The biggest risks for property investors (and why you might prefer shares)

The risks in property that you don't get in shares

 

This article is mostly about the dangers of property investors being under insured. It's a bit of a stretch to say this is why you might prefer shares.

 

"A property investor has safety obligations towards tenants and other users of the property. Things can go wrong in a property such as fires, flooding or falls, to name just a few possible calamities. These issues have the potential to cause hurt to tenants and deliver serious financial consequences for the landlord."

" owners still need to be active. Property managers usually require owner's permission before undertaking maintenance work, so ignoring their reasonable requests is risky and would make it hard to use the manager (and their professional indemnity insurance) as a shield if an accident happens."

"Dawes warns that while a death at a property is every landlord's horror scenario, there are events that have a greater financial liability. "An accident that causes permanent disability can result in a greater payout than a death, given the expense of supporting a victim for potentially decades after the accident."



hahah... Gimme a break.

 

Vacancies
Tenant damage
Land tax
Rates
Insurance
Maintenance
PM fees
Advertising for tenants
Tenant complaints
Rent arrears
etc, etc

There is a lot not to like with property.

That said, I can't renovate a share. I can't subdivide off the back yard of a share and build a new dwelling that is worth substantially more than the construction cost.

I can't easily leverage shares with a low risk loan like I can with resi property.

There is a lot to like with property

 

@Perthguy would you be able to sleep at night if you'd leveraged 70% of say a 7mil portfolio in the stock market?

#saygoodbyetosleep

 

Yes but I wouldn't do it. I would buy ETFs and LICs and hold long term. But I would use resi property for security, so no margin calls.

Dividends are good ongoing income and I know that share price fluctuations don't bother me because I have bought shares but never sold them (I am a holder not a seller).

I have sold property though

 

And what would you use to build your wealth?

 

For me this is the only thing that I prefer about property. If I could access the same loan terms for shares, I would have a nice PPOR and a big fat diversified equities portfolio.

This residential Property caper for me is just a means to an end.

 

Leverage. But I would use resi property for security, so no margin calls.

 

You can if you have properties as security, I always manage to borrow for shares the same rate
I got for my PPOR, I always keep my PPOR close to debt free for that reason.

I talk to bank manager I got 1m PPOR, bugger all debt, lend me 300K at the same rate as my PPOR and take my properties for security if I don't pay up.

no margin call, 30 years loan P&I but I usually knocked it off under 10 years, then I come back for another lot rise and repeat

and properties vs shares both have pro and cons, I take the best of both world

 

I do the same, would just rather I could use the shares as security and not need the property in the first place. Plus in my experience the banks don't give enough recognition to dividends as an income stream. I can qualify for a $500K loan for IP with a 2% net yield but not $500K worth of shares with a 5-6% yield - go figure.

 

It’s a well known fact that property is evil and Shares are the power of all that is good.

 

There are some Telstra shareholders at present that would disagree.

 

Just like there’s out of favour property at certain times there’s out of favour shares. Fortunately with shares one can buy almost the entire market. Diversification property investors can only dream about. Do that and who cares what’s happening with Telstra.

No litigation risk, no baggage, no expenses, no tenant / PM hassles, no maintenance / repairs, no massive transaction costs, no hassles of any sort, nothing to do but just relax and watch the dividends hit the bank account. Bliss on a stick.

 

You made my point . I'm not anti stocks ( recently acquired an ETF/Lic portfolio) myself .

Still yet to see a single person on here ( not saying you can't im sure many ppl have) who made millions in net worth ( not talking cf) from stocks where the risk was moderate for the leverage (if they dared) used.

 

Here are a list of thing why you should stay out of stock market
Shares can go down to Zero
Telstra scare or name any business on any given day
Market crash
Fraud
Manipulation and go it go

 

Not here, plenty of people make a lot of money on stock market, they usually don't brag about it
the one that do has a system that make them money and they keep it close to their chest.
they don't advertise, they don't sell anything, no need to when you can rake in.

 

It's a property forum after all.

Join a share forum and you may get those stories

 

Does anyone have the historical total returns of residential australian property vs ASX shares?

Assuming same leverage (or no leverage) it would be good to see how the total returns (income + capital appreciation) compares over 10,20 and 50 years AFTER taking into account property expenses (council rates, water rates, insurance, strata, repairs, land tax, vacancy and especially factoring in costs for major renovations that should occur every 20 to 30 years)

Benefits of Property:
Property has its benefits in that people need somewhere to live and so the drawdowns are not as large as shares
AND since its much more illiquid you have more time to get out
AND they usually follow regular cycles so you can time the market better than shares or jump from different markets (follow the Syd->Melb->Qld? trend)
AND if your smart you can add value (development, renovation, air bnb) to multiply your gains
AND market is inefficient and you can make big gains if you know something everyone else does not( undervalued , lazy agent, new rezoning laws, thinking outside the square for a development eg triplex site instead of duplex)

But god i really really hate all the stupid tenant requests, so many ridiculous taxes and fees, and biased laws favouring tenants plus potential changes to negative gearing.

Im going to try and get a 50/50 mix of property/shares (ETFS/LICS)

 

Whatever you’re smoking can you please tell me where I can get some.