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  1. #1
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    Default Is home buying the best investment option?

    Just wanted to pose a question on house buying (primarily as an investment rather than an asset).

    Say you can save $20,000 per year. Is it better to put this sum in a term deposit/managed fund etc or in mortgage repayments? Where would you likely see the better return (on average, obviously ignoring above average good/bad investment properties)?

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    Subbing interesting question

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    Default Is home buying the best investment option?

    Over a long term, property and shares have similar returns on average. Of course both have good & bad sides.

    We invest in property because that's what we know, and we do heaps of research before buying.

    If you're saving 20k per year, the worst thing you can do is nothing!

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    Quote Originally Posted by Cue View Post
    Over a long term, property and shares have similar returns on average. Of course both have good & bad sides.

    We invest in property because that's what we know, and we do heaps of research before buying.

    If you're saving 20k per year, the worst thing you can do is nothing!
    This is us too.

    Some things to consider; are you going to need to access the cash quickly, if so property is probably not a good option. You also have outgoings with property eg: rates, insurance, tenants to consider if it's a rental. You can also use these things to offset your taxable income. It really depends on what you want out of it - short term or long term.
    Last edited by babyla; 05-09-2012 at 09:52.

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    We were told by our financial advisor's firm or company or whatever they are called that there are better options than property. But we decided to buy a house anyway as we wanted to have the stability that living in our own home offers, not just the financial reward.

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    True, true. Did not think of the taxable implications. Good point.

    I'm not saving $20K a year (hahaha I wish!). I have been focusing on my budget and financial future as of late and have set myself a long term on going target. I would like to put $10K into savings each year starting in 2014 (after I set myself up with a few things first).
    I don't plan on staying in one place a whole lot. I like the idea of travelling in a caravan so a house of my own to live in probably wouldn't be ideal.

    But than I was thinking once you reached say, the $30,000 mark (a few years), I was wondering if it would be better at that point to buy an investment property.

    I'm not looking for financial advice, it's just a pondering sort of question really. When that time comes that I have $30K to decide what to do with than I'll seek professional advice.

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    Many years ago (back when property was booming) I read a financial advice book by Paul Clitheroe. I also read a range of other books too, but this one was very 'sensible' and straight forward - plus an Australian author so advice unique to our market.

    He said that if you look at it from a purely mathematical viewpoint, your own home is not the best investment for your money. Eg. if you took the extra money your repayments would be, plus savings for deposit, the money you would typically spend on maintenance, fees etc etc and put it into a high yeild account you would be better off than buying a house (unless it was a boom-time and you got the capital increase from the property). BUT he also pointed out that most of us do not have the discipline to set aside all that money, so a home as an investment is like 'forced' investing and works well for most people.

    I hate the advice that "the worst thing you can do is nothing" (no offence directly to PP, just advice we have had before in general). We sold an investment property and I was happy for our deposit to sit in a high interest account until the market revealed what it was going to do (this was in 2006-2007). But DH felt we couldn't just 'do nothing', we needed to be actively trying to build that money into something bigger and on the advice of a stockbroker friend we invested the bulk of it into a range of shares ... only to have the market dive just months later and halve what we had.

    When deciding what to do with your money, you need to decide what your 'risk profile' is. Also look at if you need something that 'forces' you to save, or if you can be disciplined. Also, if you decide that you want to invest in anything, do lots of your own research to ensure it's an investment that suits the period of time you want to invest over and your risk profile.

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    I read an interesting article once that showed figures on how if you put away the same amount of money as mortgage repayments into a term deposit/high interest earning account, you end up soooo much better off!

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    Default Re: Is home buying the best investment option?

    Quote Originally Posted by CMF View Post
    I read an interesting article once that showed figures on how if you put away the same amount of money as mortgage repayments into a term deposit/high interest earning account, you end up soooo much better off!
    Yes, but you have to have that money plus rent as you need to live somewhere. Not many people could afford to put aside a mortgage payment each month for 25yrs on top of paying rent.

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    I have a bit of money set aside, one in conventional savings and another with professional gamblers! It's in a syndicate with others so the total pool of funds a proportion is used to lay bets, then winnings are distributed. Not really conventional at all, but they have made me more money in a few short weeks on a lesser outlay than what I would have in conventional savings. One of the syndicate members put in $10,000 and he's so far got $1000+ up on his investment, so it's good for short or long term, minimal risk and some pretty good earning potential. It's a legit business and they are living off the profits themselves.


 

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