Is home ownership a sound strategy?

[weird]

It puzzels me when people make coments like this, owning a property does not detract anything from other investments investments you choose to make.

If anything owning a property adds a massive about of value to the other areas of investment, whether they be shares or business.

By owning a property

-you have an ever growing amount of your wage to put towards other investments as you pay off the loan, where as you get pay raises year by year the rent will probally all so go up.

-you can access loans to invest at cheaper interest rates without the threat of margin call

-you have a greater stability in your net worth



I believe that when you have a good business producing excess cashflow, combined with owning a property (or two) and also a good share investment stratergy you will have fantastic growth.


Mcdonalds would not be the company they are today without property, If Mr Sonneborn who was CFO of mcdonalds from the 50's and 60's had not turned Mcdonalds into a Real estate business instead of a burger business, they would not have been able to grow like they did.

Mcdonalds is the Largest property owner in the world buy land value, and generates a massive amount of revenue buy charging franchises rent, owning this land in the early days is what allowed them to finance at affordable rates without threating loan agreement terms.

Don't disagree. I know absolutely nothing about property, and interested in learning more. Hence following this thread with interest.

Getting a home loan is just not priority for me, and my wife atm.

Probably for the average battler, their own home was their best investment, with forced savings etc. There is also IP such as those recommended by people like Jan Somers.

As they say, it's my opinion at the moment, and have the right to change it at anytime ... just learning like every other mug.

 

[Sir Osisofliver]

A combination of circumstance and stupidity mate. Our house is beautiful... basically got hooked as soon as we saw it, and ended up paying $125K over our budget... then factor in fees, stamp duty etc, and we ended up $180K over budget. Then my wife became pregnant, and ultimately finished work... learnt my lesson... now just trying to solve the problem.

Current solution we are considering, pending advise from accountants, is to rent our house out, and rent somewhere to live, then take the tax benefits we would receive to maximise our money, and concentrate on paying off over 10 years at a fixed rate.

Has anyone got any opinions on the above?

1) Go stand in the naughty corner - you know what you've done wrong
2) By renting your house how close do you get towards positive gearing of the asset? How much negative gearing can you handle on a single income now that you are paying rent? Learn that Budgeting is your friend.
3) How long have you lived in the McMansion and did you receive FHOG? (you need to live in the place for a year for tax benefits).
4) Try buying an Investment Property or two before you purchase your next PPOR
5) Get a nickname like Davis the Destroyer and learn to gouge real estate agents. Say things like "I'm wise to your tricks." and "Never try and sell to a salesman buddy." and "Yeah, Yeah location location is that all you guys can say? Lets see a QVAS report on the sales demographics on the area for the last ten years and work for your commission!!" and "No I'm not paying for that - you're gonna take a huge commission from this why should I pay your business expenses?" and "I don't care that it's $40k below the asking price - it's a free market and if I want to try and gouge the seller I will."



Cheers

Sir O

 

[spaceman666]

Allso buy a cheap comfortable humble house that you can easily afford,
dont over extend yourself, its not the last house you will ever own, I have had 11 homes and im about to buy one again in about 9 months time when things settle down, all of our money is in small mining stocks and when the market turns we will sell some pay our 25 % capital gains tax and settle in to an un mortgaged home. We are living with my 94 year old dad and we are having the time of our lives hes a lot of fun. We sold our old home 2 years ago and invested in the stockmarket at last we are breaking even after the highs and lows we rented a mantion for 18 months and we had a miserable time of it
Try to cool and heat a mantion lol not cheap ! a humble paid for home is the answer to all of your problems just keep to yourself and pray your neighbours will leave you alone lol A HUMBLE HOME WITH A SMALL MORTGAGE IS THE ULTIMATE ANSWER TO ALL OF YOUR PROBLEMS . BE HUMBLE ITS LESS STRESSFULL ! ;-] BEEN THERE DONE THAT SO MANY TIMES IM FINALY LEARNING !

 

[Beej]

A combination of circumstance and stupidity mate. Our house is beautiful... basically got hooked as soon as we saw it, and ended up paying $125K over our budget... then factor in fees, stamp duty etc, and we ended up $180K over budget. Then my wife became pregnant, and ultimately finished work... learnt my lesson... now just trying to solve the problem.

Current solution we are considering, pending advise from accountants, is to rent our house out, and rent somewhere to live, then take the tax benefits we would receive to maximise our money, and concentrate on paying off over 10 years at a fixed rate.

Has anyone got any opinions on the above?

Yes - did you read this post earlier in the thread??? https://www.aussiestockforums.com/forums/showthread.php?p=414643#post414643

It shows how your situation, based on the info you provided, is not anywhere near as bad as you are making out. The fact that you did not respond to that post makes me a little suspicious about the veracity of your original story and the motivation for posting your story here..... Happy to have these suspicions allayed!

