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- 25 February 2007
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ha, I'll go one better and teach him how to sucker people into buying over priced property and turn him into a real bludger...
ha, I'll go one better and teach him how to sucker people into buying over priced property and turn him into a real bludger...lol Robots ,
You really are setting yourself up with all that bad Kharma
Kimo might do just that, hes creaming it this month, 80pc on MAK I noticeHe might flick some goldies to that guy you refer to that hangs around outside your place looking for handouts
Whoa there G, you've made some mighty assumptions there.Thanks for bringing us to the heart of the issue. Those on the bear side of this argument seemingly have a vested interest in being right, and prioritise that above being wealthy. What many don't realise is that the doomsdayers who write this doom and gloom scripture like the bozos over at The Daily Reckoning, are probably already wealthy thanks to doing the wrong thing and getting away with it during a previous boom somewhere, sometime. They can afford to sit back and preach about such things. Can you??
ASX.G
Obviously I havent worked it out exact, wheres the major error? The renter will have more because I only compounded annually?
Its really pretty simple, Australian owner occupied realestate has got to potentially be one of the worst investments on the planet currently, especially if your paying it off.
Person renting 350k from bank @ 9pc + rates/ins pays 3k a month.
Person renting 350k house from property speculator pays 1200 a month, investing 1800 diff (22k p/a) @ a very min of 7 p/c return.
After 5 years, renter saving difference has a min of 135k.
Person renting the 350k has made a small dent in mortgage principle and has paid out 180k already. approx 160k is interest.
After this 5 years property "owner" has a property that has cost him 510k, he will need to sell it for 645k just to break even with the renter. Make that 660k, to include realestate sharks commission - I havnt included Duty, loan app fees, conveyancing etc!
Big mistake property gamblers make is using percentages to calculate expected return, its no longer applicable because the numbers have got too large.
Your probably going to get rate rise after rate rise going forward, its only a matter of time until youve got people fleeing the property market if it keeps up. Gen-Y arnt buying this silly RE game, it sounds like the musics stopped but not too many have noticed, yet.
Person renting the 350k has made a small dent in mortgage principle and has paid out 180k already. approx 160k is interest.
After this 5 years property "owner" has a property that has cost him 510k, he will need to sell it for 645k just to break even with the renter. Make that 660k, to include realestate sharks commission - I havnt included Duty, loan app fees, conveyancing etc!
What's your problem Bubblebots, not used to dealing with people who do their research, before jumping off a cliff. For the record I accept full responsibility for NOT getting sucked into Property during the Current Credit Cycle. I'll wait for the next one before jumping in.hello,
another thing to blame on property,
but hell dont blame yourself or take any responsibility
we all play by the same rules
its great things going to intrinsic value, many suburbs in vic up 40% last year,
thankyou
robots
Reality seems to be raising it's ugly head as I type this post. I hope you've got enough stashed away for a Airfare out of the country Bubblebots, you might need it.
Ok see below- I put your original post in so people could follow along
here's where you started to lose me-
Not even close to being true. You forgot to deduct the rent from this for starters
Then on top of that you have conveniently missed one of the main benefits of buying an IP- tax deductions.
From my quick and dirty calculations(remember I'm no accountant either) the property could have a negative cash flow of roughly $18K per year(31.5K in interest plus additional costs less 17.5K in rent). In some circumstances you can claim depreciation on the building and fixtures and fittings, which could potentially bring the total claimable loss up closer to 22K per year. Depending on what income the gambler is on, the taxman could potentially chip in 6.5K per year(based on being on an income of 70K), or up closer to 9K if they are on 100K.
Once you add that into the mix, then you are looking at the property costing $9K to 11.5K per year, depending on income(not 36 like you had originally stated), and it will be going down every year as their income rises, and the rental income increases. So it works out to be more like 45-55, not 180K.
To keep up with your intelligent renter, this gambler needs his dodgy property investment to be worth 540K after the 5 years to keep up with the renter, or about 9% per year, which is hardly a cracking rate of return. I know all of you property bears will be carrying on now that 9% isn't sustainable, etc, but the point I'll make before you do(saving me typing out another post!) is that the longer this comparison runs, the better it will look for the IP buyer- the one thing missing in this calculation for the renter is that the level of rent will be rising throughout the 5 year period, which will start to tilt the balance away from the renter and towards the gambler- the renter has his ability to save eroded by the rental increases, and these increases go straight into the pocket of the gambler. This can be offset by the renter by saving more as his income grows, but the IP buyer also gets the added bonus of earning more too. And the higher tax bill that goes with the additional income helps to pay for the IP with less and less of his income. Run the calculation out over 15 years, and the gambler is holding this property for less than 4% of his income. And that's assuming they haven't made any attempt to pay it off over that time.
hello,
yeah wouldnt surprise with most running for the exits if things get tuff,
I will go down and see the church for a handout with all the ASF crew, i am sure the current crew will make me welcome
thankyou
robots
Ive been pretty lenient on the home owner, only giving the renter a 7pc return and compounded interest yearly, most these accounts pay interest on Interest calculated monthly. Sure deduct some tax each year.
Plenty of tax paid investments paying 8pc.
Oh dont let the tax free PPoR secret out
Just keeping it real for the rest of us among all you chicken littles.Thanks for your constructive input
robots, I count 5 assumptions in there, 4 points announced as 'facts' which are unsupported, 1 'most likely', 1 'I guess', and at least 15 grammatical errors. Amusing, thank you. kennashello,
explod, look at the previous posts
we have two guys 22 and 23 who have been in the system for 3 yrs doing basic building work on 50k/yr
frinkster, NC and others are deniers of capital growth because they have missed out, simple as that
most likely a lot of them have sold and done the seachange thing and then wished they could turn back the tide only to be shocked at what has happened
most of them tell "us" how they are getting 70% or 80% returns but they forget to mention its on 1k, 2k or 10k
whereas frinkster the property owners are getting it on 350k, 500k or 600k so I guess they need to justify there dismal performance and as usual property cops it,
40% returns for many in melb, I get that just for walking to the front door and sticking the key in the lock for the same cost as the renter next door
always remember the great one from Kimosabi " I looked at property", translate into I couldnt afford it so I want it to crash
thankyou
robots
But im used to the Prop Bull crowd swapping the debate from OO to IP, happens all day( funnily enough I can appreciate the virtually risk free nature of IPs provided you pay enough income tax to negatively gear the massive loss year in year out!)
Cheers.
Its really pretty simple, Australian owner occupied realestate has got to potentially be one of the worst investments on the planet currently, especially if your paying it off.
Just keeping it real for the rest of us among all you chicken littles.
Figures confirm property slump bedded in
5:00AM Wednesday February 13, 2008
By Anne Gibson
The Real Estate Institute will today release data from last month that is expected to show the slump has settled in.
Quotable Value and Barfoot & Thompson have released gloomy housing figures in the past few days.
Shamubeel Eaqub, investment research director for Goldman Sachs JBWere (NZ), said house-price slumps were almost impossible to reverse once they bedded down.
"This looks very gloomy. I would note that the United States experience shows that once house prices start falling and there is feedback loop through the slowing economy, it's difficult to pull out of the nosedive," he said.
One property commentator believes New Zealand is heading for its biggest property slump in almost two decades and warns prices could plummet by a quarter.
Residential property became a "buyers' market" last month with low sales and a sharp increase in days to sell figures, the Real Estate Institute (REINZ) says.
The national median price dropped to $340,000 in January, from $345,000 in December and compared to a peak price of $352,000 in November.
The national median was 3.97 per cent up on the $327,000 figure in January 2007.
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