So presuming the long term plan was to buy an 800k house that might now be 1.3m or higher based on same 10% assumption? Wouldn't that mean a mortgage of more than 900k vs 700 if could've bought 5 years ago with 100k deposit? I genuinely can't figure out how it works that people use equity to buy bigger houses when all the house prices are going up? Is it the presumption that the higher mortgage is serviceable but only attainable with a larger deposit?
Maybe I'm completely thick but these numbers never add up to me...
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11-05-2016 12:19 #111Senior Member
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11-05-2016 13:39 #112
Housing / negative gearing / politicians
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.
Last edited by witherwings; 11-05-2016 at 13:45.
11-05-2016 13:46 #113
When you buy a new property as an investment the bank will typically value your purchased property at the purchase price. If the overall mortgage to asset ratio is under 80% you don't pay mortgage insurance and the bank bases you eligibility on your ability to make the repayments.
11-05-2016 13:54 #114
11-05-2016 14:00 #115
Yes - and the last 2 years is not normal and no one can predict the market - I had a lot of investors when they bought in 2003 lose money when they sold in 2007, some lost hundreds of thousands of dollars or sold at what they paid for it and wasted all the interest payments and stamp duty for nothing - short term is risky
11-05-2016 14:14 #116
11-05-2016 14:24 #117
11-05-2016 14:29 #118
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11-05-2016 15:01 #119
You need to do a lot of research before making any sort of property investment whether it's to live in or to rent.
We have apartments in Bondi beach. The average unit price change is 10.21%. Houses in the same suburb only go up by 1.78%. Where we live in the north shore, units in our suburb have an annual growth of 12.17% but houses increase by 22.7%.
Property prices might not grow by 10% p.a indefinitely, but in the long run, they will grow. This is a fact. If you're trying to time the market, this is pointless. If you're holding on to your investments until retirement, as we plan to do, you don't have to worry about temporary troughs. Over time, the market always adjusts.
11-05-2016 15:04 #120
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