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Originally posted by pkcRAISTLIN sorry, thats too funny.

yeah it made me sick. I didnt want that much money sitting in one stock for a long time, so i knew i had to sell before it went lower, like it eventually did.

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Originally posted by pkcRAISTLIN no way! every little bit helps

Blergh.

I studied this briefly at university (not that that means much), and it's a load of rubbish.

Why would you intentionally make a loss on a property to avoid tax when you could make a profit, pay the tax, and still make some on top of your capital gain, rather than hoping for good capital gain whilst making nothing?

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Originally posted by jonSun It was sometime in may i think. I think it might have been $155 or $156. I sold 2 days later after it dropped about $8 a share. I had 110 shares too.

Heh.. back in July 2007, I invested half my portfolio in EGY at $4.76. My investment strategy is to hold until my target price is reach (even if it takes years), but I still watch the stock move day after day. Well, not even a month after I bought my shares, the stock price dropped 30%. But you got to have a set strategy and stick to it no matter what. I had a long-term value strategy. I studied the company front and back, and I knew it was a good company. When it dropped 30%, I actually bought even more shares. I viewed it as a Christmas sale at the mall. Fast forward to June 2008, the stock price rose to almost $9, essentially doubling my money. I valued the stock around mid $7, so when it reached $8, I sold. This just reinforced my philosophy of paying no attention to the market. If i know my companies are run by competent management and has the financial data to prove it, market pops and drops don't bother me in the least bit.

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Originally posted by Lilith Early on you have to be fairly aggressive in your purchasing, if you can find something for the right price, get it and then move onto something which is going to bring in a higher overall yield then you may as well cut and run onto the better option. By all means use its net worth to get the better property, but its one of those things (unlike shares where you have to make a spot decision sometimes) you do get a bit of time to think about it. I maintain a couple of high appreciating, high demand rental properties simply for that reason, when I want to buy something which is a smaller investment I use them as collateral. Find something I think will make money, buy it and rent it out, if/when it appreciates I'll sell it for a profit and move onto something else. But that's basically 'what I do' when it comes to a job and it also requires a volatile housing market to do a lot with. If you're in a sedentary market and have to work as well you're basically restricted to what it will hold up with and how much time you can invest into looking.

gotcha, that makes a lot of sense. me, im in it for the ultra-long haul. ie selling up around retirement age so i dont have to worry so much about my super contributions. thats what you get when youre a poorly paid lazy public servant

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Originally posted by Beat Blog Blergh. I studied this briefly at university (not that that means much), and it's a load of rubbish. Why would you intentionally make a loss on a property to avoid tax when you could make a profit, pay the tax, and still make some on top of your capital gain, rather than hoping for good capital gain whilst making nothing?

youre looking at it the wrong way. of course you want to make a profit on your investment. good luck finding a property you can rent for more than your mortgage cost. my latest purchase = $1700/month in INTEREST only repayments. and thats on a fairly low-priced house.

for me, negative gearing is a nice 30% rebate i get every tax year that helps me afford the investment in the first place.

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Originally posted by pkcRAISTLIN youre looking at it the wrong way. of course you want to make a profit on your investment. good luck finding a property you can rent for more than your mortgage cost. my latest purchase = $1700/month in INTEREST only repayments. and thats on a fairly low-priced house. for me, negative gearing is a nice 30% rebate i get every tax year that helps me afford the investment in the first place.

Exactly.

You're getting a tax rebate...yet losing money at the same time.

There are plenty of ways to make money on properties that don't involve conventional renting.

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Originally posted by Beat Blog Exactly. You're getting a tax rebate...yet losing money at the same time. There are plenty of ways to make money on properties that don't involve conventional renting.

such as? im intrigued

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Originally posted by pkcRAISTLIN gotcha, that makes a lot of sense. me, im in it for the ultra-long haul. ie selling up around retirement age so i dont have to worry so much about my super contributions. thats what you get when youre a poorly paid lazy public servant

Well you don't always have to be that but you appreciate the security of government jobs has a predictable paycheck... I went the other way around as a 'dirty yuppie' and worked myself stupid for about 10 years until I'm at the point now I have problems with fatigue, burnt out and have to stop (zee doctors orders!)
But I'm bouncing back and just taking things a bit slower.

move to england maybe? my sister's currently got 5 houses she rents out, rental income more than covers the interest only mortgage and outgoings, so just sit back and wait for appreciation.

or invest in blair athol and start a series of hydro farms

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Originally posted by Lilith Well you don't always have to be that but you appreciate the security of government jobs has a predictable paycheck... I went the other way around as a 'dirty yuppie' and worked myself stupid for about 10 years until I'm at the point now I have problems with fatigue, burnt out and have to stop (zee doctors orders!) But I'm bouncing back and just taking things a bit slower.

if you need any lessons in how to take things REAL slow, send me a PM!

