Property - Get in ASAP

[carntheroos4eva]

Was talking to somebody who is doing a commerce degree and he says that the best time to get into property is in September/October.

 

[AngelEyes]

1 major flaw in your post:

Neil Jenman.

Apart from his good book "Real Estate Mistakes", everything else he talks about is rubbish. Been to one of his seminars - he spruiks that negative gearing is a bad idea. He also spruiks that you should nebver ever under any circumstances sign a contract.

He's a nut job.

Negative gearing can be a bad idea. The idea of negative gearing is to loose money on the property market so the government gives you a greater tax refund.

So if you make a $10,000 loss on your rental property and you take rate is 30% you will get a net $10,000 tax deduction which sees you get a $3,000 extra tax refund. You are still $7,000 out of pocket and have then outlaid $7,000 just to meet the extra interest etc.

Where negative gearing is effective is when property prices are rising greater than your current year losses. So if your property rose by $20,000 in value and you where out of pocket $7,000 from gearing you have effectively made $13,000 (before capital gains tax).

The problem is when property prices fall even if slightly you are facing a decrease in the value of the property on top of your $7000 out of pocket expenses. Even when a market stands still and there is no change in property prices you are effectively losing $7,000 per year for no gain.

Negative gearing is great when property prices are increasing rapidly and has made alot of people alot of money over the recent property boom but if the market stands still, only increases slightly or falls then negative gearing isn't worth while. The problem is that with interest rates rising the current year losses are increasing and if the market stalls or reduces then people are losing an increasing amount of money for no benefit i.e. as property prices wouldn't be booming.

Negative gearing amplifies gains but also amplifies losses. It can be good but it can be bad. He could be very well justified in his opinion that negative gearing is bad especially considering some of the views of certain economists about the markets.

 

[bunsen burner]

Negative gearing can be a bad idea. The idea of negative gearing is to loose money on the property market so the government gives you a greater tax refund.

Bzzzzt, it's about leveraging. Do not pass go, do not collect $200, do not bother talking about something you don't properly understand.


And no one is suggesting no one who -ve gears ever lose mney - they do. But that doesn't mean it's fundamentally a bad idea and should never be done. Fundamentally it's a great idea and an exellent vehicle for investment.

And for the rest of your post: you're trying to explain to an experienced investor some very basics. It's like trying to tell me 2 + 2 is 4. What on earth made you think you had to tell me that? And on a side note: you do know that long term it's very rare that someone loses money out of gearing? You should make an effort to understand it properly before offering your advice.

 

[Ghostwriter]

Bunsen, why the evangelical zeal in spreading your property investment advice?, can't you accept that other people might have a different view and just leave it at that?, from reading a lot of your posts about property it seems you have multiple investments in a variety of locations, if true then you would have considerable wealth, and debt, or else you just read a lot of investment books, assuming you are not bullshitting about all the property you own, why then do you bother coming on here and vilifying anyone who has an alternative view to you, shouldn't you be spending your valuable time watching over your vast real estate empire?
My personal situation is this, House paid for, quite a good super nest egg although its taken a bit of a hit, cash in the bank and some shares which also have taken a hit, investment goals, buying another house preferably in a seaside location, I don't want for much just to be comfortable and not be saddled with debt, what is your situation?

 

[bunsen burner]

can't you accept that other people might have a different view and just leave it at that?

I'm an experienced investor. I know my property very well. So when someone comes on here and tells me I'm wrong and offers an alternate version f the truth I'm going to let them know about it.

Ever noticed there's some opinions i don't touch and some I do? Ever wondered why that is? It's because some of these are just different opinions that are necessarily right or wrong, where as other people are trying to peddle clear mistruths.

Now tell, what is your view on negative gearing? Do you think it is an absolute no go zone as Neil Jenman spruiks?

And is that a subject of opinion or fact? I think you'll find it is one of fact. So I'm not sure why you're referring to "different views of opinion"?

from reading a lot of your posts about property it seems you have multiple investments in a variety of locations, if true then you would have considerable wealth, and debt, or else you just read a lot of investment books, assuming you are not bullshitting about all the property you own, why then do you bother coming on here and vilifying anyone who has an alternative view to you, shouldn't you be spending your valuable time watching over your vast real estate empire?

