COVID-19: who’s going full doomsday prep on this?

[Freediver]

Increasing debt isn't equal to wealth but it seems to be interpreted that way. You see these news stories occasionally about some 23 year old that has lived on beans and now has 8 investment properties with a value of $4 million+.

Makes a nice story but the amount of $$$ they really have on hand opposed to having a chunk of debt serviced by rental income is usually left out. The total of the asset value which is would have to be mostly debt is only mentioned.

If that 23 year old only owns 25% of what he holds that still makes him a millionaire at 23. As the properties go up in price it's the owner that gets the gains, not the bank. For a long time houses have been going up in value at more than the interest rate.

 

[Tubbsy]

The money was not in selling it was in owning and then borrowing against the capital gain to buy more.

Spot on, this. No more saving deposits, you wanted another house, call your bank, lean on your equity and away you go.

 

[Sethius]

Well worlds fucked. Had a fire close by, thought it was going to be a car. Went to look today, cans of empty fuel, a couch or similar and a burnt dead dog...

 

[johnny]

investors are a burden to the system. the tax perks are just another form of welfare, as is the money pulled out of the rest of the economy to service all that "wealth creation".

I own investment property. I've never negative geared and I've let a young family live there without any rental references against the advice of the real estate agent, simply because they were a young family that needed a home. I didn't raise the rent on them in 7 years.

Gotta say, I resent being called a burden to the system when I take risks for other people's benefits, forego earnings to not be a cunt and pay shit tonnes of tax because I lived overseas and stare down the barrel of CGT. The other folk I know who do similar things would also resent that generalisation .

 

[Haakon]

I own investment property. I've never negative geared and I've let a young family live there without any rental references against the advice of the real estate agent, simply because they were a young family that needed a home. I didn't raise the rent on them in 7 years.

Gotta say, I resent being called a burden to the system when I take risks for other people's benefits, forego earnings to not be a cunt and pay shit tonnes of tax because I lived overseas and stare down the barrel of CGT. The other folk I know who do similar things would also resent that generalisation .

So you're only doing it as a service? If you knew you were going to lose money, would you have still done it if the only thing you'd get out of it was the sense of civic duty?

 

[Dales Cannon]

How the fuck did you get to that conclusion? Jonny will still realise capital gains at some point or his kids will. He has chosen not to fuck with leverage to neg gear and play the tax game.

 

[Haakon]

How the fuck did you get to that conclusion? Jonny will still realise capital gains at some point or his kids will. He has chosen not to fuck with leverage to neg gear and play the tax game.

Exactly. I'm just trying to gently point out its still being done for personal gain. Im sure there are varying levels of how much you work the game for personal gain, but thats not the point. Its not at its core something someone does for the benefit of others.

 

[pink poodle]

Unless @johnny has a cone rather than a child...I'd suggest preparing something for his heir/s is doing something for others. Intergenerational wealth planning is not uncommon and certainly requires thinking about others @Haakon.

Just buy the house. You'll feel less miserable. Probably not happy though. An for fucks sale don't do your on conveyancing. Sure it looks easier than rebuilding a French car...

 

[Freediver]

Exactly. I'm just trying to gently point out its still being done for personal gain. Im sure there are varying levels of how much you work the game for personal gain, but thats not the point. Its not at its core something someone does for the benefit of others.

Which is why we need some governmental encouragement but not the level we have. With no incentives the government would be forced into supplying more social housing.

 

[Litenbror]

What is the alternative Plan B to provide cheap, affordable housing that doesn't rely on someone else taking the financial risk to provide it?

Having lived in the States for many years I was amazed at the affordability of housing compared to Aus. Then I saw the California housing market and houses there were many times more expensive. When I investigated why what I came across was California has investor benifits like cuts to capital gains and other tax benifits, no other us states have these. Those benifits have driven to cost up compared to the rest of the country. It's exactly what has happened here.

 

[Haakon]

Which is why we need some governmental encouragement but not the level we have. With no incentives the government would be forced into supplying more social housing.

but not as much is house prices were not inflated by speculative investing...

 

[Haakon]

Unless @johnny has a cone rather than a child...I'd suggest preparing something for his heir/s is doing something for others. Intergenerational wealth planning is not uncommon and certainly requires thinking about others @Haakon.

Just buy the house. You'll feel less miserable. Probably not happy though. An for fucks sale don't do your on conveyancing. Sure it looks easier than rebuilding a French car...

Thinking about your kids doesn't count as "thinking about others" - thats just looking after the problem you created Actual altruism involves the broader society (so ive been told).

anyway, im not having a go at johnny. its just hard to listen to the whole caper being defended as some public service when at best its going part way to solving a problem its created in the first place.

 

[Flow-Rider]

Nobody with a 50k job and a small family is going to get a loan or be able to save to buy a rental.
The money was not in selling it was in owning and then borrowing against the capital gain to buy more. If you keep buying and selling you will always only get the gain on one property. I'm not sure what fake wealth is. If you're assets are worth way more than your debt then you have wealth.

