Are rents too low?

[Freeballinginawetsuit]

As tenancy's are ending in investment properties you can virtually name your price (within reason) to prospective tenants, screen hords of them for the best candidate and write in little bonus maintenance clauses (pool and garden maintenance etc) into your lease agreement with youre tenant.

Most tenants are just keen to secure a home for their family, As my lease agreements run out with tenants I will certainly be taking advantage of the marketplace in WA at the moment, who wouldn't.

In the end its always nice just to be able to provide a home to a responsable family who is unable to buy one......nice feeling

 

[Realist]

So why rent?
Why not purchase and keep ahead of capital growth?

Think about it a 5% growth in a 400K property means you have to put away $20000 a year just to keep ahead of Capital appreciation.
or $200/week at 2.5%.

If rents are the same as mortgage repayments, which they certainly are not in Sydney. Then buying would seem logical...

However, you need to be sure you are not paying too much for your house. Capital gains are not a certainty, I have alot of friends that have made captial losses recently.

If you have $50K, and you put it towards a $400K place and it goes up 5%. That sounds great! But....

You've paid 8% on $350K in interest, which is $28K
You've paid body corporate fees, rates, water, insurance of at least $6K
Repairs, paint, maintenance etc. of a conservative $2K

So you've paid $36K to make $20 in a capital gain - not good is it? A $16K loss.

And if you make a 5% capital loss - you just lost yourself $56K.

Sure if you don't buy you need to rent, but you can invest your $50K in shares!! And with some good mangement it may very well pay for you to rent for a year.

Rushing in to buy a house so recently after a property boom is not wise.

 

[forexgame]

I bought last year a house and rented my apartment. Both of them are grew up in value. I think real estate is a great investment.

 

[chops_a_must]

As tenancy's are ending in investment properties you can virtually name your price (within reason) to prospective tenants, screen hords of them for the best candidate

This really isn't a good thing though. A bunch of my friends moved over east because a) they couldn't afford to live here and b) no-one was prepared to let a young person rent... which is rubbish. In the end, it's not healthy for the long term.

 

[Realist]

I bought last year a house and rented my apartment. Both of them are grew up in value. I think real estate is a great investment.

Well that seals it then...

 

[krisbarry]

Ohhh no Not another housing thread

The last thead made me sick, angry frustrated and just down right pi_ssed off.

Good luck, as a few members might get their heads chopped off :axt:

 

[krisbarry]

I have learnt some new skills of late:

Not to buy into other peoples issues, I will be employing it on this thread.

I have no further comments on housing/rents etc etc

 

[krisbarry]

BUT I MUST SAY THIS:

I will make myself quite clear...discussing housing/rents affordability is a very touchy area for many, so be careful what you say, as I have been directly affected by some of the comments discussed on this forum. I am quite shocked at the lack of respect some are showing towards those that have very little, or live in unstable housing environments for whatever reason.

...Just a few words of advice...to those that want or feel the need to jack up rents, who are you hurting? Your sons, and daughters!

Why do you want to hurt your own flesh and blood...its downright disgusting?

 

[Freeballinginawetsuit]

This really isn't a good thing though. A bunch of my friends moved over east because a) they couldn't afford to live here and b) no-one was prepared to let a young person rent... which is rubbish. In the end, it's not healthy for the long term.

Totally agree with you Chops, its not a good thing at all, and I would never lump all young people in the same boat. By the way I,m only 33 so not that old yet .

I really feel for the teenagers of today, they are in a sticky boat and will never realize home ownership with out some help from the folks or some punts on the stockmarket .

But the writing was on the wall a good ten years back and many off those young crew hocked into a car, pissed their money up the wall, bought gadgets etc etc. Many didn't and invested wisely or set goals, its a hard life and only getting harder > you reap what you sow!.

If you travelled years back it was self evident urban areas in OZ would become 'Leggo Lands' with smaller blocks, sprawled and a generation of renters. Just go to the UK in the nineties, it was plain too see.