Errr, it's a forum about investment where people like to talk about investment. Why else did you think I come here?

And as for villifying everyone who doesn't agree with me? Simply not true. I only villify the people who are clearly wrong and don't know what they're on about. And how do I know they don't know what they're on about as opposed to just an alternate view? Take your profession whatever that may be, with all your experience and know how, and imagine someone coming to you and talking it up. If they don't know what they're on about (ie have almost 0 experience) you can pick it straight away, can't you.

ps I did notice you are happy to have a go at me for my manner but decline to dispute any of the knowedge I have provided? So I'm not sure why you have a problem with me pulling up the people who pretend they know what they're talking about?

ANyone who believe Jenman tripe that they should never -ve gear and that on the whole it's a bum idea simply doesn't undersatand real estate investment and there's no ifs or buts about it.

My personal situation is this, House paid for, quite a good super nest egg although its taken a bit of a hit, cash in the bank and some shares which also have taken a hit, investment goals, buying another house preferably in a seaside location, I don't want for much just to be comfortable and not be saddled with debt, what is your situation?

I can't win here because it will just look like I'm bigging myself up. I'm smart enough to know that anyone with any intelligence knows that I know my stuff when it comes to real estate. The only people who don't see it are the ones who can't accept that a guy who has given them a serve here or another thread might know their stuff. And I could be bullshitting - I may have read all the books and gone through all the street directories and learnt all the suburbs, learnt all the strategies, memorised roughly which cities have had booms and when. But any one with some intelligence knows it's possible but unlikely.

I'll give you this much:

I own or have owned property in each of Australia's 5 major property markets. I own my PPOR more or less outright. I've done buy and hold, off plan, and I'm currently doing a development, and I spent $800k in the lst 2 months on real estate. I'm also a smart dude who came second top in my software engineering degree. I have studied property investment extensively. I know my stuff reasonably well.

And as much as I don't care if anyone thinks that I think I'm above other people because I have made good investments, I don't. I just simply don't tolerate knobends who act like authorites on property when they have no real experience. ANd there's no shortage of such people here.

I'll also go as far as telling you about one of my deals: Bought in Canning Vale Perth 2002 for $240k inc costs/stamp etc. Borrowed 100%. No money down. To service it, it cost $3k pa. In May last year it was worth $530k. I wanted to sell but tennant wouldn't give access so had to drop it for $467k last december. That's %212k net profit in 5 years at a ROI rate of 1500% over 5 years. And this is typical of many of my investments.

But I have people here telling me -ve gearing is a poor investment choice or that you can't make such profits in real estate. I hope you can now understand why I have no time for people who pretend they know what they're talking about. And that is different to people who come on with mere opinions - I have no problem with those.

 

[bunsen burner]

Negative gearing can be a bad idea. The idea of negative gearing is to loose money on the property market so the government gives you a greater tax refund.

So if you make a $10,000 loss on your rental property and you take rate is 30% you will get a net $10,000 tax deduction which sees you get a $3,000 extra tax refund. You are still $7,000 out of pocket and have then outlaid $7,000 just to meet the extra interest etc.

Where negative gearing is effective is when property prices are rising greater than your current year losses. So if your property rose by $20,000 in value and you where out of pocket $7,000 from gearing you have effectively made $13,000 (before capital gains tax).

The problem is when property prices fall even if slightly you are facing a decrease in the value of the property on top of your $7000 out of pocket expenses. Even when a market stands still and there is no change in property prices you are effectively losing $7,000 per year for no gain.

Negative gearing is great when property prices are increasing rapidly and has made alot of people alot of money over the recent property boom but if the market stands still, only increases slightly or falls then negative gearing isn't worth while. The problem is that with interest rates rising the current year losses are increasing and if the market stalls or reduces then people are losing an increasing amount of money for no benefit i.e. as property prices wouldn't be booming.

