Are rents too low?

tech/a said:

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!

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I am renting the place I live in, and intend to for some time. Crunching the numbers, I've found I'm better off buying an investment property that represents approx. 1/3 of what I could borrow, and gear the rest into shares & managed funds (weighted towards capital protected products). I intend to buy every 2-3 years, and after acquiring 3 -4 properties rolling up into more exclusive suburbs with larger properties.

I'd like to think that, given even modest capital appreciation, in the long term I will have invested in the right areas, have multiple investment sources providing a return, hold a hedge against a rent price explosion & still get to live in an area I really enjoy without having a major impact on my current lifestyle.

It amazes me the number of people who do not have a financial plan beyond complaining about those that do...

It is said by many an expert that it is wiser to rent and invest youre capital in the market........ both's good I believe. But you never have control over publicly listed companies future (unless youre a large holder), youre own home you do.

What is pertinent is controlling one's destiny. At least owning the roof over your head allows a certain amount of this.

You pay no rent, you dont have to move, youre family has security of their aboad, youre kids live in their own home, no mortgage >means no risk, you can gain simple enjoyments from doing up youre own place etc etc.

Renting allows none of this. Sure youre cost is fixed, but the certainty of the roof over youre head is not. Yes if you can move to another rental at a whim but their are costs involved, family issues etc etc.

And yes its bricks and mortar, it will always have a relative net worth, even unrealistic ones like the last few years at certain times in the property cycle

Go Nuke said:

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..

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Work longer hours or get a second part time job if that is the only way. A lot of us did that to get where we are now.
If you don't then you are either a winger or a loser. The only one who can help is yourself.
I once gave a job to an ex POW (Burma Railway). He lived 10km away. I asked him how he was getting to work after he had been there a week. His answer was walking. He also was cleaning at a hospitol at night and said he would be able to buy a car in a few months time.
And you are complaining. Please excuse me if I seem cranky but you young ones these days seem to want more than you are prepared to give.

nioka said:

Please excuse me if I seem cranky but you young ones these days seem to want more than you are prepared to give.

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I think that's pretty harsh. I started my own business at a time when I was at both University and Tafe. A lot of my friends my age or slightly older I would class as workaholics.

I think a lot of the resentment lies in the lack of stability that my generation seem to have to cope with, compared with what most of our parents dealt with. Very little cost for education, no pressure to have the latest gadgets, and seemingly low expectations. Now every hack of a youngster seems to have to be a genius, earning big bucks or only being educated directly for a wealth related occupation, rather than for enjoyment.

For me and a lot of my friends... it's a matter of waiting this out... and by the time we are in positions where we can afford property, there will be enough people defaulting for us to come and make a mint on their mistakes. But for the next 5-10 years, it's going to be pretty hard.

nioka said:

And you are complaining. Please excuse me if I seem cranky but you young ones these days seem to want more than you are prepared to give.

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I love it when someone who remembers, reminds us about how good we've actually got it. Granted that we have new and different challenges, I wouldn't trade the challenges of the era you speak of Nioka, for today. I'll keep 2007 thanks.

Just a alternative cynical view:

What brought about the last two booms apart from land values generally doubling every decade?

Could the first one 1988 have had anything to do with Bob Hawke's betrayal to the union movement, hence setting the scence for lower wages and conditions for employees ---- hence lower building costs -- with lower relative building costs the only way out was increased land values.

The second one 200? when these changes started to take effect, with falling relative building costs the only way out was again to increase land values.

With John Howard's new industrial laws the same cycle is now inevitable.


Also interesting that the three nations involved in the Iraq slaughter are the same three nations where land values have skyrocketed --- govt passing on debt to the public sector? --- apparently none of this has occured in Europe.

Used to be a economic theory that as the wealth of a nation becomes concertrated the outcome is always recession and possible depression.
Looks like Keating may have been right "Banana Republic" here we come.


Cheers

Freeballinginawetsuit said:

It is said by many an expert that it is wiser to rent and invest youre capital in the market........ both's good I believe. But you never have control over publicly listed companies future (unless youre a large holder), youre own home you do.

What is pertinent is controlling one's destiny. At least owning the roof over your head allows a certain amount of this.

