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- 12 November 2007
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Good idea,..
Let me know when you have released the prospectus on this new company and i will take a look,... good luck on the capital raising.
What we really should be looking at is refining the ores ourselves, even extruding rail tracks etc. Our resources are large but finite and secondary industries should be growing from them. Now that would be jobs.
No you wouldn't subtract the holding costs in the intial calculation because these holding costs will be differtrent for every single investor,... ie. some have 90%LVR others 20% LVR.
You would look at return on investment the same way as people work out the 5year share price return figure,.... being the capital growth + dividends translated to a p/a % return.
just like when it is published that woolworths has had a 5 year share price return of 22.5%,... this is simply capital growth + dividends, property should be treated the same.
as I pointed out in my earlier thread the properites that were worth $1000 in 1890 would be worth far more than sydneys median house price today, so the actual capital growth would be far more than 5.1%,.... but even at 5.1% its a decent 10.1% when rents are included.
I think you need to still account for some holding costs but I do see your point with respect to interest. However Rates, Insurance, Repairs and Maintenace, Agents Fees, an allowance for capital refurbs etc need to be included as they are real costs that will affect your return regardless of how much you have or have not borrowed.
Tax is also something needs to be considered as after tax return is important and there are no franking credits.
A 5% net income return on investment in todays market is probably a little optomistic in my opinion.
Cheers
RustyK
Thats good for you but look at it now for new Investors.
House 400k, rent $400 p/w at best, Interest 9pc + rates/Ins/Maint/dutys etc - plus your deposit isnt free it could earn a good return elsewhere if not used in the Investment property.
I live in a 350k House (rented) for 300p/w. How does the Investment market attract new players with this equation?
But those types of properties (making a presumption on the types of properties) should contain a hefty risk premium. At say 6% return, that's a risk discount and you rely very much on cap gain for a profit. Nice if you can get it, but a dangerous game as recession approaches.If you look you will find properties with a good return, I could easily find properties in both brisbane, sydney and melbourne with rents higher than 5%.
Buying a Bargain in a Boom isn't a Bargain in a Bust.If you look you will find properties with a good return, I could easily find properties in both brisbane, sydney and melbourne with rents higher than 5%.
Real property investors wll be able to find good investments even in the current market, remember it's not supposed to be easy,
it's not as simple as walking into a real estate agents office and asking an agent to sell you an investment, if you do this you will end up with a $400,000 property returning a 3.8% return.
Real estate investing is much like stock investing,... some people buy mediocre managed funds with average returns and some people spend time reserching and identifying key performing stocks and do well,...
There were many "Real Property Investors" in the US who believed their own bullsh1t, who have now been wiped out...
Lenders are afraid that borrowers may find it's worth the hit to their credit scores, if they can drastically reduce their housing expenses. Someone with good credit and a $600,000 home in a town with cratering real estate prices could buy a similar house nearby for $450,000, and then let the other $600,000 mortgage go into foreclosure.
To head off more defaults, Countywide sent out letters to 122,000 homeowners last week informing them that their home equity credit lines were shut down since their estimated home values had dropped below their loan amounts.
But those types of properties (making a presumption on the types of properties) should contain a hefty risk premium. At say 6% return, that's a risk discount and you rely very much on cap gain for a profit. Nice if you can get it, but a dangerous game as recession approaches.
Buying a Bargain in a Boom isn't a Bargain in a Bust.
Buying a Bargain in the Bust is a real Bargain....
There were many "Real Property Investors" in the US who believed their own bullsh1t, who have now been wiped out...
I heard the latest boom in the US is Tents
Even with 11 consecutive rate rises I have never been in a better finacel position than I am in today.
Even if there were a large scale price drop of 40%, that would just make the buying better for me.
Even with a 20% drop in the share market I have never been in a better financial position as I am today.
Even if there were a large scale price drop of 40%, that would just make the buying better for me.
I am not a Property trader, The properties I buy I am expecting to hold well into the future, (unless I wrap them).
I buy properties where I can achieve good rental returns that I can bring to positive cashflow in a few years, In areas I believe will have good capital appreciation over the next 10 years,...
Even with 11 consecutive rate rises I have never been in a better finacel position than I am in today.
Even if there were a large scale price drop of 40%, that would just make the buying better for me.
I would actually say the opposite,... they are far less risky,.
take for example one I bought last year,... It's a duplex where I secured both units for $257,000. It's in a good outer suburb of brisbane achieveing capital growth and is at the lower end of the market.
It is less risk because the return is so much higher because I have 2 rent streams from it and it is actually positve geared,.... even if I loss a tenant I still have the other tenant paying rent.
If recession hits,... it's the properties at the top end that will suffer as renters try to down size to cheaper accomadation which actually increases demand for my favourite sectors the low to medium income housing.
Question: Why do you think the returns are traditionally higher in low end properties?
To many are "Reactive" in my view.
They have longterm views with short term stratagies.
Its just business.
The last time Interest rates were over 9pc in Oz was 1996.
In 1996 the average wage was 30k and the average property was 120k.
Just thought Id share that
Question: Why do you think the returns are traditionally higher in low end properties?
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