[Australia] Am I making a mistake by renting and investing instead of buying?

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JimboMutumbo
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[Australia] Am I making a mistake by renting and investing instead of buying?

Post by JimboMutumbo »

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Last edited by JimboMutumbo on Tue May 17, 2022 9:16 pm, edited 1 time in total.
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asset_chaos
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Re: [Australia] Am I making a mistake by renting and investing instead of buying?

Post by asset_chaos »

You're young, unattached, and not planning on staying in Melbourne. You're the kind of person who ought to rent. In fact, you seem to be renting more house than you need for living by yourself. Having lived in Australia a long time, but not having been raised in Australia, one thing I've noticed is that Australians tend to fetishize real estate investment more than other places. You don't have to get caught up with that, even if others are telling you that you've got to buy some real estate.

What to do with cash notionally earmarked for a future house deposit is a different question. Safe investments pay next to nothing still and aren't keeping up with inflation, though that may change. Still, it can happen seemingly quickly that you wake up one morning with a job in a place where you do want to stay, not to mention a spouse and a baby, and realize, oh yeah, I do want to buy a house now and need my deposit available now. Selling appreciated shares for a deposit means you lose a chunk to capital gains tax. Saving a deposit within super sounds promising, though i don't know anything about the first home buyers super savings scheme because it didn't exist when we bought our first home. Still, as I think you can't remove the money from super for anything other than a first home deposit, you lose the flexibility of being able to access the money for any other purpose. It's a tough set of choices to save an unknown amount to be available at an unknown time in the future.

Rent and save seems to me to suit your current circumstances.
Regards, | | Guy
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andrew99999
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Re: [Australia] Am I making a mistake by renting and investing instead of buying?

Post by andrew99999 »

The elephant in the room is leverage.

With a 1.2m house, you get 1.2m worth of growth assets growing. Even if you got just 2% inflation-adjusted per year, that is still substantially more than 240k in stocks growing at 6% inflation-adjusted per year.

Obviously it comes with a ton of downsides, including massive buying, ongoing, and selling costs, to name a few. And, of course, being leveraged is in itself much more risky.

If not for the enormous cost of moving (stamp duty in particular), you could tolerate it by moving if you wanted to.

I am also thinking about this issue and considering seeking advice on leveraging a diversified share portfolio. NAB Equity Builder is one product that acts more like a home loan in that (as far as I understand) they don't margin call you. But you are restricted to 70% LVR with a P&I loan or 30% with an IO loan. The interest rate is higher by around 1.5-1.75%, but at the same time, your loan principal is falling with inflation to offset it. In addition, the loan interest would be tax-deductible.

Not a recommendation, just some thoughts. I haven't found another practical solution between just (unhappily) buying or doing that.
jg12345
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Re: [Australia] Am I making a mistake by renting and investing instead of buying?

Post by jg12345 »

My few points:
1) In a normal situation, certificates of deposit (say 1 to 2-3 years) could be a good idea, assuming that it might take you 1-1.5y to find a house you just don't renew them the moment you start looking for the house, and by the time you're buying you should have 2/3 of the cash. Although with the inflation that we have now it doesn't seem like an appealing option.

2) Again, probably not very relevant now given volatility of bonds and low interest rates, but you might invest the sum as part of your bond allocation, to short-duration bonds. That part of the portfolio would be both your fixed income allocation, and the house fund. When you sell to buy a house, for a period you will up your fixed income contributions to re-balance your portfolio to the desired allocation.

3) The time, mental and physical energy involved in buying, maintaining, (renting?) and selling RE really keeps me out of investing in RE for financial purposes. So it seems to me you're doing well in renting, except I cannot see how a 3-bedroom is useful to a single person, as noted

I also have not found any better solution, and NAB EB seems like a possible option.

Happy to hear any other thoughts/suggestions on this!
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JimboMutumbo
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Re: [Australia] Am I making a mistake by renting and investing instead of buying?

Post by JimboMutumbo »

asset_chaos wrote: Sat Apr 16, 2022 9:57 pm You're young, unattached, and not planning on staying in Melbourne. You're the kind of person who ought to rent. In fact, you seem to be renting more house than you need for living by yourself. Having lived in Australia a long time, but not having been raised in Australia, one thing I've noticed is that Australians tend to fetishize real estate investment more than other places. You don't have to get caught up with that, even if others are telling you that you've got to buy some real estate.

What to do with cash notionally earmarked for a future house deposit is a different question. Safe investments pay next to nothing still and aren't keeping up with inflation, though that may change. Still, it can happen seemingly quickly that you wake up one morning with a job in a place where you do want to stay, not to mention a spouse and a baby, and realize, oh yeah, I do want to buy a house now and need my deposit available now. Selling appreciated shares for a deposit means you lose a chunk to capital gains tax. Saving a deposit within super sounds promising, though i don't know anything about the first home buyers super savings scheme because it didn't exist when we bought our first home. Still, as I think you can't remove the money from super for anything other than a first home deposit, you lose the flexibility of being able to access the money for any other purpose. It's a tough set of choices to save an unknown amount to be available at an unknown time in the future.

Rent and save seems to me to suit your current circumstances.
Thanks for the response. I actually don't plan on getting married or having kids. My plan is to spend the next 5-10 years in Melbourne to build my portfolio up aggressively then to take a year of two off work to travel before moving somewhere like a quiet beach where I can hit the gym, surf and work part time. I just haven't found exactly where yet hence why I haven't bought and decided to rent and invest instead.

In relations to the house, it was a steal. Most 1 bedroom apartments in inner west Melbourne go for $400 per week, I was able to find this house for the exact same price and also am able to walk everywhere so saving costs on fuel too.

Last time I checked the First Home Super Saver Scheme (FHSSS) is only allowable up to $35k and can take up to 12 months to be released to you. It's helpful, but i also have to factor in the opportunity cost of using it instead of keeping it there.
andrew99999 wrote: Sun Apr 17, 2022 5:04 am The elephant in the room is leverage.

With a 1.2m house, you get 1.2m worth of growth assets growing. Even if you got just 2% inflation-adjusted per year, that is still substantially more than 240k in stocks growing at 6% inflation-adjusted per year.

Obviously it comes with a ton of downsides, including massive buying, ongoing, and selling costs, to name a few. And, of course, being leveraged is in itself much more risky.

If not for the enormous cost of moving (stamp duty in particular), you could tolerate it by moving if you wanted to.

