Had a generic discussion among friends on what is better to do.
And we had people with an opinion to have savings safely parked in a bank and earn good interest (4.5-5%) and some had an opinion to get an investment property and get rental+$200K mortgage.
Yearly approximately $18-$20K interest or 26K per year rental less all other expenses (rates, water, maintenance, rental management fees etc), mortgage.
What does fun sound like if there are no friends around?
I don't know. I give up. What does it sound like?
Yo Pinko, it sounds like this:
An ECHO, ECHO, echo, echo …
Have a chat to your accountant or financial advisor.
By posting on here I think he is. I also think we are said ‘friends’
You say that as if most accountants and financial advisors aren't shit.
Have a chat to your accountant or financial advisor.
the most common sense answer yet someone downvoted you (here is an upvote to balance it out)
If a serious question, speak to an accountant. That said, buying an investment property in this current market seems to be an easy way to just piss your money away. I'd just park it in a term deposit while you seek professional advice. At least it's earning you money with very little risk.
savings interest taxable on your income threshold?
ip rental yield very good at the moment within favorable area , expenses tax deductible and maybe beneficial to borrow more for tax purposes depending on your circumstances ;
also weigh the risk of possible property value drops if housing crash do happens though unlikely, with current housing shortage and record immigration numbers continue increasing over coming years
not financial advice ; talk to accountant
If you already own your own home I'd invest in something else instead. Housing is approaching fever pitch, young people are on panel shows on the ABC openly criticising the mighty Investment Property, interest rates are going up and there' endless talk of recession, and we've just found out that people can actually work from home and our country has a lot of empty coastal and city adjacent land that houses can be built on. And VR is about to make living in a small house with bad view more tolerable, and remote work more tenable to bosses as the VR headset will have you captive in a VR workplace staring at your work and your persona colleagues/bosses all day.
Move to Adelaide, wear your VR glasses all day to see how good QLD looks like without suffering from the local "monster" there?
Haha… I am in Adelaide… True.
Dude, you should check the box to HIDE all votes until the END of the poll. If you don't do that, whatever option is leading on the first day will have the highest votes on the last day. I don't know why OzB doesn't just make this standard practice for all polls.
'Investment property for rental' is generally unwise, unless negative gearing is involved (or maybe, if the property is rural). 'Investment' properties tend to run at a loss if property values are not rapidly increasing.
Put the money in the bank! In a few years, you will have enough to buy a house outright.
Just can't understand Australians' obsession with going into debt unnecessarily. This is why we have a housing and debt crisis.
The government discourages savings via inflicting us with inflation. The more debt you take on, the more you can get ahead (so long as you don't default). Debt (to the banks) is printing money (among other forms of money printing going on), and the guys with the most debt have transferred the most wealth from savers, with the bank taking a cut. Some people don't understand how money works, others do but realize they can't get ahead without playing the game.
Keep telling yourself that to ease your anxiety, The reality is, the more debt you have, the higher the risk. Everyone seems to have short memories. Things don’t always stay the same. Things go wrong, houses fall apart, people get sick, economies change, populations change, recessions happen, wars happen, bubbles burst. In 1990 the Japanese real estate bubble burst and everyone who had optimistically taken on a lifetime of debt was suddenly stuck with plunging property prices and 30 years of stagnation/deflation and 30 years of wage stagnation/decline and unreliable employment, which they are only just now beginning to come out of. Some people are still stuck paying off a crumbling, near worthless house they bought in 1989.
You really can get ahead by playing it safe and being patient. All these complex financial leveraging strategies will occupy too much of your brain, and give your stress when you dish out 70% of your income to the bank every month.
I mostly agree with your sentiment, but the fact is for a long time taking on debt in most first world countries has paid off despite the risks. Your savings are going to devalue year on year and that value will be given to those that take on debt and those they are indebted to. Australia has a proven track record for propping it all up for decades. Yeah, it will come to an end some day, but most people are betting that will be after they're dead, or at least exited the market, and frankly I don't believe most people even understand money or think about the risks they take on - they just blunder through doing what's "normal".
Also, your initial comment was downvoted (not by me) because
1) Most people aren't in a position to pay cash for a house after a few years of savings. Most can only hope for a deposit.
This is why we have a housing and debt crisis.
2) People buying into the debt based economy didn't create the debt crisis, they just one small (goaded, mostly) part of it. Our FIAT currency with cartel controlled money creation, plus the massive amount of immigration (and thus population growth despite low birth rates) coupled with the inadequate supply of new houses is what creates the housing and debt crises. Both of these are the result of deliberate policies by many successive governments over decades.
to have Saving safely parked in a bank and earn good interest (4.5-5%)
Um, there is zero "safety" over $250k in a single bank account (that is the max per account the AU gov will "protect") - if you want it to be "safe", you will have to split it into different accounts, each under $250k (and plan for interest, etc)
read the bail in laws. nothing is safe, but unlikely issue
but at very least split into 4 x 100k lots
Depends, do you want to be cash rich and asset poor or asset rich and cash poor?
What about asset rich and cash rich ?
True. Sadly I think with how expensive houses are these days having both isn’t possible, unless someone is earning $200k salary a year and their partner is too.
