All Topics / General Property / Property Investing Just as risky as stock market

Viewing 20 posts - 21 through 40 (of 58 total)
  • Profile photo of SweetSweet
    Member
    @sweet
    Join Date: 2006
    Post Count: 63

    so with all this talk about shares etc is there a site that is as great as this one that has forums about share investing? There must be a few

    Peach.

    Profile photo of L.A AussieL.A Aussie
    Member
    @l.a-aussie
    Join Date: 2006
    Post Count: 1,488
    Tysonboss1 wrote:

    G'day Marc,

    Yes in a down turn your property would still be worth something but your investment wont, The piont I was trying to get at is that when you invest in property,… say you use $20,000 of your own money or equity for a $200,000 house ,… after two years of neg cash flow, stamp duty on purchase if your property is still only worth $200,000, your investment of the $20,000 deposit may have been eroded to nothing, You asked about investment risk, now you're talking about investment return. There is only bad return if you sell. The investment still has value and will never be worth nothing. If I purchase a property with the right criteria, it is never necessary to sell it. With a share, you can do all the due diligence in the world, purchase at the right time, the management seems solid etc, and the business can still go bankrupt overnight. I realise that this is mostly unlikely, but it can happen and has/does. 

    For example I found a house that I was looking at buying a few months ago, The person bought it in 2003 for $212,000,… for them to break even on the deal they would mave to sell it for over $250,000 to make back the interest they have paid, stamp duty,  maintance, neg cash flow  during that time  and the 3% sales commission, and the amount that they have to sell it at to break even is growing every day as they incurr cash flow losses, this property is only valued at $230,000 at the most so their investment of the $30,000 deposit has decreased by over $20,000 thats a negative 66% return. Why are they selling? They bought at the top of the boom, and are selling in a supposed slump, and they bought a neg geared property – operator error. Having said that, I bought 3 properties in 2003-04 and all have gone up in value by an avergae of 62%, based on current selling prices of similar properties in the respective areas.  Not bragging; just staing a fact. The good news is that in spite of making a bad investment decision, they still have an investment; the properties are still worth something; you're talking about returns again.

    L.A you keep mentioning that you will always be able to sell your property for somthing so you will never lose money,. but that is untrue you have to work out your profit and loss on the total amount returned minus the total amount you put in, Ok; since 2003 total input of cash – nil. Pos cashflow and 62% cap growth. R.O.I; infinity. All houses burn down tonight (god forbid) rebuild with insurance. You keep mentioning neg gearing and loss. I haven't had loss, but that's not the point – they won't disappear to zero.

    Capital gains are not happening at a steady rate they come and go, so your property investment could have been sold for $200k last week, this week $210K next month $195K, you won't know offcoarse because your property values aren't listed in the paper, Again; returns, and selling to realise the loss/profit. I only ever talked about the risk of the investment disappearing to zero. Also, I never sell; just use equity to keep buying.

    you also said that you don't buy unless all your capital growth factors are covered, Impossible you can not garantee that a property will have capital growth from day one, If you make an investment and their is no capital growth for 12 months then you have made a loss, simply as that, you might say that you havn't sold it so you havn't lost anything but that is flawed thinking, you have incurred a loss year, just as I explained share investors accept the risk of 1 loss year in 5.
    Tyson;
    we are getting off the track of what my post was about. My post was about the risk of property reducing to zero in the event of a crash, as shares can. This has never happened in property (maybe areas like Pompeii, New Orleans (Katrina), San Francisco (earthquake of '94 – but don't buy there if there is risk of flood etc)).
    I did say that property can lose value; but that's all you lose – some value; not all value. A property can lose value, but if it is pos cashflowed from day one, and you never sell, you are still receiving a return on your investment.
    I know that there are cycles of cap growth, but the loss if you sell after 1 year of no growth (minus holding and selling/buying costs) only occurs if you sell. I can't guarantee cap growth, but if I do some extensive research on the area, I can all but eliminate the likelihood of none occurring.
    My whole point, which was to answer the whole risk question, is the likelihood of the worst property or share market crash in the history of the universe, waking up with nothing, or an investment that is still standing.