You pay no rent, you dont have to move, youre family has security of their aboad, youre kids live in their own home, no mortgage >means no risk, you can gain simple enjoyments from doing up youre own place etc etc.

Renting allows none of this. Sure youre cost is fixed, but the certainty of the roof over youre head is not. Yes if you can move to another rental at a whim but their are costs involved, family issues etc etc.

And yes its bricks and mortar, it will always have a relative net worth, even unrealistic ones like the last few years at certain times in the property cycle

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Oh dear oh dear oh dear...

You have no control over the value of house prices.

You have no control over interest rates.

You can get your house repossesed if you lose your job.

If you own a home and a gang, or some moron moves next door you are screwed, if you own an apartment and your body corporate screws you you can't do anything.

If I change jobs to a new location, or want to move cities, or get moronic neighbours, or want to move somewhere to get Foxtel, or closer to the beach or whatever I am free. No agent fees, no stamp duty, no rates, no water fees, no body corporate fees, no interest rate worries.

My money is in shares, the ASX has more than doubled recently, Sydney house prices have gone down for 3 years now.

Renting is brilliant!!!

Freeballinginawetsuit said:

What is pertinent is controlling one's destiny. At least owning the roof over your head allows a certain amount of this.

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Perhaps too much control.

Missus and I are at the stage where we want to flit about the world a little bit, so we are happy renters ATM. Have lived in three different locations in the last three years and are moving on to the UK and possibly France or Germany after that. Buying a PPOR just does not fit into the current plan

We all laud the Buffetts' of this world for waiting for value purchases, and then advise young people to buy housing at very poor value, by hook or by crook. Doesn't make sense to me.

We did make some IP purchases at value a few years ago, but for the younger people, all I have say is - study economic history.

Tech

I will be sure to point out value when it appears. Actually there is some great value in parts of Germany and their economy is doing very well FWIW. Will be checking it out when I get over there.

chops_a_must said:

I think a lot of the resentment lies in the lack of stability that my generation seem to have to cope with, compared with what most of our parents dealt with. Very little cost for education, no pressure to have the latest gadgets, and seemingly low expectations.

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Agreed about the low cost of education, but in the days when this applied only a very small proportion of the population sought a tertiary education anyway. I worked in my parents' businesses all through my secondary school years and then at weekends after I started a full time job. Only went to uni much later in life.

You say "no pressure to have the latest gadgets". For heaven's sake, there is always so called pressure to have what everyone else has. Doesn't mean you have to succumb and buy whatever it is.

"Low expectations": again, this is entirely up to the individual. Don't agree that earlier generations had low expectations. They were simply realistic enough to appreciate that to get what you wanted you had to work damn hard, usually more than one job, and resist the above "pressure for gadgets" in order to achieve your goal of home ownership, investment property or whatever.

This constant refrain of how hard it is for young people these days compared to apparently halcyon days of the previous generation is frankly wearing a bit thin. It's never been easy. It's all a matter of attitude. Of seeing opportunities instead of obstacles. Tech-A summed it up beautifully in his anecdote about the shoe salesmen. Why do you think it's meant to be easy?

The variety of education and careers these days is fantastic. There are great opportunities everywhere. Just look for them and stop focusing on whatever the negatives are. They will always be there. Get over it.


Julia

Julia said:

This constant refrain of how hard it is for young people these days compared to apparently halcyon days of the previous generation is frankly wearing a bit thin. It's never been easy. It's all a matter of attitude. Of seeing opportunities instead of obstacles. Tech-A summed it up beautifully in his anecdote about the shoe salesmen. Why do you think it's meant to be easy?

The variety of education and careers these days is fantastic. There are great opportunities everywhere. Just look for them and stop focusing on whatever the negatives are. They will always be there. Get over it.


Julia

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I agree about the constant complaining Julia, but I actually think the problem is everything is too easy nowadays and people don't want to or have to work hard (Chops, there are exceptions). Credit has never been easier to obtain with little or no deposit, the latest gadgets are easily obtained (cheap & store credit). Our children are brought up getting everything with little or no effort, our schools don't teach responsibility or consequences of actions. And as a result of this when something goes wrong or doesn't fall into place it's always someone elses fault, and instead of improving/fixing whats wrong, people look for an easy out.