OP you forget to take into account the capital gain effect of holding the property.
the hassle of a rental must play a part in this formula.
why not just DCA $10k into shares for the next 40 months
Investment properties are such a hassle with tenants always wanting things fixed. Plus they can turn them into zoo's as you can't deny them having a pet.
Much better to buy shares. Never any hassles, just dividends in your bank account.
Can you please explain bit more?
Property is time consuming and hands on. Even if you get a property manager they always need to run things by you. With shares you just buy and watch the money roll in.
Tenants are a hassle. For some reason they want a house to live in with extremely high standards. My tenant wanted all these little things fixed, like a running heater and AC, but i disabled them because it was costing me money. Another good one was when a light bulb stopped working. I gave them a head torch instead rather than get a sparky out. One tenant wanted pets because it was 'good for the kids'. I said no because i'm not operating a god damn zoo. Can you believe this?
I'm not saying don't fix anything. Just pointing out that if you account for your time spent dealing with these things the whole thing becomes a poor investment for those who value their time and headspace.
You need to maintain property, but even if you maintain it well there will come a time when it’ll be so old that you’ll need to renovate or knock it down and rebuild it. Or if you are the type to kick the can down the road, just sell it and let someone else deal with the problem (too many people like that around IMO).
These things cost a lot of money, time and effort even if you aren’t going to DIY it. On top of that houses are so poorly insulated in this country, people can be disgusting and as a result mould can proliferate in properties.
All of that sounds like a headache to me, but some people seem to not mind (or they are ignorant to the issues before investing in property).
100%. It’s also good to max out your concessional super contributions each year.
The idea is to have enough shares outside of super to earn less than the tax-free threshold in dividends, so when you retire you get that income and on top of that you also withdraw from super tax free. Using the 4% rule your super could easily outgrow what you take from it.
Horses for courses, some people seem like they want to deal with the hassles of owning property.
Buy BOQ shares, once they have a takeover offer you are laughing!
Can you please shed some further light on this?
It looks like still early days with many banks sinking. But keep an eye on all local bank stocks!
Diversify, buy some shares, make sure you're maxing out super contributions, keep a load of cash earning interest, etc
I wouldn't put all your money into a rental property, it's a pretty unstable market requiring long term investment without really having oversized rewards (previous ridiculous capital growth is no indication of future growth). Doesn't sound like you're ready for that.
You have no idea what your talking about, you're out of your depth country yob.
5% interest might sounds great but less 32% tax (assuming up to $180k income) and less inflation and you are effectively going backwards by about 4%
Fair comment
Now that I think about it… $400k in ETFs yielding 4% of dividends a year would get you an extra $16k a year (pre-tax) in truly passive income. But you want a property, oh well.
Housing prices are inflated- wait. Bank shares always perform well, with fully franked dividends. NAB in particular.
If you want to save the value of your money- buy gold. It's not an investment but a hedge against inflation. As Dr Ron Paul author of "End the fed" among others- stated: "gas still costs a quarter (25 us cents) a gallon- but it's got to be a silver quarter (now USD $3.94)". When my wife and I had burned through an unGodly amount of money for post COVID staying in Switzerland (we had 2x Sinovac and Switzerland was one of 45 nations globally that would take us- the others were less desirable) we'd been tricked into buying old Swiss Francs no longer in circulation- they change every couple years to stay ahead of forgers. So we went to central Bank Zurich lovely old palace type building, only one teller of course, came told our sad story of dumb tourists unaware of Swiss money issues- then got slightly less than parity for the new currency. Annoyed, we found a gold "Geld Automat"- atm where you buy bullion. We had brought some from SE Asia. During the following months general prices increased markedly especially food, and we were very happy to redeem our bullion for CHF because the couple hundred CHF we'd bought had kept pace with inflation etc so all in all a nice little anecdote to sing the praises of precious metals in retaining value, vs cash which depreciates. And this stupid government thinks 5% inflation per annum is magically not on par with 1990s Asian Financial crises. You buy $400,000 in gold now- it will be worth equivalent if not slightly more in the future.
I'm not convinced lithium stocks are worth it- because we have superior salt-water-ferrous batteries (not new 1900's invention actually) that Musk has invested heavily into that require no Chinese monopoly metals and for most countries can be manufactured onshore with maybe some ferrous importation. Therefore BHP Billiton is a good investment. With stocks the advantage is fluidity- it might take a long time to sell a house (the last house we were in the owner had tried to sell for over 2.1 million for 3 years- before giving up each time passed in at auction to rent for the year). The extreme low cost of saltwater-iron batteries in materials alone is going to be huge so I would advise investing in battery specialist companies such as Yuasa- everything's going to use batteries of one form or another.
Thank you for your short-term anecdote. Inflation-adjusted, gold is now worth less than it was in 2020, less than it was in 2011 and less than it was in 1980. Even without inflation adjustment, it's only worth slightly more than it was in 2011. During that 43-year period, gold several times (and for several years) lost up to 50% of its value (or up to 75% of its value if we account for inflation). Not a great investment in my opinion. Everything has risk. Maybe if you're willing to hold onto gold for 40 or 50 years you can be fairly sure you won't lose much money on it.
Depends on whether you are renting or have a mortgage. If have mortgage, you can place it in offset a/c.
Sounds like fun.