If the price rises due to inflation, you are not actually better off. Prices went up by 100%, wages went up by 100%, no-one is able to own more stuff than before.
If buying and renting out homes was extremely profitable, banks would do it. Instead they lend out money at interest. Which suggests that the best thing an individual can do financially is to get rid of debt as quickly as possible.
Dodgy arithmetic.If you buy a house for $400,000 and borrow the entire amount (not including stamp duty and legal fees), the interest payable for an interest only loan would be 26k PA at 6.5% interest rates, interest only.
That's $500/week.
Fast track 30 years into the future, you will still owe $400,000 on your house and still be paying $500 per week to cover the interest.
However, your house will most likely be worth 2 mil+ due to capital growth and inflation, so you now have gained 1.6 mil in equity which is yours to keep.
If you had to rent a similar house, you would likely have to pay maybe $1000/week in rent, double your interest repayments.
So what's the better position to be in?
I don't know anyone that is a millionaire through owning property. The majority of property owners that i know have used their leverage have ended up in debt/bankrupt.
I don't know anyone that is a millionaire through owning property.
Personally I reckon Jan Somers' books are a better read than Kiyosaki (Rich Dad Poor Dad). They ought to have enough figures in them to satisfy you, Kyle.
I highly recommend the Somersoft forums if you want to talk property with other Aussies.
I am a big fan of property investing. Bought PPOR (principal place of residence) about 1 year ago and currently negotiating to buy 2 investment properties in Sydney. Both of these will be cashflow neutral, about 10% undervalued. The incoming rent covers the interest only repayments and other expenses like council rates, strata, landlord insurance etc etc (Trust me I've done a huge spreadsheet to account for all these).
In short, interest only repayments will remain roughly constant over the next 10-20 years but rents can only go up. Value of the property will also increase too (should average at least 5% pa which is greater than inflation 2-3% pa) Win-win situation all round.
It seems like the pro houses always seem to go back to the same arguments. So I guess your a millionaire from your leverage Hulk?
I don't know anyone that is a millionaire through owning property. The majority of property owners that i know have used their leverage have ended up in debt/bankrupt.
Although if we aren't looking at leverage and just at mortgage payment vs rent then owning does seem to make a bit more sense at least for the long term.
Its really difficult to get good financial advise in the country as everyone seems to be trying to sell their product or something they have a vested interest in.
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