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  1. #1
    Join Date
    Apr 2018
    Posts
    145

    Default How many decades until high ROI properties return? Should I sell and leverage ASX MF?

    Cashflow properties, remember them. Back when a person just starting out could by a solid investment with a 7%+ ROI property? Back when people had this idea you could buy lots of properties and retire on the cashflow.

    Lets say for argument sake the market doesnt crash and has a plateau. How long will it take for Median income to reach Median property price affordability to make 7% ROI for example in Auckland possible again (per area, ie not median Auck income to Invercargil Median house prices lol).

    Im picking that plateua in will match the time for Local median income to increase enough to make property investment high ROI properties feasible again, so Im crystal balling 20 years if no further crash than the small one in Auckland which hasnt been passed on, but like everything in NZ things take time to reach rural NZ from Auckland ;-p I remember when 3 was the "Guru" figure to buy in median multiples (3x med income). Whilst both insane property booms screwed us, I feel it was the Key Boom (I dub it that as his borrowing during the GFC gave NZ a false sense of security) was the one that really pushed us OTT. 9.6x median multiple is just crazy stupid property.

    Is it a "Boomers" conspiracy that has left nothing in the market for other generations (having had the money to invest in many properties and a boomer National PM print money during one of histories biggest financial crisis). Or was it just bad luck. Its like a cricket match and the boomers at bat and in the field and the umpires call, everything has rubbed their way. So its hard not to be cynical. But the logical side of me just says its pure luck and Boomers were the generation when good things in the world ended, or the in between generations were left without the old good things or the new good things. Thats my thoughts, I find it hard to believe J Key deliberately set the property market up to make shed loads of money in capital gains for his natty boomer voters. But I sure do miss the 8% PA years from a renovate and hold perspective. Its hard to grow the funds to buy the renovation property in Auck, almost none are left, nobody is willing to consider 20% below MV and then when you go to keep it, 2-3% ROI is generous lol. Its like an old gold mine river, with pickers still fooling themselves with the odd 1gram nugget giving false hope.



    Meanwhile my index fund is returning 15.6%, given its so hard to borrow/leverage for ASX, should I sell a property instead and just keep a hawk eye on it until it too has its nose dive. Is the only way I can think to get large amounts of money into stocks while they run hot. Is it smart to lend yourself money that you cannot get from anybody else by selling an investment returning much less than half, more like a third.

    I dont have much faith in the fund running this hot for more than 2 years, but if it evens out at 10% over 5 years Im stoked.
    Last edited by OnTheMove; 15-11-2019 at 06:51 PM.

  2. #2
    Join Date
    Apr 2004
    Location
    Auckland
    Posts
    1,923

    Default

    15.6% less taxes & fees = 7%?
    When shares are hot is a great time to sell.
    There is probably a very good reason why the bank won't lend 80% against shares.
    The three most harmful addictions are heroin, carbohydrates and a monthly salary - Fred Wilson.

  3. #3
    Join Date
    Jun 2013
    Posts
    2,132

    Default

    Quote Originally Posted by PC View Post
    When shares are hot is a great time to sell.
    If you always sell when shares are hot, you will never make any money.

    Quote Originally Posted by PC View Post
    There is probably a very good reason why the bank won't lend 80% against shares.
    Banks will loan 70%. They are slightly more volatile than houses, not by much though.

  4. #4
    Join Date
    Jun 2013
    Posts
    2,132

    Default

    Quote Originally Posted by OnTheMove View Post
    Cashflow properties, remember them. Back when a person just starting out could by a solid investment with a 7%+ ROI property? Back when people had this idea you could buy lots of properties and retire on the cashflow.
    Property is an arbitrage between the cost of finance and the cost of the asset.

    Plot your graph with the cost of finance between 2002 and 2018, what does it then look like? For the future, look at Japan. Or maybe it will be something different.

    What stops you retiring on the cashflow from lots of property?

    Quote Originally Posted by OnTheMove View Post
    given its so hard to borrow/leverage for ASX
    Why is it hard for you? All the main banks will do this. I have had a margin loan on the ASX for decades.

  5. #5
    Join Date
    Apr 2004
    Posts
    778

    Default

    Quote Originally Posted by elguapo View Post
    Property is an arbitrage between the cost of finance and the cost of the asset.

