http://www.news.com.au/finance/real-estate/is-it-cheaper-to-…
Interesting article.
It takes out the all the other crap in regards to borrowing power, unemployment rates
graphs and other irrelevant figures.
Interesting about Darwin.
It's a shame they didn't do a comparison which included investment properties, but based on the figures the investment property would romp it in as you have rental income and the tax perks.
Good point about maintenance costs. I've spent ~$1600 for a new hotwater system, $3400 for a cracked pipe (had to be replaced otherwise sewage will back the f..k up), ~$800 for a new dishwasher (fixing it would've eaten up $500 alone and no guarantee anything else won't play up) and that's just for one house in the past 6 months. Don't forget council rate at $1200-1600 a pop, building insurance insured a building cost of $300k sits at around $800 a year and even water supply is $600 a year (remember as a tenant, you only pay for usage not supply) whether you use water or not. Let's not forget if it's a house, there's lawn and garden maintenance. If you have a pool there's pool maintenance and if the pump goes pop, $750-800 for a brand newie installed.
So…renting is cheaper given mortgage repayments are often higher than the rent received (hence the whole negative gearing crap). Keep in mind some houses are cheaper to own than to rent in those cashflow positive areas.
yeah, but you don't buy and rent out to get income. you buy and rent out and pray the market will go up quickly and then you sell for a profit.
yes, renting is looking pretty good, as there are none of those outgoings, and as a landlord there is the worry of the tenant not paying. I have had property for a while and had the good tenants turn bad with lost of work and then it always seems to cost me in the end. Renting of course comes with its own problems, but mostly if you pay your rent and the landlord fixes the property, then you are ahead. well that is what I think
"yes, renting is looking pretty good"
I am not sure one of my elderly tenants on a pension would agree, especially as his rent has gone up faster than his pension has.
Luckily his children make up the shortfall for him.
This is irrelevent. The issue is not that they are renting rather than home owners, the issue is that they have limited assets behind them.
If they had the assets invested in a house they could have just as easily invested in another manner instead and had no issues paying rent.
Its relevant to him and to the children who pay extra.
He is not an isolated case, there are many in similar situations throughout the country.
Hindsight is wonderful in telling one what they should have done but reality is a bitch.
So… what is your argument? That you should in hindsight have told him to purchase a house but you can't do that anyway?
My point is either he had the resources to purchase a house or he did not. Either way, the resources he had today would be largely similar, and his issues have nothing to do with not being in the housing market specifically, and everything to do with not being able to amass wealth of any kind.
There are many reason he wont have a house. or money in later years.
Just didn't save and spent it instead, lost it through divorce, perhaps had to sell due to health reasons, perhaps lost the lot during the GFC gambling on shares.
For this guy it was lending his son money to set up a business using the family home as collateral and then the business failed and he and his wife lost the lot.
"Don't worry about it Bruce. Little landlords assume everyone who rents have no asset whatsoever because that's all they can see."
Not at all tom and your false assumption that I am a little landlord is based on what exactly?
"Instead I'd rented, saved and invested and 4 years later I now have a saving of 200k and going up. So little landlords are right, "…reality is a bitch"
Good for you tom, but what does it prove exactly?
In the same time-frame I can guarantee you this, I have done considerably better through property development and both residential and commercial rentals. Last financial year alone I got pretty close to your $200k figure.
Like you say, reality IS a bitch.
"Or even better I should have bought in Brisbane and now have a property that is 14% lower in real term minus interest."
You really aren't very good at this at all are you. (-;
Short term thinker.
Yes you did, right here in reply to Bruce who was replying to me.
"Don't worry about it Bruce. Little landlords assume"
And in this reply
"Typical insecured massive mortgage mugs and little landlords reaction to reality."
If I make close on $200k/year from my properties its obvious that I have considerable amount of property so am not "small" and also have very little debt
Comprehension fail yourself sport and poor form from you for the personal attacks and then try to hide the fact.
