investor has spent 10 - 15 years being familiar with stocks and how they all work.

Is the real estate investor, now that they have sold their house and sitting on a pile of cash going to know how to invest in the share market?

The prosecution rests your honour


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## 2BAD4U (3 December 2008)

I object your honour.

The interest on your property is tax deductible, as well as management fees and all other expenses.

Then there is depreciation of both the property and the fixtures.

Your calculations are a bit too simple.

You may now cross examine.


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## lakemac (3 December 2008)

I agree about the deductability of those costs, as are the costs of running a share portfolio.

Even if you account for those (eg depreciation, etc) the real estate figures are still nowhere near the share figures - we are talking a two to three times the magnitude in difference.

I do have a more exact spreadsheet which also includes the effect of inflation on rents, land tax, etc etc etc as well as using trusts, corporate beneficiaries etc etc.

What I am showing here is a trade off between complexity and ease of understanding.

May I suggest you provide counter evidence that a property investment including depreciation and tax deductibliity out performs an equivalent share portfolio.

And how would you then manage the drawn/retirement phase?


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## So_Cynical (3 December 2008)

2BAD4U said:


> Your calculations are a bit too simple.




yep agree...and very sorta average.

The last house i sold, i owned for 7 years and made approx 160% on it, the one before 
it, i had for 4 years and just broke even...got them both at the same time and they were 
physically about 500 meters apart.

Shares can be the same...or much worse/better...timing and dumb luck/good choices, and
the crap that life throws at u...play a big part in all outcomes



lakemac said:


> Growth in house prices = 7% over 10 years
> Growth in share prices = 15% over 10 years




Not always...there's alot of variables.


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## 2BAD4U (3 December 2008)

You can't make it that simple.  Your income tax bracket has a major impact on how you invest.

As for how you manage the retirement phase, you assume that people would have to sell their investment property.  However, what if, as the property grew in value you use that equity to purchase another property, and then another, etc, etc. The object of buying investment properties is to have enough that they provide an income and you never sell them.

The other flaw in comparing with shares is your 15% growth and 4% dividend.  Generally a low paying dividend share will grow faster than a high dividend paying share.  Because you are buying equal number of shares in each company, it is quite possible your portfolio would be biased in one direction or the other (dividends v's growth).

Finally, what happens during a crash and you get a margin call?  If you have properties that are positively geared, then it doesn't matter if values fall.

I am not saying that property is better than shares, but as I said, your calculations are too simple for such a complex issue.


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## lakemac (3 December 2008)

So_Cynical said:


> yep agree...and very sorta average.
> 
> The last house i sold, i owned for 7 years and made approx 160% on it, the one before
> it, i had for 4 years and just broke even...got them both at the same time and they were
> physically about 500 meters apart.



Ok so lets have some detailed numbers - easy to say you made 160% on it. Back it up with hard numbers.

I have several set of figures on several real estate investors which I can post. I do agree that you can be lucky - 160% gain is 60% above the norm (usual is to double at 7 years). But is that gain after tax?

Please if you are saying my figures are simplistic I throw the challenge down to those who mock them to prove otherwise with at least as much detail and explain where my assumptions are wrong.


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## 2BAD4U (4 December 2008)

Paid 90k - 115k - 5 yrs - 28%
Paid 125k - 180k - 2 yrs - 44%
Paid 260k - 660k - 5 yrs - 154%
Paid 230k - 360k - 3 yrs - 56% (Haven't sold)
Paid 360k - 380k - 1.5 yrs - 5.5% (Haven't sold)

Don't start talking real returns, inflation, etc, etc.  These are raw numbers and do not include tax, depreciation, rent, etc.


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## lakemac (4 December 2008)

Let me explain the dividend vs growth issue.

As I mentioned in my base figures you only buy shares in the top 30 stocks that are currently above $10 per share. The reason you buy equal numbers rather than equal value has to do with optimising the overall return over time. You don't care about the difference between share growth and dividend rates. You are only interested in overall performance.

How does tax bracket impact the decision to invest in shares vs property?
If you take someone with enough income to invest then most would be in the 30c tax bracket anyway.