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Originally posted by pkcRAISTLIN such as? im intrigued

Subdivision, renovation, live there yourself etc.

However, in the case that it's a pure investment and therefore hard to do any of the above, there are still lots of properties that make money on rent almost immediately.

Or in some cases, repayments outweigh rent for the first few years, but as rent increases with CPI and the repayments lessen according to how much of the principal sum has been paid off, the rent comes to cover the repayments after a while.

There's nothing inherently wrong with losing money for a few years to eventually make it back down the line, but I hear about a lot of people who sell their properties the instant they start becoming profitable, because they don't want to pay the tax!

I want to move to Japan. The rates there are 1%!

quote:

Originally posted by pkcRAISTLIN if you need any lessons in how to take things REAL slow, send me a PM!

Nah, I'm working real hard on my 'bohemian adult' image right now
Least I haven't painted any walls burgundy yet but thats only because it wont match the furniture...

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Originally posted by Beat Blog there are still lots of properties that make money on rent almost immediately.

not in this country champ!

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Originally posted by pkcRAISTLIN not in this country champ!

4th post down.

http://www.tranceaddict.com/forums/...841#post9061841

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Originally posted by Beat Blog 4th post down. http://www.tranceaddict.com/forums/...841#post9061841

no worries chief!

Regarding negative gearing, another (most obvious!) thing I didn't think of:

Why buy a property with a 3% rental return and 10% interest repayments when you could simply put the money in the bank at 7 or 8%?

You'll be missing out on capital growth, but your interest will be compounding in a risk and management free environment, leaving you to pursue other things, and if you ever need the money it's available instantly.

Simply put: I wouldn't buy an investment property if it was going to give me a negative return.

It's funny; people treat property differently to a business or shares. Would you ever buy a business (a cafe or bar for example) that you knew was going to be losing money weekly, in the hope that your tax would be reduced and that you may be able to sell the business for more later on?

quote:

Originally posted by Beat Blog Regarding negative gearing, another (most obvious!) thing I didn't think of: Why buy a property with a 3% rental return and 10% interest repayments when you could simply put the money in the bank at 7 or 8%? You'll be missing out on capital growth, but your interest will be compounding in a risk and management free environment, leaving you to pursue other things, and if you ever need the money it's available instantly. Simply put: I wouldn't buy an investment property if it was going to give me a negative return. It's funny; people treat property differently to a business or shares. Would you ever buy a business (a cafe or bar for example) that you knew was going to be losing money weekly, in the hope that your tax would be reduced and that you may be able to sell the business for more later on?

because in 10 years or so that house i paid $150,000 for is now worth $300,000 even though its probably only cost me a few hundred dollars/year to own.

like ive already said- putting $10,000 in a term deposit @ 8% interest is going to give you fuck all when compared to a house worth 20 times that appreciating over the years.

there is no "hope" about it. if youre smart with your purchases, you WILL make money on property. look at the latest boom in house prices. how much do you think people in before the boom are now worth? fucking heaps.

when interest rates come down again, be it 1, 5 or 10 years- the property market in this country is going to go absolulely spastic. be there before then or miss out

pkc, if you start with $10,000, contribute a modest $1200 per month at 7% compound interest, in 10 years you will have $229,000 less tax.

This opposed to a property which costs you far more than $1200 per month in interest repayments, and might double in value if you are lucky.

I agree with you that property is the way to go, but not if it's losing money.

What savings account gives you 7%? That can't be a saving account..

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Originally posted by Krypton What savings account gives you 7%? That can't be a saving account..

huh?

Even average Joe in Australia can get 8%.

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Originally posted by Beat Blog pkc, if you start with $10,000, contribute a modest $1200 per month at 7% compound interest, in 10 years you will have $229,000 less tax. This opposed to a property which costs you far more than $1200 per month in interest repayments, and might double in value if you are lucky. I agree with you that property is the way to go, but not if it's losing money.

haha, good luck sticking to that plan! The reason I like property is because its forced savings. with things like life getting in the way, i dont know a single person who saves $1200 a month into their savings account.

and lets not forget that your 7% rate can turn into 2% very quickly.

here's my case study and how my experience has worked.

i paid $162,000 for a unit, borrowing about $155,000 in 2006.

my payments are $513/fortnight and my rental return is $420.

after tax rebates and various other "costs" i can claim against this property, it costs me roughly $35/week to own (not including things like insurance etc).

got an appraisal from the bank and its now worth roughly $200,000 and i only owe $149,000.

now, find me a bank account that i could've started with $7,000 (though where do i get that money if not from the home owner's grant ) and with only a contribution of $35/week, have it worth $58,000 in 2008.

quote:

Originally posted by Beat Blog This opposed to a property which costs you far more than $1200 per month in interest repayments, and might double in value if you are lucky.

ill also add that my expensive property only costs me $700/month after rent is factored into it, of which i get roughly $250/month rebated at tax time, so its less than $500/month.

