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

Neither have you, on the house 10 years down the track.

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Originally posted by pkcRAISTLIN 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.

Are you kidding?! The longer you lock an account in for, the better the rate they offer! You can get term deposits with westpac for more than 8%.

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Originally posted by pkcRAISTLIN 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.

I'm following in the footsteps of my old man who started with nothing in 1970 and now owns the freehold on biggest pub in Melbourne outright, the second biggest tourist attraction in Victoria, and a multitude of other properties in the hospitality, retail, commercial and residential sectors that I can't even keep track of.

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

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Originally posted by Domesticated $229,000 less tax.

Did I?

I don't recall you citing capital gains tax on your own property story?

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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 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.

beat blog is referencing termed deposit rates. my regular savings account gets .01% interest.

quote:

Originally posted by pkcRAISTLIN beat blog is referencing termed deposit rates. my regular savings account gets .01% interest.

No, I'm talking about regular savings accounts?

Mine pays me 7.05% per annum, or .58% per month.

We are talking interest per year, yeah?

Mine doesn't have any conditions like minimum balance or monthly deposit either.

quote:

Originally posted by Beat Blog Neither have you, on the house 10 years down the track.

what? houses are immune to inflation; in the sense that an inflationary economy is not going to erode the value of my house.

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Originally posted by Beat Blog Are you kidding?! The longer you lock and account in for, the better the rate they offer! You can get term deposits with westpac for more than 8%.

i did research recently coz i had to decide what to do with my $10K. with rates looking like they may fall sooner rather than later, trying to lock in 24 month accounts gave me 4%.

quote:

Originally posted by Beat Blog I'm following in the footsteps of my old man who started with nothing in 1970 and now owns the freehold on biggest pub in Melbourne outright, the second biggest tourist attraction in Victoria, and a multitude of other properties in the hospitality, retail, commercial and residential sectors that I can't even keep track of.

and im sure a large fraction of that wealth has come from capital growth in various types of property, and not from hoarding everything he owned in a term deposit

quote:

Originally posted by Beat Blog Did I?

my mistake!

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Originally posted by Beat Blog I don't recall you citing capital gains tax on your own property story?

because capital gains only counts at the end of the cycle, so i dont need to think about it on a weekly or even yearly basis like you do with a term deposit.

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Originally posted by Beat Blog No, I'm talking about regular savings accounts? Mine pays me 7.05% per annum, or .58% per month. We are talking interest per year, yeah? Mine doesn't have any conditions like minimum balance or monthly deposit either.

really? CBA is jewing me!

quote:

Originally posted by pkcRAISTLIN beat blog is referencing termed deposit rates. my regular savings account gets .01% interest.

It says ESavings. What is the difference between this eSavings thing and a regular savings account?

I wonder if I could open up an off-shore banking account in Australia...

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Originally posted by pkcRAISTLIN what? houses are immune to inflation; in the sense that an inflationary economy is not going to erode the value of my house.

No, of course not, but an interest account increases at a faster rate than inflation does too.

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Originally posted by pkcRAISTLIN i did research recently coz i had to decide what to do with my $10K. with rates looking like they may fall sooner rather than later, trying to lock in 24 month accounts gave me 4%.

Your bank is pov.

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Originally posted by pkcRAISTLIN and im sure a large fraction of that wealth has come from capital growth in various types of property, and not from hoarding everything he owned in a term deposit

Of course - I'm not preaching bank accounts vs property, I'm preaching conserving your money if the property isn't going to give you a positive rental return and you're not going to renovate or sub-divide.

He is stoutly against negative gearing and was the one who convinced me against it when I first learnt the concept and was drooling over it as you are now.

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Originally posted by Krypton It says ESavings. What is the difference between this eSavings thing and a regular savings account? I wonder if I could open up an off-shore banking account in Australia...

eSavings is just one of a few different account types that they have - it's another name for "regular".

Check it out pkc:

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

Apparently WBC is the only Aussie bank not affected by the US market, because they got fucked over in 1990 and decided not to enter that market again. Perhaps that's why they're good now?