There is a flaw in the figures - just realised I had not taken out tax on the profit figures each year. It changes the share portfolio value from $1.68M to $1.50M at the end of 15 years and the nett figure from $1.13M to $1.07M.

Margin calls - there are two ways to handle those and a lot depends upon how long you have had the margin loan. Simple way is to sell down the portfolio. You also have to remember that real estate has similar issues - vacancy rates are one, bad tennants are another. Right now an associate of mine is having a "margin call" on his property as his previous tennant trashed the place and he has no rent coming in - probably for 6 weeks. Both asset classes have their risks.

Again I put the challenge out there for someone to run hard numbers up against mine. Until we see that everything else is just hot air.


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## lakemac (4 December 2008)

2BAD4U said:


> Paid 90k - 115k - 5 yrs - 28%
> Paid 125k - 180k - 2 yrs - 44%
> Paid 260k - 660k - 5 yrs - 154%
> Paid 230k - 360k - 3 yrs - 56% (Haven't sold)
> ...



Thanks 2BAD4U.
Those real returns are what makes the difference IMHO.

Don't take this the wrong way either - if you can convince me that real estate makes a better investment I am always open to new ideas.

That is why I throw these figures down to get real examples on the page.

If you could be more specific using the same approach I did then a true comparison can be made, particularly the effect of CGT on your gains. That must hurt


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## So_Cynical (4 December 2008)

lakemac said:


> 160% gain is 60% above the norm (usual is to double at 7 years). But is that gain after tax?




Ok forgot to take out the CGT but then didn't include the rent and tax benefits (negative gearing) 
in the 160%...anyway they would approximately cancel out each other.

I would think that potentially the share market can do better than property but not with 
simplistic, passive strategy's...i got a mate at work with a big, single, blue chip share 
portfolio, sitting on big loses 200K...and he don't even have a broking account.


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## hotbmw (4 December 2008)

lakemac, can u post your excel spreadsheet on here for us to download please. or pm me. i want to adopt this and implement my possible long term scenario.
thanks in advance
Robi


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## lakemac (4 December 2008)

hotbmw said:


> lakemac, can u post your excel spreadsheet on here for us to download please. or pm me. i want to adopt this and implement my possible long term scenario.
> thanks in advance
> Robi



do we have way of doing that?
Does someone know how?

Worst case PM me with your email and I will send it direct.


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## lakemac (4 December 2008)

So_Cynical said:


> Ok forgot to take out the CGT but then didn't include the rent and tax benefits (negative gearing)
> in the 160%...anyway they would approximately cancel out each other.
> 
> I would think that potentially the share market can do better than property but not with
> ...



Only 200K? mine is worse (by a tad)  but there again I have two things going for me - shares bought below even their current price and an options portfolio that is cushioning the blow.

When you say single blue chip do you mean just one stock?
And I assume he must have bought in the market late in the game (sort of like the real estate investors with "negative equity maaate"...).
I am interested (as would others be I am sure) as to some details - when he bought, what he bought and why he bought.

If you can spare the time So_Cynical I would love you to post more detail on the transactions, cash flows etc. It will make a big difference to those still learning as well as those with more calcified views


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## 2BAD4U (4 December 2008)

I don't want to convince you that real estate is better than shares (I have both), all I am saying is property investment is a lot more complex than shares are and simple calculations can't be used. When I purchased my first property I didn't think I could do it. I got some PROFESSIONAL advice and restructured my finances and I haven't looked back since.  Sometimes you need to think outside the square (or have someone do it for you) to get started.

You need to include your tax bracket for the purpose of working out your negative gearing and depreciation or if you are postively geared, how much tax you will pay on the rental income.

Depreciation is affected by the year the house was built, CGT is affected by when you purchased the property.  Also, how your loans are structured has an effect. Interest only, P & I, investment loan, equity loan, etc.  Do may a favour and rerun your sums with a P & I loan, I would be interested to see the difference (if any).

Finally, what happens if in a few years time your property is rezoned and you can develop the site. Do you or don't you?

