Why Shares are Better Than Property

Assuming interest rates remain at 4% for the next 10 years on that borrowed million. What if interest rates go up to say 6%? Just 1% either side of that 5% return can make a vast difference to who pays who.

 

I see your point. Though could you not also be flexible in changing jobs AFTER you've secured the IP loan and the rent is coming in? Banks only care about stable employment leading UP TO your application. Sure stable employment counts if you're buying a couple of IP's a year I guess, but not everybody is doing that.

 

Simple. Pick a higher yielding investment. Its not difficult to find ETFs with a consistent 7% to 8% return when interest rates are that high.

 

What and beat the banks. Nooo!

 

Who do you think the good LICs invest in?

 

ARG
AFI
ALF
WAM

has a good history of decent performance and well run
come down to what price you willing to pay

I also add with shares the more capital you have the easier it gets
can't say the same about owning 1 IPs and then 10 IPs

but you can easily manage 10m stock portfolio without any extra hassle or work

 

This.

I'm up to IP#8 and I've got two shelves on my bookshelf dedicated to property investments but just one folder for everything shares.

edit: Not to mention the amount of mental space it takes up

 

Sometimes people (general public that is, not PC-ers who are usually a bit more sophisticated) forget that while it is true a company can go bust and your investment goes to zero, property can have a similar effect. If you buy a property at, say 90% LVR, and prices fall by 10%, assuming you have to sell, you're in negative equity and your original 'investment' equity is gone. And if prices fall further, not only is your original investment gone, but you're also wearing further downside because you still owe the bank the difference between the house value and your loan (the downside of leverage that so rarely gets talked about). That plus the transaction costs you've paid to date.

The big difference of course is that when a company goes bust, it's all over and there's no way back. Whereas when property prices fall, assuming the bank does not force you to sell, you're still in the game and you can hang on and hope that one day prices will go back up again. But you'll probably not be sleeping well.

 

Back to the title of the thread...... Why Shares are Better than Property

investors who purchased and leveraged buying property in Sydney, Melbourne and Perth market made?????? All booming markets.

There is a place for both asset classes, but if you purchased and leveraged in these property markets in 2013 I expect you made a killing. Shares would have paled into insignificance because you simply can not leverage like property.

Moral of the story ..... timing markets key to making money.... I know I say it all the time, but its true/fact.

 

Perhaps... [your] moral is...
- timing property markets is one key to making money
- timing share markets is one key to making money
- not timing share markets for LICs and ETFs is one key to making money
?

 

Right, why not?

So you just keep buying LICs and ETFs and its a long term hold and keep increasing capital in this and you average better yields than property, but its what you call cost averaging?

 

I was just making the point that the statement "timing markets key to making money" is too strong for me. I only have to find one other way to make money to prove it wrong. Adding in "one key" strengthens the statement enormously - from being wrong, to being entirely right .

I added in the LIC and ETF based on austing's graphs in the Peter Thornhill thread. Since clearly there is another way to "make money" using long term LIC's and/or ETF's, it just adds a new point to the statement.

Logically, you've said "the sky is always blue".
I've restated to "the sky is sometimes blue".
To an optimistic artist, the first is true. As a scientist, I'll hoist my flag on the second .

 

Just don't try to liquidate the paper profits into $.... the CGT and repaying the re-evaulated loan from 2013 has made selling the property not worthwhile. Will probably change the loan to P&I so I start paying down the principal. Not saying it's a bad investment at all, Syd market has been kind, but the experience has taught me to hit the sell button earlier.

Certainly agree, both assets are needed across the journey, and it's becoming clearer to me when and how to use and manage both.

 

I have a different train of thought to probably most investors on PC, I am not a die hard buy and hold person.

In terms of paying CGT etc. I see this as part of business and therefore buying in the right structure, correct tax advice will help with this. The option of holding property for 7-10 years in a falling market/no growth while paying interest rates, and lost opportunities does not attract me.

Sydney market and Melbourne market I would say many investors have doubled their money in 3 years, its been very kind indeed.

 

I see what you mean.

I guess I should have said the easiest way to make money in a short time frame is timing the market.

But I agree there are other ways to make money as you stated and be good to do both.

 

Easier said than done, the track record of people who time the market isn't that good,
It doesn't mean it can't be done but why play the odd that has bad stats stack against you?

I don't time the market I buy when the price is right in all market condition and I let time and compounding be my friend without the worry of when to get in and out.

 

keen to understand your distinction between timing the market vs price is right. Are you saying that if, say the current value of a property is $500K, then if "price is right" means $500K or less, then do you buy even if you think there is a likelihood of a fall in prices (assuming you are otherwise in a position to buy)?

 

Absolutely, I am certainly a seller too. My (rather poorly worded!) post was to consider the total costs at selling when considering how you will use the property to take you the next step. I refinanced my Syd unit when the market was hot (rather than selling), and now that the market has flattened, the CGT and loan repayments does not make selling worthwhile.

To keep this post in line with the thread, one downside of property is it's all in or all out. I'm increasing my shares exposure as you can buy and sell smaller bits.

 

One of the biggest attractions for me is the ease of gaining exposure to markets outside of our domestic economy. Not so easy with residential property.

 

I do the number, I do the research and put on a figure I am willing to buy
if it runs away or over that way over the figure I don't buy, doesn't matter if I missed out.

that way what I get can withstand shocks and unforeseen events

Happy to sit and buy nothing when thing get too hot in any asset class