Howdy,
It depends if you can get a bargain... I am a fan of houses as opposed to
units, especially medium range ones (3 to 4 bdr) that suit families in that
popular segment of the market, where you can charge reasonable rent. I am
lucky enough to be building a place for investment whose value is $50k more
than what I paid for it... so even if prices fall by 20% (I find that
unlikely in such a high capital growth area such as where I purchased, new
shopping centre, new roads, close proximity to metro areas etc) I'll still
be ahead. And if you can't find tennants... drop your rent. Just have enough
income coming in to cut $10-20 a week off and you won't have trouble getting
someone.
Sincerely,
Mal
"Charmayne" <c.dawes@no-spam> wrote in message
news:be613q$2b3$1@no-spam
> Hello,
>
> I am going to come into a little money and was wondering whether or not
> investing in a rental property was a good investment in this economic
> climate.
>
> I current owe around $130k on my existing property.
>
> We have two wages coming in.
>
> I also have heard that there is currently too many rental properties at
the
> moment, should this be something to consider ?
>
> Or we could use the money and renovate our existing house. Eg new
bathroom,
> tiles etc.
> we are both in our mid 30's
>
> any advice would be appreciated.
>
>
>
>
"David Segall" <david@no-spam> wrote in message
news:6qfhgv0tctcc51n2sib9ijr2hen15ul4t8@no-spam
> When people talk about property investment they almost always mean
> geared property investment where they only invest part of the capital
> but make any capital gain on all of it. Although you can borrow money
> for any investment only property has lenders competing with each other
> to hand over their money at the lowest interest rates. Furthermore,
> although there are extreme circumstances when the lender will demand
> that you pay down a property loan, they do not compare with, say, a
> margin loan for shares where the lender insists that you repay part of
> the loan when the shares drop to a predetermined value.
>
> Of course, there will times when some other investment provides a
> better return and/or when property investment becomes more risky than
> an alternative. However, in general, property is a "better" investment
> than any other because Australian lenders have defined it that way. If
> you want an extreme illustration of the point, compare your bank's
> attitude to lending you some money to buy shares in a well managed
> listed property trust to lending you some money to buy a corner shop.
> [snip]
I agree with all that, but the issue is should one buy property now?
It is always the right time to buy the right property.... Get
something with dirt as your neighbour and not concrete above and below
you
"Whisper" <beaver99@no-spam> wrote:
>
>"David Segall" <david@no-spam> wrote in message
>news:6qfhgv0tctcc51n2sib9ijr2hen15ul4t8@no-spam
>
>
>
>> When people talk about property investment they almost always mean
>> geared property investment where they only invest part of the capital
>> but make any capital gain on all of it. Although you can borrow money
>> for any investment only property has lenders competing with each other
>> to hand over their money at the lowest interest rates. Furthermore,
>> although there are extreme circumstances when the lender will demand
>> that you pay down a property loan, they do not compare with, say, a
>> margin loan for shares where the lender insists that you repay part of
>> the loan when the shares drop to a predetermined value.
>>
>> Of course, there will times when some other investment provides a
>> better return and/or when property investment becomes more risky than
>> an alternative. However, in general, property is a "better" investment
>> than any other because Australian lenders have defined it that way. If
>> you want an extreme illustration of the point, compare your bank's
>> attitude to lending you some money to buy shares in a well managed
>> listed property trust to lending you some money to buy a corner shop.
>> [snip]
>
>
>I agree with all that, but the issue is should one buy property now?
>
I responded to that in a separate post in this thread by advocating
commercial, rather than residential, property. Then again, if you
think that the economy is about to crash you should stay out of both
the commercial property and the share market.
>
Id go loang with this advice. Pay out ALL non deductible debt (credit cards,
mortfgage..etc..) for good and start getting some deductible debt.(property
investing..etc..)
"Whisper" <beaver99@no-spam> wrote in message
news:3f06c1fe@no-spam
>
> "Charmayne" <c.dawes@no-spam> wrote in message
> news:be613q$2b3$1@no-spam
> > Hello,
> >
> > I am going to come into a little money and was wondering whether or not
> > investing in a rental property was a good investment in this economic
> > climate.
>
> No. Interest rates are the lowest in memory, so obviously you'll be
paying
> a huge premium. Wait for the crash & then jump in (about 3 yrs?)...
>
>
> >
> > I current owe around $130k on my existing property.
>
> You should be trying to eliminate this while rates are so low. The best
> investment you'll ever make is paying off your own home. Throw every
spare
> cent off the mortgage...... anyone who tells you otherwise has a vested
> interest (eg financial 'advisers')...
>
>
> >
> > We have two wages coming in.
>
> I know it sounds boring, but throw as much as you can off your
> non-deductible home mortgage.....
