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     davkell
Member
Username: davkell
Post Number: 502
Registered: 07-2004
Rating: N/A
Votes: 0
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| | Saturday, May 05, 2007 - 01:01 am: |  
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I am currently weighing up the pros and cons of going heavily into mortgage debt to buy my first home versus considering to just rent a nicer property and invest the difference between rent and mortgage!
I have read all the comparisons and essentially know the pros & cons of each option, but thought I might see if any of my fellow astute IC members have walked down this path and can throw some insight into the equation.
Or your opinion in general would be most appreciated.
Thanks.
"Trade Your Way To Financial Freedom" - Van K Tharp
"Manage the downside; the upside will take care of itself" - Donald Trump
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macca888
Member
Username: macca888
Post Number: 156
Registered: 10-2002Rating: N/A
Votes: 0
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| | Sunday, May 06, 2007 - 09:28 am: |
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G'day davekell
My opinion is that renting is smarter than buying currently.
If you compare the median price increase of houses with the XAO accumulation index over the last 4 years then money in the stock market would have accrued more capital than real estate (except possibly parts of Perth).
While we are in a bull market then I belive there will be daylight between the two.
I'm not familiar with the Real Estate market in Adelaide though I'm aware that the values have appreciated considerably from 4-5 years ago. Adelaide was once seen as the bargain capital of Oz, especially compared to Sydney.
At your age an interest only loan with the difference put into super with the idea of a tax free payout at 60 might not work as well as someone in their fifties with a large lump sum to put into super. (The risk is that super laws won't change and that's a mighty big assumption given your timeframe).
Even without the tax advantages of super I still believe the stock market has advantages for an adept trader or investor
Are you aware of this site
http://www.jenman.com.au/index.php
Suggest you try an advanced search on Buying versus Renting. Lots of other goodies there also for home buyers. Irregular e-newsletters if you wish, also.
Together with Noel Whittaker's "Whittaker Macnaught eBulletin" some very useful info can flow to your inbox.
Hope this helps
888
"Buy low, sell high is a cliche, not a blueprint for action. It blinds investors to the professionals' approach of buying high and selling higher." Stan Weinstein
"A prudent speculator never argues with the tape. Markets are never wrong - opinions often are". Jesse Livermore
"The only sound reason for buying a stock is that it is rising in price.
If that is happening, no other reason is required.
If that is not happening, no other reason is worth considering".Nicolas Darvas
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kate
Member
Username: kate
Post Number: 669
Registered: 04-2005Rating: N/A
Votes: 0
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| | Sunday, May 06, 2007 - 09:39 am: |
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Hi Davkell,
What would your wife prefer or does she not really mind either way?
If you are really keen to buy, do lots of looking around and pick areas you'd like to live well before you consider buying.
I've always bought houses which can be improved upon although they are becoming harder to find now. Other options are buying a much smaller house which is able to be extended or buying a nice block (preferably with services connected)and moving a house there. The only proviso in that case is to match the style of house to others in the street/area. A Californian Bungalow in row of 1950s houses won't do much for the resale value.
I always consider how diificult/easy it would to sell on in 5/10 years so I would neve consider a house and land package as they don't tend to increase in value over that time period.
Buying something that needs a lot of work is something that seems to be "either you hate it or you love it" and that goes for both partners! I found it a great way to "invest" (doubled the value of the property, and profit tax free) when the children were small and I wasn't working but for others who are time poor and don't enjoy renovating I would imagine it would be a nightmare.
Absolute musts - always factor in worst case scenarios like several more rate rises.
Better to buy something smaller and grotty in a good area than something better in a less salubrious neighbourhood.
Good luck
Kate
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msparks
Member
Username: msparks
Post Number: 1000
Registered: 10-2004
Rating: N/A
Votes: 0
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| | Sunday, May 06, 2007 - 04:19 pm: |
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While the smart money says renting is smarter than buying, i think peace of mind, and having your own home is an essential part of life.
Usually the repayments become very cheap rent in a few years as wages and your career produce higher and higher income.
You can borrow the equity back and invest it in the stock market, or just live a bit lean for a few years, pumping money back into the loan,and reduce your loan period by a decade.
Investing the money and renting is great in theory, but if the investments turn south, you will lose more equity than a house would lose usually.
Buy something affordable and pay it off as quick as possible would be my advise.