I'm a big fan of index funds personally. Residential real-estate as a long-term investment in the U.S. is a fool's game -- that might be different in Australia, though.

quote:

Originally posted by pkcRAISTLIN really? CBA is jewing me!

a bank screw over a customer? not in this country surely.

Property can be good, no doubt about it, but it has pitfalls.
Stamp duty is a big one, and the all-or-nothing nature of it, you cannot sell some of your house to fund other things.
However, it's relatively safe, and won't go down much. You do get the benefit of negative gearing, but then get hit with CGT. shares get some benefit there if you hold them over a year.

Lots of things to consider before you commit.


As for this comment:

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?


No-one would ever start a business with this attitude. Every business has startup costs that you take on for eventual profit. Property is only different in that the pay-off only comes in one hit.

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Originally posted by tubby No-one would ever start a business with this attitude. Every business has startup costs that you take on for eventual profit. Property is only different in that the pay-off only comes in one hit.

That was my exact point; people should treat a piece of property and a business the same, rather than saying negative gearing is acceptable for property but not business.

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Originally posted by Beat Blog That was my exact point; people should treat a piece of property and a business the same, rather than saying negative gearing is acceptable for property but not business.

isn't it better to have the government pay part of your loan, for a valuable asset, than earn income on a crap asset? at the end of it, with capital gains + increased rent, you would probably be better off with the more expensive asset?

quote:

Originally posted by tubby a bank screw over a customer? not in this country surely. Property can be good, no doubt about it, but it has pitfalls. Stamp duty is a big one, and the all-or-nothing nature of it, you cannot sell some of your house to fund other things. However, it's relatively safe, and won't go down much. You do get the benefit of negative gearing, but then get hit with CGT. shares get some benefit there if you hold them over a year. Lots of things to consider before you commit.

dont get me started on fucking stamp duty! fuck! cvnts. well, you can borrow against your house to fund other things; indeed if youve paid off a bit and/or there's been good capital growth, you can always refinance, take out your equity and then get some poor renter to pay for it

also, does someone know how CGT is calculated on a property you have lived in? like, i know your primary residence is 100% tax free when you sell, but how long do you have to have lived there for it to be considered your primary residence?

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Originally posted by echosystm isn't it better to have the government pay part of your loan, for a valuable asset, than earn income on a crap asset? at the end of it, with capital gains + increased rent, you would probably be better off with the more expensive asset?

bingo.

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Originally posted by echosystm isn't it better to have the government pay part of your loan, for a valuable asset, than earn income on a crap asset? at the end of it, with capital gains + increased rent, you would probably be better off with the more expensive asset?

1. You're assuming the usage of first home buyer's grant, which isn't available in all cases.

2. Why have a valuable asset losing you money when you could have a slightly lesser quality one making you money?

Why would you buy a $100,000 business that loses you $10,000 a year rather than a $80,000 business that makes you $8,000 a year???

Another important factor you guys are forgetting is that while you're losing money on a negatively geared property, waiting to sell in 5 years for capital growth, my shittier propety is making me money, both through direct rent from a tenant and from capital growth.

Hypothetically, it might not be a lot of rent, but I could instantly re-invest that money that I'm making monthly, in shares, another property, or an interest account.

Simply put: a negatively geared property provides no cash flow, whilst one that is making money increases your spending and investing power.

Also, we're all assuming that a property making a profit is going to be of a poorer quality than one not making a profit, which is not true either.

quote:

Originally posted by Beat Blog 1. You're assuming the usage of first home buyer's grant, which isn't available in all cases.

no, he is talking about the tax concession ie gearing.

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Originally posted by Beat Blog 2. Why have a valuable asset losing you money when you could have a slightly lesser quality one making you money?

well, you've just moved the goal posts right here. firstly, investing in a business is like a billion times riskier...

and

quote:

Originally posted by Beat Blog Why would you buy a $100,000 business that loses you $10,000 a year rather than a $80,000 business that makes you $8,000 a year???

secondly,

a)it is nigh on impossible with today's prices and interest rate to find a property that will pay for itself, right off the bat. unless of course youre talking about putting in a substantial amount of your own cold hard cash.

seriously, if you know where they are let please tell me because that's just free money.

