The one thing that is pretty constant across the US is that rents are a much bigger proportion of property values than they are in Australia because the landlord needs to extract a bigger percentage from the tenant in order to have a viable business.
And the only people who can afford to buy a house are those who already own a house and it is a feudal society. Right?
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Financed over 20 years with non-deductible interest no doubt. I don't see how this changes the equation at all. Happy for you to show us a worked example, though.
Sure. Lets say you want to build a tract of 50 houses, and the "infrastructure cost" of getting them "slab ready" is $80,000 per block. * State government sells $4,000,000 of 20Y bonds @ 3% coupon, and delivers 50 blocks to the developer at say $15,000 per block, leaving $3.25M outstanding * A bond levy is collected from each lot owner of $1134 per quarter for 20 years, paying off the bonds.
Investors get a fixed coupon of 3% for 20 years. Assuming the State Government is still AA or above, it supplies a large pool of investment grade paper that pension funds and insurance companies can buy. In a ZIRP world these bonds could be pretty popular. The build cost for new houses drops by $65,000. Lower land costs mean lower financing costs, lower risk. The cost of a new build could drop as much as $90K.
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On the contrary it forces an underclass to go live in trailer parks where they breed like flies.
Not in Asia. Emigration and collapsing birth rates have driven Japanese rents into the ground. Hong Kong is 10-20 years away from the same fate. South Korea is probably 5-10 years away. (South Korea's birth rate is actually lower than Japan, and emigration rate is higher).
“Talk sense to a fool and he calls you foolish.” - Euripides
Cool story bro, but totally without basis in the hard numbers. From what you's expect, you'd expect the US to have a higher home ownership rate than places where interest on mortgages is deductible. In fact there is no discernable relationship. The UK, Australia and New Zealand have higher (albeit similar home ownership rates to the US, yet interest on rentals is deductible. Germany has a much lower rate, and interest is deductible there as well.
Homes in the US affordable? depends where you want to buy. Nobody would call San Francisco, Boston, LA or even most of North Carolina affordable. Detroit city on the other hand is as cheap as chips. It's all over the place.
The one thing that is pretty constant across the US is that rents are a much bigger proportion of property values than they are in Australia because the landlord needs to extract a bigger percentage from the tenant in order to have a viable business.
Financed over 20 years with non-deductible interest no doubt. I don't see how this changes the equation at all. Happy for you to show us a worked example, though.
On the contrary it forces an underclass to go live in trailer parks where they breed like flies.
Well we drove through most of the United States in 2011 and i had a cool app called Truila. It wqs an amazing tool for knowing all property for sale around you, as well as their histor5 of asking prices as they dropped to meet the market.
Property was pretty affordable aw long as you eid not wwnt a capital city... a number of capital cities were not too bad actually. Sure some parts of LA, San fran and boston / NY ci4y were expensive, but there was heaps of cheap property not far from them, or in suburbs out of the city itself. When we went back in 2013 property was still pretty cheap... waterside homes were not all as insanely expensive as here..
Imagree wjth the rental situation... returns were amazingly good.
10% gross yield is the norm in the country where capital gains are low to non-existent and very common indeed in the US where only professional landlords can deduct interest costs from their income. In fact, 10% was quite common in Australian cities before the banking reforms in the 1980s that allowed people to borrow money to buy investment properties.
I'd say 10% gross yield would become pretty standard if mortgage interest were not deductible.
Yes but only after a long painful reset of the current numbers of holders of IP's back to more traditional numbers. If a large proportion of speculators decided to sell at once it would crash the market because the FHB's could never take up the slack. Nor is there any incentive for them to do so at current prices. Given that 89% of all recent IP loans have been IO loans they really couldn't sell, at least not without taking steep losses.
No it will take decades to return to any sort of normal balance, and by then suburban property will be pretty undesirable for a host of reasons.
"Panics do not destroy capital; they merely reveal the extent to which it has been previously destroyed by its betrayal into hopelessly unproductive works." John Stuart Mill
But this move is brilliant, allowing people to claim interest payments as a tax deduction is wrong altogether under any circumstances.
Really?? so if I set up a business I shouldn't be able to deduct outgoings?
The brainlessness of people never ceases to amaze me when it comes to property.
Write off expenses for business everyone says cool, Write off money for shares....everyone says cool Write off costs for rental properties.....get called a blood sucking landlord.
Cool story bro, but totally without basis in the hard numbers. From what you's expect, you'd expect the US to have a higher home ownership rate than places where interest on mortgages is deductible. In fact there is no discernable relationship. The UK, Australia and New Zealand have higher (albeit similar home ownership rates to the US, yet interest on rentals is deductible. Germany has a much lower rate, and interest is deductible there as well.
Cool story bro, but mortgage interest is deductible in the US: on PPoRs, on second homes, and on rental properties.
There are some limits with respect to the first two categories (e.g. only $1M total debt eligible per couple, and one has to be a line-item itemizer when filing ones taxes), but the vast majority of US homeowner/taxpayers fall within them.
A corporate shell is recommended to hold the rentals--perhaps that's what you meant by your "professional landlord" reference earlier--but that can be structured to generate flow-through personal income deductions for holding costs and depreciation, with doco and filing requirements that are pretty minimal.
The American branch of my extended family has enjoyed such investments for decades, starting at very modest scale: a $12,500 slice of a trailer park in Washington state. The only downside is, as a cousin puts it, "capital cost recapture is a bitch", so it's a medium to long term buy-and-hold strategy.
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