I am also thinking about this issue and considering seeking advice on leveraging a diversified share portfolio. NAB Equity Builder is one product that acts more like a home loan in that (as far as I understand) they don't margin call you. But you are restricted to 70% LVR with a P&I loan or 30% with an IO loan. The interest rate is higher by around 1.5-1.75%, but at the same time, your loan principal is falling with inflation to offset it. In addition, the loan interest would be tax-deductible.

Not a recommendation, just some thoughts. I haven't found another practical solution between just (unhappily) buying or doing that.
Currently the rate is 5.75% with a special rate of 3.75%. I'm aware that leverage really is the driving factor behind it all, although I really hate the idea of putting myself in a risky situation like that. Maybe my stance on debt needs to change.

I suppose it's definitely a viable option though and honestly unless picking winning penny stocks or crypto, probably the only relatively decent way to get exposure to the same sort of gains without all the overheads that RE has.

They say no margin calls but surely there's some grounds? If market drops 20%+ I'm assuming they have something in place?

Lastly, just running some numbers here, at 70% LVR with $240k I could borrow $560k making it a portfolio of $800k. At 3.75% the repayments are $2,593.45 per month. Over the life of a 30 year loan, the interest is $373,642. If that's deductible, does that mean I could claim all of that back on tax? And if all that is reinvested, is that what debt recycling is except with this loan and not a mortgage?
jg12345 wrote: Sun Apr 17, 2022 8:06 am My few points:
1) In a normal situation, certificates of deposit (say 1 to 2-3 years) could be a good idea, assuming that it might take you 1-1.5y to find a house you just don't renew them the moment you start looking for the house, and by the time you're buying you should have 2/3 of the cash. Although with the inflation that we have now it doesn't seem like an appealing option.

2) Again, probably not very relevant now given volatility of bonds and low interest rates, but you might invest the sum as part of your bond allocation, to short-duration bonds. That part of the portfolio would be both your fixed income allocation, and the house fund. When you sell to buy a house, for a period you will up your fixed income contributions to re-balance your portfolio to the desired allocation.

3) The time, mental and physical energy involved in buying, maintaining, (renting?) and selling RE really keeps me out of investing in RE for financial purposes. So it seems to me you're doing well in renting, except I cannot see how a 3-bedroom is useful to a single person, as noted

I also have not found any better solution, and NAB EB seems like a possible option.

Happy to hear any other thoughts/suggestions on this!
Those are both options I've considered, especially the bonds. The CDs at CommBank for 24 months only pay 0.30% which is pretty weak.

I made a comment above about the 3 bedroom house, it was either that or a sardine packed apartment further from work so I decided to take it for the same price.

It seems the NAB EB might be worth really looking into and seeing if it's something that can fit in my long term plan.
invest2bfree
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Re: [Australia] Am I making a mistake by renting and investing instead of buying?

Post by invest2bfree »

JimboMutumbo wrote: Sat Apr 16, 2022 1:13 pm I don't mean to make this a rent vs buy thread, I'd like to run some numbers and get some outside opinions to see if I've missed something.

Currently renting in Melbourne, AUS for $1,729 a month. I live in a 3 bedroom house which is incredibly close to work and the gym. I have also saved on car expenses as I walk everywhere now.

The same house in my neighborhood is going for around $1.2m, with a 20% deposit of $240k my repayments per month would jump to $3,738 including all other costs that come with home ownership.

To buy a house with the same repayments that i pay now I'd need to move much further away, have to endure commuting and would not only spend more money but lose more time in my day.

I'm aware rents rise but I don't plan to stay longer than 10 years in this city so can't see the point of buying.

My idea, and this could be silly, is that when I'm ready to settle somewhere I could just pay for a house outright by either selling shares or access super?

My current situation:
- 30m, no kids, no partner, no debt.
- $130k income
- $180k ETFs (VTS/VEU)
- $140k Super (Max out contributions)
- $100k Cash*

Yearly living expenses are $32,605

*I was looking at a house deposit for a while but I'm seriously considering dropping $60k into VEU to help rebalance while it's cheap.
The situation is very unique in non US locales.

Think about this you are getting $3700 worth value for $1700.

This situation will continue as long as home prices keep appreciating.
adestefan
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Re: [Australia] Am I making a mistake by renting and investing instead of buying?

Post by adestefan »

I believe there is a HUGE cultural push in Australia to buy property. So please remember that you may be feeling that force. In the end you should decide what’s right for you and not what the people around you are explicitly and implicitly saying.
pseudoiterative
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Re: [Australia] Am I making a mistake by renting and investing instead of buying?

Post by pseudoiterative »

JimboMutumbo wrote: Sat Apr 16, 2022 1:13 pm Currently renting in Melbourne, AUS for $1,729 a month. I live in a 3 bedroom house which is incredibly close to work and the gym. I have also saved on car expenses as I walk everywhere now.
Hello, welcome to the forum! I also work and rent in Melbourne and can relate to your situation. For the last few years I have had a similar plan to your current strategy -- rent and invest the surplus into diversified equity portfolio. Then if I feel the need to buy a home later in life, move somewhere cheaper.

If property prices in Australia were to crash so that owning was obviously cheaper than renting I would happily reevaluate. But, it seems to be an ongoing theme of our federal governments to keep real estate asset prices high and keep the segment of the population who are already owners of real estate happy, so I am not holding my breath for this to happen! Maybe change in planning laws increasing supply of land (e.g. higher density residential, more mixed residential commercial zoning a-la japan) or otherwise reducing the profitability of investment property by favoring the rights of long-term tenants will happen in a few decades if the political landscape shifts and a large segment of the voting-age public are renters with no realistic path to become property owners.

If I try to "back-of-the-envelope" estimate your financial situation from a cash flow perspective from your employment, ignoring your assets, I get something like this:

Code: Select all

gross income: $130k

less superannuation contributions: $27k

taxable income: $103k

less medicare levy: $2k
less medicare levy surcharge: $1k = 1% of 103k taxable income
less income tax: $24k

income net tax: $76k

less housing expenses: $21k
less other living expenses: $12k

surplus cash net tax & living expenses: $43k

surplus cash as fraction of income net tax: 43 / 76 = 57%
After expenses, you're able to save around 57% of your income net tax and direct that surplus cash toward your investments, which is great.