Julia said:

"Low expectations": again, this is entirely up to the individual. Don't agree that earlier generations had low expectations. They were simply realistic enough to appreciate that to get what you wanted you had to work damn hard, usually more than one job, and resist the above "pressure for gadgets" in order to achieve your goal of home ownership, investment property or whatever.

This constant refrain of how hard it is for young people these days compared to apparently halcyon days of the previous generation is frankly wearing a bit thin. It's never been easy. It's all a matter of attitude. Of seeing opportunities instead of obstacles. Tech-A summed it up beautifully in his anecdote about the shoe salesmen. Why do you think it's meant to be easy?

The variety of education and careers these days is fantastic. There are great opportunities everywhere. Just look for them and stop focusing on whatever the negatives are. They will always be there. Get over it.


Julia

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I think you are twisting my argument somewhat here...

It was expected that you do the same thing as your Dad... now it's almost expected that you must do better than your parents...

And from what I've posted above... does it actually look like I have to "get over it"? I'm doing very well for my age, taken an opportunity that is setting me up. I've already stated that this temporary negative time period for young people will result in a positive outcome for people my age eventually. Does it look to you like I am focussing on the negatives?

Realist said:

Oh dear oh dear oh dear...

You have no control over the value of house prices.

You have no control over interest rates.

You can get your house repossesed if you lose your job.

If you own a home and a gang, or some moron moves next door you are screwed, if you own an apartment and your body corporate screws you you can't do anything.

If I change jobs to a new location, or want to move cities, or get moronic neighbours, or want to move somewhere to get Foxtel, or closer to the beach or whatever I am free. No agent fees, no stamp duty, no rates, no water fees, no body corporate fees, no interest rate worries.

My money is in shares, the ASX has more than doubled recently, Sydney house prices have gone down for 3 years now.

Renting is brilliant!!!

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Realist,

Their are many determining factors why individuals purchase a home, my post was relative to a hypothetical scenario of a first homebuyer. An investment decision could be only one reason. The post was trying to illustrate this.

Its great youre into the sharemarket and have done well, good on ya .

Youre obviously not in the property market although their may come a time when your personal circumstances change and you find a need, no doubt with your extensive knowledge and wise investments youll be cashed up to buy a house no drama's.

In the meantime youre a renter, at the will of the going rental rate/market and this will get sticky shortly. Lots of rich share market/property guru's who have killed the pig and will be uping rents, simple supply/demand scenario as lots of renters around squeezed out of the property market. You could compare this to a very bullish stock with the only difference you have to put a roof over youre head wheras you don't have to buy the stock.

The truth of the matter in Oz is their is rapidly becoming a wealth gap. Property affordabilty is the first indicator. Unlike the past cycles when real estate crashed, this time the wealthy will provide value support and further lock in the wealth gap. The future for for renters is bleak in my opinion.

As arrogant as you are I hope you continue to do well on the stocks although you have given enough indication that this arrogance will probably be youre undoing.



Cheers.

wayneL said:

Perhaps too much control.

Missus and I are at the stage where we want to flit about the world a little bit, so we are happy renters ATM. Have lived in three different locations in the last three years and are moving on to the UK and possibly France or Germany after that. Buying a PPOR just does not fit into the current plan

We all laud the Buffetts' of this world for waiting for value purchases, and then advise young people to buy housing at very poor value, by hook or by crook. Doesn't make sense to me.

We did make some IP purchases at value a few years ago, but for the younger people, all I have say is - study economic history.

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Sounds great Wayne, all the best in your travels .

chops_a_must said:

I think that's pretty harsh. I started my own business at a time when I was at both University and Tafe.

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I'm not completely sure, but I'm tipping Nokia is making a general, sweeeeeeeping, statement.. and one that I agree with on the whole.. As with all general statements, there are exceptions..

chops_a_must said:

I think a lot of the resentment lies in the lack of stability that my generation seem to have to cope with

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Lack of stability of your generation?? Stability that those generations before yours apparently had?? Stability as in not getting shipped to other countries or to relatives in the country as children to avoid getting bombed like my parents were during WW2?? [And they were the lucky ones].. Or, not having to worry about whether or not they'll have a job next week in the economic boom times we are experiencing now as opposed to the industrial unrest and Union movement whilst my parents were struggling to pay thier mortgage and raise thier family?? Etc.. Etc..Are you serious??