I run about 4 spreadsheets and a dedicated property investment program to track my properties and still can't be exact.


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## lakemac (4 December 2008)

2BAD4U said:


> I don't want to convince you that real estate is better than shares (I have both), all I am saying is property investment is a lot more complex than shares are and simple calculations can't be used. When I purchased my first property I didn't think I could do it. I got some PROFESSIONAL advice and restructured my finances and I haven't looked back since.  Sometimes you need to think outside the square (or have someone do it for you) to get started.
> 
> You need to include your tax bracket for the purpose of working out your negative gearing and depreciation or if you are postively geared, how much tax you will pay on the rental income.
> 
> ...



I will plug in some P&I figures when I get some time. Got to sleep...
Also will add in some tax bracket analysis including neg gearing etc.
As you say it becomes complex.

Development is for hardend property people - too much hard work IMHO. Watched a couple of friends do development rezoning work - headache city. But it does make a good return I agree.


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## brty (4 December 2008)

Hi,

Lakemac,



> Please if you are saying my figures are simplistic I throw the challenge down to those who mock them to prove otherwise with at least as much detail and explain where my assumptions are wrong.




Ok.

Which shares met your criteria and have grown at 15% pa for the last 15 years??

With the advantage of hindsight, the following has happened BHP at end of '93 was ~$7.50 a share. Compounding at 15% it would have to be $61 today (I've included splits). ANZ end '93 ~$5.00 a share, again compounding at 15% would have to be $40.68. 
They are just 2 that have done well during the last 15 years. There are plenty of other "top"  stocks from that time that have performed pitifully. There is ample evidence from history that many of todays top 30 stocks will not be in the top 100 in 15 years time. Stockmarket indexes have a survivorship bias and the performance of real stocks in the real world is different.

A more accurate measure of how shares have performed over time is given by the prices of the top LICs. They have professional teams selecting stocks to purchase and hold and the costs associated with them are quite low.
ARG 1993 ~$2.20 a share, 2008 (today) $5.28 growth 6% pa
AFI  1993 ~$1.75 a share, 2008 (today) $3.69 growth 5.1% pa
MLT 1993 ~$5.00 a share, 2008 (today) $13.66 growth 6.9% pa

Also there is the fact that in your tables when property became cashflow positive, you just sat on the cash. Yet with shares you continued to pony up, ie margin up the purchases.

Another also  what did you do when you had a margin call on your shares as you would have had on some of them in '97 '98 '01 '03 and '08 ????

Shares look so easy for those who fall into the trap of neglecting the survivorship bias built into the statistics that get quoted ad-nauseum everywhere. Remember if your great grandfather had bought $10,000 of each company in the DJIA on the first trading day of 1900, and passed down the share certificates to you, you would have worthless pieces of paper as all those companies went broke. Yet that is not what is portrayed in the media.

brty


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## Trembling Hand (4 December 2008)

brty said:


> Remember if your great grandfather had bought $10,000 of each company in the DJIA on the first trading day of 1900, and passed down the share certificates to you, you would have worthless pieces of paper as all those companies went broke. Yet that is not what is portrayed in the media.




PERFECT!!


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## brty (7 December 2008)

Hi,

Sorry to have killed this thread off again with a dose of reality, any further comments from anyone, or questions for that matter??

brty


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## Awesomandy (7 December 2008)

brty said:


> Remember if your great grandfather had bought $10,000 of each company in the DJIA on the first trading day of 1900, and passed down the share certificates to you, you would have worthless pieces of paper as all those companies went broke.




That is somewhat incorrect, as you would be flogging these pieces of paper to museum as historical items of interest, so the paper aren't exactly worthless. 

Still, I note that the return of the Aussie shares index is just 14.5% over the past 30 years, so you would've needed a 7% dividend yield after tax or there abouts to reach the required rate of return to achieve $7.4m - doesn't quite seem possible.

And then, if you look at 1970 - 2000 instead, you'll find that the return of the index was only around 11.5%, i.e. 10% lower than the required rate of return - they better be paying you dividends like there's no tomorrow, year after year.


