Am I nuts??
I have been reading a lot of stuff especially in the mainstream media about how poor the property market is.
And yes it is flat where I am and in most of Oz.However it appears that the market here is still moving upwards at a “mere” 5% per year.
Doesn’t sound like much compared to the 2004 boom here.
However I keep looking at my neutrally geared investments and how they are leveraged.
Lets just say if an investor held $1.1 worth of assetts and owed $600k onn the lot. ($500k equity and neutrally geared)
He would then in theory be gaining 5% of that $1.1m worth each year.
i.e. $$55,000 per annum before tax.To me that is not too bad, considering the market is stumbling.
Or, to put it another way, 11% gain on the $500k investment.
Am I deluding myself on this?
Why are ppl so negative about property at the moment?What is wrong with this? [blink] [glum2]
Giddo
http://www.standrewsplace.com.auKNOWLEDGE IS POWER
Sounds alright to me. and the market shouldn’t be slow forever. What will the figures look like during the next boom.
Terryw
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giddo – you are completely nuts [biggrin] only joking!
that sounds about right and no doubt certain areas will perform better than others
Positive Cashflow NZ Property Deals.Email to receive current deals & Free New Zealand Information Sheet [email protected]Don Nicolussi | Mortgage Broker - Home Loan Warehouse
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Hi Giddo,
And that is why long term investors generally do very well.
Imagine 5%/annum for 4 years and then a period of high growth.
Your high growth comes off a platform of 20% growth compounded and tucked away against your bottom line.
Derek
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The only thing standing between you and mega $$$’s is time!
MikeyAlso, mainstream media is usually based in city centres, therefore they are usually looking at the immediate area surrounding city centres – which as we know has not increased in value (Melb and Syd esp)
I try not to listen to negative feedback otherwise I never have accumulated a successful portfolio…
when my inlaw said “why on earth would you want to buy there – who would live there? and you have never been there and never been in the property?” I just smiled and said nothing
TD
Originally posted by giddo:Am I Nuts – or am I making Money anyway?
Well, perhaps…
At +5% per year, your ‘wealth’ as measured in Australian dollars would be increasing. But it is absolutely possible that your investment is losing value… while its price is rising[blink]
That house can now be traded for more $AU, but paper money does not have a fixed value. Try comparing it to a range of other ‘assets’ and items; oil, gold, silver, beer, iron ore, meat, vegetables, health insurance for just a few examples. You can now trade your house for LESS of each of these than you could have 1 year ago (assuming 5% pa cap gain on house).
Of course in such a scenario, higher gearing works in your favour.
Cheers, F.[cowboy2]
Thanks Foundation,
I have read your very good posts before and I have a lot of respect for your good advice. You are one of the legends of this forum(and there are a few too).
I guess you are right about a lot of commodities gaining in cost quicker than my real estate. (inflation I think it is called)
I sincerely hope I am not in the position of ever having to swap my properties for health insurance or – even meat or vegetables.[biggrin]
At the moment I am trying to resist a yearning for bananas. i believe they will be expensive and higher in value on a % basis than my land and buildings.
The thought of trading my properties for a million dollars worth of beer truly boogles my mind? What brand would I buy? Where would I store it?? Will it’s value keep increasing. Sadly I think beer is like fruit and veg it has an expiry date where re does not.[blink]
The only things I suppose I may have to consider would be swapping it for GOLD , SILVER or IRON ORE. Nah In am too scared of losing it.
On second thought I have decided I will stick with the RE. [evo]Maybe I will just use a bit of the income to buy beer and veges.
Despite the foregoing disrespectful facetiousness, you do have a good point about the dangers of inflation.[goatee]Giddo
http://www.standrewsplace.com.auKNOWLEDGE IS POWER
Good example giddo – thats how i look at real estate.
If you make 5% on $1.1m you are in effect making a return of $55,000 on your $500,000 equity. Thats over 10% in a flat market.
Thats good in my books.
see I knew you weren’t nuts giddo[thumbsup2]
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Don Nicolussi | Mortgage Broker - Home Loan Warehouse
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Email Me | Phone Me"I think of finance as a technology, a way of getting things done." Robert Shiller
With all due respect I’d rather make 50% or more a year than 5 or 11%. With $500,000 I’d control more than $1m….thats why my portfolio is larger than most.
In fact, I’m more interested in cash flow then I am in asset growth because with cash flow I can buy more assets than I can with asset growth. Thats why I’m investing in the US because I can get 10-20% rental return with say no money in…. that gives me an infinte return….not 5 or 10%.
<snip> leave the trawling please Andrew – Derek
Andrew
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