If you want to, it is likely there is an easy move you can make to further optimise this:

As another commenter upthread has suggested, you are renting a lot more house (3 beds) than perhaps you need. If you shared the place with 1 housemate you could save another $10k per year in living expenses, and sharing with 2 housemates could save $14k. Sharing with housemates is certainly a lifestyle tradeoff. Sharing with a single housemate would reduce your annual living expenses by about a third and boost your surplus cash for investment from 57% to 70%. In practice you'd do even better as you could also split utility bills - sure, usage would rise but you could split the per-premises connection component of internet, electricity & gas bills.
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andrew99999
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Re: [Australia] Am I making a mistake by renting and investing instead of buying?

Post by andrew99999 »

JimboMutumbo wrote: Sun Apr 17, 2022 11:04 am They say no margin calls but surely there's some grounds? If market drops 20%+ I'm assuming they have something in place?
There are always terms in the terms and conditions that allow it. Not to make you think less of it, but those terms are also in home loans, but o home loans, I've never heard of anyone being forced into disclosure while they continued to make the repayments. From what I understand, this seems to be the comparable idea with NAB EB, but you need to do your own research to be sure.
JimboMutumbo wrote: Sun Apr 17, 2022 11:04 am Lastly, just running some numbers here, at 70% LVR with $240k I could borrow $560k making it a portfolio of $800k. At 3.75% the repayments are $2,593.45 per month. Over the life of a 30 year loan, the interest is $373,642. If that's deductible, does that mean I could claim all of that back on tax? And if all that is reinvested, is that what debt recycling is except with this loan and not a mortgage?
Yes, that interest is tax-deductible, so that would be 45% less interest for the top marginal rate.

Debt recycling refers to converting existing non-deductible debt into deductible debt. For example, you have $10,000 to invest and an existing non-deductible mortgage (e.g. loan on your main residence).

You pay down $10,000 off your home loan, meaning you do not pay interest on that $10,000.
You then borrow it back out to use for investing, and now the interest on that $10,000 borrowed money is tax-deductible.
With debt recycling, the total amount borrowed remains the same, but now some of the interest is tax-deductible.

On the other hand, borrowing to invest increases the amount you borrow and is, therefore, riskier due to magnifying your return (both good and bad). Although that occurs when borrowing for a house also.

But yes, in both cases (debt recycling and borrowing to invest), the interest is tax-deductible when used to purchase income-producing assets.
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JimboMutumbo
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Re: [Australia] Am I making a mistake by renting and investing instead of buying?

Post by JimboMutumbo »

pseudoiterative wrote: Sun Apr 17, 2022 7:11 pm
JimboMutumbo wrote: Sat Apr 16, 2022 1:13 pm Currently renting in Melbourne, AUS for $1,729 a month. I live in a 3 bedroom house which is incredibly close to work and the gym. I have also saved on car expenses as I walk everywhere now.
Hello, welcome to the forum! I also work and rent in Melbourne and can relate to your situation. For the last few years I have had a similar plan to your current strategy -- rent and invest the surplus into diversified equity portfolio. Then if I feel the need to buy a home later in life, move somewhere cheaper.

If property prices in Australia were to crash so that owning was obviously cheaper than renting I would happily reevaluate. But, it seems to be an ongoing theme of our federal governments to keep real estate asset prices high and keep the segment of the population who are already owners of real estate happy, so I am not holding my breath for this to happen! Maybe change in planning laws increasing supply of land (e.g. higher density residential, more mixed residential commercial zoning a-la japan) or otherwise reducing the profitability of investment property by favoring the rights of long-term tenants will happen in a few decades if the political landscape shifts and a large segment of the voting-age public are renters with no realistic path to become property owners.

If I try to "back-of-the-envelope" estimate your financial situation from a cash flow perspective from your employment, ignoring your assets, I get something like this:

Code: Select all

gross income: $130k

less superannuation contributions: $27k

taxable income: $103k

less medicare levy: $2k
less medicare levy surcharge: $1k = 1% of 103k taxable income
less income tax: $24k

income net tax: $76k

less housing expenses: $21k
less other living expenses: $12k

surplus cash net tax & living expenses: $43k

surplus cash as fraction of income net tax: 43 / 76 = 57%
After expenses, you're able to save around 57% of your income net tax and direct that surplus cash toward your investments, which is great.

If you want to, it is likely there is an easy move you can make to further optimise this:

As another commenter upthread has suggested, you are renting a lot more house (3 beds) than perhaps you need. If you shared the place with 1 housemate you could save another $10k per year in living expenses, and sharing with 2 housemates could save $14k. Sharing with housemates is certainly a lifestyle tradeoff. Sharing with a single housemate would reduce your annual living expenses by about a third and boost your surplus cash for investment from 57% to 70%. In practice you'd do even better as you could also split utility bills - sure, usage would rise but you could split the per-premises connection component of internet, electricity & gas bills.
Thanks for the response. All good points, the reason I'm not sharing at the moment is because I've shared my whole life. It's nice to be on my own but i might do so later. Also, as i said in another comment, it was either this big house or a sardine style apartment with commuting for the same price + fuel. I work a rotating roster too and sleeping during the day is easier here.

Just on the math, the max super is salary sacrifice + 15% employer contribution so I walk home with a little extra, also depending how much I want to work, overtime can give me a little more but i figured $130k was safe.
andrew99999 wrote: Sun Apr 17, 2022 8:46 pm
JimboMutumbo wrote: Sun Apr 17, 2022 11:04 am They say no margin calls but surely there's some grounds? If market drops 20%+ I'm assuming they have something in place?
There are always terms in the terms and conditions that allow it. Not to make you think less of it, but those terms are also in home loans, but o home loans, I've never heard of anyone being forced into disclosure while they continued to make the repayments. From what I understand, this seems to be the comparable idea with NAB EB, but you need to do your own research to be sure.
JimboMutumbo wrote: Sun Apr 17, 2022 11:04 am Lastly, just running some numbers here, at 70% LVR with $240k I could borrow $560k making it a portfolio of $800k. At 3.75% the repayments are $2,593.45 per month. Over the life of a 30 year loan, the interest is $373,642. If that's deductible, does that mean I could claim all of that back on tax? And if all that is reinvested, is that what debt recycling is except with this loan and not a mortgage?
Yes, that interest is tax-deductible, so that would be 45% less interest for the top marginal rate.

Debt recycling refers to converting existing non-deductible debt into deductible debt. For example, you have $10,000 to invest and an existing non-deductible mortgage (e.g. loan on your main residence).

