Why Property is Better Than Shares

I think having cold hard cash is the perfect investment. I'm getting a new fridge.

 

Dispicible.

 

So why are investors on PC jumping into these products?

My guess is Newbies, no experience ? No idea

healthy discussion is good, we are here to learn

I still want to know why I dont hear about investors retiring using this strategy?

 

Yes I'm a newbie hoping to retire on dividends. I'd also love to hear from those who have retired using these strategies / products. Do they exist, I hope so? Please do tell. After reading @Piston_Broke's comments I need reassurance to be confident that it's possible.

 

It must be some kind of elaborate scam!
Or perhaps they don't come and comment on property forums.
Either way, better be careful I say and avoid the whole thing like the plague

 

Looks like you'll be waiting for a while mate :/

 

Sorry newbie... those people are off enjoying their ongoing dividends... nothing more here, time to move on...

 

I think @keithj is too busy spending his retirement money to hang out here anymore
The keithj Interview

 

If I remember correctly Keith ended up having to go back to work a bit after that.
Though he should be sitting pretty now if he held on to the assets.
He just stopped accumulating a bit too early.

Ain't we all...

 

Interesting conversation all over. I feel its good to have a mix of assets . If one is in the below situation what would you recommend:
1) Bought a PPOR .Still owes around 600K to bank.
2) Has an offset account facility against the loan.

Should he dump all the surplus amount onto offset and invest the surplus in shares once the offset balance matches the loan or start investing in shares ( LIC/ETF ) on a monthly basis ( like 1000$ permonth ) .

 

Hi @truong ,

Thanks for spreadsheet, very handy. I have also developed a similar one using my actual marginal tax rate and found out that the conclusion is quite different to yours. Below is my assumptions:

1. Scenario 1:
- Initial investment: $125,000 in cash
Property
- Property value: $500,000
- LVR: 80%
- IR: 6%
- CG: 5%
- Net rent: 3.5%. Rent increases is based on CPI = 3%
- Depreciation: $2,000/year average
Share
- Share value: $125,000
- CG: 5%
- Dividend: 4.2%
- Fully frank

2. Scenario 2:
- Initial investment: $125,000 from equity of other properties
The rest are the same as Scenario 1.

I then compared the difference between equity in property and share (of course excl. selling cost) at 5, 10, 15 and 20 year. The results indicate with Scenario 1, property win easily and the gap keeps increasing rapidly. With Scenario 2, the gap is even much bigger.

So the conclusion is (at least for my situation with the above assumptions), property is better to build up equity and create wealth. However, if you hit the borrowing capacity limit or near retirement or have low risk appetite or do not want to have headache with repairs, vacancy, etc., or do not want to worry about interest rate rise, shares are a good choice. And imo, a good combination of properties and shares (adjusted based on individual circumstances and objectives) are the answer.

 

It's a good post that one ,and good to look at while going forward into all the different trends that we face now..

The line up in investors is pure gold from handy andy and bill l dazz so many who no longer post and I can understand why??,it's a post that anyone starting out should read several times ..

 

Interesting analysis, thanks. There are a few costs not included - council, water, maintenance, strata, mgt fees, insurance, which are significant over the longer 5,10 - 20 yr periods you're talking about.
As you say, many would agree that a combination of IP and shares would be good in accumulation phase, moving to a more passive shares heavier portfolio towards retirement would be the way to go.

 

Keithj is a deep value investor of property and shares. When those times arrive again there’s a possibility he might reappear. We’ll have to wait and see. At least in the case of Shares it’s likely when I’ll also be more aggressively buying shares.

 

Those costs have been included to get a net rent of 3.5%. Gross rent should be 4.5-5% although it is not easy to find that yield level in Syd or Mel if buy now. I have tried with a net rent of 3%, CG of 4% and property still win easily.

 

I don’t understand why people bother arguing about this when every sensible investor knows that shares are the only decent asset class worth owning.

 

He he. Careful, you could upset someone.

As long as people are happy with what they are doing, it's legal, and they're not stressed over it, I don';t consider it matters whether they invest via property or shares.

For me it's shares (LIC's) only. A pleasant surprise when I looked at my last two tax returns though out of curiosity. I'll take a 10.9% increase in income (before franking.) Really had to work hard for it too. However, no guarantee that increase will occur this year although on current numbers an increase of some nature will happen.

 

Yeah I bet. Working about as hard as this bloke who also appears to enjoy a G&T:

 

How TF did you get my pic?

 

It can also be a form of superstitious thinking,pre GFC Keith and several other like myself would be in the chat room on the old site each day..Then through the very low's of the GFC when CBA went into the mid 20 dollar mark and I don't think anyone I was talking too sold-their survival instincts kicked in and at that price most were more inclined to take take take..Then when the 2011 Brisbane floods hit I think he may have hit the same wall as me when the insurance side went from champagne to s### ..
That mindset has stayed with me through boom times bust times ,contributing to a simple desire to hold on to investment,s be they stand-alone bank shares and other things when most otherwise wouldn't have..

No one can teach you that it has to learnt the hard way,and by the way we are well overdue if you study others acquisition habits and what some invest in for another GFC and the inner squirrel within me tells me it's not that far off..