Thread: Wealth paradox

..and sometimes you get lucky.

I am a great believer in people accepting responsibilty for their own actions and decisions.
But when someone whose grandmother dies and leaves them a home in Sydney which they use as the start of their real estate empire tries to pretend that they succeeded by the sweat of their brow and they talk as if they are more financially savvy than someone whose parents and grandparents are alive and well, I think they are kidding themselves.
Of course people who work hard and make the right decisions are likely to do well. But unless the person who inherited grandma's house in Sydney actually bumped her off, how much credit do they deserve for the start they have got?
Just because we generally get what we deserve shouldn't blind us to the fact that there are some people who deserve a better hand than fate deals them and sometimes a situation that benefits most people can be harmful to others.

Can we not go over the jealousy/envy thing again. We've been there and done that.

But you have just clearly done that yourself. Who cares if someone got left property that started an empire and think they are the ants pants. Who is worrying about who gets credit? I feel that your comments are coming from somewhere personal to yourself and that there is an underlying resentment for some reason. Ultimately what ever you are dealt with, it is up to you to make the best of it,

Regards

Stevo

An interesting and quite a sensible discussion.

As far as I remember in this thread no on has admitted that they personally invest in rental markets. OK yes family has but not them.


Well I invest in the rental market in the UK and yes I have taken a bit of stick from people about it.

In the first instance given, it sounds to be that they are 'highly geared', i.e. they have borrowed a high percentage of total worth of assets.

That is a high risk strategy. Many possible pitfalls, property prices fall (Can be due to very local reasons, like a new trunk road/rubbish recycling facility being built at end of garden), rental voids, BIG investors coming into town and building more rental properties so that surplus of rental properties on market which drives rents down and void periods up. Rising interest rates.

On a highly geared portfolio (say 80-90%) then with a strong rental market and rising property prices you can make money, equally if market weakens the banks can pull the plug and enforce sale of properties.

Banks consider two things on investments, 1) Security of their money, 2) ability to repay. As long as those things are satisfied they basically dont care


Personally I am happier with a lower geaing and wont go above about 60% on my portfolio. That way IF I get a void/house prices drop then I can sit it out.

One way of getting money out of property TAX FREE in UK is as follows. Buy a house for £100,000, put down a 20% deposit, borrow 80% as long as rent covers costs. Two years later say house is worth £120,000 reliase the 80% increase in value(i.e. borrow) of £16,000. This extra £16,000 is TAX FREE. Do what you will with it. Pi$$ed up against a wall or use it as another deposit

You now have a house worth £120,000 with an outstanding loan of £96,000 and with £4,000 of your money in it plus an equity of £20,000 in it. Repeat it again in 2 years time and you have none of your own cash in the property, have taken cash out and still have equity in property. THIS always asumes rent will pay loan off!

In my search for properties I see rental properties which I would not let an animal live in. I take pride in providing a decent rental property and quite often will reroof/rewire/install new central heating/kitchen/bathroom etc. That way i tend to get decent tenants who stay in the property.

Where I do feel sorry for youngster is in pictuesque areas where people buy second homes and only occupy them for a few weekends of the year but drive up costs of housing often in area of low employment prospects, hence youngsters are forced out of countryside into towns


Regards


Brendan

I am genuinely sorry that I have to withdraw from the discussion for a day or two, but I am visiting relatives and my niece needs her computer back to do some schoolwork.

I know it is unfair to make a parting comment then disappear for a couple of days, but I am going to do it anyway.

Why are so many people so insistent (or is it just one person who is repeatedly insistent) that I am being jealous or resentful or something similar?

Aren't other people prepared to look at situations from other people's points of view? Why do you assume they are my views? Is it just because I take pride in presenting a side of a case in a fairly robust manner?

Apart from the obviously personal comments about my father and my first house, I am simply repeating arguments advanced by some of the panel on a recent episode of "Difference of Opinion" on TV. Those panelists were not personally attacked for presenting those views; why are people casting aspersions on my motives?

We are fairly conservatively geared. If interest rates went to 18 percent tomorrow it would not impact us in any direct way. If anything it would be a benefit as housing would probably get cheaper after the shakeup.