You pay down $10,000 off your home loan, meaning you do not pay interest on that $10,000.
You then borrow it back out to use for investing, and now the interest on that $10,000 borrowed money is tax-deductible.
With debt recycling, the total amount borrowed remains the same, but now some of the interest is tax-deductible.

On the other hand, borrowing to invest increases the amount you borrow and is, therefore, riskier due to magnifying your return (both good and bad). Although that occurs when borrowing for a house also.

But yes, in both cases (debt recycling and borrowing to invest), the interest is tax-deductible when used to purchase income-producing assets.
I see. I'll need to look into it more. Thank you.

I think I'm just dealing with a bit of FOMO. Everyone talks about rates rising but also that property may only just stall which basically means I'd still pay $1m+ but with higher interest. Just seems so overwhelming and frightening sometimes...
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andrew99999
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Re: [Australia] Am I making a mistake by renting and investing instead of buying?

Post by andrew99999 »

JimboMutumbo wrote: Sun Apr 17, 2022 9:55 pm I think I'm just dealing with a bit of FOMO. Everyone talks about rates rising but also that property may only just stall which basically means I'd still pay $1m+ but with higher interest. Just seems so overwhelming and frightening sometimes...
A million-dollar debt is going to be frightening to anyone.

If you do not currently budget, you really should start. It will give you some certainty about your actual financial situation and mortgage repayments. It's good finance to do it regardless.

Budgeting for a year will give you a guide on how much of your income is really being used because we tend to forget about infrequent expenses. After a year, you should know them all. In addition, you would begin to set money aside every payday for fixed expenses, day-to-day spending, any savings goals (e.g. holiday, car, etc) — and then set money aside for savings, which is what you can really afford.

Once you know your real cash flow, you can then begin to look at the cost of owning a home. A rough rule is 1-2% of the property value each year to pay for ongoing expenses plus saving for when you eventually need a bathroom reno, kitchen reno, repairs, etc. You need to find out each of these for the type of property you are considering buying to get a realistic estimate similar to the budgeting mentioned above.

And on top of that, you need to factor in at least a 2% higher interest rate than whatever is currently available in the market. If you want to be double sure, 3%, but I would be surprised if rates rise by 3% within the span of a few years because it would likely cause a recession from the number of defaults from people who haven't done what I have just described.

Once you know all that, you will be in a much better situation to make a decision. Still scary, but you will have the figures down to reduce the surprises and you will be in much more control rather than feeling like you have been forced into a situation you didn't fully understand.

At that point, you could do the figures on borrowing to invest and compare, or even just the figures on what you are doing now and see if you can meet your retirement goal (which probably includes owning a house at some point?) and see if you an achieve it without the debt.
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JimboMutumbo
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Re: [Australia] Am I making a mistake by renting and investing instead of buying?

Post by JimboMutumbo »

andrew99999 wrote: Mon Apr 18, 2022 1:31 am
JimboMutumbo wrote: Sun Apr 17, 2022 9:55 pm I think I'm just dealing with a bit of FOMO. Everyone talks about rates rising but also that property may only just stall which basically means I'd still pay $1m+ but with higher interest. Just seems so overwhelming and frightening sometimes...
A million-dollar debt is going to be frightening to anyone.

If you do not currently budget, you really should start. It will give you some certainty about your actual financial situation and mortgage repayments. It's good finance to do it regardless.

Budgeting for a year will give you a guide on how much of your income is really being used because we tend to forget about infrequent expenses. After a year, you should know them all. In addition, you would begin to set money aside every payday for fixed expenses, day-to-day spending, any savings goals (e.g. holiday, car, etc) — and then set money aside for savings, which is what you can really afford.

Once you know your real cash flow, you can then begin to look at the cost of owning a home. A rough rule is 1-2% of the property value each year to pay for ongoing expenses plus saving for when you eventually need a bathroom reno, kitchen reno, repairs, etc. You need to find out each of these for the type of property you are considering buying to get a realistic estimate similar to the budgeting mentioned above.

And on top of that, you need to factor in at least a 2% higher interest rate than whatever is currently available in the market. If you want to be double sure, 3%, but I would be surprised if rates rise by 3% within the span of a few years because it would likely cause a recession from the number of defaults from people who haven't done what I have just described.

Once you know all that, you will be in a much better situation to make a decision. Still scary, but you will have the figures down to reduce the surprises and you will be in much more control rather than feeling like you have been forced into a situation you didn't fully understand.

At that point, you could do the figures on borrowing to invest and compare, or even just the figures on what you are doing now and see if you can meet your retirement goal (which probably includes owning a house at some point?) and see if you an achieve it without the debt.
I do budget but I did stop for a while as I found it was affecting my mental health but have recently started again.

My finances are very simple, the expenses for my current lifestyle are:

Rent $400
Bills $50
Food $130
Gym $16.20
Phone $10
_____________
$606.20

With yearly car rego $720, car insurance $220 and ambulance cover $40 it brings my yearly living costs to $32,502.40 (give or take increases in these last few expenses).

In relation to "achieving it without the debt", are you talking about just purchasing ETFs? Or also purchasing a house outright too?

Factoring in an extra 2% (4.39% given CommBank current 20% deposit rate is 2.39%) will definitely be affordable but I'll need to run the numbers. If that plus 1-2% of the property for repairs and also saving X amount for future Renos turns out to be much greater than a NAB EB repayment then I might consider renting and just take out a loan to invest instead.

I used the spreadsheet off your website and for my current finances I could reach that in a matter of less than 10 years with a 3.5% swr but I'm aware that number will change if I decide to purchase a house or decide to live life a little and splurge. I'd also need a little more as rents increase overtime.
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andrew99999
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Re: [Australia] Am I making a mistake by renting and investing instead of buying?

Post by andrew99999 »

JimboMutumbo wrote: Mon Apr 18, 2022 4:18 pm In relation to "achieving it without the debt", are you talking about just purchasing ETFs? Or also purchasing a house outright too?
I mean that if you were not going to buy a house until much later, then not using leverage with your shares.