Seems to me if anyone has insecurity issues it is you.
Obvious troll is obvious
Not to mention, not very smart.
"Little landlords assume" - are you a little landlord ? if you said you're not then why are you insecured? You shouldn't be worried at all."
You said I was and then denied it, you have lost all credibility
"and hide what facts ?"
the fact that you said it, losing all credibility
"Still no stats ? Here let me help you.
http://www.macrobusiness.com.au/2014/02/rp-data-weekly-austr…
All capital cities house prices are now lower than they are in 2010 in real term except Sydney. But wait wait, my properties are special, they're different. ROLFLMAO."
I dont buy a whole city are you so silly as to not understand that a property in one suburb may be increasing in value while other suburbs are not?
Obviously you are.
Your argument is flawed and again, you have lost credibility
"And "200k a year on my properties" ? What a try hard! LOL, GUFFAW!
http://www.afr.com/p/national/productivity_call_as_wage_grow… - housing boom."
Well it sure beats your $200k over 4.
I see now that you feel threatened, is that insecurity we see?
+2 votes
tomleonhart on 06/02/2014 - 06:15
When did you buy a place Stewballs ? 10 years ago ? IF that's the case then good on you. Otherwise here's a quick calculation on an 2 br apartment in Wollie Creek Sydney.
http://www.realestate.com.au/neighbourhoods/wolli%20creek-22…
Average 2br price: $546000
Average rent: $570/week
Yield: (570*52) / 546000 = 5.4% yield. That's excluding Strata, maintenance, stamp duty, council, water, interest rates, agent fees (7% on rent per week) etc….
Oh that's in case your property is in Sydney because if it's not. You're losing money.
http://www.macrobusiness.com.au/2014/01/rp-data-melbourne-le…
Last chart shows the price changes from peak(2010). Since 2010, inflation rate has been 7.7% since the last 3 years, you have been losing money on your properties in all cities/states except Sydney with a mere 4.1% return of capital over 3 years. Even if you bought a place for more than 10 years ago, here's a good read if you still don't want to understand:
http://www.macrobusiness.com.au/2013/02/the-history-of-austr…
Inflation number is from RBA website. http://www.rba.gov.au/calculator/annualDecimal.html
Meanwhile my 140k deposit are loving the 18% $AUD drop and average 9% tax free interest a year.
Feel free to dispute any of my figures
Wow
In 14 days your bank balance has gone up 60k
Are you Walter White?
ohh you said feel free to dispute any of my figures, hahaha
Your credibility is Zip.
You also posted a while back about what people could save a month and you were amazed that people could save $6,000.00. Now it seems you are doing it.
Let me guess 5 foot 3.
http://www.watoday.com.au/wa-news/perth-median-house-prices-…
No complaints here.
You seem to be an expert in Perth property but you don't live here.
You seem to be an expert in mortgages but don't have one.
C'mon FOBSY, your credibility is 0, but how about another website reference.
If you knew anything about Perth you would know all about the inner-city development.
Send me your address and I'll send you a shirt that reads
"My Landlord loves me"
The falling rents are being attributed to the little tomleonharts leaving the rent trap and buying there own property.
LMAO
As long as there are more tomleonharts out there, we will all be happy. Please keep preaching.
2010, why not talk current figures, we can all dissect a graph and pick out highs and lows.
Perths figures have never been higher. 4% up in the last 3 months, so if you bought 3 months ago, I'm pretty sure you beat inflation.
The only thing I read is my bank statement to check that my tenant is paying their rent.
Try keeping it on topic and don't fear the mailman, it may not be a rent increase.
except stamp duty takes 3.5% out of that 4% increase.
and inflation takes 0.8% out of that 4% increase.
Did i mention rates, council, strata, agent fee etc ? ROLFLMAO.
Stamp duty 1 off fee. and you forget a few things
First home owner rate – for stamp duty in Western Australia on an established home
•$ 0 – $500,000 Nil
Also there are FHOG
also Agent fees are the sellers responsibility.
