What made you choose investing in property other than shares and mutual index funds ?

Im thinking of investing in index funds , why did use choose properties over shares or mutual index funds etc ?

 

Property is low risk (if you buy something that will be in demand), you can value add through renos or other techniques, but for me the most powerful thing is the power of leverage, and the power of compounding. You can borrow say $9 for every $1 deposit. And if property goes up 5%, if you were to hypothetically borrow $450k for a $500k home, the property would be $525k at the end of the year, but you actually only put in $50k, so that's a 50% gain on your equity. Now if your boom goes a bit longer.... boom! Suddenly your 500k home is now $1mill in a blink of an eye. Depends on the market of course. There's also tax benefits through depreciation.

I would not feel comfortable borrowing money for shares, or at least, no where near as much as I do for property. Its fairly normal for people to borrow large amounts for properties and Australian banks are keen to lend, so its not too difficult (at least if you balance off growth (CG) vs. Cashflow well). Therefore my unwillingness to leverage on shares is the main reason why property is my major investment vehicle outside of super.

Its nice seeing the value of your properties go up and then you can pull equity from them and repeat the process.... Last few years all my Sydney places were going up $1k/week each, and I didn't have to do anything for that to happen. Of course, this growth has to slow/stop, but I am so glad I was on that ride.
To be successful I believe you have to have patience and think about when to buy/sell/hold. By monitoring the market where I invest closely I can get to know what I feel I should do. I was fortunate, I have a property in middde Sydney, it wasnt doing all that much, anyway I was thinking, sell. But anyway, it was renting well with no hassles (tenant was sometimes late on payments but nothing overly drastic, just more of an annoyance perhaps) and anyway I held it. And then... boom! Glad I held it.

 

Ability to add value in many different ways, significant leverage is obtainable for bigger profits and it's a physical asset that's needed by everyone. It's also not 100% investor dominated which is a good thing in my book.

 

shares are too hard for me.. Not that properties are easy..

 

I believe that we can't influence the outcome when investing in shares and that price movements (at least in the short term) are determined quite cunningly by major institutions.

To me property is very much like a poker game. It's an uneven playing field which I like because that means that we can swing the odds in our favor by doing a few things, and sometimes we can increase our 'odds' of doing well by a lot. We can also add value to an asset to manufacture equity in multiple ways. Leverage is also easier and imo safer to apply which then lets the magic of compounding do its magic. Also the underlying asset is unique. Everyone wants it to own, rent, live in etc. It has much emotional and psychological connection with most people.

So all in all, property for me wins hands down. I don't know anyone personally who has made it mega big in only shares. I know many people who have made it big in property or property and shares, but never shares alone. To me that says something.

 

Pretty much what's been said already. Levarage is the huge one with the ability to do something about its value being a close second. Another part of it is the ability to use the property if it is vacant should i want to.

Watch this and see if it explains a lot.

 

There are only 2 reasons:
1. Leverage
2. ability to add value

Shares are superior to property in dollar for dollar investing because:
1. No stamp duty
2. no land tax
3. franking credits
4. ability to sell down a small parcel
5. ability to sell and have your money within days
6. no broken toilets or repairs
7. no agent commissions
8. more fluctuations in price
9. higher yields
10. ???

 

Agree with Terry. Leverage is key reason.

Although a bank has just offered my fund a margin facilty that doesn't get margin called for 5 years. So shares are increasingly more attractive to me now. Not to mention they're in different ends of the cycle.

Ability to add value is an ok concept. But finding value is the best. Adding value is just creating a job for yourself. Don't forget the most successful investor in this world doesn't invest in real estate.

 

What Terry and everyone said.

But, why choose? I'm doing both.

 

We did both. Each has its advantages and disadvantages.
Marg

 

My brother invested solely in shares and retired at 53, by which the his dividend income exceeded his medical science full time salary. He now spends his time travelling the world.
Marg

 

What was his strategy? Can you provide some detail?

 

I was talking about this with a mate the other day. He is selling his 5 unencumbered properties and investing the lot into 2 index funds - Imagine if you left school and just invested 20% of your salary into an index fund such as VAS - wonder how long it would take to have passive income matching your annual salary.

 

Can someone do the numbers on this? Shouldn't be hard right...

Edit: My calculations, sans compounding at 5% return, suggest 100 years. I hope I haven't made a mistake.

 

Great stuff. It obviously worked well for him and his goals. Retired and travelling the world at 53 is a fantasy for most i reckon.

 

Property has the advantage of LVR and that is huge, the power to buy/work volume.

Which asset class is superior has more to do with the actual investor, their ability and skill to make money. Its impossible to pick which is the better because there will always be those who are highly successful and those that have failed in both... hope this makes some sense, it does to me


MTR

 

Give me a break!!

Most of us in our 60s never heard of having a "strategy". We simply paid off our homes, saved as much money as we could and invested it in what seemed like a good deal at the time.

Mainly property or shares, though term deposits and cash management accounts did rather well in the heady days of high interest rates. Our personal best was 18% received. On the down side, we considered ourselves lucky to have a savings bank housing loan capped at 13.5%. And the loan for our first IP was at 16%.

No internet and very little information generally available. Mostly word of mouth or looking at what friends achieved. Most of us muddled through and our investments grew over the years as time worked its magic.
Marg

 

Two main reasons:
1. Everyone needs a roof over their head.
2. You can't spend some time and effort on a share to make it look pretty and therefore increase its value.

 

It's low risk
Cheap to get into
And like most people who invest in property I'm not smart enough to invest in anything else.

Same goes with most people on here

 

I bought some bank shares post gfc and they doubled in value in about three years. Tick. I bought a block of land out in the bush for $20K back before the GFC and sold it 2 years later for $80K.

I stuffed up everything else I've bought though. I believe that with shares and funds, there are thousands of other people who can stuff them up for us, whereas with property it is just my responsibility.