Negative gearing amplifies gains but also amplifies losses. It can be good but it can be bad. He could be very well justified in his opinion that negative gearing is bad especially considering some of the views of certain economists about the markets.

This time around I will actually give you the respect of a proper answer.

Your idea of -ve gearing being a tax strategy is incorrect. The reason you most likely believe this is unscrupulous property vendors use this as lure. And then nut jobs like Jenman repeat that -ve gearing for tax purposes is bad. It is bad just for tax reasons but that's not why investors do it. Most investors negatively gear to increase their leverage. Leverage is the most important facet of investing.

We all know that if the price goes down and you're negatively geared you lose money. But so what? If you're investing you need to be able to hold onto a property for 1 cycle if need be. Over one cycle (5-10 years) your property will almost always return you a sizeable profit. This notion that you stand to lose money is neither here nor there - the issue is "can you afford to service this property for 5-10 years". If the answer is no, then that doesn't mean -ve gearing is bad, it means you shouldn't be investing because you don't have enough money.

I suspect you've ready this Jenman nonsense. He's a nutjob. Real Estate Mistakes was an excellent book - except the bit where he urges people they should never -tively gear. He has no idea what he's on about. He is not an investor - he's a real estate agent. And there's a big difference between those two.

And if you're still not sure, get out a pad and do the figures.

 

[nokiacasio]

Personally, if I wanted to invest in property I would rather do it through a mutual fund such as the Fortuna Fund. This is appropriate because the high prices of homes nowadays means that most investors will not be diversified if they buy one home. I put I think 10 per cent of my portfolio in property. Within the Fortuna Fund is internal gearing.

I'm an experienced investor.

It looks like you're very inclined to spread your knowledge. Can you explain to me why property prics must rise forever into the future? Is it because of rental income, immigration, development laws, etc? Taking out inflation, what are the forces of demand and supply that make long-term price rises inevitable? Does it only apply for Australian real estate, and if so what is unique about Australia? What tools do you use to detect an asset bubble? What is this property cycle you're talking about? Is it like the business cycle? What causes the property cycle?

If we can know for sure that property prices always goes up and never bubbles then we can be certain that negative gearing always works.

 

[bunsen burner]

Personally, if I wanted to invest in property I would rather do it through a mutual fund such as the Fortuna Fund. This is appropriate because the high prices of homes nowadays means that most investors will not be diversified if they buy one home. I put I think 10 per cent of my portfolio in property. Within the Fortuna Fund is internal gearing.

Jozeph,

Please note the above post. I would do things differnet to this, but I don't have a problem with this post. Just a different view on how to invest. But an educated view. This is very different to the people I lambast for coming out with uneducated crap like "negative gearing is a bad investment strategy" or "Shares outperform propery every time" (or vice versa) or "Real Estate has in real terms had 0 growht fr the last 40 years and is a bad investment" etc.

It looks like you're very inclined to spread your knowledge.

It's a forum.

Can you explain to me why property prics must rise forever into the future? Is it because of rental income, immigration, development laws, etc? Taking out inflation, what are the forces of demand and supply that make long-term price rises inevitable? Does it only apply for Australian real estate, and if so what is unique about Australia? What tools do you use to detect an asset bubble? What is this property cycle you're talking about? Is it like the business cycle? What causes the property cycle?

No need to be a smart arse.

If we can know for sure that property prices always goes up and never bubbles then we can be certain that negative gearing always works.

Please quote where I have ever said this. Maybe you don't understand the difference between long term and short term? And I can only assume that because you are suggesting that I don't understand that their are corrections then I am full of shit regarding my experience?

A few more points:

1. Let's say that it's possible for a Japan type scenario (which it is): Property has been rising for 100+ years in this country. Why would you refrain from investing because this "may" happen? That's a chicken little attitude that is neither here nor there.

2. These people who claim -ve gearing is a bad strategy or doesn't work are not referring to the future (ie it won't work if sky falls in). They are also referring to the past. f course -ve gearing won't work if the sky falls in, but again, that is neither here nor there.