b) i dont know about you but running a business better be turning me more than a $8,000 a year i give you the hot tip! and i suspect that learning how to invest in real estate is much easier than learning how to be successful in business.

the amount of time and effort required might be something that floats your boat, but im simply not interested. id prefer to spend my time listening to tunes, sleeping in and playing PC games

c) where are you gonna get all this money to invest in the business? how easy will it be to get a bank loan to help? fuck just risking your own money, that game's for mugs!

quote:

Originally posted by Beat Blog Another important factor you guys are forgetting is that while you're losing money on a negatively geared property, waiting to sell in 5 years for capital growth, my shittier propety is making me money, both through direct rent from a tenant and from capital growth. Hypothetically, it might not be a lot of rent, but I could instantly re-invest that money that I'm making monthly, in shares, another property, or an interest account. Simply put: a negatively geared property provides no cash flow, whilst one that is making money increases your spending and investing power. Also, we're all assuming that a property making a profit is going to be of a poorer quality than one not making a profit, which is not true either.

you still dont understand. your shittier property ISNT giving you more cash than what it is costing you in 2008 to service your loan. this year ill make more in $ than i paid in % for the unit (which i bought at a lower price and interest than id have to today) but that's after 3 years.

chief!

quote:

Originally posted by Beat Blog 2. Why have a valuable asset losing you money when you could have a slightly lesser quality one making you money?

presumably the capital gains make up for the after-tax loss? also, once the loan IS paid off, you get more income in the long run?

quote:

Originally posted by pkcRAISTLIN no, he is talking about the tax concession ie gearing.

Where's that emoticon of the guy banging his head on the wall?

That's my whole point, it's NOT a concession!

Take a rich doctor who earns $150,000 per year. He gets taxed at the top rate, 49%.

Some guy who earns $40,000 a year gets taxed at whatever the piss ant rate is, maybe 15%? Would you say that he's getting a "tax break"?

Yes, he is, but it's a false illusion of help because the Doctor is still earning far more than the other guy post tax. It's the same with negative gearing.

Negative gearing is the equivalent of being the rich doctor and throwing $110,000 a year down the drain just so you can save 35% on tax.

quote:

Originally posted by pkcRAISTLIN well, you've just moved the goal posts right here. firstly, investing in a business is like a billion times riskier...

Yes, of course. I was just using an analogy, as I did above.

quote:

Originally posted by pkcRAISTLIN a)it is nigh on impossible with today's prices and interest rate to find a property that will pay for itself, right off the bat. unless of course youre talking about putting in a substantial amount of your own cold hard cash.

There are. I don't own any myself though.

quote:

Originally posted by pkcRAISTLIN b) i dont know about you but running a business better be turning me more than a $8,000 a year i give you the hot tip! and i suspect that learning how to invest in real estate is much easier than learning how to be successful in business.

Again...poor analogy. Of course a business will return more than $8,000 a year.

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Originally posted by pkcRAISTLIN c) where are you gonna get all this money to invest in the business? how easy will it be to get a bank loan to help? fuck just risking your own money, that game's for mugs!

Uh...what?

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Originally posted by pkcRAISTLIN 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.

here's a nice simplified snippet:

quote:

