[MooseheadMember@mooseheadJoin Date: 2006Post Count: 42]

June 24, 2007 - 1:56 am

foundation wrote:

Option 1) I buy a $6k (just an example) tele today, but (thanks Harvey Norman!) still get to invest the money for 3 years: at the end of 3 years I'll have just the investment return and a tele worth $1.5k if I'm lucky.

Ahh see… there's the kicker – to you  having TV during that 3 years isn't worth anything.  To me that's 3 years of having something that I want & enjoy, something that I share with the person closest to me (GF & I are movie buffs)… so having it now is worth something to me and I'm willing to pay it!  And if we are going to do a financial analysis – don't forget inflation mean's I'm paying less in real dollars buy delaying the purchase (ssshh steve keen). 

The TV's just an example.  Everyone has things that they want.  If they are prepared to pay for it AND they can afford, it go for it I say.  I don't think anyone is here reading these forums because they love property investing per se – it's because PI brings people a way to get the things they want, albeit financially, whatever they may be.

 F.- if you are happy with a basic existence then I am truly envious and I wish you the best.  I admit, I want a lot from this world before I die, many of these things are expensive.  And so I am here.

PS I don't lease a car, I drive a 91 laser with 200 000 kms on the clock   Of course, on a purely financial basis leasing any sort of car does not seem like a good investment… UNLESS you put a value on the joy & satisfaction you get from driving it.  I guess that just depends on your perspective…

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June 22, 2007 - 12:47 am

Yes I think you have it there – we obviously do think differently!  At home I have 42" pioneer plasma TV.  It's fantastic watching a good show or movie in full HD – a daily pleasure of life for me.  I don't own it, it's on 3 years interest free terms.  It'll be paid off comfortably before the 3 year period – hell I have the cash to pay it all off tomorrow if I wanted.  But I'm not going to – I love my TV and I don't care one iota I don't own it outright!  When I go to bed at night it gives me satisfaction to know I have used the capital I spared to invest elsewhere.

It's all about risk tolerance.  To me saying zero debt = freedom is a risk averse policy.  If you want higher returns you must accept higher risk – and I think it would be safe to say that most people that come to this forum are here because they have made a decision that they desire higher returns than the average Joe.  This is not a forum for people who are happy to survive on a meagre wage for the rest of their days, finally paying off their house a few years before they croak!

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June 20, 2007 - 11:47 pm

F. – my next question is then, why participate in a property investing forum, when you are in essense idealogically opposed to the idea?  You say you don't advocate anything for others, I find that quite a comical statement given your quite prolific promotion of anti-debt theories here.  If you are trully happy with your own life and choices, I don't think you would feel the need to come here and tell people they are wrong.

To me your situation sounds much the same as the indebted masses you deride.  You have 1-2 years cash saved up… so what?  Most people would have the same if they sold their assets tomorrow, as is their option.  What happens if you're injured and can't work?  What happens if you wish to start a family and provide for a wife and child?  How is your 1-2 years cash looking now?  And good thing you like your job – you would want to, given you have to keep working at it (or one similar) for the rest of your natural life, to survive.  Freedom, I think not.

On the idea of 'the bank owns your house' …

Yes legally they do, but you get to use it, and you profit from it's appreciation.  Sounds like a pretty good deal to me.  You don't need to own and asset to benefit from it, merely control it.  Same goes for other items – cars, TVs etc… I would suggest most of the satisfaction is in the USE not the OWNING.  If I was driving around in nice car I think I would prefer to know that it was leased, and my capital was invested somewhere else with a better prospect for growth.  Yeah, the finance company technically owns the car – and good thing too, they're usually bad investments…

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June 20, 2007 - 4:30 am

Heh, good to see this post again, a little trip down memory lane from last year!

F –
 
Every post I see from you just makes me more hungry to know, what strategy do you advocate to acheive financial freedom, and how is it going?

In response to your Max & Penelope story, here's one of moosehead's.  Oops used his real name… doh.