3. In answer to your question "why must real estate prices rise inevitably (long term)"? Polualtion growth and land scarcity.

4. And as for property cycles: no difinitive answer but property booms, corrects, flattens, slowly grows, booms, corrects, and so on. No hard and fast rules but you get the drift.

 

[Ghostwriter]

Thanks for the reply and a bit of background about yourself, it all helps to paint the picture a bit better.

 

[nokiacasio]

If we use gearing, that is, borrow to invest in an asset, we need to make sure the rate at which the asset appreciates is greater than the rate we're borrowing from the bank. Otherwise, we'll make a loss.

In answer to your question "why must real estate prices rise inevitably (long term)"? Polualtion growth and land scarcity.

What do you think about the Victorian Government's plans to convert farm land around Melbourne into houses? This would reduce scarcity. (Read More Land, Lower Prices - Guaranteed.)

Scarcity of land depends mainly on Government policies, which are influenced to a degree by voters. Many voters will want house prices to go up but many will also want houses to be affordable. Are you sure land owners as a political interest group will have more power over Government than buyers, renters, etc?

Fertility rate in rich countries tend to be low. In Australia total fertility rate at the moment is about 1.8 babies per woman, even with the Baby Bonus. The main reason we have booming population growth in Austraia was high immigration during the Howard Era and this is likely to continue in the Rudd Era although the Labor Party is a party that represents the interests of workers and workers traditionally tend to dislike immigration and are usually economic protectionists. Rudd claims he is a "fiscal conservative." But we'll see what happens.

And as for property cycles: no difinitive answer but property booms, corrects, flattens, slowly grows, booms, corrects, and so on. No hard and fast rules but you get the drift.

I would agree. Real estate as an asset is subject to economic forces just like shares and precious metals are, and there are many forces acting simultaenously, leading to volatility. I get the impression many believe real estate is special. Real estate does have many traits that make it unique, e.g. low liquidity, high transaction costs, etc, but nevertheless it is still an asset and we know for sure from real estate in other countries that changes in supply and demand can causes prices to go up and even down.

 

[bunsen burner]

If we use gearing, that is, borrow to invest in an asset, we need to make sure the rate at which the asset appreciates is greater than the rate we're borrowing from the bank. Otherwise, we'll make a loss.

Is there any point to this comment?

Actually, I just read the rest of your post, do you have a point at all? Why are you telling me this? What has this got to do with me and anything I have said?

 

[nokiacasio]

I made responses to what you and others have said. Am I off topic?

 

[bunsen burner]

I made responses to what you and others have said. Am I off topic?

Yes. I have stated that -ve gearing almost always works if you can hold on through a cycle. But here you are talking small term and posing such questions as "what if it doesn't rise to cover your costs?".

If you disagree with me, show me some figures. There's no point telling me that a person my buy a property at a market peak and then sell in 3 years later at a loss. I'm quite aware of this. It's not only assumed knowleddge, but I have acknwledged this several times.

You seem to be a share guy with limited property knowledge and experience (I'm assuming this because you analyse property like you would shares), so I'm not sure why you're trying to shoot me down? Perhaps you can clarify this?

 

[bunsen burner]

And as for figures, let me show you some:

I don't recall a time where a major market (Syd Mel Bris Per Adel) didn't double in 10 years. There's no guarantees it will continue like this in the future, but it is highly likely.

500k loan for 100% purchase price
10% interest
$450 pw rent
= $35k per year to hold
Over 10 years you pay $350k
Your place is worth $1m
$150k profit

That's using a formula with very conservative estimates. Keep in mind if you know where to buy, property will double closer to 5 years. To lose money with gearing long term you either need extraordinarily high interest rates AND little growth OVER a 10 year period. The chances of that are very very very slim. The odds are highly stacked in the investor's favour - as long as they can service the debt. The risk isn't -ve gearing or the market not moving or interest rates, the risk is keeping your job or not having a major illness or injury.

It's a ****ing no-brainer.

 

[nokiacasio]

What I'm saying is that you need sustained long-term price rises in real estate for leverage to be profitable.