Still could potentially use debt on your home, but depends on how late you may end up buying a house. If it's near retirement that may be an issue.
JimboMutumbo wrote: Mon Apr 18, 2022 4:18 pm Factoring in an extra 2% (4.39% given CommBank current 20% deposit rate is 2.39%) will definitely be affordable but I'll need to run the numbers. If that plus 1-2% of the property for repairs and also saving X amount for future Renos turns out to be much greater than a NAB EB repayment then I might consider renting and just take out a loan to invest instead.
I would expect NAB EB to be rising by a similar amount to that of home loans.
JimboMutumbo wrote: Mon Apr 18, 2022 4:18 pm I used the spreadsheet off your website and for my current finances I could reach that in a matter of less than 10 years with a 3.5% swr but I'm aware that number will change if I decide to purchase a house or decide to live life a little and splurge. I'd also need a little more as rents increase overtime.
SWR increases annually with inflation, so the inflation increase is built in.
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JimboMutumbo
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Re: [Australia] Am I making a mistake by renting and investing instead of buying?

Post by JimboMutumbo »

andrew99999 wrote: Mon Apr 18, 2022 7:50 pm
JimboMutumbo wrote: Mon Apr 18, 2022 4:18 pm In relation to "achieving it without the debt", are you talking about just purchasing ETFs? Or also purchasing a house outright too?
I mean that if you were not going to buy a house until much later, then not using leverage with your shares.

Still could potentially use debt on your home, but depends on how late you may end up buying a house. If it's near retirement that may be an issue.
JimboMutumbo wrote: Mon Apr 18, 2022 4:18 pm Factoring in an extra 2% (4.39% given CommBank current 20% deposit rate is 2.39%) will definitely be affordable but I'll need to run the numbers. If that plus 1-2% of the property for repairs and also saving X amount for future Renos turns out to be much greater than a NAB EB repayment then I might consider renting and just take out a loan to invest instead.
I would expect NAB EB to be rising by a similar amount to that of home loans.
JimboMutumbo wrote: Mon Apr 18, 2022 4:18 pm I used the spreadsheet off your website and for my current finances I could reach that in a matter of less than 10 years with a 3.5% swr but I'm aware that number will change if I decide to purchase a house or decide to live life a little and splurge. I'd also need a little more as rents increase overtime.
SWR increases annually with inflation, so the inflation increase is built in.
Hmm I have thought about that honestly but I'm not sure if it's a smart strategy or not. I figured something along the lines of rent and invest until I can essentially replace my income and then use that to pay off a mortgage in my later years and then bowl it over with super. But obviously I'd be paying much more for a house in 30 years time than I would today.

Can you explain that last part about the SWR and inflation? I don't quite understand.
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Re: [Australia] Am I making a mistake by renting and investing instead of buying?

Post by andrew99999 »

JimboMutumbo wrote: Mon Apr 18, 2022 11:44 pm Can you explain that last part about the SWR and inflation? I don't quite understand.
SWR is inflation-adjusted. So if you had 1m and use a 3.5% SWR and inflation was 3% each year, you would withdraw

Yr1. $35,000
Yr2. $36,050
Yr3. $37,131
etc.

Inflation is built into the idea of SWRs.
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Re: [Australia] Am I making a mistake by renting and investing instead of buying?

Post by JimboMutumbo »

andrew99999 wrote: Tue Apr 19, 2022 4:37 am
JimboMutumbo wrote: Mon Apr 18, 2022 11:44 pm Can you explain that last part about the SWR and inflation? I don't quite understand.
SWR is inflation-adjusted. So if you had 1m and use a 3.5% SWR and inflation was 3% each year, you would withdraw

Yr1. $35,000
Yr2. $36,050
Yr3. $37,131
etc.

Inflation is built into the idea of SWRs.
Makes sense. Are you aware of any spreadsheets/calculators or anything that I can compare buying a PPOR vs rent & invest in shares?
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Re: [Australia] Am I making a mistake by renting and investing instead of buying?

Post by andrew99999 »

JimboMutumbo wrote: Thu Apr 21, 2022 12:52 am Makes sense. Are you aware of any spreadsheets/calculators or anything that I can compare buying a PPOR vs rent & invest in shares?
No, sorry.

It is mainly the assumptions used, if you have that, the rest is easy, but yea, not sure of all the assumptions. Actually I would be curious about that myself.
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Re: [Australia] Am I making a mistake by renting and investing instead of buying?

Post by pseudoiterative »

JimboMutumbo wrote: Thu Apr 21, 2022 12:52 am Are you aware of any spreadsheets/calculators or anything that I can compare buying a PPOR vs rent & invest in shares?
back in 2014 New York Times published an interactive rent vs buy calculator that accounts for the opportunity cost of locking away cash that could otherwise be invested in the market. Some of the details may be a bit US centric & the model used for investment returns might be cruder than what bogleheads might prefer, but I reckon most of the model translates across to the Australian context, provided you set reasonable values for all the parameters.

As inputs to the model you do need to set things such as your crystal ball forecast of "home price growth rate" for the next 10 -- 50 years, guessing that forecast accurately in Australia might be challenging, but on another hand you can try sliding that parameter around and see how it impacts your decision.
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Re: [Australia] Am I making a mistake by renting and investing instead of buying?

Post by JimboMutumbo »

pseudoiterative wrote: Thu Apr 21, 2022 3:26 am
JimboMutumbo wrote: Thu Apr 21, 2022 12:52 am Are you aware of any spreadsheets/calculators or anything that I can compare buying a PPOR vs rent & invest in shares?
back in 2014 New York Times published an interactive rent vs buy calculator that accounts for the opportunity cost of locking away cash that could otherwise be invested in the market. Some of the details may be a bit US centric & the model used for investment returns might be cruder than what bogleheads might prefer, but I reckon most of the model translates across to the Australian context, provided you set reasonable values for all the parameters.

As inputs to the model you do need to set things such as your crystal ball forecast of "home price growth rate" for the next 10 -- 50 years, guessing that forecast accurately in Australia might be challenging, but on another hand you can try sliding that parameter around and see how it impacts your decision.
Can't seem to view that without an account but in relation to the opportunity cost argument, doesn't that go out the window when leverage is involved? I mean $100k deposit on a percentage basis might be better off in stocks, but that $100k in stocks is now comparing against a $500k+ home. It's not really the same.
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Re: [Australia] Am I making a mistake by renting and investing instead of buying?

Post by Jaymover »

I too rent and invest rather than own with a mortgage. During 2019 I tried to buy in sydney but found it too hard. If I borrowed to the hilt I could only buy something at the lower end of the scale (lowish income, kids, separated). I got outbid a few times and emotionally exhausted.

I did some modelling with an IFA and found that renting and investing worked out the same using long term return averages. My rental works well and is stable (76% of my suburb rents) and in a great spot so bugger it, I decided to invest and keep renting.