I have no answers........for today's predicament, just proud of the fact I set goals to not be one of the statistics.

 

[Julia]

BUT I MUST SAY THIS:

I will make myself quite clear...discussing housing/rents affordability is a very touchy area for many, so be careful what you say, as I have been directly affected by some of the comments discussed on this forum. I am quite shocked at the lack of respect some are showing towards those that have very little, or live in unstable housing environments for whatever reason.

...Just a few words of advice...to those that want or feel the need to jack up rents, who are you hurting? Your sons, and daughters!

Why do you want to hurt your own flesh and blood...its downright disgusting?

STC

You want everyone to be sensitive to not hurting your feelings, but you give little indication of any similar sensitivity to anyone else's feelings in your comments.
Seems like yet another version of the familiar refrain of "poor me".

Julia

 

[coyotte]

Rents are way too low...removing negative gearing has been tried before and nearly crippled the tenants. The government realised that they would have to provide a lot more housing for people who could not afford the rent. That is why it was brought back in..expect the rents to be 30% higher in 3 years time.

cheers

If I remember correctly , the period you are referring to ( nil neg gearing ) housing over that period would have become the most affordable ever -- Prices stagnated whilst incomes grew --- Rents where dear relative to the value of the property BUT the property value was low, making it fare easier for young families to jump in and buy their first home ---- what buggered it up was when neg gearing was reintroduced and land values tripled in as many years.

given a chance (nil neg gearing) all our kids would now probably have their own homes.

and no this is not sour grapes as during that period i aquired a few rentals myself.


Cheers

 

[wayneL]

If I remember correctly , the period you are referring to ( nil neg gearing ) housing over that period would have become the most affordable ever -- Prices stagnated whilst incomes grew --- Rents where dear relative to the value of the property BUT the property value was low, making it fare easier for young families to jump in and buy their first home ---- what buggered it up was when neg gearing was reintroduced and land values tripled in as many years.

given a chance (nil neg gearing) all our kids would now probably have their own homes.

and no this is not sour grapes as during that period i aquired a few rentals myself.


Cheers

Couldn't agree more Coyote

 

[bingk6]

If rents are the same as mortgage repayments, which they certainly are not in Sydney. Then buying would seem logical...

However, you need to be sure you are not paying too much for your house. Capital gains are not a certainty, I have alot of friends that have made captial losses recently.

If you have $50K, and you put it towards a $400K place and it goes up 5%. That sounds great! But....

You've paid 8% on $350K in interest, which is $28K
You've paid body corporate fees, rates, water, insurance of at least $6K
Repairs, paint, maintenance etc. of a conservative $2K

So you've paid $36K to make $20 in a capital gain - not good is it? A $16K loss.

And if you make a 5% capital loss - you just lost yourself $56K.

Sure if you don't buy you need to rent, but you can invest your $50K in shares!! And with some good mangement it may very well pay for you to rent for a year.

Rushing in to buy a house so recently after a property boom is not wise.

You have hit the nail right on the head. In addition to the overheads that you mentioned, lets not forget that the overheads associated in buying/selling a property (stamp duty, solicitors charges, real estate agent fees etc etc). The trasactional cost associated with property is very significant relative to shares.

You would purchase a property only if you are confident of capital gains, as that is your only means of offsetting those overheads. But as you pointed out, capital gains are not a certainty (at least, not for the next year or so).

Off course, as with all asset classes, there are cycles involved. The time for property will unquetionably come again and with the transactional costs associated with property, it really does pay to remain patient. No future in firing your bullets prematurely.

 

[happytrader]

So why rent?
Why not purchase and keep ahead of capital growth?

Think about it a 5% growth in a 400K property means you have to put away $20000 a year just to keep ahead of Capital appreciation.
or $200/week at 2.5%.

Havent got a deposit---Either join with someone who can help.
Friend if not married or Partner and get one as soon as possible.
Its even worth looking at a low doc loan when you really look at the figures.--IE 5% deposit.
If you buy a house you can even rent out a room.