The idea that real estate does go up in the long-term seems to be regarded as a self-evident truth. If the chart of Australian house prices on the other page is accurate, for the first half of the 20th century house prices went down. Of course if you look at the second half house prices went up. But if we are this selective we can say that the Chinese stock market post 9/11 achieved better growth rates. In 2006-2007 the MSCI China Index went up 109 per cent. Thus investment in Australian residential real estate during this time would produce a loss if we count the better investment we could have gotten elsewhere.

Boom periods are usually hard to predict. To always ride the boom you need to pick the right asset class, the right house or company, and you have to do it at the right time. I acknowledge that I don't know when property will boom or when Australian shares will boom, so I diversify. I put about 10 per cent in the Fortuna Fund.

What some are saying is that based on past performance of residential real-estate you can make lots of money through leverage. If it's based on past performance then if are selective about the period over which we invest then maximum leverage will obviously make money. We are talking about historical data, which is certain. What I'm trying to say is that the future is uncertain and leveraging into one house would make me nervous. In the last 2 months Melbourne median house prices has dropped by $11,000 because of "repeated interest rate rises and a volatile sharemarket."

You seem to be a share guy with limited property knowledge and experience (I'm assuming this because you analyse property like you would shares), so I'm not sure why you're trying to shoot me down? Perhaps you can clarify this?

If we are both men I'm sure it's natural for each us to intimidate the other and show off about ourselves. Evolution preserved these instincts in us so we can attract females. Instinct, however, can get in the way of truth, and I believe that for the pursuit of truth to be most effective, efforts must be made to suppress instincts. For a topic like personal finance, truth is far too important. So I am not trying to "shoot you down."

 

[i_hate_scams]

medium property prices also dropped last year, in may and June....

it depends on where you buy, really, i've been to a few auctions in melbourne and they have gone between 100K to 150K over the quoted amount (mid 400K quotes, admittly they were in mont ablert and brunswick). There are also more properties PI compare to last year. The key i think is buying in areas where new overseas immigants wanna live. they have money and they will pay for it.

for example, my mum has a house in kew, she paid $72K in 1984. if she sold it now it will get in excess of 1.2 million. you buy in the right area and you will get your return. having said that, who on bigfooty will have a million dollars to buy a property?

 

[dodgy_boy]

Depends on location. The areas just outside of Melbourne, i.e Kilmore, have been growing very rapidly, retirees need somewhere quiet to settle down, but still like to be reasonably close to the major centres, (for health services etc). So I'd be looking for areas maybe 30min to an hour from the cities for a solid medium-long term growth

 

[AngelEyes]

This time around I will actually give you the respect of a proper answer.

Your idea of -ve gearing being a tax strategy is incorrect. The reason you most likely believe this is unscrupulous property vendors use this as lure. And then nut jobs like Jenman repeat that -ve gearing for tax purposes is bad. It is bad just for tax reasons but that's not why investors do it. Most investors negatively gear to increase their leverage. Leverage is the most important facet of investing.

We all know that if the price goes down and you're negatively geared you lose money. But so what? If you're investing you need to be able to hold onto a property for 1 cycle if need be. Over one cycle (5-10 years) your property will almost always return you a sizeable profit. This notion that you stand to lose money is neither here nor there - the issue is "can you afford to service this property for 5-10 years". If the answer is no, then that doesn't mean -ve gearing is bad, it means you shouldn't be investing because you don't have enough money.

I suspect you've ready this Jenman nonsense. He's a nutjob. Real Estate Mistakes was an excellent book - except the bit where he urges people they should never -tively gear. He has no idea what he's on about. He is not an investor - he's a real estate agent. And there's a big difference between those two.

And if you're still not sure, get out a pad and do the figures.

Bunsen what part didn't you understand that gearing amplifies both gains and losses. The higher the gearing the higher the gain or loss. Surely you understand that being such an experienced investor. That has nothing to do with tax purposes. It fails on multiple purposes.