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## Wysiwyg (7 December 2008)

> Posted by brty
> 
> Remember if your great grandfather had bought $10,000 of each company in the DJIA on the first trading day of 1900, and passed down the share certificates to you, you would have worthless pieces of paper as all those companies went broke. Yet that is not what is portrayed in the media.




A block of land worth the same amount/same time on the Gold Coast would now be worth more money than anyone would ever need.

Companies come and go yet land/house remains a lifetime/s.

E.g. my dad bought his house for 35k and still lives in it. the house nextdoor went for 225k last year.

I do like shares for a medium term hold though.


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## lakemac (8 December 2008)

busy at the moment brty - will be back with an answer.
Don't buy that house quite yet...


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## hissho (19 February 2009)

anyone still interested in this topic or it's officially dead?


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## lakemac (19 February 2009)

No no he's not dead, he's, he's restin'!

You assured me that its total lack of movement was due to it bein' tired and shagged out following a prolonged squawk.


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## brty (25 February 2009)

Lakemac,

In 2 and 1/2 months you have been unable to come up with any evidence to the contrary of my post.

I'm still waiting for something/some type of response from the long term pro share brigade. 

Waiting, waiting, patiently waiting.

Of course it is possible that there is no response to harsh reality over lovely theory...

brty


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## lakemac (25 February 2009)

Patience is a virtue.

Some more pressing personal issues to attend to before I write the next installment.

As I said it is not dead yet, just very busy.


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## lakemac (25 February 2009)

On the other foot I don't see any compelling hard facts coming from the real-estate brigade to refute my side.

I have often asked for details on real estate transactions which rarely seem to be forthcoming.

I have one adjustment and that is the effect of depreciation. My model did not take that into account. I need to adjust for that as it does affect the profitability of the investment.

So rather than just sit on the couch, put up at least some hard facts on the real estate deals.

By hard facts I mean:

Capital account:
Purchase price of the property excluding other costs
Other costs to purchase the property (legals, inspections, agents fees etc).
Purchase date
Deposit
Amount borrowed (which should be Total purchase + other costs - deposit)
Interest rate at purchase
Loan type: I only or P&I
Number of properties inspected pre purchase (ie. how much effort was it to find this property)
Sale date
Sale amount (property only excluding agents costs etc)
Sale costs (auction, agent fees, advertising)
Depreciation amount

Income account:
Rent per week/month/year
Vacancy (actual and/or expected)

Expenses:
Repayment amount on loan + interest rate changes along the way if any
Agents fees (% of Rent or actual, releasing costs)
Insurance costs (landlord, property, rent etc)
Any deposit insurance
Ancilliary holding costs
Taxes (land tax, rates etc)

You need all that in order to correctly compare investments.
I have collected details on about 8 investments.
More hard data points would be good if anyone can put them up.

I find few people can or do.
Even API magazine (to which I subscribe) rarely publishes the hard facts. They gloss them over in order to make the stories they publish look better than what they are.

Maybe I am wrong on the share side of things being a better investment. Give me some hard evidence to convince me otherwise.

It might edify and enlighten those that seek answers.


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## Sir Osisofliver (25 February 2009)

Hey guys (lakemac and brty) what is with the arguing?

Don't you guys know that each asset class has a specific period of time in which it wil outperform the other asset class?

You guys seem to be working yourself into a frenzy over which is better - Shares or Property and are struggling to try and come up with a way of comparing apples to apples in terms of depreciation, use of leverage, taxation benefits etc.

I've seen these arguments before and stockbrokers arguing with estate agents about which is better and both of them can spout stats that support their view. A favourite trick of each is to do exactly that and take a segment of time to support their view and ignore all other data.

So when we are dealing with cyclical assets, why the hell wouldn't you move away (or at least protect it) from that asset class when the cycle downtrends? 

Neither one is superior to the other, neither one will give you a good result if you expect you can just buy it and then ignore it for 50 years, without maintenance, insurance, improvements, gardening etc etc.

