would our prop detractors prefer we get out of property and put it into the stockmarket....for safekeeping ? in the current market thats like watching it all just slip sliding away.... prop investors ideas for alternatives
eg; 1,000,000 prop with 500,000 loan = 500,000 equity
A/. sell out and put it into the banks....say earn 5% by xmas....just say 500.000 locked in for a year = 25000....
B/. leave it in props....the loan costs 500,000 x 5% = 25,000 interest only...rents 1000 pw earns..52000 = 27.000 cash before rates, insurance etc say 5000 = net 22000
C/. difference between A and B = 3000....but at A there is no capital growth available....B capital growth is available....or it could go down in value in the short term. D/ Just say you lost your job and the above is your only income...could you live on that amount ? E/ What if interest rates went down to 3%.....x 500,000 = 15000 could you live on that amount ???? or 2% = 10,000 scary situation...... F/ Compare to the prop owner....the mortgage drops to 3% = 15,000.+ other costs 5000 = 20,000 but earns 52,000 = net rents 32,000 G/ Rents are not expected to reduce for say 3 years...and that would only be if there was a massive increase in new housing available....in facts rents could rise but I have not factored that into these examples
I would be in property heaven if rates came down to 2- 3% like the rest of the world.....would love to see some overseas banks come in and offer those rates..... Can you see how some people can picture themselves buying props at those low rates.....a 400.000 prop at 3% = 12,000
Blue chip shares may have averaged a return of 5% with potential for capital growth....however after watching the carnage for the past year....with no relief in sight that is not an option for many of us....... and super is stuck in the stockmarket and cash cicycles cheers