What you lack in knowledge shines through in your posts.
A couple of things, this article is about renting versing buying so when you buy a house for yourself they are assuming you are living in it. 2nd I manage my own property, why pay an agent when I can do the same. Duh
I love how you post wrong information ie Stamp Duty and when you are exposed you just skip over it.
You posted 6.6%, did that beat inflation.
the 4% increase is in the last quarter, can't you keep up.
You are dead right about the profit part, but why kill the goose that lays the golden egg.
You post how bad Perth is going then post it went up 6.6% last year.
My kids will benefit from my choices, please don't reproduce mate.
One thing it also doesn't cover is removal costs when you are forced to move. I agree its very simplistic, ie I've never known anyone to just increase there rent by the inflation rate.
The biggest point is, what do you have after 30 years.
The biggest point is, what do you have after 30 years.
This is exactly the falacy that leads people to thinking property is better. If you didn't invest the money in property, you would have a huge pile of cash (more than said property would be worth). This is the whole point.
Most people however don't end up with a huge pile of cash because they don't maximise their wealth by using leverage. Those who invest in property are forced to leverage their money thus create more opportunity to maximise their wealth.
Bruce do you own your principal place of residence?
Most people however don't end up with a huge pile of cash because they don't maximise their wealth by using leverage.
Sure, but this is a personal organisation issue. If you goal is to make money, buying a house only helps if you need that to remind you to put money asside.
Bruce do you own your principal place of residence?
Actually I do, but not for financial reasons. I like the personal and emotional security, and accept that I am less wealthy because of this decision.
If someone's have the propensity to invest, with or without a mortgage shouldn't actually affect them at all. It's just mean they have less to invest.
The article is crap. The biggest problems are:
1: Does not cover interest earned from all the money not stuck in a house.
2: Does not cover any maintenance/rates expenses
3: Assumes current (crazy low) interest rate
4: They are comparing median rent with median house price, not all houses are rented, so these numbers can't be compared
"enter the market at the emergency interest rate"
You are wrong again, the current interest rate is what it has been since at least 1930 to 1975.
Then they went up above trend and spiked and then came back down to follow the long term trend.
The RBA didn't even exist until 1960 and the cash rate target wasn't published until 1990. However in 1960, the effective rate is calculated as 2.89% (current rate is 2.5%).
In 1975 standard home loan interest rates were 10.38, now they are 5.23, which in case you haven't worked it out is almost half.
Are you just making these things up?
Here you go sport, courtesy of the CBA
http://imageshack.com/a/img196/5680/ztva.jpg
I believe that has PWNED tomwhatever as well
Are you blind? That backs up exactly what I just wrote.
Also note that the banking sector was run completely differently before 1960 (the flat bit) and is hardly relevent today.
Unless of course you are arguing that the last 55 years of banking is just a blip and 1950s are coming back any day now.
"Also note that the banking sector was run completely differently before 1960 (the flat bit) and is hardly relevent today."
Ha ha ha, never is when it works against you Ha ha.
And so much for tom whatshisname and his emergency rate rubbish.
I vaguely remember reading an article about something similar. It basically was saying rent is superior up until the 50-55 year mark. At that point, if you rented that long you may as well have bought the property.
If I find it I will post.
In summary: RENT less than 50 years otherwise get a mortgage! :D
Nope. Never been interested in a mortgage. Pay rent in 100's as required, no issues. I don't need a useless pile of bricks. Witness the freedom of renting.
Why no one has considered capital appreciation here?
Of course it is a consideration, if it wasn't for capital appreciation it would be completely backward to buy investment property.
The question is only is the appreciate enough to offset all the costs.
http://www.yourmortgage.com.au/calculators/rent_vs_buy/resul…
I find this useful to evaluate rent vs buy performance ..
Rent money is dead money.
Not according to some of the folks up there. Little landlords and large mortgage mugs etc etc
How is rent money not dead money when you're the one paying it?