Sir O


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## tech/a (25 February 2009)

> So when we are dealing with cyclical assets, why the hell wouldn't you move away (or at least protect it) from that asset class when the cycle downtrends?




Love it.

95% of people missed the dot com boom 
Of those that got it
90% of them managed to also catch the bust
95% of people missed the late 90s early 2000s property boom.
95% of people missed the last 7 yrs bull run in the stock market.
95% of people in the stock market rode and most are still riding the crash of the last 2 yrs.

To compound matters 95% of Financial Advisers/writers and not a single bank manager either didnt see or didnt know and didnt advise their clients how to take part or avoid any of the above,well enough in advance.

To spruik how dumb the general populace is with regard to cycles-----I certainly wouldnt narrow it to



> Don't you guys know




You guys.

In hindsite everything is crystal clear and some of us through good management or plain luck did manage to take advantage of these cycles up and down.

I have never seen the eminently qualified (outside of these circles) warning of us to take advantage of the pending booms or warning us of pending busts---*mind you there were a few here who were/are on the money!!*

But rest assured I'll be waiting with baited breath for Sir 
Osisofliver's clear and concise buy signal for the next share boom even better his pending warning---if any of further downside and his advice on property domestic,commercial and industrial.
Your "Beginners thread" is an interesting read.


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## Trembling Hand (25 February 2009)

Tech I'm with you. Its all clear in hindsight. And the asset roller coaster is the easiest hindsight game around.

It would seem the only way to grow true wealth not based on some sort of ponzi scheme would be to create and grow a business. 

IMO.


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## Mactavish (26 February 2009)

An interesting debate... both have their positives and negitives i guess...


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## Taltan (26 February 2009)

There is no right answer here due to the number of external factors affecting both markets. Govts play around with taxes, grants, immigration policies and subsidies so unless you know govt policy for the next 40 years its impossible to pick. Having said that in the very long-term shares should outperform property because its a riskier investment, so if you have a 30+ year outlook I would definately buy shares (remembering that they are volatile so if you say bought shares in 1980 with your 30+ year outlook you should have reached your target sometime 2004-2007 and sold, too late now)


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## tech/a (26 February 2009)

Taltan said:


> There is no right answer here due to the number of external factors affecting both markets. Govts play around with taxes, grants, immigration policies and subsidies so unless you know govt policy for the next 40 years its impossible to pick. Having said that in the very long-term shares should outperform property because its a riskier investment, so if you have a 30+ year outlook I would definately buy shares (remembering that they are volatile so if you say bought shares in 1980 with your 30+ year outlook you should have reached your target sometime 2004-2007 and sold, too late now)





I disagree.

We can all gain experience from hind site.
That's why some here got it pretty right. But there is more to it.

We have to always be on the look out for in balance.
The more out of whack the imbalance the more opportunity that exists in the direction of the correction--to balance--this often over corrects both to the positive ( You'll note it takes a long time to stop a bull run) and to the negative (You'll note panic often sends something plummeting beyond balance).

Take property.

There was in Australia a great deal of demand and interest rates and house prices coupled with rent return meant it was impossible NOT TO positively gear a purchase in the late 90s---all had to re balance.

When you see this again and you WILL Ive seen it twice in my 55 yrs.--buy your brains out.

On the negative side we now have over supply in some areas and housing costs far exceeding return--again in balance.

Take shares.

The boom times of China and India sent resources sky high. Massive demand
2001-2007.
The exact opposite now.

Opportunity was there and many see it but are frozen by fear or uncertainty--so they do nothing.
Some made a fortune on the way down on the markets and although I saw it I didn't milk it for all it was worth---an opportunity lost!

But got the Property and Share market booms.

Much had to do with Good management and *EVEN* more *amazing luck*.

My little story is that I received on my desk Civil Drawings for the Southern Expressway 3 yrs before it was built---Civil is my field.
I live 3ks further on than the end of the freeway.
I went home to my wife and said we should buy property here as the South was going to open up with the freeway.

We bought 2
Pretty soon we realised that banks loved the positive gearing and finished up with 10 2 yrs after the freeway was built (6 yrs later)--the rest as they say is history.