SInce then it has been a rocky road of volatility and I have been trying to hang in there. I have doubted my decision quite often but each time the thought of going through the motions to buy something and have gone "yeah, nah". Of course, mortgagees are getting a great deal at the moment;2 percent mortgages with inflation at 5%, huge tax free capital gains on PPOR almost everwhere. HOwever property is incredibly rate sensitive so maybe no growth anywhere for 10 years and not the doubling as Australians expect.

Even though my shares have tanked I am still way better off than having had cash in the bank all this time. Also, there are some properties, eg pokey new inner city apartments that have fallen in value so glad I didnt buy one of those to suffer in.

However good Australian property; buying one likes to live in for 10 years or so with a reasonable mortgage seems like a less volatile, all weather asset, even taking into account 10% loss via stamp duty and buying costs etc.

Not sure about property investing though. Risky, stressful stuff unless you have a high income, paid for advice and lots of money.

A note is that real total return on property over the last 100 years is only 2.8 percent real whereas stocks are something like 6.5 percent real. Not as much as people think but yes if leveraged then the return on real estate is much better. The story is that real estate has generally only provided bond like returns if unleveraged, not the doubling every 10 years like everyone talks about.
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Re: [Australia] Am I making a mistake by renting and investing instead of buying?

Post by andrew99999 »

JimboMutumbo wrote: Thu Apr 21, 2022 12:52 am Makes sense. Are you aware of any spreadsheets/calculators or anything that I can compare buying a PPOR vs rent & invest in shares?
I've been looking further into this and have knocked up a spreadsheet. PM me and I can email it to you and you can consider whether the assumptions are correct or not. It seems like leveraging into stocks may be a viable option, provided you have risk mitigation strategies in place.
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Re: [Australia] Am I making a mistake by renting and investing instead of buying?

Post by Jaymover »

andrew99999 wrote: Thu May 12, 2022 4:00 am
JimboMutumbo wrote: Thu Apr 21, 2022 12:52 am Makes sense. Are you aware of any spreadsheets/calculators or anything that I can compare buying a PPOR vs rent & invest in shares?
I've been looking further into this and have knocked up a spreadsheet. PM me and I can email it to you and you can consider whether the assumptions are correct or not. It seems like leveraging into stocks may be a viable option, provided you have risk mitigation strategies in place.
It so much depends on assumptions in this low yield future. Would this be right?

PPOR absolute capital gain = starting mortgage rate
Rent increase = inflation rate
total Return on 80/20 portfolio = 6 percent real (not taking into account fees and taxes)
minimum ownership costs = 0.5 percent

It really depends if you want to stay put for 10 plus years or move to a cheaper area in 10 years. If you plan to stay put I think PPOR is ahead (also psychologically a sense of stability)
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Re: [Australia] Am I making a mistake by renting and investing instead of buying?

Post by andrew99999 »

Jaymover wrote: Thu May 12, 2022 5:05 pm It so much depends on assumptions in this low yield future. Would this be right?

PPOR absolute capital gain = starting mortgage rate
Rent increase = inflation rate
total Return on 80/20 portfolio = 6 percent real (not taking into account fees and taxes)
minimum ownership costs = 0.5 percent

It really depends if you want to stay put for 10 plus years or move to a cheaper area in 10 years. If you plan to stay put I think PPOR is ahead (also psychologically a sense of stability)
Yes, absolutely, but you can try different scenarios based on changing situations and compare.
Some things may be more consistent, such as:
- buying a house comes with a 5% sunk cost (stamp duty) vs 0% for a diversified portfolio
- a house has 1-2% ongoing costs of maintenance vs 0.2%
- selling costs of 2.2% vs 0%
- the interest rate on borrowing against shares is about 2% higher
- tax deductions on loan interest of investments (not on your home) are tax deductible reducing effective interest rate
- can drawdown in pieces in retirement lowering your tax even further, and use super to reduce further

These things make an enormous difference and are worth doing projections to see.

The rate of return will be an estimate, but they always were going to be so you can get a bare-bones plan for your future, so not being sure isn't a reason not to use estimates and do projections, which means they can still be useful for comparisons of projections.
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Re: [Australia] Am I making a mistake by renting and investing instead of buying?

Post by JimboMutumbo »

andrew99999 wrote: Thu May 12, 2022 4:00 am
JimboMutumbo wrote: Thu Apr 21, 2022 12:52 am Makes sense. Are you aware of any spreadsheets/calculators or anything that I can compare buying a PPOR vs rent & invest in shares?
I've been looking further into this and have knocked up a spreadsheet. PM me and I can email it to you and you can consider whether the assumptions are correct or not. It seems like leveraging into stocks may be a viable option, provided you have risk mitigation strategies in place.
Would love this please mate, PMd you.
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Re: [Australia] Am I making a mistake by renting and investing instead of buying?

Post by ScubaHogg »

JimboMutumbo wrote: Sat Apr 16, 2022 1:13 pm
Currently renting in Melbourne, AUS for $1,729 a month. I live in a 3 bedroom house which is incredibly close to work and the gym. I have also saved on car expenses as I walk everywhere now.

The same house in my neighborhood is going for around $1.2m, with a 20% deposit of $240k my repayments per month would jump to $3,738 including all other costs that come with home ownership.
For this spread between rent and the mortgage payment I would definitely rent.

Have you ever used this calculator?

https://www.nytimes.com/interactive/201 ... lator.html
“Inflation is always and everywhere a monetary phenomenon.” - Milton Friedman
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Re: [Australia] Am I making a mistake by renting and investing instead of buying?

Post by Jaymover »

There is always the 5 percent rule advocated by Ben Felix. Check out his great you tube.



There are some important caveats though:
Rent must be no more than one third of income
save the difference
Must be aggressively invested

Also. I think whilst there are deep negative real interest rates buying tends win out over time if you stay put due to the rental inflation factor
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Re: [Australia] Am I making a mistake by renting and investing instead of buying?

Post by Jaymover »

JimboMutumbo wrote: Sun Apr 17, 2022 11:04 am
asset_chaos wrote: Sat Apr 16, 2022 9:57 pm You're young, unattached, and not planning on staying in Melbourne. You're the kind of person who ought to rent. In fact, you seem to be renting more house than you need for living by yourself. Having lived in Australia a long time, but not having been raised in Australia, one thing I've noticed is that Australians tend to fetishize real estate investment more than other places. You don't have to get caught up with that, even if others are telling you that you've got to buy some real estate.