DEBT has become a dirty word in the past 12 months. A crisis in global financial markets has forced up the cost of borrowed money, and the Reserve Bank of Australia has added some of its own interest rate rises to spice things up. Some people who borrowed too much in the four-year share market boom have crashed spectacularly. Just look at ABC Learning Centres founder Eddy Groves, who lost almost all his millions, and even his basketball team. We are being told to rein in our spending, cut back on debts, and have no fun whatsoever. But before we throw the idea of debt on the same scrap-heap as Beta video tapes and Big Brother, remember this: Debt is one of the few tools available for ordinary people to build extraordinary wealth. Related Coverage * Shaky foundations or ripe for picking?NEWS.com.au, 16 Jun 2008 * How blue-chips have survived the meltdownNEWS.com.au, 21 Jul 2008 * Are you brave enough to take a punt?NEWS.com.au, 6 Jul 2008 * Stocks to watch in the new financial yearNEWS.com.au, 1 Jul 2008 * Banks' secure image take a pummellingNEWS.com.au, 18 May 2008 It should only be good debt - that is, the debt used to buy investments such as property, shares and managed funds. Bad debt, such as credit cards and personal loans, should be banished as quickly as possible. A home loan is technically a bad debt that should be paid off as quickly as possible, but owning a home is a great way to build wealth over many years tax-free. Good debt gives you a tax deduction on your interest payments, so if you pay $10,000 a year of interest on an investment loan and are on the 30 per cent marginal tax rate, you get $3000 of your interest paid back at tax time. Good debt also gives you leverage. Why own one $350,000 house when you can use good debt - secured against the equity in your home - to own two? That way, when the property market rises 10 per cent in a year, as it has averaged over the long term, you make $70,000 instead of $35,000 of profit. Debt is only dangerous when it is not managed properly, and people get too greedy. Eddy Groves lost his fortune because he wasn't happy with millions of dollars worth of ABC shares, so he borrowed millions more dollars to buy more shares that were secured against his existing shares. Ruthless investors discovered this, sold down ABC shares to make money for themselves, and wiped out Eddy's fortune in the process. Managing good debt properly means making sure you can afford the repayments, leaving a buffer in your borrowings by not taking on the maximum debt possible, and regularly monitoring interest rates and investment returns. Depending on who you listen to, the next six months may be an ideal time to look at using debt to build wealth in shares as the bear market hits its expected bottom. In property, there are conflicting stories, with some forecasting an upcoming boom in residential property and other tipping a nasty bust. Whatever happens, people who carefully embrace good debt will be long-term winners.

http://www.news.com.au/business/mon...5013953,00.html

quote:

Originally posted by Beat Blog Where's that emoticon of the guy banging his head on the wall?

haha, tell me about it im not sure i can put it any other way, chief!

quote:

Originally posted by Beat Blog That's my whole point, it's NOT a concession! Take a rich doctor who earns $150,000 per year. He gets taxed at the top rate, 49%. Some guy who earns $40,000 a year gets taxed at whatever the piss ant rate is, maybe 15%? Would you say that he's getting a "tax break"? Yes, he is, but it's a false illusion of help because the Doctor is still earning far more than the other guy post tax. It's the same with negative gearing. Negative gearing is the equivalent of being the rich doctor and throwing $110,000 a year down the drain just so you can save 35% on tax.

what youre forgetting is that you dont invest in property to lose money, or to negatively gear. you negatively gear as one of the benefits of investing in property.

negative gearing makes borrowing large sums of money easier. its that simple. someone without your doctor's salary, can use that debt to make money. of course it would be awesome if we could all invest in property that makes us a positive return from the get go. the reality is that this is very difficult to do, if youre talking about borrowing 100% of the property.

quote:

Originally posted by Beat Blog There are. I don't own any myself though.

look, i can only talk specifically about the tassie market, which is one of the most affordable in the country btw. but you are simply incorrect. interest rates and prices are more than rents. unless youre talking about property purchased some time ago.

quote:

Originally posted by Beat Blog Uh...what?

borrow to invest. that's how you make money. borrow. investing in something with all your own money is just silly. silly i tell you! just ask bond or scase!

Can someone write up an example? I want to see if my understanding is right. Eg...

The median house price in Sydney, Australia is close to $500,000 and the average rent for such homes is $400+ per week. Lets say you have $200,000 in the bank and an income of $75,000 a year.

You buy a 500,000 house
- $300,000 loan over 20 years
- @ current rates, paying back $2,813 per month
- Assume $400 a week rent, thats about 1600 a month
- You have $1213 loss per month of which the govt pays $?
- Your real loss is $? per month

You buy a 300,000 house
- $100,000 loan over ? years
...

quote:

Originally posted by echosystm - You have $1213 loss per month of which the govt pays $?

that depends entirely on your income; the loss is made against your income. in my case, its 30%. in lilith's case, the greedy bitch probably gets more

and remember, its not the government thats paying anything; its you getting your taxes back. taxes that would otherwise stay with the department of treasury thank you very much!

quote:

Originally posted by echosystm Lets say you have ... and an income of $75,000 a year.

my example fails though...

i want to see a comparison of no negative gearing vs. negative gearing and the end result

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