Property v shares - by Brent S

[JABlog]

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10722411

There will always be disagreements over whether residential property is a better deal than owning shares but a betting man would, given the yield differential, put his money on shares and listed property outperforming residential in the next 20 years. The FundSource analysis, however, adds nothing to the debate.

[Winston001]

Haven't read your link but I have invested in shares and followed property for 25 years. As I've said on other occasions, wish it had been the other way around. Seen half-wits make a mint simply owning a property and educated people go backwards owning shares.

As for property types, residential is a distant last. Too much hard work and trouble. Commercial tenants get on with their business and want security of premises. Industrial is best (so I'm told) but that must depend upon location and the economy.

[Rosco]

Big difference between the two is leverage.

Who would borrow $350k, secured over their personal home, to buy shares? Yet lots of investors do this all the time for property!

So for shares you might borrow $50k, if you could get a 20% return(increase in value, so capital gain effectively), then that is $10k per year return.

For property you borrow $350k and buy an average NZ house. It would only take a 3% capital gain to get $10.5k per year, or around the same dollar figure as the 20% return on shares.

So a standard investor would need a 20% capital gain from shares, to equal a 3% capital gain from property.

I'm quite biased to property, and I imagine over time these capital gain figures are actually quite similar, or that property even outperforms shares.

So if get 5% capital gain on each, property goes up $17.5 k and shares only $2.5k. HUGE DIFFERENCE!!

Ross

[spaceman]

I LOLed at the bit where they said they didn't count rent as income.

Cheers
Spaceman

[damage]

I LOLed at the bit where they said they didn't count rent as income.

Cheers
Spaceman

yeah I struggled with that one as well.

[damage]

Haven't read your link but I have invested in shares and followed property for 25 years. As I've said on other occasions, wish it had been the other way around. Seen half-wits make a mint simply owning a property and educated people go backwards owning shares.

As for property types, residential is a distant last. Too much hard work and trouble. Commercial tenants get on with their business and want security of premises. Industrial is best (so I'm told) but that must depend upon location and the economy.

Only trouble with commerical & industrial is vaccancy rates. In a poor economy you can be right royally screwed.
Investing in residential property is easy, so the more suckers you can get the better

[DazRaz]

Just looked at at old articles by fundsource comparing shares vs property. They have been doing it this way for some time. Similiar articles in 2003, 2004 and 2005. During this period, I had money in a share fund returning 25%pa. The fund is back at 2004 / 2005 prices now yet the property I bought in 2003 has not had the same slip in value. And that's not taking into account rents either.

[Skeptic]

Just looked at at old articles by fundsource comparing shares vs property. They have been doing it this way for some time. Similiar articles in 2003, 2004 and 2005. During this period, I had money in a share fund returning 25%pa. The fund is back at 2004 / 2005 prices now yet the property I bought in 2003 has not had the same slip in value. And that's not taking into account rents either.

Of course, if you had to sell your property and your shares both tomorrow, I think you'd find it easier to get money for your shares.

[Shane D]

Of course, if you had to sell your property and your shares both tomorrow, I think you'd find it easier to get money for your shares.

Skeptic,

I would take the above property off the above poster's hands this minute at 2004/2005 prices :-). That is the price his shares are at today.

Property can be just as quick to convert into cash as shares if you are willing to sell at the right price.

Shane

[Red Carpet Dresses]

Big difference between the two is leverage.

Who would borrow $350k, secured over their personal home, to buy shares? Yet lots of investors do this all the time for property!

So for shares you might borrow $50k, if you could get a 20% return(increase in value, so capital gain effectively), then that is $10k per year return.

For property you borrow $350k and buy an average NZ house. It would only take a 3% capital gain to get $10.5k per year, or around the same dollar figure as the 20% return on shares.

So a standard investor would need a 20% capital gain from shares, to equal a 3% capital gain from property.

I'm quite biased to property, and I imagine over time these capital gain figures are actually quite similar, or that property even outperforms shares.

So if get 5% capital gain on each, property goes up $17.5 k and shares only $2.5k. HUGE DIFFERENCE!!

Ross

Quite right you are Rosco, the other advantageous thing property has over shares, you haven't even begun on tax deductible items, such as depreciation.

[DazRaz]

Quite right you are Rosco, the other advantageous thing property has over shares, you haven't even begun on tax deductible items, such as depreciation.

That is hardly a factor now. Claiming depreciation offset the fact that property requires maintenance. Now that can't be claimed, it makes shares marginally better in comparison. The big factor still in property's favour is leverage.

For myself, I borrow to invest in property (no deposit) and when I have spare cash, it goes to shares. I have made a minimal amount on shares, but done well with property.

[WGN ex-property manager]

Property also has theses other advantages:

1. You really can buy it below "market value"
2. Control. YOU can assess the market rent, the tenant pool and the location, YOU can judge the risks, make the decisions and track all of the money all of the time. In shares a bent or incompetent CEO can drop your entire investment to zero, with no warning signs that you could react to before you loose the lot.

[GO DO IT]

Commercial versus Residential

Just out of interest what property manage rates do you pay on commercial properties in Hamilton?