    there

    Profile photo of L.A AussieL.A Aussie
    Member
    @l.a-aussie
    Join Date: 2006
    Post Count: 1,488
    Mortgage Hunter wrote:
    You know it wasn't aimed at you specifically.  Was more a knee jerk reaction I have to everyone who believes shares are inherently dangerous.  An atitude that is usually fostered by a well meaning parent who knew someone who speculated once out of greed and got burnt.  It is an attitude that gets reinforced daily in forums like this.  I would never say that shares are better than property or vice versa.  Only that they are a perfectly valid avenue in themselves.  If anyone believes they are "risky" and akin to "gambling" then they should reasses where that belief comes from and be honest with themselves. 

    When I fist started borrowing to buy shares my peers thought I was insane.  They knew what borrowing was for – it was for buying cars and going on holidays.  Even whitegoods etc.  But not to blow on a share that might go down in value.   What if I lost money they asked?

    I must admit that when I first read your comment that I fail to help people I thought it lacked a bit of recognition to the effort I put into this forum and I felt bad.  I reckon I give advice within my area of expertise and qualifications quite a bit.  Possibly more so by email.  Helps a disabled fellow like myself to feel useful and passes the time  

    But I reckon you weren't referring to that stuff I do – rather that I can be relied upon to comment whenever anyone trots out the old chestnut that shares are risky.   I get your point that I don't offer any examples so here is one.

    In 1994 I bought my first shares in the Woolworths float.  I bought $2000 worth which was a lot of money to me then and I don't mind admitting it caused some marital friction.  Now a decent house could have been had in Melbourne (where I lived at the time) for $100K.  Had I the guts to buy $100K worth of Woolworths now where would I be?

    Would now be worth $1.1M.  it would be paying me a annual dividend worth $27K pa.  This dividend would be fully franked as the company has paid 30% tax on it already.  So I get that tax credit.  Compared to my initial price I am earning 27% on my outlay with tax credits and that grows every year!

    If I had elected to join a Dividend Reinvestment Program (DRP) where I can take additional shares instead of cash then it would be worth quite a multiple of that.  I don't know how to calculate it.  I am guessing as least three times as much?  Quite likely more.

    What has it cost me?  well an interest bill of $8550 pa assuming I had never paid any principal.

    Not a single cent extra.  No land rates, insurances, repairs, land tax, nothing.  I can read an annual report if I choose but that is the full extent of it.

    Now I guess you are thinking that I chose an example to prove my point.  Do the sums with any of the banks.  CBA would have been a good float to get in on…  CSL – wow that was something special.  Doesn't even need to be a float.  I bought NAB for $10K and sold a few days later for $14K.  A 40% profit and I thought myself pretty clever but do you think I wish I had kept them today?  Not just the price but the growing dividend yield!  In fact I suggest that a growing dividend is of as much importanceto the buy and hold investor as capital growth.

    I am sorry I cannot make a suggestion as to a share that has the potential to do that today.   This is a property forum.  We are not licensed to discuss specific shares etc.  I am not a financial advisor and am neither licensed nor insured to give such advice.  As a Moderator I would delete such a post and you would be right to suspect the motives of anyone who does ramp up a specific share publicly.

    But if you wish to discuss generalised investment strategies I am happy to do so.  Perhaps a better place to do so is another forum?  Here is a thread where I contributed as a fellow investor and I would welcome your input there on any of the threads.  Some of you might even find it as useful a site as this one and I hope I am not breaking any unwritten rules by suggesting another website .

    I hope you understand my position.

    Do I think shares are better than property? 

    Nope.  They complement each other well and with the different boom cycles it allows you considerably more rising market opportunities.

