Forum Replies Created
Catts
I think you missed my point about share markets rising to new highs. The point is the Japanese share market hasn’t remotely approached the high it set in 1989 – 27 years ago! Our market hasn’t remotely approached the high set in 2007 – 9 years ago. So when people make generalizations, you have to take them with a grain of salt. It’s often so far away from the truth.
As far as websites for equities, there are so many it just requires a Google search. I use CommSec quite a bit, for all things equity related – buying and selling, researching company financials and so on.
Wes.
Thanks for replies. I guess my post is a little bit cynical, but sometimes I can’t help it. I am more into shares than property, but having read and observed a lot about both investments, I do get a bit sick of generalizations people make, e.g. you can’t go wrong with property; it’s the land where the value is (may be the case if you’ve got a prime block in a city location with a derelict old house on it); the share market has never failed to reach a new high (check Japan’s market since 1989 and in Australia we’ve been waiting 8 years or so and we’re still a long way from the peak). So, I just threw this theoretical case out there to get some thoughts on it.
Sometimes I tend to think the mining lifestyle is glamorised a bit with all the media coverage. Let me give you a bit more perspective on a FIFO lifestyle, from someone who is living it.
There is nothing glamorous about a FIFO lifestyle, especially in the Pilbara of WA. The only glamor is in your pay packet. That's it.
It is stinking hot in the summer (40°C+), cold (inland, not the coast) in the winter on night shift, flies are rampant in the summer, dust bad enough to have to wear safety glasses all the time and usually irritating dust masks as well. Everything is so dirty in comparison to the city. There are different rosters, but it's mostly 14 x 12 hour days. Do your sums and you can see we average a 56 hour week. You don't get a break in the middle of the roster, except for a minibreak switching from day to night shift. You live in one room for those two weeks and you can't whip down to Maccas, go to the cinema, go shopping or attend a concert. The general conversation is crude with rampant swearing everyday speech. I'm single, but apparently FIFO and marriage is a difficult mix. If you are married and can see yourself living away from your partner for two thirds of your life, then it could work.
If you can stomach those conditions, then you are a candidate for FIFO.
Wes.
Jamie M wrote:Hi WesI'm a little lost with your post but if you're 100% sure your PPOR will never become an IP, then pay down the principle on your PPOR and borrow against it when you're ready to invest.
Cheers
Jamie
OK Jamie, let me have another go and in reference to Cameron's reply also…
Currently I have a 15 year P&I loan for $330,000 – at least I did when I started it last Nov. Some principal has obviously been paid down.
1. Right now I have no idea whether I will be there for more than 15 years or not. My idea after reading threads in this post was to dump $330,000 into my offset account to effectively give me ownership and be paying no interest, and to do this as quickly as possible. Unless I miss my guess, this then gives me options: if I stay there and believe at a later date that I won't be moving, then I can shut the loan out with the funds in my offset account, or if I decide to move, it becomes a rental that is tax effective.
2. In the other scenario, if I complete my commitment and pay back P&I, I will own my PPOR, but I have NO options should I decide to move out. I will have "done my dough". I then have to start the process all over again in taking up another PPOR, do I not?
It was stated in one of the earlier posts the bank wouldn't require me to close out the loan should I completely offset the principal, so that's what I'm working on. Surely scenario 1. gives me the best options. If not, what have I overlooked? Thanks.
Wes.
Jamie (or anyone who wants to contribute)
I want to revisit this topic…
I admit I don't know enough about the ins and outs of property, but have been thinking about all the contributions to my post.
Let's say I have no inkling whatsoever that my PPOR may one day become a rental property. It would seem the best solution still would be to extinguish interest on the loan by completely offsetting the principal, i.e. I take out a loan of $300,000, say, and contribute $300,000 to my offset account as quick as I can. Therefore, I am now paying no interest. I effectively own the property, but have the flexibility to draw that money out as indicated previously to put into a PPOR (should I decide to move). That would save me paying down non-deductible debt again.
So is my strategy sound? Convert P&I to an interest only loan, and completely offset the principal on my PPOR using the offset account as quickly as possible? To clarify a bit further, I have no notion at this point that I will ever move from this property and I have the ability to offset the principal quite quickly – in less than 3 years, maybe even quicker.
Maybe I am stating the bleeding obvious to experienced property investors, but I just want to be very clear before I change anything. Thanks for any advice you can contribute.
Wes.
Thanks Jamie, for the tip. This has been an eye opener!