Along came this across the board property boom--*I didn't pick it *but saw opportunity in other areas---the point is had I not been holding asset I would not have taken part in this amazing opportunity.

In 2001 I developed a trading system for long term long trading. "Techtrader" its still traded live on Radges site (Its sort of in hibernation now).

At the time I had *NO* idea that we would see a 7 yr bull-market.
I only started trading it myself with the same funds allocated to the live trading sample 12 mths after it had been running. (I had little faith!).
Unbeknown to the missus. Finally pulling out in July 2007--a little early as it turned out! The results are there for those to see who are interested.

Now had I used even half the funds I had used in property---well--hindsight is indeed a wonderful thing.

I don't mean this as a chest beating look at me exercise but--

The point is that I was not that smart I was in the game and when I was the opportunity presented itself and I unwittingly was in a position to take advantage of it---twice.

You *HAVE TO BE *in the game.
You need--I need---to recognise opportunity and take advantage of it.

It was there on the down side and it went begging---even though I and a few of us clearly saw it unfold in front of our eyes---in fact we ALL did.


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## brty (2 March 2009)

Hi,

Arguing?? I was just trying to highlight how some simple assumptions do not lend themselves to viable outcomes. The concept of "good stocks" held for the long term, is fraught with the danger of survivorship bias in the outcome.

A stock is usually regarded as a "good stock" because it performed well in the past. Before that performance, it was most likely not regarded as a "good stock".

brty


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## Sir Osisofliver (3 March 2009)

tech/a said:


> Love it.
> 
> 95% of people missed the dot com boom
> Of those that got it
> ...





Hi TH,

Knowing how to recognise these things before they happen is possible - after all isn't that why we trade?  Because we think we can predict with a degree of certainty what will happen before it does?  Otherwise we'd all believe strictly in the efficient market hypothesis and just invest in the index. I will get to what to look for in the beginners thread so feel free to read that. I'll also tell you exactly what I did to *protect* my position (which amounted to a rolling series of put options which cost about 6% of the portfolio value). Remember that the share market (and to a lessor extent Property markets) are cycles and just like every other cycle events within that cycle repeat themselves. 

So TH - ask yourself - what were the major events that occurred _prior to_ the correction - and can you find a repeatable pattern? You can look at a fairly small number of characteristics of our market and get a sense of where it is at any particular time - if you then know the cycle of events _*you know what is coming next*_. If you want me to name a date and a specific number on the All Ords - no I won't be doing that, but I will be telling you what to look for to make up your own mind. 

95% of advisers, real estate agents and bank managers _*have a vested interest in a single asset class*_. There are no stockbroker/real estate agents out there. They specialize. And so they ignore anything that doesn't apply to their speciality. They filter it out because it doesn't fit their paradigm.

Only time will tell you whether you think the lessons in the beginners thread apply TH - but feel free to weigh in with your opinion - I heartily encourage you to do so. (I'll even include some stuff on wave analysis of the broader market that you can get your teeth into if you want).

Cheers
Sir O


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## Trembling Hand (3 March 2009)

Sir Osisofliver ya kidding!!


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## Stormin_Norman (3 March 2009)

shares now may seem cheap. but in the future they may seem expensive.

look at a real (adjusted for inflation) graph of the DOW between 1925 and 1960; and again from 1970 to 1980.


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## nomore4s (3 March 2009)

Trembling Hand said:


> Sir Osisofliver ya kidding!!




Is he talking to you or Tech?

But either way I'm rotflmao big time.


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## Sir Osisofliver (3 March 2009)

Trembling Hand said:


> Sir Osisofliver ya kidding!!




Sorry I did mean Tech not you


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## tech/a (3 March 2009)

Thanks O

Patronising is normally my specialty.


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## Sir Osisofliver (3 March 2009)

nomore4s said:


> Is he talking to you or Tech?
> 
> But either way I'm rotflmao big time.