May not be dead money for landlords but sure is for tenants.
Try argue with some of them up there who thinks renting is king, mortgage is a load of garbage would've lost them bulk coins meanwhile they're…paying a landlord! SHOCK HORROR!
Because you get a service for the money (ie: somewhere to live).
If you aren't paying rent you are either paying interest, or losing interest on the money stuck in the house.
The whole concept is rubbish, unless you are comparing renting to being homeless, which I agree might save you money, but has a few drawbacks.
I guess I must be thinking wrong then when I invested in a house in the late 90's (in UK) for the grand sum of £14,750. Two years later moving into a property for £39,000 and two years after that making a total "profit" of £20,000 to emigrate here with. At that time, with exchange rates the way they were, I ended up with $50,000.
Maybe I should have rented for those 4 years and come here with……….nothing.
It's all perspective anyway.
Buy a house, whack it on a 30 years loan and use up the entire 30 years to pay for it = interest alone would've been like doubling your initial purchase price. At least the house is yours at the end.
Rent a house for 30 years = nothing to show for at the end of it. Granted rent in most cases are lower than mortgage repayment, no building insurance/council rate/water supply charges/pest control/house maintenance..maybe use this "savings" to fund other investment initiatives so you can build up a large enough nest egg to keep paying landlords and/or retirement village.
I guess I must be thinking wrong then when I invested in a house in the late 90's (in UK) for the grand sum of £14,750. Two years later moving into a property for £39,000 and two years after that making a total "profit" of £20,000 to emigrate here with. At that time, with exchange rates the way they were, I ended up with $50,000.
You invested in something, great. Investing is property has no particular advantage over investing in anything else.
Property can return growth and a yield. Gold doesn't produce a yield.
If I buy art or a collectors car, no yield there.
The bank will lend money against your property, I'm not sure about my 5 chopper reid paintings but I'm pretty confident the answer is no.
Investing in shares can be frightening, yes they give you a yield and yes those who bought Telstra shares 2 have finally recouped their costs.
Also if the property is your primary residence no capital gains tax.
Overall you'd be hard pressed to find a better investment. Yes I know you can find a few years which property hasn't done to well, but tis the same with all investments.
Rent money is dead money
Sunk costs prevail on either option, possibly moreso for mortgage depending on your LVR and size of loan.
It's getting a bit too technical for our mortgage bashing friends to comprehend that.
comprehend
The irony is sad and funny at the same time.
I just cant beleive that people will sign themselves up for a thirty year mortgage at the drop of a hat. Its as if they had access to a DeLorean and came back from the future Biff style and went " ..mass leveraging on property is the way to go, I'll put everything I'll ever earn on it".
The best in the business normally aim for 50% leverage.
Only recently inflation was reported at 2.7, interest rates will not be this low forever. By all means please invest but do it within your own means - do you think the banks know what you can afford?
????????
Can I borrow your crystal ball?
Yes the banks will sign you up to a 30 year mortgage, they are talking 40 years as well. These loans are based on your salary today. I'm pretty sure your salary will go up in the 30 years making your loan repayments easier.
I'm yet to meet anyone who has said, it took them 20,25 and 30 years to pay off a mortgage.
You can lock in your rate as well, if you want a bit of certainty.
I'm pretty sure the banks know what you can afford, check there share prices and then ask yourself if the banks know what you can afford.
Don't forget the costs of maintaining a leaky roof!
Mine started leaking suddenly yesterday due to the wild weather in Sydney. Turns out there was a hole in one of the tiles.
Replacing a tile, $50
Don't forget that you can claim more family tax benefits and higher income limits if you rent: https://www.ozbargain.com.au/node/136262
I wish life was this simplistic. A big factor it doesnt consider is you have to maintain your home which adds cost? What about council rates? All of these add to the total cost of ownership which is conveniently been missed out altogether. Besides using inflation as a measure of increase in rent is not fair and neither is using the current rates as a standard for 30 years.