I want to present a further scenario on the article you wrote for API:
Say I have bought my PPOR for $450k with a $330k loan. After depositing money into my offset account, it eventually reaches a balance of $330k. Obviously, then I am paying no interest. On the other hand I'm not getting any interest on a wad of $330k, which isn't ideal. If you've effectively extinguished the loan, will the loan provider expect you to close it out?
I only have a vague idea that my PPOR may become a rental in the future – probably at least 15 – 20 years away. How do I weigh up the best way to go?
Wes.
Whoops! I was talking about PPOR, so I won't be paying interest only. I know there are many strategies, but in a world that is drowning in debt, getting rid of it is probably the best option. When growth appears unlikely, gearing helps no-one, whether it be property or the share market.
Just remember with options, like any other investment, there's no free ride and it's not the keys to the castle.
I have been involved in writing covered calls and puts. I believe it is a useful strategy under the right conditions, but there is always a downside to consider. It is much better than sitting and waiting for dividends. One premium alone can equal or better a dividend, and you can write quite a few in a year. The theory goes that you can do it every month. Unlikely, because the conditions aren't always optimum for your strategy.
Many educators talk about "secrets". There aren't any. In a nutshell, you simply make a judgement on whether you believe a share will stay below or above a strike price before expiry. If you are comfortable with that, you write your option or give it a miss. If your strategy is to be exercised, then you write your option anyway.
Trev
The villa in Centenary Heights is new.
I am looking to make a choice on living in Perth or Toowoomba, so looking for an owner occupier. Toowoomba is my home area, but Perth puts me closer to work. The dilemma is Perth is so expensive, but then again every capital city is. It's not a matter of what I can afford. It's about drawing a line in the sand and say I'm not paying more than that. In that respect, Toowoomba offers better prospects.
Printing more money; taking on more debt…where does it end? We have had some disastrous failures in the past few years. One suspects it is inevitable we are in for the mother of all crises sometime in the future. It has to happen, simply because global economies will not take their medicine.
To a "simpleton" like me, growth in money supply can only occur with equivalent growth in products and services. Is it any more complicated than that? Globally this equation has failed because the growth in money has far exceeded growth in products and services. Why do governments let this happen? Because they have rocks in their heads! No-one wants to see growth disappear, so governments continually try to prop it up. Unfortunately, that is ignoring the reality of the situation. Shrinking economies should be the reality. Tell me I'm wrong.
If you or I destroy ourselves with debt, no-one comes along and says, "No worries, I'm going to bail you out – here's $1 million." Why not? Countries get away with it. What am I not seeing?
Don't totally agree with you, Steve.
Economies (countries) seem to play by a different set of rules to individuals. They shouldn't, but they do. An individual can have the rug pulled out from underneath them quickly and be bankrupted. Not countries, oh no. We've just had it with Greece. They should have been cut loose for their useless mismanagement of money. But no, others came to the rescue, "You want bailing out? No problem, here's $160 billion to do as you wish. We don't have it either, but so what, we'll just pluck it out of thin air, rack up more debt ourselves. Who cares?" Brilliant!
I really don't get it. Many countries are in debt. I guess the only thing that separates them from Greece is they magically find a way to service it. Take the USA. Are they any different to Greece in their mismanagement of money? The GFC happened because useless managers charged with managing finances absolutely failed in that duty. Until the world stops attempting to extract more from a system than it is capable of providing, we will be in the crap. The growth in products and services simply does not match the value we want to place on them. That balance must be restored. How that is achieved and how long it will take is the $64 trillion question.
Look at it this way. If one has too much debt, you are going nowhere until you suck it up and take your medicine! What that means is forget growth because it can't happen when you are in dire straits. That's pumping a dead horse. No, you need to reduce debt to a manageable level until the balance is restored. Only then can you look towards growing again at a sustainable rate. Anything else and you're kidding yourself. Think of the word "greed". Sure, we all want more, but the world is in no state to be getting it.
I remember someone once saying money is an illusion. At the time I thought that was a pretty vague and meaningless concept. I think I now know what it means. You only have to see how amazing amounts of money are plucked from nowhere. It's ridiculous and should be stopped dead in its tracks. Stop using alchemy! It's illogical and completely unethical.
…and to finish with a question that I hope someone can answer. What is a bailout? Now, no vague, airy fairy explanations please. Explain to me the nuts and bolts of how a bailout works. Where does the money come from, i.e. do the countries providing the money actually have it? Does it get paid back? I'm all ears and look forward to someone with real knowledge of how this works. Thanks.
