Why does everyone allways recommend buying property?

Discussion in 'Wealth Creation & Management' started by bullionexpress, Aug 21, 2014.

  1. bullionexpress

    bullionexpress New Member

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    I find the whole idea of taking on a massive debt just to buy a home when I could rent one for half the cost of buying one rather odd.

    Id rather use the cost difference to simply build up reserves of cash and invest in PM or other investments.

    Im a single man who would need to rent or buy on my own if it wasnt for living with my family at a very low cost.

    I just cant justify spending 300K to 400K most of it fully borrowed to buy a small apartment in melbourne australia. When I dont even know if i wilk jave an income by the end of next year. It seem crazy to have to cover the full cost of this loan myself without anyone else to share the load with.

    Even if i rented my own place it would cost less than $300 per week. But a 400K loan would cost more than double that and eat up all posiable future savings for decades.

    What do people think is it better to rent and save the difference. Or buy and take the massive risk that I could lose my job and have to sell up just a year or two lter possiably with negative eqity.

    P.S things like marrage and children are not part of my future plans. Thus I expect to be single for decades.
     
  2. DanielM

    DanielM Active Member Silver Stacker

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    Well you're spending your money to pay off your own asset that gains equity and doesn't get taxed
     
    House likes this.
  3. AngloSaxon

    AngloSaxon Active Member

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    Yeah, we all thought that as young men. Life gets complex and those plans go out the window.
     
  4. bullionexpress

    bullionexpress New Member

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    That is fine but the assumption there is the price of the house allways rises. It also assumes you will allways have continuous income. Niether are allways correct as shown by the GFC around the world.

    Unlike some people I have had period of over 12 months without income a few times in my life so far. It will allways be in back of my mind what if i had a huge debt while looking for work for many months. Cant see that doing anything good for me.

    Id only consider it if i had a few things:

    At least 3 years worth of full mortage payments as a reserve just in case.

    Some kind of job that had at least few years of good prospects of continuing.

    I would not want the total cost of home to exceed 40% of my after tax income. Total cost is made up of morgage, council rates, insurances.

    Im not quite as young as some might think I can be very sure that a family is not on the cards. Thinks early 30s Single gay male.

    I had thought it would be better to rent and save the excess then in my 60s use the money to by in rural area or a retirement unit when being fixed to the city work wise would not matter and it would be debt free purchase.
     
  5. Lunardragon

    Lunardragon Well-Known Member Silver Stacker

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    ^
    +100

    We can come back to this when you find the right soul mate :D
     
  6. pi

    pi Member Silver Stacker

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    Don't you buy property and give it away a couple of times before finding this soulmate?
     
  7. trew

    trew Active Member Silver Stacker

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    So if you have been living with your family at very low cost, have you actually saved and invested in PM or other investments so far ?

    Often the problem is not in the plan but the execution.
    People that say they'll rent and invest the difference end up pissing away the difference.

    If you plan to rent for 30 years and live in the same place then it would make more sense to buy.
    Even with high prices, buying still wins out in the long run over renting.

    If you want to move around and live in different cities or countries or your job may move you around then renting is probably better.
     
  8. Caput Lupinum

    Caput Lupinum Active Member Silver Stacker

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    Depending on the type of work you do you could move to an area where you can buy a house outright without taking out a mortgage. That's what I did. Turtle being a slave to the bank and I'm living proof a hetro male can remain single and I haven't had any requests for child support payments yet. I can't even commit to scrunching or folding let alone a relationship.
     
  9. SilverKendo

    SilverKendo New Member

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    I think it might depend on where you live too. I was paying $850 per month for a one bedroom apartment. I purchased a small house with two bedroom, two bath, a finished basement and front and back yard and my mortgage is $900.35 a month. That has the taxes and insurance rolled into the payment. Now I don't have to worry about land lord rules but I do have to deal with the up keep. I have some ok equity built into it so if I sell and buy a larger "family" home my payments won't change much. But depending on where you live that might not work out as well for you.
     
  10. petey

    petey Active Member Silver Stacker

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    I rent at the moment but my long term strategy is still to buy housing all over the world that has a studio or 1-2 bedroom suite built into the rest of the house, giving me somewhere to live in each of the cities I frequent.

    Income generating assets are the goal, the catch is buying at the right time in an irrational market.
     
  11. DanielM

    DanielM Active Member Silver Stacker

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    Also remember that yes you do pay interest and usually that interest is variable but your minimum payments will generally be similar but over the years your income will increase allowing you to put away more money on your loan. With rent it will generally go up so say your rent is $300 a week now, in 30 years it might be $1,000 per week or more for the same place you're renting now whilst you still have $0 equity. Whereas if you bought a house now and were paying $600 a week in 30 years your minimum would still be around $600 even though it should be paid off by then and you'll have a house worth a couple million dollars(still worth about the same as now adjusted for inflation) but you'll own your place and not be paying that $1000 a week in rent
     
  12. sammysilver

    sammysilver Well-Known Member Silver Stacker

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    Bullionexpress, it's how you feel about it. Homeowners are asking why you buy silver? There is no right or wrong reason for either choice, just different choices.
     
  13. SpacePete

    SpacePete Well-Known Member Silver Stacker

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    A major point to consider with property is that it is actively favoured by the Australian government in terms of pro-housing policy and taxation, and by selective neglect of govt. departments and regulatory bodies that oversee and enforce regulations that would limit demand-side activity. And this will not change given that the majority of senior politicians have a vested interest in the property market with some of them even having extensive property portfolios.