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Originally posted by pkcRAISTLIN haha, good luck sticking to that plan! The reason I like property is because its forced savings. with things like life getting in the way, i dont know a single person who saves $1200 a month into their savings account.

I do, but I don't have a wife and kids to support, which makes it hard for some people.

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Originally posted by pkcRAISTLIN and lets not forget that your 7% rate can turn into 2% very quickly.

I'm pretty sure you can get fixed interest accounts like loans? The converse is also true though, if an interest account can go down to 2%, a loan can go to 15% if you're not on a fixed rate, like it was in the 80's.

quote:

Originally posted by pkcRAISTLIN here's my case study and how my experience has worked. i paid $162,000 for a unit, borrowing about $155,000 in 2006. my payments are $513/fortnight and my rental return is $420. after tax rebates and various other "costs" i can claim against this property, it costs me roughly $35/week to own (not including things like insurance etc). got an appraisal from the bank and its now worth roughly $200,000 and i only owe $149,000. now, find me a bank account that i could've started with $7,000 (though where do i get that money if not from the home owner's grant ) and with only a contribution of $35/week, have it worth $58,000 in 2008.

That's admirable, but it's only one example.

The first home owner's grant is AWESOME, I can't wait to take advantage of it, but it doesn't apply to everyone.

We've totally fucking hijacked this thread anyway. I think we can both agree on the fact that echo should just plonk his money into an interest account at 7 or 8% and in 2 years he will be laughing.

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Originally posted by Beat Blog huh? Even average Joe in Australia can get 8%.

That is insane. I simply don't believe it. At Bank of America, the interest rate on the basic savings account is .20% (http://www.bankofamerica.com/deposi...te=save_regular)

Getting an 8% would involve either buying junk bonds, ultra-high yield dividend stocks, etc. No money market, no treasury bond, no certificate of deposit goes higher than 5%. That's why it's so hard for me to believe a basic savings account in Australia can get 8%. How do the banks make money?? They must charge very high interest rates on loans if they want a profit.

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Originally posted by Krypton That is insane. I simply don't believe it. At Bank of America, the interest rate on the basic savings account if .20% (http://www.bankofamerica.com/deposi...te=save_regular) Getting an 8% would involve either buying junk bonds, ultra-high yield dividend stocks, etc. No money market, no treasury bond, no certificate of deposit goes higher than 5%. That's why it's so hard for me to believe a basic savings account in Australia can get 8%. How do the banks make money?? They must charge very high interest rates on loans if they want a profit.

Interest rates on home loans are currently around 10% per annum.

Average savings accounts are 7% per annum.

Top right:

http://www.westpac.com.au/internet/...ent/PB+HomePage

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Originally posted by Beat Blog I do, but I don't have a wife and kids to support, which makes it hard for some people.

fair enough. and what about inflation? have you factored that into how much youre REALLY making.

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Originally posted by Beat Blog I'm pretty sure you can get fixed interest accounts like loans? The converse is also true though, if an interest account can go down to 2%, a loan can go to 15% if you're not on a fixed rate, like it was in the 80's.

but you cant get fixed terms for like 5 years (or if you do, the % is awful). and i always lock in my rates so i know i can afford that investment for at least 5 years.

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Originally posted by Beat Blog That's admirable, but it's only one example.

but its not though man. i am following in the footsteps of a good friend of mine who is now a millionaire following these basic steps. there are many people i know (or know of) that made their fortune in property.

ask lilith to tell you about her success stories. i wouldnt be so adament if i thought i was a special case, im not and my income is (very) average.

you have also failed to include any and all tax costs into your compounding interest formula.

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Originally posted by Beat Blog We've totally fucking hijacked this thread anyway. I think we can both agree on the fact that echo should just plonk his money into an interest account at 7 or 8% and in 2 years he will be laughing.

nah, fuck that. you need to risk to make the big pay offs. id sink it into (aust) banks and mining companies for the next 2 years. and then see how he's travelling.

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