I'm not sure I understand the levity here guys do you think I am joking? I'm not saying you can pick it exactly - but to take advantage of the circumstances you don't NEED to pick the exact moment that the market turns.  I've seen it in another thread where another adviser started doing things in August 07 - but admitted that they couldn't do the same for their clients. 

I was able to do it in '02 and I've done it again in '07 - yes I know two times doesn't make a trend - but tell me now if you don't want me to detail this out - It's not like it won't save me a heap of time and effort writing it out.

Sir O


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## Sir Osisofliver (3 March 2009)

tech/a said:


> Thanks O
> 
> Patronising is normally my specialty.




Look tone is really hard to convey in a written medium - I don't mean this to sound patronising and I apologise if it does. Bottom line - as much as the real estate agents will tell you that property is the best and as much as the stock brokers will tell you that shares are the best - 1) you need both asset classes and 2) It's possible to TIME your investment into each asset class effectively.

Sir O


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## tech/a (3 March 2009)

Statement made by TH on 15 August 2007



> I'm guessing the "correction" will end when people stop comparing this to previous ones.
> This is different. This was distribution then a fall. Not a run up of hot money and an Unwinding of leverage. This is a bubble bursting in credit, not a nasty pull back and run higher which in its self is a part of a bubble. Bubbles do not unwind in three weeks and when they involve hard assets (US houses) they tend to have effects on the world economy.
> 
> Just before you start jumping up and down I didn't say that stocks where in a bubble, just credit. and the Financing of Real estate. What sort of effect does that have on the economy. Ironically part of this mess is a result of the Japanese real estate bubble that goes back 20 years. Have a look at what has driven this credit bubble. The Yen carry trade. Its so linked you have to laugh. Rates that are so low tyring to stimulate growth that has never really got going since money was poured into Sub prime real estates bubble 20 years ago have had there effect 20 years later to fund anther credit/real estate mess. To perfect to believe.




And If you have time you may wish to follow the analysis on this thread from post 546 posted by tech/a.

https://www.aussiestockforums.com/forums/showthread.php?t=4888&page=28

As I have said before 



> To spruik how dumb the general populace is with regard to cycles-----I certainly wouldnt narrow it to
> You guys.


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## Trembling Hand (3 March 2009)

tech/a said:


> Statement made by TH on 15 August 2007
> 
> 
> 
> And If you have time you may wish to follow the analysis on this thread from post 546 posted by tech/a.




Thanks for that Tech my crystal balls was flying around then. But that goes to my point about creating wealth is best done through a business not hindsight asset game.

I mean there is many here that picked this mess that we are in. Many, you included. Many punters that are actual traders. But how many have nailed it to make REAL $$. And in hindsight everyone should of made more. It all looks easy in hindsight. But if actual traders find it difficult to implement their correct ideas what hope has the punter? Better to create a biz.

But Financial advisor's know that, that's why they sell a "service". :


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## Sir Osisofliver (3 March 2009)

tech/a said:


> Statement made by TH on 15 August 2007
> 
> 
> 
> ...




Ok Now I'm confused Tech 

1) I know you like wave analysis - I was being cheeky - when I get to that in the Newbies thread I *want* you to comment on my remarks. Please. As much as I started the thread and it is substantially my pet project here - I do not assume I am the font of all knowledge - there is always something to learn. 
2) I know you also picked that the market was peaking - See it's not hard when you know what to look for  (Although wave analysis is more technical, slightly more subjective, and probably requires a lot more experience than most newbies have), although I like to use wave analysis in conjunction with fundamental factors which I will detail in the Newbies Thread.
3) You're last comment about spruiking my view on cycles - Are you agreeing with me that most people forget about cycles???

Ok I just re-read your response to me originally - Maybe it's because I hadn't had my morning coffee when I read your remarks - or because I skimmed it speedreading style and missed some comprehension - but I realize I was projecting a negative sarcastic tone on your remarks. Sorry - Maybe I'm being too sensitive being under the pump at present.

Cheers

Sir O


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## tech/a (3 March 2009)

Sir Osisofliver said:


> Ok Now I'm confused Tech
> 
> 1) I know you like wave analysis - I was being cheeky - when I get to that in the Newbies thread I *want* you to comment on my remarks. Please. As much as I started the thread and it is substantially my pet project here - I do not assume I am the font of all knowledge - there is always something to learn.