You would also understand that gearing in stagnating or a falling market amplifies losses so if the property market does either of these people gearing will loose significant amount of money. I'm very happy to see your calculations to prove me wrong.

As for cycles, I never mentioned cycles. I probably am more a negative thinker on the future of the Australian Property Market. I tend to believe that the market is over priced. Its interesting that the International Money Fund said that even with housing stress etc it believes that 25% of the price in the Australian Housing prices are unexplainable and have no reason. Surely, this would mean that their is a possible of a correction of 25% or something near about. I would tend to think it will be a bigger correction because people generally panic where slides in any market occur.

I think on this basis its very possible that with a possible recession too, rising interest rates, rising defaults, 25% overpriced housing and moderating growth in China that the Australian Property Market over the short-medium term will have a significant fall. The problem is that confidence will be dented and it could be very well hard to reignite if people get burnt by upto 25%. Thats over $100,000 on the average house. Due to the length of this boom, its very possible that we have a long low period.

Reality is that with the market outlook, you would be silly to suggest sustainable gains in the near future which puts in doubt any reason to negative gear over the short-medium term. Negative gearing is worthless in a stagnating or falling market. There is no point investing to loose money. Cycles do exist but the bigger the gain the bigger the fall and we have had a pretty big gain lately so expect a prolonged fall.

 

[AngelEyes]

And as for figures, let me show you some:

I don't recall a time where a major market (Syd Mel Bris Per Adel) didn't double in 10 years. There's no guarantees it will continue like this in the future, but it is highly likely.

500k loan for 100% purchase price
10% interest
$450 pw rent
= $35k per year to hold
Over 10 years you pay $350k
Your place is worth $1m
$150k profit

That's using a formula with very conservative estimates. Keep in mind if you know where to buy, property will double closer to 5 years. To lose money with gearing long term you either need extraordinarily high interest rates AND little growth OVER a 10 year period. The chances of that are very very very slim. The odds are highly stacked in the investor's favour - as long as they can service the debt. The risk isn't -ve gearing or the market not moving or interest rates, the risk is keeping your job or not having a major illness or injury.

It's a ****ing no-brainer.

Or if the 500k house is worth 800k after ten years you have lost $50k. Thats 60% growth and you're losing money.

Bunsen, its not that your logic isn't correct in a fastly rising market but you also fail to conceive that the market may actually stand still or fall. As the IMF said there is no reason for 25% of the housing market growth in value. There has to be some room in the near future for a fall. Recent times have been good but there is alot of risk in the property market at the moment.

Under the same scenario if property prices fall 25% (using the International Monetary Fund figure) then you will have a property worth $375,000 and have paid out $350,000 which means you will in effect get $25,000 for the $500k investment. You have lost a staggering $475,000 by gearing. With no gearing you would loose $125,000 but have a steady stream of income. Gearing has increased your losses by 380% and gives no stream of income.

Assuming property prices stall over the same period of time. Your $500k investment will still be worth $500k but you will have paid out $350k so for your $500k investment you will have $150k in value left. A loss of $350k. Once again gearing amplifies your losses or in this case makes you lose. If no gearing existed you would have a $500k asset and a steady stream of income where with gearing you have a net asset loss of $350k and no steady stream of income.

Gearing is very dangerous in a falling or stagnating market. The property market has a very poor outlook and the gains that have occured are not sustainable. There will be falls or stagnating for a significant period of time. The last 10 years aren't a good ten years to be basing things on - its very easy to base the future on the most successful financial period in Australian history - every market went gangbusters. Wages and other indicators show property has increased by far more than these other measures which would suggest that the property value is unstainable at current prices. We are going to get the cycle, a further downward spiral in the property prices due to the other indicators and well if the economy stalls or growth slows alot of people are going to suffer big time.

There is no reason we won't fall like the US and UK markets have. Infact, there is probably more reason why our market will fall.

 

[bunsen burner]

Bunsen what part didn't you understand that gearing amplifies both gains and losses. The higher the gearing the higher the gain or loss. Surely you understand that being such an experienced investor. That has nothing to do with tax purposes. It fails on multiple purposes.