    Plot your graph with the cost of finance between 2002 and 2018, what does it then look like? For the future, look at Japan. Or maybe it will be something different.

    What stops you retiring on the cashflow from lots of property?



    Why is it hard for you? All the main banks will do this. I have had a margin loan on the ASX for decades.
    I agree,,, now if interest rates for whatever reasons were forced upwards to say 7-8% then yields would follow as very few investors if any would buy rentals of 4-5% gross hen paying 7%+ on debt

    Yes the whole western world is turning Japanese and we will have decades of low to nil growth

    As too loans for the ASX I do have some experience here as for the last 15yrs my share trading company has had around 250k on loan at RES rates ..now the banks don't love the idea but as long as you have the equity then its no issues ..

    Biggest problem with having capital in shares is banks give very little equity to the value you have in your portfolio or what you made over the last Fy , you could even have shares in the bank your dealing with and they will still only give you 5% equity value Vs 50-80% for commercial / Res property is kind of crazy when I'm sure if you held say 5% of banks ownership then they would bend over backwards for you and really the bank works for its owners(S/H's) first then its customers ..

    My short term goal is to pay-off the Sharemarket loan completely (could do now but will wait till I have more capital left-over mid 2020) and use my RES equity to purchase another property(Prob. Commercial) the banks seem to love so much

  6. #6
    Join Date
    Apr 2018
    Posts
    145

    Default

    Quote Originally Posted by elguapo View Post
    Why is it hard for you? All the main banks will do this. I have had a margin loan on the ASX for decades.

    Sorry totally misleading, as stated above 70% is VERY doable.

    Its my aussie SMSF, totally stretched to the end of my rules.

    Im just trying to see my best option to my mid 50s retirement. Which will get me there faster, my SMSF fund or NZ Property.

    Essentially where should I be looking NZ for highest ROI IPs?

    Back to my SMSF in Aus, the rules around living in property state you cant, but I think once you cash out you can. I need to look into that a bit better. I think the Aus, especially SE Qld property market is gettng prime for the pickings and the last few months have been good news. But when selling up Im not sure if tax applies to the property as per normal or just the SMSF, I suspect the former. Need a calculator and blog of paper probably just to work out how much it costs me going in, how much I save entering SMSF, how much they will cost to sell when exiting SMSF, is there additional tax to the Super Fund on any profits. ASX does make SMSF Property look very complicated.

    I really need to sit down and sort out my exit plan, its become a bit unwieldy with the SMSF doing so good post GFC. I could just sell it all and buy me some shiny Gold fossicking is a hobby of mine haha. Would be very cool to see how much my lifes worth is in gold bars.
    Last edited by OnTheMove; 18-11-2019 at 07:59 PM.

  7. #7
    Join Date
    Mar 2015
    Location
    Brisbane Wellington Auckland
    Posts
    831

    Default

    Quote Originally Posted by OnTheMove View Post
    Sorry totally misleading, as stated above 70% is VERY doable.

    Its my aussie SMSF, totally stretched to the end of my rules.

    Im just trying to see my best option to my mid 50s retirement. Which will get me there faster, my SMSF fund or NZ Property.

    Essentially where should I be looking NZ for highest ROI IPs?

    Back to my SMSF in Aus, the rules around living in property state you cant, but I think once you cash out you can. I need to look into that a bit better. I think the Aus, especially SE Qld property market is gettng prime for the pickings and the last few months have been good news. But when selling up Im not sure if tax applies to the property as per normal or just the SMSF, I suspect the former. Need a calculator and blog of paper probably just to work out how much it costs me going in, how much I save entering SMSF, how much they will cost to sell when exiting SMSF, is there additional tax to the Super Fund on any profits. ASX does make SMSF Property look very complicated.

    I really need to sit down and sort out my exit plan, its become a bit unwieldy with the SMSF doing so good post GFC. I could just sell it all and buy me some shiny Gold fossicking is a hobby of mine haha. Would be very cool to see how much my lifes worth is in gold bars.
    Based on a past sale this year maybe Palmerston North .
    Twenty one percent net
    Based on future purchase over the next couple of weeks maybe Wellington 9% net rental before tax and interest.
    (Commercial)


 

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