I commend you for your effort after 7000 posts of my own i know the amount of time and effort it takes. Interesting reading --- I havent commented as Ive had neither the time or the inclination as there is so much to wade through. More a practical thing than anything else.



> 2) I know you also picked that the market was peaking - See it's not hard when you know what to look for  (Although wave analysis is more technical, slightly more subjective, and probably requires a lot more experience than most newbies have), although I like to use wave analysis in conjunction with fundamental factors which I will detail in the Newbies Thread.




Ye well as T/H points out quite a few did pick it and I did manage to protect my financial situation better than most
*BUT* I didnt participate in possibly the greatest SHORT trading opportunity I'll ever see in my lifetime.

I dont care how good people/I are at analysing ANYTHING if they DONT participate then they may as well have not had any interest at all in that which they analysed.
I've always said.

(1) Most recognise opportunity
(2) Few understand how to take advantage of it
(3) Fewer still actually do anything!




> 3) You're last comment about spruiking my view on cycles - Are you agreeing with me that most people forget about cycles???




Here or the population at large?
Here most have a grasp I think
The general populace dont have a clue and dont care *(Until its too late to care!)*



> Ok I just re-read your response to me originally - Maybe it's because I hadn't had my morning coffee when I read your remarks - or because I skimmed it speedreading style and missed some comprehension - but I realize I was projecting a negative sarcastic tone on your remarks. Sorry - Maybe I'm being too sensitive being under the pump at present.
> 
> Cheers
> 
> Sir O





No problem I'm usually on the other end.---handing it out.


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## nooberator (9 October 2010)

I'll be dead in 30 years, try 'factoring' that into your equations.

Solid gold coffin anyone?


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## Tysonboss1 (10 October 2010)

nooberator said:


> Solid gold coffin anyone?




Just be be sure to have your family post the details of your burial location so we can rob your grave, oops. I mean pay our respects.


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## mallymcl (10 October 2010)

worth noting this thread was started pre GFC


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## Tysonboss1 (10 October 2010)

mallymcl said:


> worth noting this thread was started pre GFC




The GFC does not really change anything, every investment plan should be made knowing that such things will occur at least 2 or 3 times a century, and smaller crashes maybe every 10 years.

If your investment stratergy does not allow for the fact that your holdings can decline top tick to bottom tick by 50%, then you are sitting on a financel time bomb.


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## Atomic (6 December 2010)

Just a thought after reading this thread 

Who's property portfolio survived the GFC . march 2010 turndown and is and was producing an income throughout it all,

Did these properties act as a buffer for it all and even if you did see the 09 crash coming and pulled back to cash , would you have bought more properties?


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## TKline (6 December 2010)

Atomic said:


> Just a thought after reading this thread
> 
> Who's property portfolio survived the GFC . march 2010 turndown and is and was producing an income throughout it all,
> 
> Did these properties act as a buffer for it all and even if you did see the 09 crash coming and pulled back to cash , would you have bought more properties?




Property survived the GFC because of reckless bribes and handouts thrown on the bubble. Debt piled on top of more debt. What happens now the govt is out of ammo?


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## Atomic (6 December 2010)

TKline said:


> Property survived the GFC because of reckless bribes and handouts thrown on the bubble. Debt piled on top of more debt. What happens now the govt is out of ammo?




hmmm im not sure either , but i am not seeing houses for a dollar here yet, unlike the USA


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## Tysonboss1 (7 December 2010)

Atomic said:


> Just a thought after reading this thread
> 
> Who's property portfolio survived the GFC . march 2010 turndown and is and was producing an income throughout it all,




Tenants don't stop paying rent just because the share market or property market has a price correction.

And that's all crashes are "price corrections".

Property is the most long term asset there is, you should care if the price goes up year to year. All you should care about is that the rental yield keeps coming in and your principle holds pace with inflation over time, any extra growth is a bonus.


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