Society/Culture Landlords - What is the point?

[burge13]

Interesting point on your second line.

Personally, I find it so odd that housing is still being pushed as the primary investment most people should be striving for when in reality, for most it's simply a debt trap they'll be chained to for most of their lives, that ends up costing them significant amounts of money every year to maintain.

Then there's the barrier to entry simply to begin with.

I certainly agree that this is a major cause for concern, as people should be able to have access to affordable housing that isn't in remote country towns, or 3 hours from the CBD of a major city. Instead, it's an asset that is getting increasingly out of reach of future generations.

Back on the investment front, there's far better options for you to greatly increase your wealth that don't get you into mountains of debt. Better off investing in an education to learn how to trade/invest properly into the markets, unless you have a high enough income that allows you to do both.

Owning your own home has to be the main focus - you don't want to be renting in retirement (assuming you don't have shitloads of money saved which most people don't). Your payments drop over time

Even those stretched atm buying at today's inflated prices aren't going to regret it in 5 years time provided they don't lose their job or divorce or something

 

[bzparkes]

Owning your own home has to be the main focus - you don't want to be renting in retirement (assuming you don't have shitloads of money saved which most people don't). Your payments drop over time

Oh I get that you should aim to own your own home prior to retirement. I'm just suggesting that there are more efficient ways to build your wealth, considering the cost of housing these days.

Even those stretched atm buying at today's inflated prices aren't going to regret it in 5 years time provided they don't lose their job or divorce or something

Well, that's the issue.

My best mate recently got divorced and had to pay out his ex-wife around $700k. they'd already paid off their house, which was originally bought for $445k. To pay her out, he had to re-mortgage the house to get the cash. Now he has to pay off double the original loan of the house just to keep it. I guess eventually he'll get a positive return, as it's worth around $1mil now, but he's $600k poorer for it due to the divorce.

 

[faible]

Interesting point on your second line.

Personally, I find it so odd that housing is still being pushed as the primary investment most people should be striving for when in reality, for most it's simply a debt trap they'll be chained to for most of their lives, that ends up costing them significant amounts of money every year to maintain.

Then there's the barrier to entry simply to begin with.

I certainly agree that this is a major cause for concern, as people should be able to have access to affordable housing that isn't in remote country towns, or 3 hours from the CBD of a major city. Instead, it's an asset that is getting increasingly out of reach of future generations.

Back on the investment front, there's far better options for you to greatly increase your wealth that don't get you into mountains of debt. Better off investing in an education to learn how to trade/invest properly into the markets, unless you have a high enough income that allows you to do both.

Housing is probably the biggest part of income and wealth security in later life though, rental increases atm would absolutely destroy you if you have no real means to increase your income.

I'm sure someone has done the maths on the ROI over lifetime of owning your own home somewhere.

 

[burge13]

Oh I get that you should aim to own your own home prior to retirement. I'm just suggesting that there are more efficient ways to build your wealth, considering the cost of housing these days.



Well, that's the issue.

My best mate recently got divorced and had to pay out his ex-wife around $700k. they'd already paid off their house, which was originally bought for $445k. To pay her out, he had to re-mortgage the house to get the cash. Now he has to pay off double the original loan of the house just to keep it. I guess eventually he'll get a positive return, as it's worth around $1mil now, but he's $600k poorer for it due to the divorce.

That's a divorce law issue rather than the housing issue though.

Rent in my area is >$550 a week when my mortgage is $300ish (I bought years ago at what was 'expensive' at the time). Buy, make the payments, refinance to a better rate when it pops up. You'll be way ahead compared to renting where you always pay the top price with little to no option to go cheaper like a refinance does with your mortgage. It's way harder now, there needs to be more supply. I don't think there's that many advantages to long term rent though

Should be putting some money in to ETF's and things anyway but for some reason most people ignore the stock market. I don't know that many people could build wealth more efficiently that way though...

 

[bzparkes]

Housing is probably the biggest part of income and wealth security in later life though, rental increases atm would absolutely destroy you if you have no real means to increase your income.

I'm sure someone has done the maths on the ROI over lifetime of owning your own home somewhere.

You'll mostly get a positive return obviously, but people very much underestimate how much a house costs to maintain.