2003
Age 23
Income 50k pa
IP purchased $187 000 rented at $190 pw

2007
Income 72k
IP sold $263 000, was renting for $250pw

Price growth roughly 10% compound pa, rental growth similar

Plan to buy two IPs with sale proceeds at highest LVR I can get on IO terms…

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June 19, 2007 - 11:15 pm

Thanks for the replies guys, looks like I need to shop around a bit.

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June 19, 2007 - 1:37 am

I think it's more like

(to the vendor) "I have 80 bucks, will you loan me the other 20?  I'll pay the 20 back to you over x years at x.x interest rate, deal?"

The main problem with this strategy is that it only works with vendors who aren't under pressure to sell.  If they were, they most likely need the money soon, and won't be interested in vendor financing.  It's pretty hard to get a vendor to agree to something like this if there's other buyers offering the asking price on standard terms.  So, you either have to find a property that no one else is interested in (which there's probably a good reason for) or offer an inflated price.

If you can make it work good luck to you, personally I would rather have my finance ready to go so that when I find a good property, I can make an unconditional offer very quickly and get a good price.  To each his own.

Furthermore if you really don't even have the money to put down 5% and purchase costs, is it wise to take on a few hundred thousand dollars of debt that requires servicing?  You would want it be a pretty special deal to take on that risk if you ask me….

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June 19, 2007 - 12:43 am

My advice would be – don’t read one book on property and adopt it as your bible. Positive cashflow is only one way to invest is property. After I read Steve’s book I was sold on the idea, but after doing some more research and reading, I believe investing for capital growth is where the real money is.

Check out Michael Yardney’s first book or more recently Peter Spann, good reads that will test your faith in the positive cashflow dogma…

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June 18, 2007 - 5:28 am

This is something I have wondered about myself also.  All well and good to say that you can keep buying properties and funding the shortfall with increasing equity, but what sort of loans are we talking here?  From my limited experience with banks, even with a high salary, they won't lend you much more than 600-700k total because of serviceability.  So if you are a talking about ga portfolio of property in the millions I must assume that apart from the first couple of loans, most of them are asset lends (eg no docs) with 30% deposit roughly.  Can anyone confirm/deny this?

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June 18, 2007 - 4:44 am

Great thread.

This is something I think about just about every other day… and the main reason I am into property!

A few days a week, I would get up at a reasonable hour and head over to my office and review my investments, look for new deals, basically keep my affairs in order.  It would be a small place, just with a assistant to take calls and do admin and maybe a couple of junior people I'd be mentoring.  I've always thought that I would like to have a place like this to do business so I can keep my home free of it and relax when I am there. 

The other days of the week it would look like handy andy's idea.  Sleep in, nice big breaky, a bit of exercise.The rest would be for catching up with friends, shopping, and indulging in whatever pursuit has my interest at the time (they come and go )

But the main point is… I would get to chose.  Not wake up on Monday morning and realise that although I don't want to go to work and would much rather do something else… I have to go and what's more do it 4 more times until the next weekend rolls around!

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June 18, 2007 - 12:57 am

Thanks for the responses.

I suppose it would be a lot simpler if I just wait to settle!

:impatient:

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June 18, 2007 - 12:35 am

Some interesting discussion here.

If I may I would like to throw my hat into the ring.

A couple of people have said that they don't think house prices will double within the next 7-10 years, as has been the trend over the last 25 years or so.  The argument given is that affordability will prevent prices from growing any further.

I agree that affordability is an important issue affecting house prices, but in reality it is only one among many forces driving the market.  On the other side, driving prices upwards, we have  stable economy, and growing population.  Most people want to live near a major city, where land is scarce and prices are already high.  Unless this situation changes considerably prices will continue to grow as they have in the past.  Prices do seem high now but I'm sure back in the 80' and 90's there were times when, without foresight, they seemed high then too.

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May 3, 2006 - 12:12 am

Hey Bruham,

Sorry if I came off a little strong, I guess I was venting a bit of transferred frustration built up from my encounters with the naysayers I have encountered since becoming a property investor

Didn’t realise you were only against borrowing against your own home. Not something I can really comment as I’m a renter (employer pays healthy subsidy).