If there is any resentment, I'd put my money on the fact that those of 'your' generation have never had it so good and are unable to appreciate it..

chops_a_must said:

Very little cost for education

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and very little education..

chops_a_must said:

no pressure to have the latest gadgets

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'latest' gadgets few and far between.. and why would someone of your intellect bow to peer group or marketing pressure??

chops_a_must said:

and seemingly low expectations.

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Seemingly low Expectations?? Every generation will have those that take on responsibility (expectations) and those that are simply along for the ride (low expectations)..
Thankfully it appears you fell in with the right crowd and are comfortable making a go of what is available to you. You come across as reasonably intelligent in most of your posts I have read..

In regards to property, Swings and Roundabouts mate, swings and roundabouts.. You know that markets work in cycles, keep you money in your pocket if you think there will be correction.. if not hop in now and buy something you can afford, like I had to many moons ago, a crappy unit in a crappy suburb.. that was twenty years ago, which seems like a long time.. but let me tell you I have reaped the rewards since.. When I purchased my crappy unit in a crappy suburb I expected to be paying for the property for the rest of my life.. it cost me just over 80K.. many many sleepless nights wondering if I could afford it, especially as interest rates were considerably higher than they are now, in fact more than double.. only a few years later (after I sold it, but funds not entirely from sale proceeds) I had 80K in the bank and have not looked back since. But you have to make the first move..

The hardest part is actually DOING it.. just DO it, it hurts for a while getting used to not having the repayment money, but in a couple of years time when you have sorted the priorities , and had a couple of pay rises it's all good..

chops_a_must said:

For me and a lot of my friends... it's a matter of waiting this out... and by the time we are in positions where we can afford property, there will be enough people defaulting for us to come and make a mint on their mistakes.

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Again, swings and roundabouts.. If you think the Property Market is topped out, stay clear. My opinion is that all States barring WA and NT are looking pretty good at the minute. If you are unable to afford a property by your lonesome, why not get together with some of your mates, pool your money and make a mint now.. and make a mint in the future when the rates rise and force (some) people out..

Cheers,

Buster

Freeballinginawetsuit said:

The future for for renters is bleak in my opinion.

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You opinion for what it is worth, is incorrect.

Renters are better off than home owners in Sydney and have been for 4 years now.

Statistics and facts prove this, not just opinions.

As arrogant as you are I hope you continue to do well on the stocks although you have given enough indication that this arrogance will probably be youre undoing.

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Arrogance has nothing to do with it. I'm very careful with my investments, do alot of research, diversify widely, reduce tax and brokerage when possible, and follow proven principles for longterm success.

Realist said:

You opinion for what it is worth, is incorrect.

Renters are better off than home owners in Sydney and have been for 4 years now.

Statistics and facts prove this, not just opinions.



Arrogance has nothing to do with it. I'm very careful with my investments, do alot of research, diversify widely, reduce tax and brokerage when possible, and follow proven principles for longterm success.

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Yep Realist, the Sydney property market in certain areas is looking attractive ATM. Where do you think WA investment in Property came from, the pundits bailing Sydney . I am talking about the future property market, not the past market

It's a simple fact that a lot of money is burning holes in pundits pockets ATM itching for a hidey hole to gain a return. Sydney in all likelihood will flip sooner than later. Im certainly looking for value their myself ATM.

WA has flipped and renters will be squeezed, simple....., property investors have killed the pig.......simple and the same crew have parked money in the stockmarket killing the pig..........simple.

Thats the fact over here Realist and you are naive to believe these pundits aren't wise enough to continue to flip the roundabout gaining returns left/right and centre, including parking funds in Sydney property (in the right localities).

Buster said:

Lack of stability of your generation?? Stability that those generations before yours apparently had?? Stability as in not getting shipped to other countries or to relatives in the country as children to avoid getting bombed like my parents were during WW2?? [And they were the lucky ones].. Or, not having to worry about whether or not they'll have a job next week in the economic boom times we are experiencing now as opposed to the industrial unrest and Union movement whilst my parents were struggling to pay thier mortgage and raise thier family?? Etc.. Etc..Are you serious??

If there is any resentment, I'd put my money on the fact that those of 'your' generation have never had it so good and are unable to appreciate it..


and very little education..

