Property or metals

Discussion in 'Silver' started by Topherclaus, Apr 20, 2019.

  1. Topherclaus

    Topherclaus Member

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    I've been in this area since the week of the bottom in '15. I sunk what I had as a home loan principle into metals because I knew that it would be a few years before I'd be in any position to use that money.

    I'm now at the point where I'm looking to buy a place relatively soon. House prices are still dropping, and metals prices appear to have a recession boost in the next 1-2yr ahead. However, I'm currently paying rent and not selling the metals would mean that I'm looking at a >90% loan (in a position that it is possible), meaning anything over 90% is at 10.62%.

    Would you hold on and hope for the moon, or just slowly liquidate and purchase property in its decline? I don't live in a city, so the decline and the boom have been much less obvious.

    I'm looking at small, productive, land; if that helps. It is not just a small house block.
     
  2. RichardAL

    RichardAL Member

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    I just bought more property recently, the market has declined further since then - however I get a lot more out of the property than an equivalent outlay in precious metals would have brought, ie I'm glad I didn't hold on hoping for the moon. Sure on paper in currency terms I may well be behind but when it comes to holding assets I reckon owning property beats owning precious metals - it's the lack of debt that counts in times like these, I feel...
     
  3. JulieW

    JulieW Well-Known Member Silver Stacker

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    I'd take it slowly. My own view is that land/property is in a slow downward grind till 2022 when it comes back on the simmer at least. Currently my opinion is RE is tepid and cooling . Country RE starts a downturn first and is last to pull up.

    I'd place a reasonable target - say AUD$1850 and liquidate into a deposit as required, keeping metals on hand for project development and liquidate as expenses arrived.

    In essence, "be bold and hold the gold" as long as you can.
    I've seen a few predictions for AUD nearer 65c later this year. If so, then a slow liquidation would be to your advantage.

    Interestingly, if the common predictions of gold at $1450 meet the fairly common predictions of AUD nearer 60c, then $2k+ gold is very possible for us this year, and that is without 'to da moon' type hysteria of the pundits' predictions on USD moves.
     
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  4. SilverDJ

    SilverDJ Well-Known Member

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    Both metals and your own home are zero-income producing assets, so in that respect they are both similar.
    Hoping for the moon is almost always going to end badly, look at the history of metals:
    In the last 45 years gold has "gone to the moon" twice, and once was not all that quickly. And silver has also "gone to the moon" twice.
    Do you really think you can call when the next moon shot will happen?
    Take that money and improve your lifestyle now by buying your own home.



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  5. SilverDJ

    SilverDJ Well-Known Member

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    That's the trick here, you aren't just betting on the price of the metal, you are betting on the combination of the metal price and the price of the AUD.
     
  6. SilverDJ

    SilverDJ Well-Known Member

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    And that equity in the home becomes money you can draw on by "being your own bank". You can withdraw that money in the future and do anything you want with it without the bank having a say in it.
    Sure cash/metal does the same thing, but you will always need a roof over your head, so sticking that money in your own home can have major advantages.
    Downside is buying keeps you tied down to one location for a long time.
     
  7. Ad1

    Ad1 Active Member

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    I would not hold on and hope for the moon .As others have said above, no one knows when or if it is going to happen. I see PMs as an insurance policy and a diversification tool more so than an investment vehicle. If it does shoot up, great! If not, that's ok too.

    Here's what I'd do:
    1. Slowly liquidate based on AUD/USD/Spot fluctuations and get to 80% LVR if possible. I feel paying lenders mortgage insurance (LMI) is not worth it in most cases. If you default on the loan and bank takes money from the Insurer, the Insurer would still chase you for their money back even though you took LMI!
    2. Not try to time either the PM or Property market. Buy when you are financially and mentally ready to make the purchases. Most date predictions are almost always wrong as they depend on a multitude of factors.
    3. Buy my own home, but know it is not an asset. It will certainly cost you a lot of money (rates, non-tax deductible interest, repairs etc) and has no tax benefits as of now apart from a few first home owners grants if you qualify. However if the property market does well and if you buy the right property, you might see capital growth in your house and you can use the equity created to purchase another property or take loans against the equity. This is the distinct advantage of property vs metals. You can also rent the home out later if needed and avail the benefits of owning an investment property until the laws change.
     