>
> >
> > I also have heard that there is currently too many rental properties at
> the
> > moment, should this be something to consider ?
>
> What do you think?
>
>
> >
> > Or we could use the money and renovate our existing house. Eg new
> bathroom,
> > tiles etc.
>
> Not unless it really needs it. I'd throw the whole lot off your
> mortgage....
>
>
> > we are both in our mid 30's
>
> So am I, & I'm debt free (no mortgage, loans, credit card - zilch)....
It's
> the best feeling in the world. You're behind & better get cracking.
Paying
> a mortgage into your 50's is stupid & unnecessary - don't listen to the
> banks advertising, financial advisers etc. Pay your debts off & only
borrow
> for investments when the time is right (not now).....
>
>
> >
> > any advice would be appreciated.
>
>
> You probably won't take my advice because it's boring, but it's by far the
> best advice you'll get.....
>
>
Charmayne,
It is hard to say given the lack of detail about your situation. However
a couple of comments:
1. Real estate is up a lot over the past 7 years. traditionally, after a
runup of 5-7 years, things slow down. So this might not the the right
time to increase your real estate exposure, especially is using partly
borrowed funds.
2. Paying off the mortgage is a guaranteed after tax return of 12%
(assuming top marginal tax rate). I would take that in a flash.
3. Even if you decide to invest in real estate, you should consider
paying off your existing loan and then reborrowing for the investment.
That way the interest is tax deductable, which greatly increases the
after tax returns. Considerations like this would be explained by a good
financial advisor. However most financial advisors are really just
commission sales agents who will try and get you into managed funds and
rake off high commissions. Or, if real estate oriented, they may try and
get you into a property development, where again, commissions would be
involved.
4. If you renovate your house, you may get some of the money back on
sale, depending on what you do. However renovations tend to look dated
in 8-10 years i.e. they depreciate alarmingly fast. You should probably
consider renovations as a lifestyle expenditure. One downside of
renovating is that th building industry is a full capacity. So you would
be paying top dollar for second rate tradesmen, if they show up at all.
Probably better to wait until things are quieter.
Every investor makes mistakes. All you can do is control the size of
them and how much you learn from them.
Tim Josling
Charmayne wrote:
> Hello,
>
> I am going to come into a little money and was wondering whether or not
> investing in a rental property was a good investment in this economic
> climate.
>
> I current owe around $130k on my existing property.
>
> We have two wages coming in.
>
> I also have heard that there is currently too many rental properties at the
> moment, should this be something to consider ?
>
> Or we could use the money and renovate our existing house. Eg new bathroom,
> tiles etc.
> we are both in our mid 30's
>
> any advice would be appreciated.
>
>
>
>
<points 1 - 3 snipped, but I agree with them>
> 4. If you renovate your house, you may get some of the money back on
> sale, depending on what you do. However renovations tend to look dated
> in 8-10 years i.e. they depreciate alarmingly fast.
I don't think its true at all to say the benefit of a renovation is lost
after 8 - 10 years making it a lifestyle expenditure. (As you seem to
below). A house that was renovated 10 years ago will be worth a lot more
than a similar one with its original 1950's kitchen etc in it. Fact is
houses need periodic renovations - I'd be inclined to lump them in with
general maintenance.
You should probably
> consider renovations as a lifestyle expenditure. One downside of
> renovating is that th building industry is a full capacity. So you would
> be paying top dollar for second rate tradesmen, if they show up at all.
I'm not sure tradies are any more reliable at any particular time in the
industry.
> Probably better to wait until things are quieter.
Depends what she wants to do, eg, repainting she could do herself.
Charmayne wrote:
> Hello,
>
> I am going to come into a little money and was wondering whether or not
> investing in a rental property was a good investment in this economic
> climate.
>
> I current owe around $130k on my existing property.
>
> We have two wages coming in.
>
> I also have heard that there is currently too many rental properties at
> the moment, should this be something to consider ?
A look at the Australian Property Investor (maybe not exact title) magazine
from your newsagent will give you a better idea, not all locations have
plenty of rental properties.
>
> Or we could use the money and renovate our existing house. Eg new
> bathroom, tiles etc.
> we are both in our mid 30's
>
> any advice would be appreciated.
I suggest you do a lot of reading, there are good books about Real Estate
Investting by Jan Somers or Margaret Lomas.
Also visit the Jan Somers site and spend time reading the forum:
http://www.somersoft.com/forums
Considering that your age group needs to be developing your own
retirement/superannuation plans then a long term property investment
strategy for rental income is well worth while. If you read the references
above you will get a good idea of what I am talking about.
Also there are other investment strategies and vehicles that you can use.
Bear in mind that so called Investment Advisors are in that profession to
make money, so be cautious when seeking advice.
Good luck,
--
John
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