DrewEckhardt 0 #51 March 30, 2010 QuoteQuoteHere in Australia PROPERTY is the retirement investment. Over the long term property has out perfomed stocks in recent years. Recent years is close to pointless when you look at long term strategies. Have you actually seen the data to back that up? In the US, if you look at the CS index from 87 (the time the index was started) to the top of the market (December 2005), the average return on a property is only 3% annually, when taking into account inflation. Looking at a well diversified portfolio (say the Wilshire 5000) over a 20 years period, you should see at least 6% return when accounting for inflation. That ignores maintenance which can run 1-4% annually, property taxes with a 1% national median over 2006-2008 with high cost areas reaching 3%, home owner's insurance (including flood and/or earth quake coverage where appropriate), etc. Quote Share this post Link to post Share on other sites
Remster 24 #52 March 30, 2010 Quote Quote Quote Here in Australia PROPERTY is the retirement investment. Over the long term property has out perfomed stocks in recent years. Recent years is close to pointless when you look at long term strategies. Have you actually seen the data to back that up? In the US, if you look at the CS index from 87 (the time the index was started) to the top of the market (December 2005), the average return on a property is only 3% annually, when taking into account inflation. Looking at a well diversified portfolio (say the Wilshire 5000) over a 20 years period, you should see at least 6% return when accounting for inflation. That ignores maintenance which can run 1-4% annually, property taxes with a 1% national median over 2006-2008 with high cost areas reaching 3%, home owner's insurance (including flood and/or earth quake coverage where appropriate), etc. I'm definitely keeping it simple... Start talking about transaction fees, tax issues, and then you start to get into business! I just wanted to put it out there that the data does not support that homes are great investments. They are not bad, but not great.Remster Quote Share this post Link to post Share on other sites
DrewEckhardt 0 #53 March 30, 2010 Quote I'm definitely keeping it simple... Start talking about transaction fees, tax issues, and then you start to get into business! I just wanted to put it out there that the data does not support that homes are great investments. They are not bad, but not great. The point I'm making is that houses aren't investments since the real rates of return are usually negative. Case-Schiller shows a 3.4% annual growth in resale price of the same home from 1987 to 2009. Since inflation was 2.9% over that period, that's .5% after inflation before costs. After the big recurring costs that's negative. The US census data shows a 5.4% increase in the price of new homes from 1963 to 2000; but after you remove the 1.6% annual increase in square footage you have 4.2% increases in price per square foot. Subtract the inflation rate of 4.4% over the same period and you're at -.2% before you add the recurring costs. You have a lot more latitude in what you do with property you own. It's a slow forced tax-advantaged savings plan that will cut your housing costs in retirement. In some cases renting (borrowing) the money costs less than renting the property would. While all that's good, it doesn't make houses investments. This makes perfect sense. Logically house prices can't increase faster than wages. Real wages in the US have been decreasing since 1974. Quote Share this post Link to post Share on other sites
Remster 24 #54 March 30, 2010 I think we're agreeing on the whole, but differ on the details... Remster Quote Share this post Link to post Share on other sites
airtwardo 6 #55 March 30, 2010 Quote The point I'm making is that houses aren't investments since the real rates of return are usually negative. Location location location...However, in this economy yes they are predominantly negative, the thing with rental properties as an investment is being able to effectively minimise overhead costs on something that for whatever reason will offer maximum return for minimal initial investment, be that initial cost, location, lending, community growth...there are several possible reasons one property is better than another. ...it's a cold numbers game that usually disqualifies a 'home' someone lives in and wants to rent. *That tends to be the best home in the best neighborhood that's affordable to them at the time. Usually for rental investment depending on what ya can afford, the idea is to try to get the best house in the worst neighborhood or the worst house in the best neighborhood at bottom dollar, and upgrade between tenants utilizing annual profits to do so. Do as much of the work yourself as you can and be frugal as well as relentless with your documentation in all areas. I finally had to run the numbers a couple ways to illustrate to my wife we should unload some 'investments'...not only the economic trends to consider, but overhead was going to factor significantly regarding a 5 year strategy with roofing replacements and heat & A/C replacements as well as projected tax increases & drastic insurance bump up because of the recent hurricanes here. Economic necessity now calls for a 10grand deductible on rentals to stay even...in the current market, a fire puts ya back 2-3 years easy. If you can get more with T-bills than a realistic possibility with property...dump & run! You can't make true business decisions lying to yourself and 'hoping' things will pan out...I don't mind a gamble now & then, just not with MONEY! ~ If you choke a Smurf, what color does it turn? ~ Quote Share this post Link to post Share on other sites