There was a story here about a guy who rents rooms to air hostie who are away more often than home at $150 a week---he wins they win.

FIND A WAY.

We all had to and it wasnt/isnt easy AT FIRST.

Just following on from Techs excellent advice. I noticed in the last Sunday Mails TV Guide, an advert saying 'spare room? Homestay families needed. Enjoy a wonderful experience hosting international students. Earn up to $245 per student per week. Up to 3 students per home. Transport the students to and from college each day. Earn $185 per student per week. Up to 2 students per home. Students make their own way to and from college via public stransport within 30 mins of the college.' Shafston International College

Can't get much better than that imho.

Cheers
Happytrader

 

[tech/a]

This thread reminds me of a little story and we can see the players clearly in that story in this thread.


2 Salesmen working for a shoe company are sent to investigate the possiblilty of selling shoes to the Chinese. Both are away 1 mth and both come back to their sales manager to report.

Salesman(1) Well I can tell you there is no way we should waste time effort money and rescources trying to sell shoes to the Chinese. I travelled 1000s of miles and hardly saw anyone wearing shoes.

Salesman(2) WOW what an amazing opportunity---I travelled 1000s of miles and I saw hardly anyone wearing shoes!

As another poster on this site once wisely said---Perception IS everything!

Some get it others never will

 

[GOYCO]

If I remember correctly , the period you are referring to ( nil neg gearing ) housing over that period would have become the most affordable ever -- Prices stagnated whilst incomes grew --- Rents where dear relative to the value of the property BUT the property value was low, making it fare easier for young families to jump in and buy their first home ---- what buggered it up was when neg gearing was reintroduced and land values tripled in as many years.

given a chance (nil neg gearing) all our kids would now probably have their own homes.

and no this is not sour grapes as during that period i aquired a few rentals myself.


Cheers

What do you want????? Cheaper houses or cheaper rent? Honestly if you remove negative gearing property will be an income asset and the government will have to pick up the tab for housing a fair chunk of the population. Why do you think they brought it back in. Because the government is a lousy landlord. Don't really understand your argument. Without investors who would provide the housing? If you want to buy a house do what everyone else had had to do. Save for it and go without for a while. The government will even give you some money to help out.

cheers

 

[Go Nuke]

So why rent?
Why not purchase and keep ahead of capital growth?

Think about it a 5% growth in a 400K property means you have to put away $20000 a year just to keep ahead of Capital appreciation.
or $200/week at 2.5%.

Havent got a deposit---Either join with someone who can help.
Friend if not married or Partner and get one as soon as possible.
Its even worth looking at a low doc loan when you really look at the figures.--IE 5% deposit.
If you buy a house you can even rent out a room.

There was a story here about a guy who rents rooms to air hostie who are away more often than home at $150 a week---he wins they win.

FIND A WAY.

We all had to and it wasnt/isnt easy AT FIRST.

Have you heard of the "Rents Trap"?
Its tough to rent close to work AND save a laughable 20k a yr +survive.
$265+200 ...hmmm without food etc..

 

[tech/a]

Err thats my point.

Find away out of the trap.
Of course the other alternative is simply
slosh around in it and complain.

 

[wayneL]

Err thats my point.

Find away out of the trap.
Of course the other alternative is simply
slosh around in it and complain.

Agree,

But "BUY NOW" may not be the appropriate strategy to advise.

 

[tech/a]

Be sure to let me know when to buy then.

Also where.
Also why.

Its called due dilligence.
There are a myriad of reasons why not--- but Ive not seen ANY---suggestions other than a few from myself and a couple of others---nothing from the renters! As to how they intend to get off the Rent Roll.

The ONLY suggestion Ive seen is wait for property prices to fall.

Fall to what level?
Where?
Why--wait for a specific place/area you can get off the rent roll and into capital appreciation OUTSIDE your own backyard.

I dont think they want to.
Its so far out of their comfort zone they have sleepless nights.
What on earth they are doing trading shares with their meagre $$s that they cannot afford to put at even the slightest risk---I'll never know.

Go sell shoes I say!