    But there is far more to life than housing investment (hard to realise going by Australian television). If you want to take some risks with your career rather than working as a wage slave forever in fear of job loss (with your fears making you an easy target of manipulation by government rhetoric) then it is perfectly valid to opt out of a life of debt.

    And if the economy were to crash, and with Australians' having record levels of personal debt where "Household debt has increased nearly twice as fast as the value of household assets over the last 25 years" then you may be in a good position to pick up a property more affordably if things turn bad. Of course, the government may simply penalise savers with emergency levies to bail house borrowers so its a risk either way.
     
  14. clear

    clear Well-Known Member

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    The Government (not sure if it was state or federal) was offering a first home owners grant (maximum of $ 21,000) some time back as an incentive, I think it has been reduced now, this grant may assist you and allow you to enter the property market if you believe the property

    market will rise greater than the stamp duty you are being charged. Then you can do quick flip - once you have exceeded the capital gains period.
     
  15. lamp

    lamp New Member

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    Unless you are sure that your weekly rent still remains $400 per week in 20 years' time and your earning power continues to meet the increase in rent as you age. Say your loan repayment is $2500 per month now, if you are discipline enough, the repayment will continue to decrease to a point you fully pay it off, just in time when you are no longer employable. Of course, this is just one aspect of the plus side of owning your property, but not for everyone. Also, depends on your strategies and the ultimate goal, time frame, etc., this is definitely not a one size fits all strategy, like any other investment e.g. Shares, PM, Collectibles, etc. forum members may be pro certain investment class but keep in mind that if anyone chose to invest in certain type of asset, he/she must has certain level of confidence that the class will do well over x number of years, if one cannot see / perceive the profitability of the same investment, advice is to stay away from it. There are always 3 groups of people for different things, "For", "Anti", "Neutral", there too many strategies to handle an investment class which can lead you to financial freedom or complete chaos, again important to do our due diligent and do what you are comfortable with. I personally belong to the "For" group :)
     
  16. Maxwell

    Maxwell New Member

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    well.... interesting question, my thoughts are only my thoughts, and suit my situation and my somewhat 'Prepper' leanings

    I bought in a small country town, my work is FIFO, so it really doesn't matter where I live, as long as I'm at the airport on time in the morning.

    I always wanted a bolt hole, a place that no landlord could kick me out of, or bank repossess. I found a house and block out in the scrub, and got stuck into the mortgage, to the extent of growing, raising and hunting as much of my own food as I could, so I could add the extra $$ to the mortgage payments. I now own the property, I supply my own water, some of my own power, most of my food, have a huge workshop which I use in the local barter economy, and I sleep very soundly, knowing a landlord or a bank isn't going to be knocking on the door if I lose my job, get sick or whatever.

    Along the way I found I could in fact live very frugally, so by learning that, I removed my fear of losing an income as well. My food is healthier, I hunt and fish in the area, and therefore know every rabbit hole, game trail, fishing hole etc. in a 50k radius, again , all this removes any fear of being financially smashed by knowing I can provide quite well for myself should I lose my job.

    I don't look at my home as an investment with an expected return, I look at it as an investment in my mental health, I sleep very well and night, and don't give a single thought to losing a job, or losing money or a housing bubble bursting, I'll be fine, I can't put a value on the peace of mind that a house that I own outright gives me.

    Now I have $$ to make sure my health cover and income protection is of a good standard, I have $$ to invest in PM's, tools, gardening equipment, sporting equipment, boat etc. I have been able to purchase another bush block outright, soon to be Max's fishing shack, and I think all of this came about because I own my place and sink a good wage into other insurance policies.

    My outgoings over theh next 30 years will be rates, power, phones etc. I can cover all that with a day or two's work per week. I fully believe there will be a bubble burst in the housing market, it won't affect me, because I won't be selling, and my mortgage won't be underwater. And I guess we all believe there will be an economic sh1tstorm at some stage, and a country block is about the best place I can think of to weather that.

    It worked for me hope it makes sense

    Regards

    Max
     
  17. bullionexpress

    bullionexpress New Member

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    Yes I have a fairly reasonable investment in PM all of it aquired in the last 2 years. The other 70% of my assets is simply term deposits and savings accounts. So that I can access the money quickly.

    My biggest problem with all investing is not the savings but earning the income not only to invest but also cover my living costs. Ie its very hard to get a job that pays well and is not contract or temp. Education has not helped me get work any easier over the last 12 years. Thats why id never study again at university. I have a business degree from a major australian university. It would have to be the biggest waste of money ever.
     
  18. AngloSaxon

    AngloSaxon Active Member

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    I feel the same about my numerous university pieces of paper.
     
  19. Dabloodymess

    Dabloodymess Active Member

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    I really enjoyed reading about how happy you are with your property Max and it reminded me of a quote I saw today:

    "If you know something is good for you, stop saying that you can't afford it. Instead, ask yourself, how can I afford it?"

    The above quote really did hit home for me, as I have been living this way for a while now without realising. Before I left Australia a few years ago, I had an idea in my head about how I wanted to live. I am probably only 25% there, but I have been chipping away at it slowly, simply by asking how I can achieve my goals rather than complaining about the status quo.
     
  20. Maxwell

    Maxwell New Member

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    I have to say, it wasn't what you would call 'easy' while I was getting the mortgage paid, i just kept plugging away, keeping the finish line in sight. but now, my friends, family etc. all tell me how much happier I now seem, obviously there is a noticeable difference that I didn't see in myself until I got rid of the mortgage noose.

    Next time I'm in Chiang Mai, I'd love to hear about how Thailand is going for you, stories about 25% of a completed plan in Thailand would be very interesting :)
     

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