Rent - Don't buy

[cdt18]

Owning houses is so over-rated in NZ. It's ingrained in the culture and bugger the financial consequences. It's like you're a second class citizen if you don't own a house. Why not take advantage of this 'own it at all costs' culture and sell your cultural rites to some other fools. Property was a good investment a few years ago but now, it is just plain stupid in most areas. You get to look after a pack of slobs, risk your capital all for the eqivalent ( or less ) return available from the friendly government. This is surely a bubble when the returns in property are less than government bonds AND interest rates are going up. I noticed the fixed rates have gone up now also. This is the final stages of the boom, head for cover & don't even think about buying for the next year.

[duncan macgregor]

COOPER,IT is easy to work out the past inflation rates etc. What most people dont understand with property is it is not your money that makes the money, it is the banks money. When a property becomes self funding, then makes a small profit, and progresses into a larger profit, then it is time to refinance and buy another property. The value of the property goes up along with the rent over time, so in the end on average your first property has financed you into at least five more in a ten year period. The object of the excercise is not to pay the principle off, but refinance into bigger and better deals. When it is at the stage where the tenant pays the out goings, then the capital gain is your profit on the total. The people that understand that simple system will be rich, without trying. It is like buying a car a house has a life cycle your oldest property gets sold at the top of the next cycle. CAP says buying blocks of land if you have money to spare is a good investment. The block of land next door to me is a typical example, 8 acres of paddock bought by someone left some money in an inheritance. They paid $68000 for it in 1994 and leased it to a farmer for his livestock grazing for the price of the rates. They have had offers for over $300000 to buy it, but on my advice refused. I told them it is a no hassle investment that sits there until you need the money, or find a better place to invest it. Those people next door will put their kids through university on the back of a `$68000 inheritance or slightly more, and hold common low paid jobs. I did tell them as you are not buying or selling property as a business, then this money is tax free when you finally sell. If anyone is so stupid they cant see the facts then be poor see if i care. macdunk
PS not as much fun as the sharemarket

[dingdong]

O Caber Tosser, sections are in the same league as art, stamps, coins and of course GOLD. They provide no income and are purchased purely for the hope of capital gain. Proper investments should provide some income via POSITIVE CASHFLOW. Unfortunately this generally rules out rental property at the moment.

[Halebop]

Investment: Bare Land
$68,000 Capital Cost
$300,000 termination value
11 Year time span
= 14.5% per annum compounding.

Upside:
Beats gross global share performance of roughly 12%
Can't get much more knowledgable about your investment than nearby land
Unlikely to pay tax on resale over such a long period
The bricks and mortar/something solid/hands on perception of security (I stress the word perception though)
Little input required beyond patience

Downside:
Lacks liquidity
Produces no income and potentially a negative income if you can't lease it to the farmer
High transaction costs on resale
Difficult to value accurately

Personally I'm happy to have held shares over that time period, having beaten that return by a useful margin. All the same, a handy result. Once again I'll say just having a plan is a step in the right direction. They could have spent the $68,000 on a car and a holiday!

[duncan macgregor]

haletop, you miss the point. you and i are educated in investment strategies the people i speak of are normal people with no idea about what we talk about. macdunk

[rmbbrave]

Halebop,

You missed the most important "downside".

Lost Opportunity for self Education. While the 68K was invested in the land these people learnt nothing about investing.

They could have reseached 20 or so companies, chose the best 5 and bought $13600 in each. Then, closely followed their 5 companies and sold when they thought the companies prospects had changed and bought some better ones.

At the end of the 11 years they'd probably have about the same amount of money but buying (and selling) shares should have also left them with an education.

Halebop what would you have paid in rates in the period and how many times would you have mowed it. take these expense off and see what it does to your return. Then that money plus what the expense money could have earned either by compounding interest or other investment and then your investment does not look so good.

[cdt18]

not to mention your time at full cost to mow it !

[duncan macgregor]

ABDAB and RMBBRAVE, we must be truely aware that some of our friends have very little up top when we talk of investment. I will venture the suggestion that most of your closest and dearest friends alas fall into this category. It is not for us to advise in strategies that is clearly beyond their comprehension, but to play the game that in general is understood. MY friend ABDAB speaks of gold because where he comes from you can wear you bank account round your neck as you run up the street in front of the intruders. RMBBRAVE is obviousely an educated person living in Japan that teaches the natives to speak with a Kiwi accent. We have a common bond and that is to disclose or teach what life has thrown against us to the people that may want to learn from our life experiences. I feel priviledged that people like yourselves that will share your business knowledge with me. It is so easy to think this is right and that is wrong ,but then it is only a matter of your birth place that is why i like your views, it keeps me on track . your old mate macdunk.

[rmbbrave]

quote:Originally posted by duncan macgregor

RMBBRAVE is obviousely an educated person living in Japan...

An education isn't how much you have committed to memory, or even how much you know. It's being able to differentiate between what you do know and what you don't.

Anatole France

French novelist (1844 - 1924)