What do I advise the kids.....buy or rent and invest?

Interesting....we bought ppor in 1980...sold in 86 at No capital gain but the house we bought doubled in price in one year. Need to be in the market to see the cycles through.

 

They actually have separate space. We font need them gone...but they want independence.
We like them around...fun.

 

They are always OUR kids.

 

Totally agree. And she is just like me. They will make up their own minds. But what financial strategies can they ponder. They are on goid...not great incomes. They have saved a deposit. Good on them.

 

I would say stay put for 1-2 years, or rent for 1-2 years, and jump in when unit prices drop a little or not so many are buying due to all the building and lending changes.

 

This is true. We have stayed in the market and have had the benefit of the full cycle but it took a full 10 years. In that time we had 3 kids and had to rent elsewhere as we outgrew our unit. The cost of houses were still out of reach. I would prefer to buy in a market due to rise and see the benefit of those gains sooner. In hindsight, we could have bought elsewhere as an investment and ended up with the deposit for a house on Northern Beaches a few years later or just continued to invest and had the choice of an early or semi retirement strategy. Hindsight is a wonderful thing!

 

She may wish to consider her goals and risk tolerance. Then assess:

• Her prefered investment vehicle (property, direct shares, Exchange Trade Funds (ETFs) or Listed Investment Companies (LICs), term deposits etc),
• How to structure the purchase of her chosen investment vehicle(s),
• Tax considerations.

There are lots of things to consider, and lots of places to learn it. For a high level introduction, perhaps try MoneySmart.
https://www.moneysmart.gov.au/investing/invest-smarter/choose-your-investments

 

Agree with them living at home and purchasing an IP (in somewhere that has long term demand, not out in the sticks - demand is key)
And using the money they would pay for rent to put towards paying it off as much as possible in the first 3-4 years of their first loan.
Spending money on other stuff instead of paying all you can in the first 3-4 years of a first property is ridiculous if you were able to understand the benefits you are missing out on.
Lazy to explain the maths of this though. Oh actually you can read about it here.

Beware the yield trap

Nice if you can predict the future and know that this is a peak or a not, but lets face it, you cant.
Secondly, if you get somewhere that has long term demand, even if it turns out to be at a peak, it won't drop much and will back growing faster than other places after not too long.

No parasites is the way to go go goooooooooo \o/

 

Right that's it

 

My eldest left home at age 19, the youngest currently at Uni and at home.
we have a great relationship with our children so love having them around and the boyfriends, works well for us.

 

Can you buy your daughter a house? If she's a good kid she will eventually inherit your assets anyhow. This will speed up her financail position and keep the family wealth growing.

 

no I can not predict the future, but somewhere with long term demand and limited supply has actual value and while the market might correct in the short term, the long term trend will usually be preferable.

 

I will have to disagree the last crash in Syd lasted 10 years 2003 then boom 2013. This is just one market.
Timing the market not time in the market

But most will disagree, and take most of their life time to reach financial freedom chasing their tail, accumulating properties in dead markets. Enough said, not here to convert.

 

Congrats to your daughter....you must be proud.xx

 

Its true. I was trying to get them in the market a few years ago. But now...i think they can take their time...

 

Thank you to everyone. Please know that im not telling them what to do. Im interested in best strategy.
I think that what THEY think is that they want a lifestyle choice...independence and a place to call their own. And those goals are as relevant as any $$ over time. Im hoping for the next generation....but that is another story...or thread. Wish them luck.
But time will tell.

 

Of course it is better to buy low and sell high.
Unfortunately we don't have a crystal ball, so we try to estimate.
As a consequence for the past 4 years people have been saying Sydney hit a peak and will come down
if we were having this conversation 4 years ago you would say the same thing and not buy waiting for it to correct and missed out on a 40% profit.
if this was 3 years ago or 2 years ago or 1 year ago - same thing.

Take a look at the Sydney chart below. Sorry I don't know where to get data until 2016. If you know, please tell me.
Notice the 4 places I marked it with a black cross.

If you were at the first one, you would say you hit a peak and not buy and miss out on a 50% appreciation in value over the next 9 years and that is including the crash. That is not an amazing profit (comes to average of 5% compounded), but considering you went right through a crash it is not bad. You get another 4% from rental income and you have a pretty good return. I think anyone buying with an expectation an average of 10% just in capital gain is gambling.

if you were at the second one, you would say to stay out and don't buy and yes you would not have made much - about an average of 3.5% compounded yearly during that time, but it easily could have gone up another 100k and the whole graph could be 100k higher and it would have been fine.

if you were at the 3rd one, yes it obviously sux and takes a long time to recoup. I would like to see how it averages out when the graph continues to now but I can't find it online. Considering since about 2009 the market in sydney has average about 9% compounded yearly, I suspect that they might have an average return of around 5% which is not amazing but considering it is the worse case scenario it is not terrible by any means. I will be satisfied to get 5% average compounded for the long term.

if you were at the 4th one, you would say it hasn't bottumed out yet and missed out on an insane profit.

my point is that you have no idea where it will go.

it is easy enough to say "buy low, sell high" but that is a load of complete b.s. unless you are a fortune teller.

the best you can do is choose somewhere that has actual value so that in the long term it will go in the right direction at the best possible average speed.

Edit: Can't seem to get it to embed this image

 

First thing is to encourage them to have an excel model (20 years) to model a few scenarios.

No doubt Sydney is high - but my gut feeling is that if they bought an IP with a view to it being a PPOR in 3-5 years whilst renting it would achieve the best overall outcome - in terms of NPV, hedged risk and quality of life. Need to buy something that would be suitable for that life stage and make sure they know the costs of turning over property.

My 2c