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If you don't own a home by your 40s, you never will. And you'll end up poorer than those who do.; Silly bears who think they can rent their way to wealth are only fooling themselves...
Topic Started: 10 Oct 2016, 07:29 AM (8,618 Views)
Rufus
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Chris
10 Oct 2016, 05:21 PM
And how many if those businesses fail in the first year, how many of the remaining businesses survive the proceeding 12 months? Your idea of a perfect investment strategy is to leverage into a highly valued asset, hope it rises in value then leverage into an extremely risky start up strategy.

Surely you work for a bank.
Many will fail, but the point is that because they owned a home they are able to access finance to start a business, and the non-homeowner won't have the same access to finance, meaning that they either can't start a business, or their chances of success will be lower.

This is not an insignificant point.
Take risks - if you win you will become wealthy, if you lose you will become wise
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Blondie girl
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Will
10 Oct 2016, 10:06 AM
You're quite right on this one, generational wealth buildup is very powerful. It makes a heck of a difference to the outcomes of people.
What about the reality that one has parents who were property mad for quite a few decades, provided some assistance to their four children and then they themselves bought in areas that in the long term have performed well in their investing. Then they will assist their own children for the next generation set up.

What about the fact some families don't need to wait for the elders to kark it.
foxbat
10 Oct 2016, 10:18 AM
For most of the people you are correct.

For the 1% that do or are rich.

Houses are not an investment.

At all.

They are a cost of living.

To say it is "cheaper" to own than rent is not true.

But for the majority, myself included it is better own your own home.

As who in their right mind would put money into a house to rent at a loss to someone they do not know.

My mom and dad rented for years.

Mom worked as a nurse, dad started numerous small micro businesses until i left school at 15 to partner in a small country hotel.

But remember mom and dad bought and sold over 120 houses as a business.

So my view of a house may be skewed.

If i was starting again, the LAST thing i would do is buy a house.

LAST.

I would educate myself in markets and mathematics.

I would play games that increase my critical thinking.

Build a risk model.

Then i would take what ever capital i can get and invest it.

And work in an industry that complements the above.

Good luck to all.

Peter




West Perth an area I know with my eyes closed.

4/51 Mount St was sold for $1,460, 000

6/15-19 Carr St was sold for $549 k

60 Carr St was sold for $570k ( May 2016)

You certainly don't believe in the power of one "P"




Edited by Blondie girl, 10 Oct 2016, 06:20 PM.
Newjerk? can you try harder than dig up another person's blog. My first promo was with Billabong and my name in English is modified with a T, am Perth born but also lived in Sydney to make my $$
It's Absolutely Fabulous if it includes brilliant locations, & high calibre tenants..what more does one want? Understand the power of the two "P"" or be financially challenged
Even better when there is family who are property mad and one is born in some entitlements.....Understand that beautiful women are the exhibitionists we crave attention, whilst hot blooded men are the voyeurs ... A stunning woman can command and takes pleasure in being noticed. Seems not too many understand what it means to hold and own props and get threatened by those who do.
Banks are considered to be law abiding and & rather boring places yeah not true . A bank balance sheet will show capital is dwarfed by their liabilities this means when a portions of loans is falling its problems for the bank.
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Chris
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Rufus
10 Oct 2016, 06:08 PM
Many will fail, but the point is that because they owned a home they are able to access finance to start a business, and the non-homeowner won't have the same access to finance, meaning that they either can't start a business, or their chances of success will be lower.

This is not an insignificant point.
Because I don't own a home and have significant savings I can access funds to start a business. Having a home isn't a guarantee that you will see any loan from the banks. It's all numbers Pete. There may come a day where houses are a liability that would inhibit borrowing.


It's a very narrow/hollow view IMO.
Edited by Chris, 10 Oct 2016, 06:32 PM.
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Foxy
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Zero is coming...

Khaderbhai
10 Oct 2016, 11:45 AM
Sure, although it has already been covered here many times...

Calculate the cost to buy a home, and then calculate the cost to rent an equivalent home for 70 years.

For example, take a $500K home. The cost to rent an equivalent home will be around $20K per annum.

Rent paid after 70 years = $1.4 million (20,000 x 70) assuming zero inflation.

But if inflation is around 2% and rents rise by 2% per annum, the total cost to rent over 70 years is $3 million.

So you can buy a home for $500K, or you can pay $3 million to rent it for your lifetime.

If you have to buy using a mortgage, then you'll pay about $250K in interest, so the total cost to buy will be around $750K.

Still much cheaper than renting forever.

And the homeowner holds a valuable asset at the end of those 70 years, while the renter still doesn't own a home.
ok,
So i now see and understand the thinking.

You think you can predict over the next 70 years???

Oh,

I am simply human and have no idea what the "real" rent and "real" price of anything will be tomorrow let alone in 70 years.

What i will say to you is i have been to Detroit in 2011.

Something else you may like to add to your equation.

Taxes.

You see houses are very hard to trade into and out of.

And our favourite partner that is in every deal we do takes a nice little cut of all the action and none of the risk.

So as i know over the years of investing, taxes go???

UP.

I now pay on one investment property in Highgate Perth, $8,000 landtax, $2,000 shire rates, $2,000 water.

Not a lot i hear you say, yes but totally out of my cost control.

A business cost that is fixed.

I have a commercial property in Perth, i think it is up to $100,000 in government charges per year.

When we first bought that property it was paying $26,000 per year rent.