What made house prices go up was mostly tax incentives that made housing more lucrative than other forms of investment which then had the effect of driving further increases.

I know what they're doing, they own one house and then lever against it to buy several. There's lots of people in Brisbane on low incomes with rentals, parents give them deposits and etc. Houses in Brisbane are more affordable than a lot of others down the east coast. Fake wealth is when people say that their assets are worth a lot more than what they really are, you know fiddle the books, if they had to pay all their loans out at once they would have been left with nothing. Oh yeah and you need to make a profit to pay CG in the first place, heaps of people buy interest only and dump before the loan changes over and take the profits after CG and run.

Anyway this isn't an investor post, it's more a post about helping people in hardship, that places the hardship onto other people in the end.

 

[pink poodle]

Thinking about your kids doesn't count as "thinking about others" - thats just looking after the problem you created Actual altruism involves the broader society (so ive been told).

anyway, im not having a go at johnny. its just hard to listen to the whole caper being defended as some public service when at best its going part way to solving a problem its created in the first place.

Still, I don't have an answer to 2 very important questions...

1) what were you homeless victims of greed and capitalism doing in your 20s?

2) when will we see confirmation of your new house in Hobart?

This is the shit that will keep me awake tonight.




It is also sometimes easier to buy an investment property than to buy a place of residence. In response to flow rides comments above.

 

[Mr Crudley]

If that 23 year old only owns 25% of what he holds that still makes him a millionaire at 23. As the properties go up in price it's the owner that gets the gains, not the bank. For a long time houses have been going up in value at more than the interest rate.

Yebbut, it is all paperwork exercise until the properties are sold, taxes paid and the final number is in the bank account. Likewise if the property market crashes and you get negative equity too.

I have been accosted by sales reps a few times trying to flog off their new school badly built high rise city apartments. I didn't buy the 'property always goes up' argument since there is always a limits in what the buyer is willing to pay and saying 'what the the market decides' is too fluffy.

I told them that I'll sign now if you can stand behind your words and put it in a contract agreed to by lawyers and backed by trust fund that if the $600k property doesn't hit $900k in a 'x' years as in the pretty graph then your company will pay the difference in lost capital earnings. Needless to say, no one would sign that one. Give it try and I bet you will have the same results.

 

[Mr Crudley]

Having lived in the States for many years I was amazed at the affordability of housing compared to Aus. Then I saw the California housing market and houses there were many times more expensive. When I investigated why what I came across was California has investor benifits like cuts to capital gains and other tax benifits, no other us states have these. Those benifits have driven to cost up compared to the rest of the country. It's exactly what has happened here.

Mrs watches those fixer upper shows too much and the amount of US houses, admittedly not in prime locations, that go for sub USD $150k is nuts.

I didn't know that about California but anywhere near the Bay Area and Santa Cruz also have some hideously expensive properties which is at odds with it loose surfer/biker d00d culture. There were loads of homeless in SC too unfortunately and probably in part due to drugs and expensive property. You ride past tent cities on the way to the trailheads.

HK and SG's expensvie property must be due to the lack of supply vs. greater number of buyers.

 

[Flow-Rider]

There's been nothing written in stone ATM that Tenants don't need to back pay unpaid rent anyway, just the same as for homeowners & businesses not paying outstanding money. I thought the whole point of the govt stepping in to aid people with relief was to stop people from going under. People might slacken off and then get themselves into a whole heap of trouble with debt in the end. It's tough times ahead and I feel for the people that get the grunt of this but who gets it all in the end is still unknown.

 

[tubby74]

HK and SG's expensvie property must be due to the lack of supply vs. greater number of buyers.

At least in Sg you have the HDB flats in huge numbers, getting most people on the property ladder. And stamp duty rates that rise with the number of properties owned.

 

[Mr Crudley]

At least in Sg you have the HDB flats in huge numbers, getting most people on the property ladder. And stamp duty rates that rise with the number of properties owned.

It is pretty good for local Sing to have the HDB flat but you sure need a load of $$$ if you are a expat there. The further out you go from the CBD towards JB then you see it taper off pretty quickly IMHO.

 

[johnny]

So you're only doing it as a service? If you knew you were going to lose money, would you have still done it if the only thing you'd get out of it was the sense of civic duty?

Hang on a minute, the goal posts just shifted. You said that investors were a drain on the system and that the tax perks take money from where it's really needed. I don't get tax perks and I gave cheap housing to some one who was struggling to put a roof over their head because they were new to the country. I took nothing from the system and effectively took some one from needing to get govt support to get shelter.

Now we've moved from "you're a drain on the system" to "you're not altruistically putting into the system". Of course I'm not losing money (I'm losing opportunity and taking risks that I didn't need to be challenged with), but that was not the point of your original claim.