Squeak 17 #56 March 30, 2010 Quote Quote Here in Australia PROPERTY is the retirement investment. Over the long term property has out perfomed stocks in recent years. Recent years is close to pointless when you look at long term strategies. Have you actually seen the data to back that up? . Yes. Including personal data, my 2 investment properties are currently worth 300% more than i paid for them 7 years ago. Even in the last few years their growth has slowed but not stopped and NEVER have they depreciated. You are not now, nor will you ever be, good enough to not die in this sport (Sparky) My Life ROCKS! How's yours doing? Quote Share this post Link to post Share on other sites
nanook 1 #57 March 31, 2010 Hmmm. Australia, eh? Thinking. . .thinking. . . What's the median price of a home in suburbia over there?_____________________________ "The trouble with quotes on the internet is that you can never know if they are genuine" - Abraham Lincoln Quote Share this post Link to post Share on other sites
Remster 24 #58 March 31, 2010 Quote Quote Quote Here in Australia PROPERTY is the retirement investment. Over the long term property has out perfomed stocks in recent years. Recent years is close to pointless when you look at long term strategies. Have you actually seen the data to back that up? . Yes. Including personal data, my 2 investment properties are currently worth 300% more than i paid for them 7 years ago. Even in the last few years their growth has slowed but not stopped and NEVER have they depreciated. No offence Squeaky, but 7 years is not representative. I'd love to see the Oz data tho! Do you know if there is such a thing as the case Shiller index in Oz? But eh, I hope it continues like that for ya!Remster Quote Share this post Link to post Share on other sites
Squeak 17 #59 March 31, 2010 Quote Quote Quote Quote Here in Australia PROPERTY is the retirement investment. Over the long term property has out perfomed stocks in recent years. Recent years is close to pointless when you look at long term strategies. Have you actually seen the data to back that up? . Yes. Including personal data, my 2 investment properties are currently worth 300% more than i paid for them 7 years ago. Even in the last few years their growth has slowed but not stopped and NEVER have they depreciated. No offence Squeaky, but 7 years is not representative. I'd love to see the Oz data tho! Do you know if there is such a thing as the case Shiller index in Oz? But eh, I hope it continues like that for ya! As i said yes i researched it prior to buying. Realestate in OZ has NEVER actually depreciated, growth slows and plateus occassionally but never goes negative. The"finacial crisis" that the world has been going through, has not overly effected Australia.You are not now, nor will you ever be, good enough to not die in this sport (Sparky) My Life ROCKS! How's yours doing? Quote Share this post Link to post Share on other sites
DrewEckhardt 0 #60 April 1, 2010 Quote Quote Including personal data, my 2 investment properties are currently worth 300% more than i paid for them 7 years ago. Even in the last few years their growth has slowed but not stopped and NEVER have they depreciated. As i said yes i researched it prior to buying. Realestate in OZ has NEVER actually depreciated, growth slows and plateus occassionally but never goes negative. Quote And this is sustainable because over the last seven years salaries have quadrupled in the location you bought your investment properties? Quote Share this post Link to post Share on other sites
TrophyHusband 0 #61 April 9, 2010 good news! a couple had previously put in an offer and we had a few rounds of negotiations. they ended the process before we even came close to an agreement. their best offer was far undere what we were willing to sell the house for, so we didn't feel like let a sale slip away. two nights ago they sent us a verbal offer. it sounded good so we said to write it up and make it official. last night we signed it and sent it back so now we are under contract. the good news is that with this offer, i looks as if we'll be writing a check for less than $1000 when its all said and done, but we have almost $1000 in our escrow so it may end up being a wash. this will be great. they also want to close before our next mortgage payment, even better. "Your scrotum is quite nice" - Skymama www.kjandmegan.com Quote Share this post Link to post Share on other sites