    Good luck to you all.

    Thankyou for that Simon.
    I wasn't actually asking you to suggest a share or shares – just some strategies and mindsets; things like that.
    An example; once you said that you can insure shares against loss; how? As far as I know, there is no actual policy you can buy for this, so does it involve a strategy?

    Profile photo of MasterRELMasterREL
    Member
    @masterrel
    Join Date: 2003
    Post Count: 52

    You can protect shares with options or make extra income through writing options.Theres a lot of different strats.

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    You can protect shares with options or make extra income through writing options.Theres a lot of different strats

    There certainly is. From last recall i think over 20 different protective ways to trade from a simple Call to a Iron Condor.

    It is just finding the strategy you are confortable with.

    Richard Taylor | Australia's leading private lender

    Profile photo of Mortgage HunterMortgage Hunter
    Participant
    @mortgage-hunter
    Join Date: 2003
    Post Count: 3,781

    You can even get capital protected 100% loans to buy shares.  At the end of the period if the shares are worth less you can just give them to the lender and walk away. 

    Profile photo of Tysonboss1Tysonboss1
    Participant
    @tysonboss1
    Join Date: 2007
    Post Count: 306
    L.A Aussie wrote:

    Tyson;
    we are getting off the track of what my post was about. My post was about the risk of property reducing to zero in the event of a crash, as shares can.

    The point I am trying to get at marc is that your investment can reduce to zero and below zero, If you invest 10% deposit and your property drops in value by 10% then your investment of $20,000 is now worth nothing you may still be able to sell that property for $180,000 but you owe $180,000 to the bank, infact your investment has actually droped below zero when you factor in buying and selling costs, holding costs and all that jazz,

    Another thing you said was that losses in property were often operater error, and you don't think losses in the share market aren't,…. offcoarse they are.

    Trust me I am not Bagging property investing, I love investing in property, I am just trying to point out alot of the flaws in people's thinking, If you can Take the time to learn about investing in the stock market your investment portfoilio growth will accelerate beyond belief,….

    shares are the missing link that so many people focused on property miss when structuring there investments, shares and property go hand in hand, An astute investor using both classes will always out perform, Don't be afaid of risk it is not a bad thing,…. when people talk of risk it is not an all or nothing game like black jack.

    Profile photo of HandyAndy888HandyAndy888
    Member
    @handyandy888
    Join Date: 2005
    Post Count: 160

    Meh, you're all wrong…

    Profile photo of HandyAndy888HandyAndy888
    Member
    @handyandy888
    Join Date: 2005
    Post Count: 160
    Profile photo of HandyAndy888HandyAndy888
    Member
    @handyandy888
    Join Date: 2005
    Post Count: 160

    This thread is interesting..why we are even talking about shares is beyond me, whats this forum called again? ANYWAY, I have these sorts of discussions with lots of people and all I can say, from MY OPINION, is that the psychology behind owning brick and mortar, or fibro and nails, or weatherboard and stumps…is that is is "there in front of you"….yes, people can wank off on how much they made on their IPs or how much they make in the sahremarket, but the important thing to consider is that all these people have began a journey to increase their wealth, hopefully though some risk management process, with either shares or IP…they are not like the majority, slaves to  a job, dumb and uneducated (no offense) when it comes to making extra money. So stop being bad little boys and girls, kiss and make up and realise that a LOT of people have become wealthy from IPs and a LOT of people have become wealthy through shares…now stop fighting or I'm going to have to give a detention to someone….

    Profile photo of elkamelkam
    Member
    @elkam
    Join Date: 2006
    Post Count: 722
    Mortgage Hunter wrote:
    You can even get capital protected 100% loans to buy shares.  At the end of the period if the shares are worth less you can just give them to the lender and walk away. 

    I just can't help myself Simon. I have to ask.

    What sort of interest rate are we talking about for such a loan.

    Just curious at this point.