You would also understand that gearing in stagnating or a falling market amplifies losses so if the property market does either of these people gearing will loose significant amount of money. I'm very happy to see your calculations to prove me wrong.

As for cycles, I never mentioned cycles. I probably am more a negative thinker on the future of the Australian Property Market. I tend to believe that the market is over priced. Its interesting that the International Money Fund said that even with housing stress etc it believes that 25% of the price in the Australian Housing prices are unexplainable and have no reason. Surely, this would mean that their is a possible of a correction of 25% or something near about. I would tend to think it will be a bigger correction because people generally panic where slides in any market occur.

I think on this basis its very possible that with a possible recession too, rising interest rates, rising defaults, 25% overpriced housing and moderating growth in China that the Australian Property Market over the short-medium term will have a significant fall. The problem is that confidence will be dented and it could be very well hard to reignite if people get burnt by upto 25%. Thats over $100,000 on the average house. Due to the length of this boom, its very possible that we have a long low period.

Reality is that with the market outlook, you would be silly to suggest sustainable gains in the near future which puts in doubt any reason to negative gear over the short-medium term. Negative gearing is worthless in a stagnating or falling market. There is no point investing to loose money. Cycles do exist but the bigger the gain the bigger the fall and we have had a pretty big gain lately so expect a prolonged fall.

I had a full reply but lost it, so to sum it up: you just don't get it. And it amazes me how someone like yourself is arguing with someone who knows it inside out. Has it occured to you yet that you just might not get it?

 

[bunsen burner]

Or if the 500k house is worth 800k after ten years you have lost $50k. Thats 60% growth and you're losing money.

Show me an example of where a house has not doubled within 10 years. Those figures i used are stretching the bounds of reasonability too.

Bunsen, its not that your logic isn't correct in a fastly rising market but you also fail to conceive that the market may actually stand still or fall.

Amazing. You are sitting there telling me I am stupid?

Let's just analyze this quickly:

I am an experienced investor. I have owned property in all major Australian markets over the last 10 years. And you think I am unaware that markets can be flat or falling.

Your clear lack of intellect astounds me. I'm not even going to waste my time with you. You simply don't get it. And at the same time you know yourself that you have no actual experience, no have read books by real estate experts, nor been to seminars. But you're actually talking as if you know what you're talking about? Simply amzing. Personally I wouldn't have the hide to go to seasoned and successful share trader, or carpenter, or mechanic and tell them they have it wrong and I know better.

 

[nokiacasio]

Angel Eyes is saying that gearing into a stagnant or falling market can lose you money, which is true.

I think Bunsen Burner is saying that property always doubles in 10 years and therefore gearing is always profitable. Is that right?

I produced stats showing that in about one century median house prices in Sydney went up on average 5 per cent per annum. Someone else said that if you instead looked at a different range then property prices would seem to grow more. However, if we can be selective then why not be selective on other assets like gold or shares? We can choose figures carefully that coincide with boom times.

 

[HighettBomber]

I produced stats showing that in about one century median house prices in Sydney went up on average 5 per cent per annum. Someone else said that if you instead looked at a different range then property prices would seem to grow more. However, if we can be selective then why not be selective on other assets like gold or shares? We can choose figures carefully that coincide with boom times.

The stats you showed are not not useful as they included the time prior to the great depression. Economies were run completely different then and you had long periods of deflation as well as inflation.

It is also quite easy to argue against the usefulness of median figures when it comes to property. This has already been discussed in some detail.

 

[bunsen burner]

We can argue these stats all day but at the end of the day, this is what it all comes down to:

1. Just because property markets sometimes drop and are often flat, it does not mean that gearing is a bad strategy. Some properties I have owned have been flat for 3 years then boomed for two netting over 1500% return. It's all about holding onto that asset through a cycle. To say "well if the market goes backwards you are losing money" is a stupid view and underlines a misunderstanding of gearing.

2. If you're not gearing, it's unlikely you will turn out wealthy.

 

[HighettBomber]

If you're not gearing, it's unlikely you will turn out wealthy

Well said.