Suprised to hear you borrow for your wants? Do you mean, personal loans etc for toys? More sacrilige!! (kidding)

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April 28, 2006 - 3:44 am

Well thanks for economics lesson F but I do appreciate the cyclic nature of economies and the somewhat inevitable process of growth & contraction. But to go as far to say that all debt is bad and borrowing against property is stupid, is where I disagree.

Edit (in reply to your edit…)
With regards ownership. I’m no lawyer and have no intention searching for a reference that interprets mortgage law differently (and I’m quietely confident I could find a lawyer that would, given aruing is what they do right? ) I agree the bank has a legal right to repossess or dispose of a property it has mortgage over, but only if the borrower defaults on the loan contract, or certain other conditions are met. That, to me, does not define ownership. It is still your name on the title, and you are free to use it as you decide. And, most importantly, you are free to use it as security with another lender, to leverage your assets more effectively and hopefully, create wealth faster!

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April 28, 2006 - 1:52 am

I have always believed that there is no such thing as GOOD DEBT.
All debt is bad. Yes you can work a rort on your tax return.

But over all, you would be better off collecting full rent from your rentals,paying no bank interest (Oh GOD! how wonderful). Then paying some taxation.

At least with our taxes they might do some one some good. Or build new infrastuctures for the good of our country.

As for being over-stretched financially, that is ALL those investors who stupidly ?? use their home as equity to fund more property
purchases.
These investors don’t (or do) realise that they’ve just given their homes to the banks.
They now own absolutely nothing !!!!!!!!

bruham.

I’m gobsmacked. Are you for real or is this a trolling attempt? It’s as if a right to lifer is posting on a pro choice forum.

All debt is bad? People that borrow against their homes are stupid? It’s better to pay more tax? When a bank has a mortgage over your property you don’t own it?

I considered arguing against some of these proposterous statements and you know what, there’s no point because I don’t think you would be convinced.

But I will say, in my humble opinion sir, you are wrong. And I challenge you to find a single (self made) wealthy person to agree with you.

And to comment on the general feeling of this thread – I’m amazed to see posts that read as if the author is hoping for a recession, to teach all the bad investors a lesson. I am in my 20’s but that is old enough to have been through a recession and in case I have got it wrong, everybody, not just investors suffer. Jobs are lost, lives are ruined and it is hard for anyone to make an honest buck. I sincerely hope we never have another recession.

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April 21, 2006 - 7:51 am

I would advise against using cash to purchase the property if you are doing this for wealth creation.

Why? Real estate as an investment vehicle by itself is inferior to other vehicles (etc shares) over the long term. The only thing that makes it superior is the amount of leverage you can get on an RE investment.

If had 165k sitting around I would either use that to buy the most amount of properties I could, subject to getting finance OR gear into shares/manage funds albeit at a lower gearing ratio.

Just my 2c

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April 7, 2006 - 7:57 am

shake the disease – I wonder if your opinions are backed by your own research or if you are just joining in with the crowd who bash melbourne CBD investing?

My opinion is that it COULD be a VERY GOOD investment. Reasons being (these are my opinions only of course):

1. The demand is there. Look at the forecast building starts VS underlying demand forecast by the major economic analysts. There is already a housing shortage in Melb and it is expected to deepen over the next 2-3 years. Sure there has been alot of apartment in/near the CBD but from what I have seen it is being absorbed. It has suffered along with the rest of the Melb market.

2. There’s plenty of scarcity! I don’t understand how you came to the conlusion there isn’t… CBD land is the definition of scarcity!

3. Collateral value – provided you choose a quality apartment in a smaller building it would be no better/worse than other RE investments.

4. Income – probably about on average with what you can (and should) expect from RE investing.

So coral – there’s another view for you

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March 31, 2006 - 4:45 am

I’ve also just read Michael Yardney’s book, and found it excellent. He presents an alternative to Steve’s +CF strategy which anyone trying to find +CF IPs should read. Michael also goes into the economics of the property cycle which I found very enlightening.

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March 28, 2006 - 10:29 pm

Hi all… my first post after reading both steve’s books and michael’s in the last 3 weeks

Can anyone give a run down on the available off the shelf develoment calculators… features, cost etc?