    Elka

    Profile photo of justin71justin71
    Member
    @justin71
    Join Date: 2007
    Post Count: 26
    Handy Andy wrote:
    You're wrong…sorry.

    I like your site, good read!  I like how u say the biggest risk is doing nothing, how true and thats why most people dont do anything to create wealth.

    Profile photo of L.A AussieL.A Aussie
    Member
    @l.a-aussie
    Join Date: 2006
    Post Count: 1,488
    MasterREL wrote:

    You can protect shares with options or make extra income through writing options.Theres a lot of different strats.

     

    O.K, now we're getting somewhere; how about some detail on a few of them.
    I get plenty of detail about what a fool I am for mentioning yes, there is risk when someone asks, but it seems no-one want s to back up the pot-shot with some constructive advice about how to avoid that risk. 

    Profile photo of L.A AussieL.A Aussie
    Member
    @l.a-aussie
    Join Date: 2006
    Post Count: 1,488
    Qlds007 wrote:
    You can protect shares with options or make extra income through writing options.Theres a lot of different strats

    There certainly is. From last recall i think over 20 different protective ways to trade from a simple Call to a Iron Condor.

    It is just finding the strategy you are confortable with.

    Another breakthrough! now we have some strategies, all we need are some details.

    Profile photo of L.A AussieL.A Aussie
    Member
    @l.a-aussie
    Join Date: 2006
    Post Count: 1,488
    elkam wrote:
    Mortgage Hunter wrote:
    You can even get capital protected 100% loans to buy shares.  At the end of the period if the shares are worth less you can just give them to the lender and walk away. 

    I just can't help myself Simon. I have to ask.

    What sort of interest rate are we talking about for such a loan.

    Just curious at this point.

    Elka

    Yeah, more detail on the good stuff; less detail on calling people fools.

    Profile photo of L.A AussieL.A Aussie
    Member
    @l.a-aussie
    Join Date: 2006
    Post Count: 1,488
    crashy wrote:
    "If you a buy a standard, well positioned, good quality average family house in an average established suburb, make sure it is properly insured, using a standard P&I, fixed rate or I.O loan, you will never wake up in the morning and find out it is worth zero." unless the government has plans for a freeway through your back yard. if you buy a good quality share you will never wake up in the morning and find out it is worth zero. Again, I use the HIH's the Enrons etc. There have been a gazillion more specualtive and blue chip shares and companies that have diasppeared forever. I used those two because they are some of the more recent and spectacular examples.
    My best friend lost $150k in shares 3 years ago. Totally gone. Admittedly, he was the operator error factor to a degree, but if he had put $75k into the share, and $75k into the property, he would still have the property at least. Ask him about risk.

    "These sorts of houses, if bought at fair market value and held for the immediate to long term, always go up in value. Of course; they may not go up value very quickly, but they always have and all ways will."
    and shares dont? That's not the issue; stick to the topic. The topic is RISK. Besides; the key word in my sentence is ALWAYS. Shares do  not always go up in value. If they did, then no-one would need to have a portfolio of several different shares to minimise the risk.

    "There are many horror stories of people who have lost money in property, but this is usually bad decisions by the owner – they buy too high, over-extend themselves financially, maybe have to sell for some unexpected reason and now they have to sell at a loss."
    gee, people who buy shares never do any of that right? Of course they do, but they can still do all thr right things and lose the lot. Obviously it's a slim chance, but it has happened and can happen again. 

    "With shares, there is no scope to insure against loss, you can't add value, you can't increase the dividends"
    all false statements. ok, if they're false, then explain to me and all the other less knowlegable readers how to do it. Being a smart-arse and simply flipping us off doesn't help anyone. Be constructive; remember, people read this forum to get help and advice. I give advice and help based on my experience, albeit limited, and don't attack people with less knowledge when they say something out of ignorance. You should try do to the same and then more people might put some weight on your statements.

