Author Topic: Real Estate vs. Buying More Index?  (Read 2601 times)

Alchemisst

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Real Estate vs. Buying More Index?
« on: January 26, 2020, 02:29:48 AM »
What are everyones thoughts on having property in their portfolio vs. just having the index? I am considering it either as an investment property or own home due to the tax breaks such as negative gearing and potentially no tax on capital gains as well as the ability to leverage.

mjr

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Re: Real Estate vs. Buying More Index?
« Reply #1 on: January 26, 2020, 03:55:36 AM »
I don't consider my house as part of my portfolio, it's where I live and no landlord can make me move.

I personally wouldn't own property as an investment, too much effort, too many expenses and too illiquid.

Bloop Bloop

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Re: Real Estate vs. Buying More Index?
« Reply #2 on: January 26, 2020, 05:11:59 PM »
As someone who previously was heavily into property and is now diversifying somewhat, I must warn against being too optimistic re property.

NG is under existential threat from the next Labor government. Sure, it'll be grandfathered, but it'll be killed off for new investors and that will drive down prices and I doubt it will have any positive effect on rents.

In my state we just had rental reforms which minimise landlords' power to set market rates - e.g., no more tenant bidding, maximum deposits etc. This is happening all over the world. There is a backlash against land lording. Shares face no such market constraints.

Depreciation is no longer the racket it used to be. It's been restricted now for a couple of years. It used to be the best part of NG.

I still plan on investing in real estate but only as a conservative foundation to my stash. At the end of the day young families need to rent houses close to local schools and there's a comfort in knowing that a couple of other families are paying off your retirement. Real estate is also useful early on in your career when your ability to generate a large yearly stash (from active income & passive gains) is limited - during that time you do need the leverage. But at other times, I would go with shares for the most part.

Model96

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Re: Real Estate vs. Buying More Index?
« Reply #3 on: January 27, 2020, 01:24:11 AM »
If you don't own your own home, I think that should be your priority......it's the lowest taxed investment you'll ever have.
I've invested wholly in real estate, no shares, right up to now, so I definitely recommend some investment property in your investment mix. The houses in my suburb in Sydney have been increasing in value by over $1000 per week for 40 years.........

deborah

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Re: Real Estate vs. Buying More Index?
« Reply #4 on: January 29, 2020, 08:38:11 PM »
Iíve never been big on property, yet Iím retired. So both forms of investment do work.

There are many forms of investment risk. The most obvious are the risks your type of investment will reduce or increase its value. If you put your money into a high interest account in a bank, youíre assured that youíll get back your investment plus the interest earnt - even though, with current interest rates, that isnít much. With just about any other investment thereís a chance you wonít get as much back as you put in. And each year different investments are better - some years the peak performer is international shares, and property does poorly, while in other years the opposite occurs.

Most forms of investment have risks associated with the actual individual investment. When you buy an index fund youíre reducing this risk because youíre buying a bucket that contains a number of different individual investments. So an index fund inherently has less risk (of this type) than individual property investments. You should be comparing purchase of individual stocks to investment in property to get a realistic comparison. In both cases you really need to look at your potential investment and ensure that youíre not buying a lemon, and that it really has the potential you think it has. Mining towns are notorious for poor investment property - even though they can also give you exceptional returns. Similarly, some mining stocks are little more than a gamble. If your investment property doesnít rent, youíre not going to make much from it and youíre not going to be able to negatively gear it either.

The property market is also much more diverse than most investors appear to think. Itís not only houses. A relative once owned the local supermarket and that was a real money spinner for her. Another relative specialises in owning factories that she rents out. Both of these people had done a fair bit of due diligence before deciding on their investments, and both really knew their investment area. I think itís very important (if youíre not just going to buy the index) to actually spend time understanding the market you plan to invest in - whether itís property, shares or any other of the myriad opportunities for investment - and that this is far more important than the type of investment you actually purchase.

Most of the time, index investment gives you a way to invest without having to do as much due diligence as other investments, without getting your fingers burnt.

Alchemisst

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Re: Real Estate vs. Buying More Index?
« Reply #5 on: February 01, 2020, 07:27:35 AM »
Thanks for the responses, I've worked out that property has a lot higher ROE due to the ability to leverage based on historic capital gains, even if negatively geared, however who knows if the price increases will continue.

Alchemisst

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Re: Real Estate vs. Buying More Index?
« Reply #6 on: June 24, 2020, 11:43:07 PM »
Wonder if the current situation has changed anyone thoughts on property vs. shares/ index?

Model96

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Re: Real Estate vs. Buying More Index?
« Reply #7 on: July 04, 2020, 07:30:35 AM »
No. I did, for the first time, buy some index shares though that had fallen some 25% in value, and have now come half way back up to where they were.
I still believe you should at least own your own home in a good area that people want to live in.....it's the best savings plan and lowest taxed investment you'll ever have :)