Hot water tank goes? There's $1k-$2k
Aircon/heater needs replacing? Maybe $5k
Rates? Around $3k p.a.
Need a plumber? A few hundred every time.
Electrician? Same.
Heaven forbid you have a swimming pool.

You may not(hopefully) need to be calling out tradies regularly but it's no longer a phone call/email to the agent for the owner's problem to have.

Of course, you'd much rather be spending money on those things than paying rent at the end of the day, but a number of my mates said when they became homeowner, they didn't realise how expensive it was just for the little things, or to make improvements to the house.

That's a divorce law issue rather than the housing issue though.

Rent in my area is >$550 a week when my mortgage is $300ish. Buy, make the payments, refinance to a better rate when it pops up. You'll be way ahead compared to renting where you always pay the top price with little to no option to go cheaper like a refinance does with your mortgage

I live in Brisbane, so unfortunately prices like that are around 15 years int he past

Went to a kid's b'day(my daughter's class) party in East Brisbane a few week's ago and they owned the house. it was massive. 4 bedrooms, 2 story, swimming pool, etc. The dad bought it when he was working in Singapore over a decade ago. I'd estimate it'd be worth over $2mil by now and he wouldn't have paid close to it back then, was well under a mil.

Obviously his investment was a very good one.

Should be putting some money in to ETF's and things anyway but for some reason most people ignore the stock market. I don't know that many people could build wealth more efficiently that way though...

Pretty simple really. Just put $500 a month into the S&P 500 and forget about it, you'll have an extra $100k to play with. Obviously the more you put in, the more it compounds.

If your risk tolerance is higher, put it into tech stocks or Bitcoin instead. It'll likely be worth far more but S&P is a 'safer' play.


Warren Buffet got rich from identifying undervalued companies and holding stocks in them long term. Not everyone wants to go this method though, so simply DCA'ing into indices or Bitcoin will net you positive returns over the course of 20 years, unless the world goes to absolute shit of course, then your house probably won't matter either at that point.

 

[faible]

You'll mostly get a positive return obviously, but people very much underestimate how much a house costs to maintain.

Hot water tank goes? There's $1k-$2k
Aircon/heater needs replacing? Maybe $5k
Rates? Around $3k p.a.
Need a plumber? A few hundred every time.
Electrician? Same.
Heaven forbid you have a swimming pool.

You may not(hopefully) need to be calling out tradies regularly but it's no longer a phone call/email to the agent for the owner's problem to have.

Of course, you'd much rather be spending money on those things than paying rent at the end of the day, but a number of my mates said when they became homeowner, they didn't realise how expensive it was just for the little things, or to make improvements to the house.

Rental report

www.dffh.vic.gov.au

Median Rent in Metro Melbourne is currently $560 or $29,120 / pa.

This will rise, annual change was 14.6% for example. A number that renters have no control over really.

It's a lot cheaper to own the house, once you can meet the barrier to entry of a deposit and the repayments.

Most of those things you named aren't even an annual expense, if you're replacing heating or hot water in 5 years that's a pretty bad deal.

Long-term renting is not a great financial option, as there's a point in life where your ability to earn income will be finished and you'll still be at the mercy of the rental market, whereas if you buy you're locked in at whatever the purchase price was at the time, and once you're paid off, you only have maintenance costs which are likely lower than ~ $30k p.a.

So it's probably in one's best interest to buy the principal place of residence if they're able. Investment incentives in the space seem pretty bad to me.

 

[bzparkes]

Rental report

www.dffh.vic.gov.au

Median Rent in Metro Melbourne is currently $560 or $29,120 / pa.

This will rise, annual change was 14.6% for example. A number that renters have no control over really.

It's a lot cheaper to own the house, once you can meet the barrier to entry of a deposit and the repayments.

Most of those things you named aren't even an annual expense, if you're replacing heating or hot water in 5 years that's a pretty bad deal.

Long-term renting is not a great financial option, as there's a point in life where your ability to earn income will be finished and you'll still be at the mercy of the rental market, whereas if you buy you're locked in at whatever the purchase price was at the time, and once you're paid off, you only have maintenance costs which are likely lower than ~ $30k p.a.

So it's probably in one's best interest to buy the principal place of residence if they're able. Investment incentives in the space seem pretty bad to me.