    "there is very little you can do to protect your share from disappearing to zero overnight. I know there are many who will say "oh, but that is unlikely to happen".
    Well, the reality is it could happen, and has happened. Think Emron, WorldCom etc. These were supposedly "blue chip" companies."
    wow. you found 2 companies that went bust out of the 70 million companies on the planet. firstly, they didnt go bust overnight. second, its ENRON, not emron. a little knowledge is dangerous. thirdly, ok, sometimes companies go bust. You just contradicted your own argument. I haven't seen a property go bust in my lifetime. I've seen people lose money on them, but the houses are still there, going up steadily.

    But, how many houses triple in value overnight? this often happens with shares and easily offsets your argument. We all know they can. That's one of the reasons why there are 10 times as many people in the stock market as there are in property. It's also more liquid than property, no tenant or maintenance dramas, etc. There is no doubt; shares have a lot of attractive features. But, again, the topic is the RISK between shares and property.

    "If you have bought shares directly, and the market tanks over-night, you may not have a buyer to save you before the share reaches zero value." what rubbish. ok, so if it's rubbish; explain why. Dismissing my comment with a flippant statement like that helps no-one. My best friend would like to know the answers I'm sure.

    " With property, no matter what the market is like, you can still sell it for something."
    really? So all the houses listed 3-4 months with no offers are a figment of our imaginations? they are simply over-priced for the current market. They still have value, just not what the Vendor thinks and the agents tells them it's worth. How often have you sat watching a house waiting for the price to drop? in the end, you still paid some money for it. The Vendor still found a buyer. The property didn't go bankrupt un-announced and disappear forever.

    Now just because I have blown LA's argument to bits doesnt mean I think shares are better. I think they have the same risk when ALL factors are considered by EDUCATED investors who walk the walk instead of regurgitating the talk.

    Crashy, I like our debates, but please make them constructive with valid reasons to back up your comments. Not for my benefit; for everyone else who are reading the posts. They, as I, would like to learn from your knowledge in these areas.

    Profile photo of crashycrashy
    Participant
    @crashy
    Join Date: 2003
    Post Count: 736

    the problem here L.A is that you think your comments are constructive. They arent. You make sweeping statements that are just not true, not only that, but you cannot back up your own comments with fact yet expect everyone else to.

    I would define a "smart-arse" as someone who is opinionated and gives the impression they are knowledgeable but in fact is inexperienced and uneducated on the subject. They also tend to criticize things they dont understand. Now which of us qualifies?

    Your arguments are filled with bias. The only valid response to bias is to expose it as such. Rebuttle is secondary. Its almost impossible to fully explain everything you queried to someone with no equities knowledge. In fact, it took me 200 pages in a course to do it. This is a property forum remember.

    Profile photo of pjapd43pjapd43
    Member
    @pjapd43
    Join Date: 2007
    Post Count: 4

    This is better than Jerry Springer

    Profile photo of HandyAndy888HandyAndy888
    Member
    @handyandy888
    Join Date: 2005
    Post Count: 160
    pjapd43 wrote:

    This is better than Jerry Springer

    lol..yeah..bring out the bouncers and the whipped cream!!!

    Profile photo of HandyAndy888HandyAndy888
    Member
    @handyandy888
    Join Date: 2005
    Post Count: 160
    justin71 wrote:
    Handy Andy wrote:
    You're wrong…sorry.

    I like your site, good read! I like how u say the biggest risk is doing nothing, how true and thats why most people dont do anything to create wealth.

    Thanks for the constructive feedback…always looking to write more, so if you find something really interesting that I can add, please email me…

    I just wanted to say that perhaps we all need to go and have a small coffee break from this thread, get our thoughts together, hire a boxing ring and then go at it till only one man is standing…seems fair to me…

    I have my money on LA…..

Viewing 20 posts - 21 through 40 (of 58 total)

You must be logged in to reply to this topic. If you don't have an account, you can register here.