What to do with cash notionally earmarked for a future house deposit is a different question. Safe investments pay next to nothing still and aren't keeping up with inflation, though that may change. Still, it can happen seemingly quickly that you wake up one morning with a job in a place where you do want to stay, not to mention a spouse and a baby, and realize, oh yeah, I do want to buy a house now and need my deposit available now. Selling appreciated shares for a deposit means you lose a chunk to capital gains tax. Saving a deposit within super sounds promising, though i don't know anything about the first home buyers super savings scheme because it didn't exist when we bought our first home. Still, as I think you can't remove the money from super for anything other than a first home deposit, you lose the flexibility of being able to access the money for any other purpose. It's a tough set of choices to save an unknown amount to be available at an unknown time in the future.

Rent and save seems to me to suit your current circumstances.
Thanks for the response. I actually don't plan on getting married or having kids. My plan is to spend the next 5-10 years in Melbourne to build my portfolio up aggressively then to take a year of two off work to travel before moving somewhere like a quiet beach where I can hit the gym, surf and work part time. I just haven't found exactly where yet hence why I haven't bought and decided to rent and invest instead.

In relations to the house, it was a steal. Most 1 bedroom apartments in inner west Melbourne go for $400 per week, I was able to find this house for the exact same price and also am able to walk everywhere so saving costs on fuel too.

Last time I checked the First Home Super Saver Scheme (FHSSS) is only allowable up to $35k and can take up to 12 months to be released to you. It's helpful, but i also have to factor in the opportunity cost of using it instead of keeping it there.
andrew99999 wrote: Sun Apr 17, 2022 5:04 am The elephant in the room is leverage.

With a 1.2m house, you get 1.2m worth of growth assets growing. Even if you got just 2% inflation-adjusted per year, that is still substantially more than 240k in stocks growing at 6% inflation-adjusted per year.

Obviously it comes with a ton of downsides, including massive buying, ongoing, and selling costs, to name a few. And, of course, being leveraged is in itself much more risky.

If not for the enormous cost of moving (stamp duty in particular), you could tolerate it by moving if you wanted to.

I am also thinking about this issue and considering seeking advice on leveraging a diversified share portfolio. NAB Equity Builder is one product that acts more like a home loan in that (as far as I understand) they don't margin call you. But you are restricted to 70% LVR with a P&I loan or 30% with an IO loan. The interest rate is higher by around 1.5-1.75%, but at the same time, your loan principal is falling with inflation to offset it. In addition, the loan interest would be tax-deductible.

Not a recommendation, just some thoughts. I haven't found another practical solution between just (unhappily) buying or doing that.
Currently the rate is 5.75% with a special rate of 3.75%. I'm aware that leverage really is the driving factor behind it all, although I really hate the idea of putting myself in a risky situation like that. Maybe my stance on debt needs to change.

I suppose it's definitely a viable option though and honestly unless picking winning penny stocks or crypto, probably the only relatively decent way to get exposure to the same sort of gains without all the overheads that RE has.

They say no margin calls but surely there's some grounds? If market drops 20%+ I'm assuming they have something in place?

Lastly, just running some numbers here, at 70% LVR with $240k I could borrow $560k making it a portfolio of $800k. At 3.75% the repayments are $2,593.45 per month. Over the life of a 30 year loan, the interest is $373,642. If that's deductible, does that mean I could claim all of that back on tax? And if all that is reinvested, is that what debt recycling is except with this loan and not a mortgage?
jg12345 wrote: Sun Apr 17, 2022 8:06 am My few points:
1) In a normal situation, certificates of deposit (say 1 to 2-3 years) could be a good idea, assuming that it might take you 1-1.5y to find a house you just don't renew them the moment you start looking for the house, and by the time you're buying you should have 2/3 of the cash. Although with the inflation that we have now it doesn't seem like an appealing option.

2) Again, probably not very relevant now given volatility of bonds and low interest rates, but you might invest the sum as part of your bond allocation, to short-duration bonds. That part of the portfolio would be both your fixed income allocation, and the house fund. When you sell to buy a house, for a period you will up your fixed income contributions to re-balance your portfolio to the desired allocation.

3) The time, mental and physical energy involved in buying, maintaining, (renting?) and selling RE really keeps me out of investing in RE for financial purposes. So it seems to me you're doing well in renting, except I cannot see how a 3-bedroom is useful to a single person, as noted

I also have not found any better solution, and NAB EB seems like a possible option.

Happy to hear any other thoughts/suggestions on this!
Those are both options I've considered, especially the bonds. The CDs at CommBank for 24 months only pay 0.30% which is pretty weak.

I made a comment above about the 3 bedroom house, it was either that or a sardine packed apartment further from work so I decided to take it for the same price.

It seems the NAB EB might be worth really looking into and seeing if it's something that can fit in my long term plan.
Also, I thought leveraging shares is playing with fire unless it is a short term speculative bet after a massive crash. I looked at some charts on this and a major drop would wipe you out. Property seems more stable the worst case scenario so far seems to only ever be flat for a decade or a 15 percent drop, unless you bought into a shakey tower or flood zone
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Re: [Australia] Am I making a mistake by renting and investing instead of buying?

Post by JimboMutumbo »

I've decided to keep 12 months expenses aside as an emergency fund and put the remainder of what was my house deposit into ETFs to rebalance my portfolio.

I'm not 100% certain it's the right move, but I'm also 100% certain I don't plan to live in Melbourne forever. I'm also fairly certain that with this high inflation, low interest environment that holding so much cash is losing money. Especially when I'm trying to catch up to house prices which don't stop rising at a much faster rate.

I'll reevaluate in 5 years time to see if this was the right move or not but the way I see it, I'd rather have an "oh well, but at least my portfolio is a few hundred thousand dollars" than an "oh no, not only do I not have the ETFs, or a house, but my cash is worth less".
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Re: [Australia] Am I making a mistake by renting and investing instead of buying?

Post by JimboMutumbo »

ScubaHogg wrote: Fri May 13, 2022 8:36 am
JimboMutumbo wrote: Sat Apr 16, 2022 1:13 pm
Currently renting in Melbourne, AUS for $1,729 a month. I live in a 3 bedroom house which is incredibly close to work and the gym. I have also saved on car expenses as I walk everywhere now.

The same house in my neighborhood is going for around $1.2m, with a 20% deposit of $240k my repayments per month would jump to $3,738 including all other costs that come with home ownership.
For this spread between rent and the mortgage payment I would definitely rent.