The security of owning a home or having a lot of equity in it, is much better for the mind than being a tenant, at the mercy of realestate inspections, or a landlords whims.
On the other hand, council rates keep going up and there is always something to fix, and it all costs dollars nowadays unless you can do it yourself.
Watch out for hidden costs in units etc, best be a house on a block of land so no hassles with strata and all that crap.
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qed
Member
Username: qed
Post Number: 60
Registered: 01-2006Rating: N/A
Votes: 0
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| | Sunday, May 06, 2007 - 08:00 pm: |
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"What would your wife prefer or does she not really mind either way?" Kate ur wisdom is beyond belief,, thats what matters in the end ... WHAT SHE WANTS ... after all what do u kno about design,decoration,or anything else about a house ..all u need is a SHED LOL Qed
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davkell
Member
Username: davkell
Post Number: 506
Registered: 07-2004
Rating: N/A
Votes: 0
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| | Sunday, May 06, 2007 - 11:24 pm: |
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Thanks for your replies. And as I've found on Google searches, everything ends with "....but then...."!!!!
Will wait for my 'promotion' because there is no house anywhere without that, before making a decision.
Cheers.
"Trade Your Way To Financial Freedom" - Van K Tharp
"Manage the downside; the upside will take care of itself" - Donald Trump
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ingot54
Member
Username: ingot54
Post Number: 2052
Registered: 05-2004
Rating: N/A
Votes: 0
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| | Friday, November 30, 2007 - 08:31 am: |
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Wise decision Davkell ...
... says Ingot (who has just sold the family home and moved into a lovely, large rental)
This was the "right" decision for the Ingot family, who may see economic times differently from your personal view).
Mortgages as a % of disposable income are much higher today than they were under the Keating-inspired 17% rout!
This translated means that even at 8% pa mortgagees will be faced with a heftier impost than they were under the 17% rates.
Hard for me to admit that ... but in the interests of truth I have to.
As an aside, rents are also not cheap.
It now behoves me to grow that cash the best I can so as to ensure the move from owner-to-tenant is a prosperous one.
Cash is King right now - there have only been a few times in Australia's economic history where going to cash has outperformed property and stocks.
While you may not see it today ... or until maybe the New Year, I am backing cash.
In retrospect I may have erred ... but that's for me to discover, and I am astutely doing further research.
Keep Smiling - Don't look back
Hell, there are no rules here - we're trying to accomplish something ~ Thomas A. Edison
Loss and failure are inevitable but misery is optional
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moleman
Member
Username: moleman
Post Number: 304
Registered: 10-2003Rating: N/A
Votes: 0
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| | Friday, November 30, 2007 - 06:23 pm: |
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Hi Davkell
If you and your wife want to buy a house somewhere you'd like to live then do it - it'll make you happy! If you want to take the financial return into account then I suggest taking time to find out about property and go into it with your eyes wide open. Property is a different game than shares and has its own rules.
When comparing property and shares, typically commentators don't take into account the extra leverage you can use for property so aren't comparing the cash on cash returns. Sure you can get the leverage with shares but this is far more risky for the average punter due to the extra volatility. Taking your time to do the research so you buy well when using this leverage can make a huge difference to your bottom line. And I think it's far easier to do than gaining the experience necessary to become a trading guru!
If you want to buy in Adelaide then to begin with have a look at:
http://www.propertyupdate.com.au/articles/269/1/National-Property-Update-Decembe r-2007/Page1.html
to see where it is in the property cycle. Then get the Adelaide property report from www.residex.com.au to confirm and see which suburbs are expected to perform the best. I'd also suggest getting Michael Yardney's first book which is an eye opener if you haven't considered property before. Peter Spann's book "How You Could Build a Ten Million Dollar Property Portfolio in Just Ten Years" is also good. And I'd recommend lurking at www.somersoft.com.au which seems to have a decent number of full time professional property investors. People are very friendly and readily answer questions on where/what to buy, what to look out for etc.
good luck
MM
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morton
Member
Username: morton
Post Number: 89
Registered: 05-2005Rating: N/A
Votes: 0
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| | Friday, November 30, 2007 - 07:59 pm: |
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Rental any day!!!
The best way I've worked out to own your own house is to build a highrise, sell the first 50 floors and keep the top one for yourself.
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