Multi -asset Investing modelling - 15 yr plan

I agree, my calculation is simple and doesn't consider capital gain tax, negative gearing benefits, depreciation, franking credit, CGT discount, leverage equity to buy more property etc.

I do know that ETF don't provide any guarantee of capital gain or ongoing dividend but everyone knows that some of big names like vanguard has provided that over three decade.

The challenge i have is that none of commercial property advertisement clearly shows outgoing cost (council, water, strata etc.), insurances. many even don't show sell price as they want to negotiate and there is no way we can find sold price of commercial property unlike residential property so i can't actually fill in the spreadsheet myself.

my intention is to invest in ETF that provides return after paying expenses without additional borrowing or if there is asset that provides superior return in a way that i receive return after paying all cost plus mortgage and that return is better then return from etf. so basically i don't want any more mortgage or debt so investment needs to be for net return either through positive geared property or etf and this is because ubank and many other banks saving rates are touching down to 1.05% which significantly low and if you consider inflation then will be getting negative return.

i concluded with my own experience and talking to people i know that residential is a no-go zone compare to etf unless i can develop residential property by subdividing in QLD where there is possibility to make better return then etf in short term holding of 2 to 3 year at this moment.

But for commercial i have absolutely no knowledge and i simply can't find forum on this type of investment.

 

Thanks for sharing. I think for a 500k property, 1.3% net rental return after expenses seems too low. $450 per week rent. $2000 management fee. $2000 for maintenance. $3000 for rates, miscellaneous costs $1000. Net return is (450x52 -2000- 2000-3000-1000)/500000=3.08%.That would make property investment have 50% higher ROI than shares.

 

Found a good article on property investment vs index tracking passive ETF.... It just reinforced my thoughts on passive index tracking fund... !

You can see many comments on blog and certainly author replied to major once so you can ask him if you see flaw in the strategy...!

Our Investing Strategy Explained - Aussie Firebug

 

If you take the starting capital $600k and apply the RE/ ETF strategies to it. RE results in 3m unencumbered assets +3% yield P/A after year 10 compared to $1.4m (assumed 8% CG) + 4% yield on ETFS. The only way ETFS catch up is if you make contributions over that 10 year period but on a like for like basis you could do that with RE strategy as well to negate the variable.

How does passive index tracking ever beat leverage RE?

 

how could this be?

 

Well, my maths isn't that good but @Terry_w has two thread explaining why property better than stocks and why stocks better than property. Property gives massive advantage of leverage which you can have with shares as well but not to the extent property can give you but I find property boring if it isn't for development.

 

Very true - hindsight is great.

I did a site analysis on a postage stamp this morning.

A 40m² suburban site sold for around $1m, nett rent $68k/yr, annual 6% increases, 10 years remaining on the lease. Even if the value goes nowhere for 10 years, the IRR is still over 10%.

A little higher if the tenant renews for another 20 years at a lower rent & annual review.

The IRR increases to 13% if the land value increases by 50% in 10 years (pretty conservative). We can only model these things and use a sensitivity analysis to determine if it fits our risk profile.

 

Seriously, which website do you use to search for this type of properties? You mentioned 6% net return plus 10 year remaining lease .... wow that something like once in a generation to come out at a price bracket of $1m.. !

most commercial comes with gross yield of 3% to 5% and that is also with 2 to 3 year on lease remaining if you are lucky.

 

All the mainstream ones

Hardtoshiftproperties.con.au
Buymysite.con.au
Domaincommercial.con.au
Connercialrealestate.con.au

Telco sites come up often enough

 

never heard about this two? and why google can't find this sites?

 

I better reserve the domain names ".con.au"