Issue is, due to the rental pricing(I moved in Jan and my rent is $200 more expensive than my last place...) coupled with the ever-increasing price of property ownership, most of us can't save up enough of a deposit in time to purchase without borrowing too much so that we can pay excess on the mortgage and not get stuck paying rent to the bank(in the form of interest) instead of a landlord.

A normal 9-5 barely cuts it as a gateway to home ownership anymore, if you live in the city that is.

 

[faible]

Issue is, due to the rental pricing(I moved in Jan and my rent is $200 more expensive than my last place...) coupled with the ever-increasing price of property ownership, most of us can't save up enough of a deposit in time to purchase without borrowing too much so that we can pay excess on the mortgage and not get stuck paying rent to the bank(in the form of interest) instead of a landlord.

A normal 9-5 barely cuts it as a gateway to home ownership anymore, if you live in the city that is.

Sadly true, unless you do this one trick that unlocked home ownership for this 20 something!*

*secret is have wealthy parents to help you out.

 

[bzparkes]

Sadly true, unless you do this one trick that unlocked home ownership for this 20 something!*

*secret is have wealthy parents to help you out.

A healthy dose of nepotism definitely helps.

I'm about to turn 40, likely need to wait for my mum to kick the bucket before I can have enough for a deposit, after my brother and I split the money from her house. Obviously I'd rather pay rent for many years longer than wish for that to happen.

teaching myself to day trade as a side hustle instead. Been dabbling in it for a few years but only recently decided to take it seriously. Finally starting to become profitable, so that's a potential way for me personally to generate more income than I can working.

This isn't a feasible solution for most people though.

 

[Nuggs Bunny]

Housing is an attractive investment because it's leveraged by the mortgage. Fewer people are game to take out a loan for buying shares or invest the equity in their PPR.

3 requirements of investment success - Brains, balls and leverage

 

[burge13]

Issue is, due to the rental pricing(I moved in Jan and my rent is $200 more expensive than my last place...) coupled with the ever-increasing price of property ownership, most of us can't save up enough of a deposit in time to purchase without borrowing too much so that we can pay excess on the mortgage and not get stuck paying rent to the bank(in the form of interest) instead of a landlord.

A normal 9-5 barely cuts it as a gateway to home ownership anymore, if you live in the city that is.

Isn't this proving the point of buying > renting though. Not to be at the mercy of the landlord

Had you bought and been making payments (likely similar to the rental costs atm), you could refinance after 2 years onto a better deal, some with cash back offers. I've had $11k in cash back offers refinancing the last 7 years for example

Buying (for most people) > renting. I can see sense in buying somewhere and renting that out, then renting closer to where you want to live for example but for the majority, buying is a better option for wealth than renting.

My house has doubled in price in 8 years, would the markets have given me > $420k tax free profits (house prices pretty cheap in adelaide 8 years ago!) in that time DCA into them? Not even close...

Granted I'd need to sell to achieve that but the equity is still valuable, much more than having rented

 

[bzparkes]

Housing is an attractive investment because it's leveraged by the mortgage. Fewer people are game to take out a loan for buying shares or invest the equity in their PPR.

3 requirements of investment success - Brains, balls and leverage

That's true. Property is seen as the 'safe' investment, especially for people who don't have the interest or will to learn stocks/shares/crypto/etc.

Plus, it's a real-world purchase that has the very practical use of being a place to actually live in.

 

[jezfooty]

harsh but landlords gonna landlord i guess

 

[bzparkes]

Isn't this proving the point of buying > renting though. Not to be at the mercy of the landlord

Had you bought and been making payments (likely similar to the rental costs atm), you could refinance after 2 years onto a better deal, some with cash back offers. I've had $11k in cash back offers refinancing the last 7 years for example

Buying (for most people) > renting. I can see sense in buying somewhere and renting that out, then renting closer to where you want to live for example but for the majority, buying is a better option for wealth than renting.

My house has doubled in price in 8 years, would the markets have given me > $420k tax free profits (house prices pretty cheap in adelaide 8 years ago!) in that time DCA into them? Not even close...

Granted I'd need to sell to achieve that but the equity is still valuable, much more than having rented

Well, that's the issue. Saving up enough for a deposit takes far too long, especially when, as you say, housing prices double every few years. If my income isn't doubling at the same rate, it'll be incredibly difficult to ever have enough to purchase a property any time soon.