Wow.

So then you know the drill.

After all costs and then income tax whats left???

Debt.

So please go easy.

The "landlords" are really "landslaves"

The renters are truly getting the upper hand.

And i say, well done.

The renter has the option, the owner does not.

Please do not under estimate that value in the populist propaganda diatribe you so willingly repeat.

How can the government "tax" a renter???

Good luck.

Peter













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Khaderbhai
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Wealthy Suburbanite

foxbat
10 Oct 2016, 06:41 PM
How can the government "tax" a renter???
Renters are taxed on their income from wages and other investments (e.g. share dividends), plus any other (non-housing) assets they decide to sell for profit.

But obviously renters overall are taxed less than homeowners, because they're much less wealthy than homeowners...

Posted Image

This lack of wealth is mainly because renters end up paying more for their lifetime accommodation costs, which leaves less disposable income to invest in other income-producing assets. And obviously renters don't own their own home, which is one of the greatest stores of wealth for most Australians.
Edited by Khaderbhai, 10 Oct 2016, 06:51 PM.
Banks can't repossess your home simply because the market value falls. Australia's Consumer Credit Code says consumers aren't liable for things ordinarily outside their control and can't be held to obligations that could only be met by selling their home. Click for details.

"The truth is that there are no good men, or bad men. It is the deeds that have goodness or badness in them. There are good deeds, and bad deeds. Men are just men."
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Jon Snow
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Khaderbhai
10 Oct 2016, 06:51 PM
This lack of wealth is mainly because renters end up paying more for their lifetime accommodation costs, which leaves less disposable income to invest in other income-producing assets. And obviously renters don't own their own home, which is one of the greatest stores of wealth for most Australians.

No, it's because we had 55 years of inflation.

Try to run 55 years of deflation through your house owning strategy and see what you come up with.
Speak when you are angry and you will make the best speech you will ever regret.
Ambrose Bierce
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Rufus
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Chris
10 Oct 2016, 06:31 PM
Because I don't own a home and have significant savings I can access funds to start a business. Having a home isn't a guarantee that you will see any loan from the banks. It's all numbers Pete. There may come a day where houses are a liability that would inhibit borrowing.


It's a very narrow/hollow view IMO.
Actually you can't unless you borrow against your own funds, which has it's limitations.

For a budding entrepreneur having equity in a home makes getting finance so much easier.

It's not a narrow view, it's the reality of life.
Take risks - if you win you will become wealthy, if you lose you will become wise
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Khaderbhai
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Wealthy Suburbanite

Jon Snow
10 Oct 2016, 07:36 PM
No, it's because we had 55 years of inflation.
Even with no inflation, it's still cheaper to buy. A $500K home rents for $20K per annum, which is $1.4 million after 70 years, even with zero rent inflation.

Quote:
 
Try to run 55 years of deflation through your house owning strategy and see what you come up with.
Even with deflation of 2% per annum, total rent paid over 70 years would still be $757K.

But given that the RBA has a mandate to inflate prices by 2-3% per annum, I think long-term deflation is unlikely.

If that's what you're betting on, then it's a risky move.
Edited by Khaderbhai, 10 Oct 2016, 07:59 PM.
Banks can't repossess your home simply because the market value falls. Australia's Consumer Credit Code says consumers aren't liable for things ordinarily outside their control and can't be held to obligations that could only be met by selling their home. Click for details.

"The truth is that there are no good men, or bad men. It is the deeds that have goodness or badness in them. There are good deeds, and bad deeds. Men are just men."
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Simon_S
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Khaderbhai
10 Oct 2016, 06:51 PM
Renters are taxed on their income from wages and other investments (e.g. share dividends), plus any other (non-housing) assets they decide to sell for profit.

But obviously renters overall are taxed less than homeowners, because they're much less wealthy than homeowners...

Posted Image

This lack of wealth is mainly because renters end up paying more for their lifetime accommodation costs, which leaves less disposable income to invest in other income-producing assets. And obviously renters don't own their own home, which is one of the greatest stores of wealth for most Australians.
When did the Home owner finish paying off his PPOR to be able to begin investing for his retirement?

Remember the home owner only saves the equivalent rent. He still has the associated ongoing costs of ownership each year.

Meanwhile the Renter has started 25 to 30 years earlier......

What happens when Interest rates rise again..........

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Jon Snow
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Khaderbhai
10 Oct 2016, 07:58 PM
Even with no inflation, it's still cheaper to buy. A $500K home rents for $20K per annum, which is $1.4 million after 70 years, even with zero rent inflation.

Even with deflation of 2% per annum, total rent paid over 70 years would still be $757K.
Yes, but how much would a $500K home sell for if you had 40 years of 2% deflation?
Quote:
 
But given that the RBA has a mandate to inflate prices by 2-3% per annum, I think long-term deflation is unlikely.
All central banks have that mandate, including the Bank Of Japan. I think the ability of central banks to create consumer inflation has gone (although they are still able to blow asset bubbles). Even ScoMo agrees with me (today AFR).
Quote:
 
If that's what you're betting on, then it's a risky move.
I am betting on what I have observed occurring in every industrialised economy over the past 30 years. Will it continue? I believe so. I don't have any reason to believe the relentless march of increasing productivity will somehow come to an end. Maybe you have some insight into that that I don't?
Speak when you are angry and you will make the best speech you will ever regret.
Ambrose Bierce
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