  8. Number 47

    Number 47 Member

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    Something to consider is the hidden costs of owning a home that you don't see as a renter like maintenance and rates.

    And it's worth factoring the price of servicing a loan.

    Once that loans repaid how much has that house really cost.

    If housing prices don't continue to trend as they have for the past 30 years then you'll be behind.

    Personally, when I bought my home, I bought the cheapest house that I was happy to live in.
    That mentality saved me hundreds of thousands of dollars and decades of repayments and ment that I wasn't under the thumb financially while repaying the loan.

    Hold your PM until it moons unless you absolutely must sell.

    Be very careful with equity. It's a trap for most people who make poor financial decisions. I'd only ever use if to buy additional property with the help from a good financial advisor or perhaps home improvements that will add more value than the money spent.

    Definitely don't use equity for cars, bikes, boats, holidays ecc.
     
    Last edited: May 15, 2019
  9. SilverDJ

    SilverDJ Well-Known Member

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    That's the classic "don't borrow beyond your means" thing, not really about owning the house itself.
    For example, when we looked for out first home, being professional DINKs (Double Income No Kids) the bank was willing to loan us $1M without even haggling. Could have gotten that seaside mansion with gold plated crapper back then. We said no thanks, $350k will do just fine and we'll buy a modest place and do it up.
    Idiot kids these days borrow every dollar they can get so they can live next to their favorite cafe.
     
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  10. Ad1

    Ad1 Active Member

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    Well done on this. Have seen people do quite the opposite in most cases to 'Keep up with the Joneses' so to speak. I know about a couple with DINKs who bought a place in Toorak, Melbourne. They worked in a supermarket as full time service assistants and this was back when the banks were lending freely and before the APRA changes.

    Once most supermarkets moved to self service checkouts and reduced staff numbers, one if them lost the job and they could not repay the huge monthly repayment based on a single income. Loan serviciblity is the key and most 'what if' scenario numbers must be done before purchasing
     
  11. sgbuyer

    sgbuyer Well-Known Member Silver Stacker

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    With no minimum wage, many unskilled jobs in Singapore pay way much lower than in Australia or any "higher per capita gdp" country, yet they are automating many of these jobs with machines such as self-checkout counters. Interestingly, I've not seen self-checkout counters in the supermarkets I visited in my recent trip to hong kong even though wages in hk are about 50% higher.
     
  12. Number 47

    Number 47 Member

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    Yes sir ...

    I was 24 and single with a decent income and no credit rating (I had never borrowed money before) they offered me $400,000.
    That would have bought me the home of my dreams on a lovely 200 acre lifestyle / hobby farm and 40 years of financial pain.

    I remember my boss saying "well you'll be working for us for a long time then" when I told him how much I was offered.
    I said to myself... In ya dreams buddy.

    I enede up borrowing less than half of that and settled into a quiet country town on a large block with a very modest home and a heap of financial freedom.

    I still dream of that lifestyle property. But I'm happy that money is never the topic of conversation In our household.

    Hopefully I'll be ready to make my kids dreams come true when they have ambitions for a hobby farm in the future.
    That's what I'm working towards.
     
    Last edited: May 15, 2019
  13. SilverDJ

    SilverDJ Well-Known Member

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    Yep, we factored in potential job loss, and so were paying it off at like 3-4 times the minimum, and the saving in interest in those initial few years was staggering, as that's when most of the gains are to be had. The excess we put in was used to improve the place slowly and also took world trips in there as well, and still comfortably payed the place off. None of that would have been possible if we had taken the $1M, the interest rate at 7% or so at the time would have meant not paying off much more than the minimum and a reduced lifestyle.
     
  14. Pirocco

    Pirocco Well-Known Member

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    My hope with silver is that when prices of houses food etc double a coming decade, silvers price doubles too.
    The currencies 'round never did and will never do, due to manipulation of interest rates (forcing deposit interest rate lower than prices increase rate.
    And that's it. To da moon etc is just a meaningless yell.
     

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