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  1. #121
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    Where do you guys think still has some growth left in it?

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    Quote Originally Posted by Wise Enough View Post
    Where do you guys think still has some growth left in it?
    If you're considering buying an investment property, you would be best off waiting until after the election to see what happens.

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    Quote Originally Posted by witherwings View Post
    House prices go up, yes. But you invest $100k in year 0 and at the end of year 5 (in your example) you now have $400k equity. The alternative house you really want which is $800k in year 0 is now worth $1.2m and you need a deposit of $260k, which Lo and behold, you have, because you now have equity of $400k instead of $100k.

    I hope this makes sense now? Yes your loan might be bigger but I assume that after 5 years you also earn a higher income. This is obviously a very simplified investment strategy but it works if you have some money saved up to start (but not enough to buy your dream house). Since under current market conditions, the property will pay for itself, as long as you don't make a bad investment up front, it's a good way to achieve your goals.

    ETA - even after accounting for CGT on the sale, you're still left with around $325k in your hand. Not many people can increase their savings by $225k in 5 years.
    Ok but with wages going up at about 2% a year these days is that a fair assumption? Or is this just a strategy for young people starting off their careers who expect their earnings to increase way beyond that? Or is it a strategy to not get locked out of property by getting locked into the Ponzi scheme 😜

  4. #124
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    Quote Originally Posted by Freyamum View Post
    Ok but with wages going up at about 2% a year these days is that a fair assumption? Or is this just a strategy for young people starting off their careers who expect their earnings to increase way beyond that? Or is it a strategy to not get locked out of property by getting locked into the Ponzi scheme 😜
    This is a strategy that worked for me. I don't know why you bring up Ponzi schemes. There is nothing illegal, fraudulent or unethical about property investment. And the only person expecting a return on their investment is you. Strange thing to bring up, even as a joke.

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  6. #125
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    Default Housing / negative gearing / politicians

    Quote Originally Posted by witherwings View Post
    This is a strategy that worked for me. I don't know why you bring up Ponzi schemes. There is nothing illegal, fraudulent or unethical about property investment. And the only person expecting a return on their investment is you. Strange thing to bring up, even as a joke.
    It wasn't really a joke. Property has been compared to a Ponzi scheme by many people. It's not meant in the literal sense of being illegal or fraudulent.
    Eta: http://www.smartpropertyinvestment.c...c-ponzi-scheme

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    Default Housing / negative gearing / politicians

    In this climate with job uncertainty I see property investment as quite a risky investment option unless you can cover the repayments and not end up in negative equity. If you buy in the right location and don't intend to sell until retirement then maybe it's ok. By then the government will have changed the tax rule and your negative geared property will be heavily taxed. Gah it's very hard to work out what to do with money. I have one property that's negative but it costs me money as I was made redundant so have no income to off set anyway.

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  9. #127
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    Default Housing / negative gearing / politicians

    Quote Originally Posted by lilypily View Post
    In this climate with job uncertainty I see property investment as quite a risky investment option unless you can cover the repayments and not end up in negative equity. If you buy in the right location and don't intend to sell until retirement then maybe it's ok. By then the government will have changed the tax rule and your negative geared property will be heavily taxed. Gah it's very hard to work out what to do with money. I have one property that's negative but it costs me money as I was made redundant so have no income to off set anyway.
    If it's negatively geared, it won't be "highly taxed". It won't be taxed at all. But you won't get a tax benefit. You will just be taxed as if you didn't have it in the first place, unless you have other properties that are positively geared, or other investment income such as dividends or trust distributions - in which case the negatively geared property will reduce your taxable income overall.

    As for risky, I think this largely depends on your personal risk profile and what you consider to be risky. For me personally, since my properties are positively geared, and located in areas that will always be in high demand, and I haven't borrowed more than 80% LVR, I don't think this type of investment is "very" risky. Certainly far less risky than other asset classes.

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    Quote Originally Posted by Freyamum View Post
    It wasn't really a joke. Property has been compared to a Ponzi scheme by many people. It's not meant in the literal sense of being illegal or fraudulent.
    Eta: http://www.smartpropertyinvestment.c...c-ponzi-scheme
    If you read the article, it doesn't compare property to a Ponzi scheme, it compares the practice of parents lending their children money to buy properties that they can't afford, and then suffering when the children have to "foreclose".

    They describe this as a classic Ponzi scheme but it is nothing like a Ponzi scheme.

    We are really going off into tangent territory here, but a Ponzi scheme is when a fund manager sets up an investment vehicle that promises investors a particular return, but instead of paying out the returns out of actual returns, the manager pays investors returns out of new investors' capital proceeds.

    I can't see any parallel between this sort of scheme and parents lending their kids money to buy property. I also can't see how anyone could describe "property as a Ponzi scheme".

    Anyway, back to the topic at hand...

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    Property is still a solid LONG term investment. As in 10-20yrs or more. If you can afford the repayments and your loan is less than the value of the property then all is good.

    After the gfc debacle of 2009 we are cautious of managed funds. We lost 30K that year in the value of our funds/shares. We haven't sold any so slooooowwwwllllllyyyyy it's accruing again.

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  14. #130
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    absolutely property is a great long term investment.

    But it is a classic "you have to have money to make money" investment.

    You need to have the cash to make the repayments. Interest-only will only make money in good times, but is risky in even/bad times.

    You need to have enough cash flow to be able to make the repayments in the times of low rent, vacancies, damage, repairs or other issues that DO happen from time to time. You need to be able to afford to go without the rent for a good long while ... without being forced to sell the property.

    Provided you can afford to hold onto it, and sell when its right to sell not because you need the money, provided you do your research and buy the right property, for the right price for your budget/needs, and structured correctly - then property is a relatively low risk, long term investment. with or without tax incentives.

    If you remove the tax incentives though - many who invest in the medium term will look at something else. This includes managed funds and super funds - who make up a significant proportion of the developers of new houses and apartments ...

    Something needs to be done. But its a fine line as to exactly what .... and no doubt whichever party does legislate, they will get it wrong (its what politicians do best after all )

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