Erik
I'm not prepared to say whether it is right or wrong. However, one thing I'd say is never get too comfy thinking the Australian property market is immune from downturns, and even the unexpected, i.e. "that could never happen here" mentality. We've seen this sort of wayward thinking in the share market, when we least expect a crash.
Property values aren't a one-way street. Anything that gets to a level driven by speculation where the buyers dry up is always a disaster waiting to happen.
This has been going on for years and will continue into the future because useless regulators like ASIC and Fair Trading are absolutely and completely clueless in doing anything to stop it. Scammers register with ASIC because it "legitimises" their name in the eyes of the unsuspecting public. It is such a limp process and anyone can do it. It's called a $2 company.
When the proverbial hits the fan, i.e. complaints from customers, they disappear and go to ground until the dust settles. No-one ever finds them. Then they rise out of the ashes like the phoenix and start all over again, and milk the next unsuspecting victims. Scammers are very clever and know they need their escape plan in order.
If you've got no conscience, there couldn't be a better business. If you're free of ethics, this is the business for you. Unfortunately, blood suckers like this exist in society. With my upbringing it is something that I couldn't believe for a long time, but now I know it is simply part of life.
W J Hooker
Better listen to Bootlace because he knows his "onions". You don't understand probability if you think you can win using your system. There have been documented cases of card counters winning at blackjack because, to my knowledge, it's the only casino game you can put the odds in your favour. But my guess is you still have to be quite skilled at it to win consistently, i.e. you don't read a book and think you are a champion card counter. Added to that, card counters are the exception, not the rule. Casinos also have the right to eject people if they are seen to be using skill, believe it or not, because casino games are supposed to be games of chance (and they are except for blackjack).
As I stated previously, if a person could win consistently they wouldn't give it up. Why would you? Think. There's all the money in the world on tap, and who doesn't want more of it?
Tony
I don't have a huge opinion on this, but will just make one point. Don't get too cosy thinking property is immune to big falls like the share market. It may not fall to that degree. But if circumstances come together and there is a panic (and that's the key) you never know what might happen.
There is a tendency to take comfort in the points you make, trying to convince yourself everything stacks up and nothing can go wrong. This is the sort of thinking that pervaded the mining industry. And it all turned to s..t. Some sources believe the Aust property market is highly overvalued. Can we say they are wrong without a shadow of a doubt?
Nothing is guaranteed, and you should keep in mind the outcome you least expect is a possibility.
That's right, Gazza. Logic says why would you sell a fool proof money-making system? Just use it and make all the money you want. The reasoning is usually something along the lines that they just want to share their success.
These systems are for gamblers and should be marketed as such (if they insist on selling them). You cannot make a living out of them. Life is not like that, so wake up if you're still tempted to waste your money.
WJ Hooker
Your argument is flawed. It won't work. If you believe it, then give up your day job and work your system. Why would you work if all the money you need is on tap betting on the horses? Nope. You love your work and don't want to give it up. Fine, but you still have all that money on tap to build your property and/or share portfolio.
Anyone who reckons they win at the casino, horse racing or whatever, just tell them to give up work and do it full time. Like I said above, logic says you don't need any other income because the pool of money available is huge, and they reckon they can tap it any time they want. Absolute crap!
If you don't believe what I'm saying, you are probably too young to know (no life experience), or a naive fool. If you still want to play it, be my guest, but know right now you won't win. And that's not being negative, it's reality. Your choice.
To sum up, these sorts of shemes are out and out scams.
If you part with thousands of dollars, you'll end up with a useless piece of software, which they tell you is sophisticated. What a joke! They're all the same – con you into thinking they've got a secret to making money that no-one else knows; tell you to hurry because there are only a few licenses left. Maybe even give you a guarantee that isn't worth the paper it's written on.
Don't be sucked into their promises. You'll regret it. And I guarantee that.
Off topic. Please start another thread.
So no-one disagrees with what I said in my original post?
This argument is a load of crap and a very superficial statement. It in no way covers all the interrelated elements of investing. Did you happen to buy the right shares or properties? Did you buy the properties in the right locations? How was your timing? Maybe you got in when the market was near a peak in one of those investment areas.
I personally feel more comfortable with shares, even though I've backed some real #$%#@ dogs at times. I just feel it is my best chance to create long term wealth.
One of the previous comments never ceases to amaze me…the idea that property has the advantage of leverage. You can get huge leverage in the share market, even greater than property for that matter. Check out derivatives. Having said that, it carries huge risks and is only for the very skilled (or lucky).