Personally, I applaud people for doing this type of thing. However I think it becomes a hobby of theirs and good on them.

However sometimes I think they forget what is important. Some friends of our are building a mega property portfolio. Our children are the same age, and at one point the Meningococcal vaccine had to be paid for. It was about $300, and we paid for it. Despite their income being double ours, and them having half a dozen million dollar houses, they choose not to do it because it was too expensive ???

They are definitely going to die richer than us.

The way I look at it, we're doing better than some, and not as well as some others.

Originally Posted by DirtyDawg

I have a friend who needs some brick paving done
He and his lovely wife have 3x homes and 2x blocks of land , 1 x HSV club sport R8 about 3 weeks old and a new ford Territory.

Quote for the brick paving $4000 , he said they can affored it mates rates I said I would do it for $2000
When asking him about his cash flow he said his whole earnings and his wifes go's on the mortgages and they live off of the $800 rent the receive each week.
Weird up front looks as if he is rolling in it but really just making ends meet...God help him if interest rates go up...
Oh in answer to the obvious question..was 3 blocks of land but they sold it and bought the cars with the profit

Anyone else know of anybody doing it this way?

yep Me and SWMBO all my pay, the rent from the property in townsville go on paying for houses and we live off of her pay for the bills food and fuel....

(this is the only reason IVe started doing backyarders for cashies instead of beer/bbq and no its not the reason for yall are paying how much thread that was my sheer disbelief)

Unfortunately for the 'life experience' we have a generation that has never seen hard times.

When was the last recession?

When I was teaching at TAFE I used to tell students that a recession is no fun. I used the example of going to work on Monday and finding out that the company had gone bust. You would be told that your wages and entitlements might be paid when the assets were sold, if there was money left over.

This happened to me as an Apprentice in late 1974 and again as Production Manager in 1990.

Without fail the students would say "they can't do that to an employee". "We have rights you know!"

On house values, we rented in 1991 while I was training to be a Teacher for $200 per week. The next year we thought we would be smart and buy a place and sell it when I was transferred.

The house cost us $108,000 and I never had to transfer so we kept the house to renovate.

You know, buy the worst house in the best street and get rich.

After 7 years and spending $30,000 in renovations plus loan repayments we sold the house for $108,000 due to a new estate opening over the road.

We should have saved our money and had time to spend apart from renovating.

You don't always make money on real estate.

Can anyone name a period in Australian history when real estate prices have had large gains without being followed by a "bust"?

Interesting topic, something I have been thinking & talking about with people of similar age to myself - many arguments here are of similar / mixed standings to myself.

I have just turned 22 - still studying and will be for the next 18 months and will exit university with a piece of paper and a $35000 HECS debt (Not a massive drama, only goes up by CPI, comes off wage as tax so effectively it pays itself off - the point of this being that many students can be behind the 8 ball so to speak before the you even get out of the red)

So I will be 23, without really having held a full time job, due to a full time study load with heavy course requirements - I have as worked for 14months full time with a company as experience, but at work exp rates.
This doesn't enable me to save the way I would like to, and once finished I won't have a bank balance that even warrants considering the purchase of a property.

Given a few years time, and I have managed to save some money and can consider the option of purchase it is now 5 years from the current time at minimum – what will prices and availability be like then? It is a scary thought, and most likely be a very real problem for those of my generation.


With that being said, I don’t believe I will in a position of enormous difficulty, sure it may be tight when the time arises but I have the skills to nut it all out and make the decision and get through it. Although I do know a few people of a similar position whose career outlooks are much bleaker than mine.

Whist it is said there is a housing crisis now, the future is not looking like it will ease for those who are struggling at this current period, especially if housing prices continue to rise at the same rate as they have over the previous 5 year period – even if the do decelerate, the rate still will not be proportional to wage increase rates for the average or median person.

At the end of the day, land is not infinite. There is the old saying supply and demand; whilst the supply is steady and the demand is rising the prices will continue to go up. Those who wish to invest in property MUST have some bearing on this price rise as the are increasing demand whilst reducing supply – attribute it to ‘market conditions’ if you will, but this must have some bearing on the effect, justifying sentiments by some above.

A block of land now is looking good!

Cheers,
Dave.