Cheers,

Beej

 

[jpldavis]

1) Go stand in the naughty corner - you know what you've done wrong
2) By renting your house how close do you get towards positive gearing of the asset? How much negative gearing can you handle on a single income now that you are paying rent? Learn that Budgeting is your friend.
3) How long have you lived in the McMansion and did you receive FHOG? (you need to live in the place for a year for tax benefits).
4) Try buying an Investment Property or two before you purchase your next PPOR
5) Get a nickname like Davis the Destroyer and learn to gouge real estate agents. Say things like "I'm wise to your tricks." and "Never try and sell to a salesman buddy." and "Yeah, Yeah location location is that all you guys can say? Lets see a QVAS report on the sales demographics on the area for the last ten years and work for your commission!!" and "No I'm not paying for that - you're gonna take a huge commission from this why should I pay your business expenses?" and "I don't care that it's $40k below the asking price - it's a free market and if I want to try and gouge the seller I will."



Cheers

Sir O

Getting the local agent to give us an estimate of rental income... then I can assess the gap. Also, amusingly, I work in real estate (although not as a real estate agent)... so really should know how to deal with 'em!

 

[jpldavis]

Yes - did you read this post earlier in the thread??? https://www.aussiestockforums.com/forums/showthread.php?p=414643#post414643

It shows how your situation, based on the info you provided, is not anywhere near as bad as you are making out. The fact that you did not respond to that post makes me a little suspicious about the veracity of your original story and the motivation for posting your story here..... Happy to have these suspicions allayed!

Cheers,

Beej

What other motivation might I have???

I was factoring into the costs all the associated ones as well... rates, bills, insurance and misc. expenses based on the total from last year (new cooker, new washing machine, repairs to aircon etc).

I'm sorry but your post confuses me.

 

[Beej]

What other motivation might I have???

I was factoring into the costs all the associated ones as well... rates, bills, insurance and misc. expenses based on the total from last year (new cooker, new washing machine, repairs to aircon etc).

I'm sorry but your post confuses me.

OK let me spell it out: Your numbers don't add up.

1) You claimed that your are burning 60-70% of your net income of $7k on the interest only payments of a $580k mortgage, yet at current interest rates you should only be paying ~$2500/month = 35% of your single net income? Adding rates and insurance, and even a new cooker (lol!) only effects that calc by a small amount, rates say $1.2k, insurance $500, a new cooker - $1k? (PS may as well have done a full kitchen reno and added some value!). So that's a total of about 1 months interest extra over the past year. You can't count utility bills, washing machine etc as they are expenses that you would incur whether you were a renter or an owner.

2) You claim that when you originally bought your house, you went $125k over budget, but then when you add fees/stamp duty etc it was $180k over. $55k in stamp duty and fees?? Geez - that's the sort of money that you pay when you buy a $1.5M house, not a $600k-$700k one.

3) I also pointed out (as did others) how strict budgeting and getting your wife back to work etc would enable you to rapidly reduce the interest payable on your mortgage such that things would become much easier, plus you would build a buffer against possible future interest rate rises etc.

PS: re motivation for stirring up things on ASF with this sort of scenario, I would have thought that was obvious given the predominance of vocal bearish views on property ownership on this forum! But I will give you the benefit of the doubt! If what you have told us is correct then it seems that your situation might actually be as dire as you think, and a bit of simple budgeting could get you well under control and onto the path of future financial freedom!

PPS: I can see little point in renting your house out and paying rent elsewhere, unless you have free (family) alternative accommodation available. The rent on your house will only cover your mortgage interest most likely (if you are lucky re area and rental returns!), and then you have to pay rent on top of that, in after tax dollars, which would be close to the same amount, possibly more, depending on what/where you rent? Plus you will still have to maintain your house.

Cheers,

Beej

 

[johenmo]

5) Get a nickname like Davis the Destroyer and learn to gouge real estate agents. Say things like "I'm wise to your tricks." and "Never try and sell to a salesman buddy." and "Yeah, Yeah location location is that all you guys can say? Lets see a QVAS report on the sales demographics on the area for the last ten years and work for your commission!!" and "No I'm not paying for that - you're gonna take a huge commission from this why should I pay your business expenses?" and "I don't care that it's $40k below the asking price - it's a free market and if I want to try and gouge the seller I will."

Excellent advice. WIll use that next time.

Allso buy a cheap comfortable humble house that you can easily afford,A HUMBLE HOME WITH A SMALL MORTGAGE IS THE ULTIMATE ANSWER TO ALL OF YOUR PROBLEMS . BE HUMBLE ITS LESS STRESSFULL ! ;-] BEEN THERE DONE THAT SO MANY TIMES IM FINALY LEARNING !

That's what we did.

We're about to wipe out our mortgage, so that will free up heaps of $ per month. Having said that, it's only about 15% of nett income. Didn't buy too large & we have always been 1 income.

So now we can starting channelling $ to shares, property & other investments. Oh, and have a holiday without the kids.

 

[Glen48]

Look at Patrick.net and see what is about to happen to house prices here.