Simple Question

Rather go commercial. Will end up paying property faster but will require more deposit for same purchase price!

I'll call it lost opportunity tbh. Resi is all about CG and building portfolio by releasing equity

 

In the scenario owner does not pay a cent each month and is $10 a month in front.
The tenant pays the principal and interest.
If the rent principal was let's $400 a week is this added to my current taxable income?

 

Sorry probably not the best way to put it 'going backwards', since you havent paid 500k at the start. But assuming 1.5% inflation for 20yrs, 500k would be worth 370k today. Assuming ur inital investment is 75k (50k + stamps and legals) rough return of 8%pa. But if we go with historical inflation of 3%, 500k then would be worth 275k today, i.e return of 6.7%pa.

 

Ok cheers. Could you give an example i.e with upfront costs and a scenario i.e type of commercial property and how to get involved in something like this.

 

Who pays the tax?

 

Over the last 16 years (since 2003), my share portfolio has achieved a total return of 14% pa. This includes the GFC.

So, take your $50k and invest it in the sharemarket. In 18 years time, it will be worth $528k.

Then sell your share portfolio and buy this property for cash. You get to the same financial position (owning this property outright) without all the stress of investing in property.

Such things as 18 years without dealing with tenants, 18 years without dealing with maintenance issues, 18 years without worrying about interest rates, ...

If you think share investing is scary and stressful, wait until you try property investing .

Definitely NOT advice.

 

Small cap Tech stocks on the ASX that are founder lead and have revenue growing at 30%+, In the thread on the next 10 bagger 5 weeks ago I named my recent buys which were ALC as it had reached inflexion point that is what you need to look for, it has already gained 100% , I think CAT was named at the same time it is up 50%, a few weeks before that I named AD8 it is up 90% and MP1 up 40%. Recently my buy order on MVP was triggered and have had a nice gain on that in a few days, Residential property is for security, not the initial seed for growing wealth there are better options, it is the silo a place to safely store wealth, it can give higher LVRs. depreciation benefits , taxation benefits, and ability to leverage on funds already earned to give liquidity (money for spending) via loans. It is a backup or reserved seed or insurance if other plantings hit a lean period. If you invest your capital in shares and they go bust you have lost your capital. If you invest your capital in property then use that for security to fund shares, if the shares do poorly at least you still have your capital hopefully still gaining, and growing earnings. With your scenario your LVR is too high. You would be better off with a 150 or 300k house so you could have a house that pays for its self that you can leverage off to use shares for capital growth as this is more likely to give faster and self sustaining growth.

 

I think this is just a very poorly written question but what I interpret OP as asking is IF they spent 50k on a property and it was positively geared and paid itself off in 20 years (MEANING no additional contribution to make repayments after rent).

Then absolutely that is a brilliant investment.

However just to be clear to OP it would need to be a heck of a lot more CF+ than $10 a week to achieve this. The yields your seeking likely don’t exists in resi.

 

Interesting!

What if stock market goes south as we witnessed recent global crisis on 2008? Some might say depends on what stocks you would pick for portfolio, and your strategy to invest, but still there are risks apparently. And with only $50K upfront, margin is the only way to gain quick with greater risks tag along.

I think the initial assumption is not realistic, as property value definitely will not be the same after 20 years down the road, unless you buy ones in the middle of nowhere.

"The housing market has shown some extraordinary changes over the past twenty five years, with conditions moving through five distinct growth cycles which have pushed national median house values 412% higher. Over the same period, the ASX All Ordinaries index has risen by a substantially lower 261%." - CoreLogic

If I could find a positive gear property, put the hard earned $50K in for deposit, forget it for 20 years then off load for half a million (if not more), I will blame my damn self if I won't take the opportunity.

 

Thanks to everyone - probably more confused than when I asked the initial question but definitely learnt some interesting stuff.

 

I thought the $50k turns into $500k in 20years ?
So the return is fantastic

 

Yes that is the way I look at it too

 

That's the way I read it too

 

I thought he said he paid it off via extra repayment so on top of 50K investment he paid it off via extra repayment

 

@Property Baron could you confirm what you meant in your question?

Did you mean you would only ever invest the initial 50k and that the property would pay for itself via rental income and have the loan paid in 20 years?

Or did you mean you would pay the initial 50k and then make extra repayments yourself and have the loan paid in 20 years?

Because option 1 would be a brilliant investment. Option 2 would be horrendous.

 

Remember a lot of the share return will come in the form of dividends which is invisible in the share price so the actual return from shares could nearly be doubled.

Yes, you get rent from property but you also get ongoing maintenance, (repairs and improvements), council rates, water supply charges, insurance, potential floods, building issues, vacancies etc. In many places rent won't cover all this and your mortgage.

If stocks go south like in the GFC, that's the time to buy up quality stocks. They'll still pay dividends but there will be low prices as people need their cash or get margin called or panic! So it's a good time to buy.

 

Wait a minute! Don't we suppose to cut loss rather than buying more in a bearish market? Even if we are capable to pick quality stocks, which is hard enough mission, we still need to have sufficient cash in hand to maintain long position, and to deal with margin calls.

 

Yep, that's it.