If a person's income went up at the same rate that property prices did, then there'd be no issue there. That'd create a whole raft of other problems though.

 

[Kram]

Bitcoin and day trading.

Good luck with that.

 

[bzparkes]

Bitcoin and day trading.

Good luck with that.

Thanks, I've made plenty of money(and missed out on heaps more) so far.

 

[Captivating]

Invest in Bitcoin

1 month ago = 9% return
6 months ago = 57% return
1 year ago = 173% return
5 years ago = 560% return
Since 2015 = 22,300% return

 

[barreness]

The entire point was to have those who have long held properties selling at below market rate to first home buyers, because they get a considerable tax advantage to doing so. It quite literally distributes the wealth of the rich to the young and poorer by way of not extracting it from the wealthier party to be spent anywhere else and goes directly to the younger poorer person. There could be sales going through with $100,000+ discounts on market rates if circumstances line up and you allow home owners to shop their house to first home buyers - and both parties will win. The only side of that arrangement who miss out is the government, but this is all their fault to begin with so stuff them.

The challenge is to clearly define a first home buyer, which I will leave up to you.

This is hilarious. Let's cut taxes for investors, that will somehow distribute wealth downwards, literally trickle down rubbish

Yaaaaaaa less money for health, education, and infrastructure. Problem solved, bloody govt

The likely result of this policy would be collusion between the seller and first home buyer for a split of the sale/tax discount, probably in the buyers favour(at least in this market) 90/10. How very free market of you

Rich get richer, as intended I guess.


If you look at the policy that has driven the huge property price increase it's the CGT discount from Howard. Doubling down on this policy to transfer a small percentage of that tax loophole profit to a first home buyer is not solving the problem. Just get rid of it, all investments capital gains are taxed at 30%(maybe 40) regardless of income level

 

[Taylor]

This is hilarious. Let's cut taxes for investors, that will somehow distribute wealth downwards, literally trickle down rubbish

Yaaaaaaa less money for health, education, and infrastructure. Problem solved, bloody govt

The likely result of this policy would be collusion between the seller and first home buyer for a split of the sale/tax discount, probably in the buyers favour(at least in this market) 90/10. How very free market of you

Rich get richer, as intended I guess.


If you look at the policy that has driven the huge property price increase it's the CGT discount from Howard. Doubling down on this policy to transfer a small percentage of that tax loophole profit to a first home buyer is not solving the problem. Just get rid of it, all investments capital gains are taxed at 30%(maybe 40) regardless of income level

Do you prefer a reality where wealthier people are taxed or, and strictly or, one where first home buyer are sought out to sell property to at a significant discount for the tax advantage in doing so?

Because it seems to me that you're content with first home buyers being denied a massive leg up as long as wealthier people still get taxed.

And given the debt spending that goes on, I don't think we should look at tax as anything but an anti inflationary tool.

You'd be literally moving maybe hundreds of thousands of dollars in equity wealth to first home buyers but you'd rather continue as we are where the government isn't doing so well helping that so richer people can wear a few blows.

Damn those first home buyers. But you genuinely do need to decide if cashed up migrants are going to count as first home buyers because you're about to be smacked with headlines about how first home buyers have risen lately, politicians patting themselves on the back, and it won't be who you picture.

 

[faible]

Blaming migrants and trickle down economics, tick tick.

 

[Ghost Patrol]

Do you prefer a reality where wealthier people are taxed

Yes

 

[Taylor]

Blaming migrants and trickle down economics, tick tick.

No blaming at all, I'm saying YOU need to decide if first home buyers includes the cashed up migrants that the government is about to claim are first home buyers for the purpose of their self congratulations.

I don't have a problem with cashed up migrants buying peoples places. Clearly. But the goal is for those already here to be able to buy isn't it?

 

[Taylor]

And wealthy people gifting their equity to younger poorer people isn't trickle down.

 

[faible]

And wealthy people gifting their equity to younger poorer people isn't trickle down.

‘Gifting’ clearly means something very different to you than anyone else.

 

[Gralin]

Love it
Create a fake problem (CGT on primary residence)
Argue for a solution that benefits the wealthy (CGT removal for selling investments to "first home buyers")
Throw in some racism (cashed up foreigners will take advantage of this generosity)
Get people to argue about your made up situation