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Please don't quote me out of context! If you actually read what I said, "compared to our parents" i.e. baby boomers!!!! How many people had the same job for fourty years in previous times? And how many are likely to have that surety now? None perhaps? I mean, my parents both got jobs when employment was what... at 0%.

As to lack of education... well. I have a Diploma and three post Diploma qualifications. I am one of only around 10 Vodder therapists in this state...

Plus, while I was doing this... I continued with my double degree and I maintain an average of over 70%.

A lot of what I said I don't think applies to me. I was only offering it as a possible suggestion for the lamentations of the current youthful generation.

And I really resent my lack of intelligence/ education being attacked. Especially considering I have paid my entire way through my training with my hard work. And I really would like you to take that back.

For now, I will continue to be putting more money into my training/ education as it increases my value, and increases my professional status.

Not all young people are like you seem to think they are... ok?

chops_a_must said:

I think that's pretty harsh. I started my own business at a time when I was at both University and Tafe. A lot of my friends my age or slightly older I would class as workaholics.

I think a lot of the resentment lies in the lack of stability that my generation seem to have to cope with, compared with what most of our parents dealt with. Very little cost for education, no pressure to have the latest gadgets, and seemingly low expectations. Now every hack of a youngster seems to have to be a genius, earning big bucks or only being educated directly for a wealth related occupation, rather than for enjoyment.

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Oh dear me. Stability? My father died suddenly in the middle of the depression leaving my mother with three children. the youngest 6 months old I left school as soon as I was old enough to get a job. I also worked delivering milk twice a day from the age of 9. We didn't cry instability we were too busy. I don't have any resentment so why should you. You have had a chance of a good education. Use it and be happy.

nioka said:

We didn't cry instability we were too busy. I don't have any resentment so why should you. You have had a chance of a good education. Use it and be happy.

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Hey. I'm NOT complaining!

And you ARE NOT in the age bracket that I am using as an example. Clear?

Hey Chops..

chops_a_must said:

Please don't quote me out of context! If you actually read what I said, "compared to our parents" i.e. baby boomers!!!!

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Ahhh, I thought you said OUR pararents.. as in whoever was reading the posts parents blah bla bla ba blah.. Oh wait, you did!! I guess I should have read it simply as YOUR parents.. Seems others made the same mistake as me.. good to see it's all been cleared up..

chops_a_must said:

How many people had the same job for fourty years in previous times?

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Lots.. and there is good reason.. the lack of 'Good' (but apparently low cost) education for the masses, and very little in the way of 'Personal Development' or 'Self Improvement' offered by the employers then as opposed to the plethora offered by employers these days.

chops_a_must said:

And how many are likely to have that surety now? None perhaps?

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Surety?? Again, Lots.. Will people hang about the same job these days for longer than 6 -7 years, nope.. Thats the trend these days, and it's purely because of the PD programs offered by employers.. the employee takes what he/she can get, a few extra ticks in the box and it's time to move onto greener fields. That's just the way it is these days, but if you wanted to hang about the same workshop/office/retail job for 40 years I'd tip that you could..

chops_a_must said:

And I really resent my lack of intelligence/ education being attacked. Especially considering I have paid my entire way through my training with my hard work. And I really would like you to take that back.

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I never attacked your lack of intelligence, I like your lack of intelligence.. Sorry, couldn't resist, your first line made me laugh.. Seriously though.. I have reread my post and cannot for the life of me figure out what this quote is about?? I didn't slag you off as a knucklehead.. Did I??

chops_a_must said:

For now, I will continue to be putting more money into my training/ education as it increases my value, and increases my professional status.

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And more power to you Chops.. Keep it up..

chops_a_must said:

Not all young people are like you seem to think they are... ok?

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I don't think young people are anything just quietly, I just made a statement that if there is anything that is to be resented it's that the younger generation don't know how good they've got it.. This BTW would be true of Every generation I would suggest. Else the ol' Monty Python 'shoebox in middle of road' skit wouldn't be nearly as funny, would it..

[On Topic] Anyone who thinks that rents are not too low obviously does not own an Investment property here in Perth.. $200 - 300 a week for a $500K property is NOT a good return.. IMHO anyway..

Cheers,

Buster