Have you ever used this calculator?

https://www.nytimes.com/interactive/201 ... lator.html
Can't seem to view this without paying, could someone please run the numbers on it for me?

EDIT: All good, got it. Geez, it's saying that renting is substantially better, even on a house worth $650k compared to my current rent of $1,729pm.
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Re: [Australia] Am I making a mistake by renting and investing instead of buying?

Post by Bogle1984 »

I would invest into stocks and bonds until your portfolio is about the price of an average home. Then I would cash out about 20-30% and buy a home with mortgage, regardless of current prices. I wouldn't time the housing market, as I wouldn't time the stock market.

70-80% stocks + bonds and 20-30% real estate seems good to me.

By owning real estate, you
1) own a higher return and risk asset class that is not directly correlated with the stock market, increasing your portfolios risk-adjusted returns
2) hedge against rising rent prices (regardless wether you rent your home out or use it yourself)
3) diversify
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Re: [Australia] Am I making a mistake by renting and investing instead of buying?

Post by gougou »

Jaymover wrote: Thu May 12, 2022 2:02 am A note is that real total return on property over the last 100 years is only 2.8 percent real whereas stocks are something like 6.5 percent real. Not as much as people think but yes if leveraged then the return on real estate is much better. The story is that real estate has generally only provided bond like returns if unleveraged, not the doubling every 10 years like everyone talks about.
Is that 2.8% real return only the price return? Does it include rental income? If you buy a rental property you get both the price appreciation and rental income. If you buy a home to live in you save rent. You may very well be doubling your money every 10 years if you included the rental income/imputed rent.

Real estate without leverage has performed pretty closely to index funds in recent decades with rental income included. So if you bought home with 20% down you would have done much better than if you invested the down payment in index funds.
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Re: [Australia] Am I making a mistake by renting and investing instead of buying?

Post by andrew99999 »

Bogle1984 wrote: Sat May 21, 2022 10:56 am I would invest into stocks and bonds until your portfolio is about the price of an average home. Then I would cash out about 20-30% and buy a home with mortgage
This doesn't seem prudent to me.

By waiting to have the entire price of a home in stocks before taking out 20-30%, the price of housing would have been expected to go up (and faster than the price of that 20 - 30 % would have gone up due to the leverage).
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Re: [Australia] Am I making a mistake by renting and investing instead of buying?

Post by Valuethinker »

Jaymover wrote: Sun May 15, 2022 7:40 am
Also, I thought leveraging shares is playing with fire unless it is a short term speculative bet after a massive crash. I looked at some charts on this and a major drop would wipe you out. Property seems more stable the worst case scenario so far seems to only ever be flat for a decade or a 15 percent drop, unless you bought into a shakey tower or flood zone
1. Do not leverage equities. Because you can be margin called at or near the bottom and not profit from a subsequent recovery. Wiped out.

The only way you can leverage equities safely is not to repay your mortgage faster than required - mortgage debt generally cannot be called unless you fail to make payments on time.

2. "Worst case scenario so far". Well, globally Japan has gone down by about 2/3rds (and never recovered), USA as a whole dropped by 40% as a whole in the 2007-2010 period. There have been many worse regional crashes (New England in the 1990s; California, same; Texas in the 80s; Britain in the early 90s was about minus 40%, so was Canada).

If you mean Australia then I expect if you look at inflation-adjusted (real) prices it can be worse than that. What I do know is that house prices in Australia went down from the beginning of WW1 (1914) until the 1950s (more or less tracking the global price of wheat - the same thing happened in Canada, Winnipeg (dead centre of the continent & gateway to the West) peaked in prosperity & population about 1910)). Melbourne, Sydney etc have those big Victorian suburbs which were built in the great late 19th C Australian boom.

But I don't know a huge amount about Australian property prices.

Just don't bet that your house is a "sure winner". It might be, it might not be. Mostly houses are places to live. You cannot eat your house, and you can't sell small parts of it over time - which is what you do with a stock portfolio in drawdown phase (retirement).
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Re: [Australia] Am I making a mistake by renting and investing instead of buying?

Post by Jaymover »

gougou wrote: Sat May 21, 2022 11:39 am
Jaymover wrote: Thu May 12, 2022 2:02 am A note is that real total return on property over the last 100 years is only 2.8 percent real whereas stocks are something like 6.5 percent real. Not as much as people think but yes if leveraged then the return on real estate is much better. The story is that real estate has generally only provided bond like returns if unleveraged, not the doubling every 10 years like everyone talks about.
Is that 2.8% real return only the price return? Does it include rental income? If you buy a rental property you get both the price appreciation and rental income. If you buy a home to live in you save rent. You may very well be doubling your money every 10 years if you included the rental income/imputed rent.

Real estate without leverage has performed pretty closely to index funds in recent decades with rental income included. So if you bought home with 20% down you would have done much better than if you invested the down payment in index funds.
I think it is yield plus capital gain. Remember that people are often ploughing heaps of money into their houses so the yield ends up being only about 2.3 percent.

Being a little bit of a devil's advocate as clearly Australian property has done well compared to global shares in the last few years and rents have been going up.
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Re: [Australia] Am I making a mistake by renting and investing instead of buying?

Post by Jaymover »

Jaymover wrote: Tue May 24, 2022 6:46 am
gougou wrote: Sat May 21, 2022 11:39 am
Jaymover wrote: Thu May 12, 2022 2:02 am A note is that real total return on property over the last 100 years is only 2.8 percent real whereas stocks are something like 6.5 percent real. Not as much as people think but yes if leveraged then the return on real estate is much better. The story is that real estate has generally only provided bond like returns if unleveraged, not the doubling every 10 years like everyone talks about.
Is that 2.8% real return only the price return? Does it include rental income? If you buy a rental property you get both the price appreciation and rental income. If you buy a home to live in you save rent. You may very well be doubling your money every 10 years if you included the rental income/imputed rent.

Real estate without leverage has performed pretty closely to index funds in recent decades with rental income included. So if you bought home with 20% down you would have done much better than if you invested the down payment in index funds.
I think it is yield plus capital gain. Remember that people are often ploughing heaps of money into their houses so the yield ends up being only about 2.3 percent.

Being a little bit of a devil's advocate as clearly Australian property has done well compared to global shares in the last few years and rents have been going up. In recent decades Australian property has been tracking index funds bit over a longer timeframe has only yielded 3 percent in total then maybe we can expect poor returns going forward and maybe indexes to do a bit better
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