Future for people who are not investing in property

[notpom]

Interesting OECD report.

 

We are in the country who is the second worst in caring for older people.

 

http://www.smh.com.au/national/onethird-of-australian-pensioners-live-in-poverty-oecd-report-20160106-gm0uno.html

 

This sort of falls into the big picture of other well-known statistics:

 

- Australians work the longest hours among OECD nations

- One in four workers do not make it till the pension age (not surprising considering the previous one)

- Only 3% of Australians retire on $50K pa or more

- 89% of people who are on BRW 200 list (self-made, not inherited money) made their first million in Real Estate.

- Superannuation half of the time delivers negative returns (now it is exactly the time)

- $1M in term deposit at the current rate would earn $40K pa minus fees

 

I know that 99% of people who read this would not do anything to help themselves. But it would pay to figure out how much you would need to support your usual lifestyle. Divide that amount by 0.04 and you will get an amount you need to accumulate before the retirement.

[Sallyh]

Interesting. My knowledge of this is very limited. Is the answer necessarily property investment though? I didn't think it was.

[notpom]

Interesting. My knowledge of this is very limited. Is the answer necessarily property investment though? I didn't think it was.

 

What are your options?

 

1. Working harder. If you think it is the way, read Das Kapital by comrade Karl Marx. No one in the history has become rich by working for the other people or "saving"

 

2. Share market. First rule of sharemarket - do not risk more than 10% of what you have . Second rule - buy only you have got ten reasons to buy, sell when you have one reason to sell. Warren Buffett for the last 15 years only bought preferred shares in Gold Sachs in 2008, and sold them shortly afterwards. For some obscure reason there are herds there who think they are more clever than Warren. I would not even mention 2008 and what happens to the market now.

 

3. Running your own business. 95% of the businesses fail within 12 months.

 

If property "not the only" - what it is then ?

[Tamara (Homes Down Under)]

I do believe in property investment.

Rental properties are essentially a tool to accumulate capital gains (hopefully!)

Location is the key...the power of hindsight!

If I could change decisions I would have taken out mortgages on coastal properties in Christies and Port Noarlunga and would have made a fortune with the development changes that allow medium density property development.

On the other hand their have been some spectacular increased in prices in the eastern suburbs and a large mortgage their would have paid handsome returns....hindsight!!

[notpom]

I do believe in property investment.

Rental properties are essentially a tool to accumulate capital gains (hopefully!)

Location is the key...the power of hindsight!

If I could change decisions I would have taken out mortgages on coastal properties in Christies and Port Noarlunga and would have made a fortune with the development changes that allow medium density property development.

On the other hand their have been some spectacular increased in prices in the eastern suburbs and a large mortgage their would have paid handsome returns....hindsight!!

 

Slight correction. After approx 13 years (rents double every 13 years on average) rent becomes a nice cash cow. This is in capital cities.

 

In rural areas you usually get the rent exceeding your outgoings from the day one. But that would be at the expense of capital growth.

 

But even in the capitals rent plays a big part at the beginning. Other people pay your mortgage. Partly through the rent, partly through the tax breaks.

[kadina]

Totally agree property investment is the way to go

[John Browning]

with regard to how much income you really need:

 

from personal experience, it's probably a great deal less than you think, and certainly a great deal less than the consultants (-and your family/friends) will tell you.

 

The trick is to stop thinking about lump sums and money in the bank and start thinking about an income stream that will keep up with inflation. Perhaps this means you also need to look at Annuities, as part of the mix.

 

JB

[John Browning]

If you really want an income stream that is index- linked (inflation-proof), then you can still purchase them in the form of Annuities.

 

Yes, you will be paying someone to do the worrying for you, and there will always be times when you might have done better with other investments. But you will know what your income stream can buy this year and every year. But your money will be spread over a very wide range of investments not just local property

 

-do you really want the hassle of of buying and selling, and calculating Stamp Duty and dealing with tenants

when you could be retired?

 

-do you really want to go to sleep wondering if your part in Property Speculation isn't just pushing home ownership out of the reach of young Australians

 

JB

[notpom]

If you really want an income stream that is index- linked (inflation-proof), then you can still purchase them in the form of Annuities.

 

Yes, you will be paying someone to do the worrying for you, and there will always be times when you might have done better with other investments. But you will know what your income stream can buy this year and every year. But your money will be spread over a very wide range of investments not just local property

 

-do you really want the hassle of of buying and selling, and calculating Stamp Duty and dealing with tenants

when you could be retired?

 

-do you really want to go to sleep wondering if your part in Property Speculation isn't just pushing home ownership out of the reach of young Australians

 

JB

 

 

There are just a few flaws with your approach.

 

1. It is a big delusion to think that someone will look after your money. They simply would look after their own. Super is a bright example. They deliver negative returns all the time, but it does not stop them charging you fees.

2. To purchase annuities you need money. If you mean you would get money from super - look what is market is doing and think again.

3. Return on the annuities depends on two things - interest rates and share market. Good luck getting enough funds to buy milk.

4. "Property speculation" is a myth created by unscrupulous media for people with weak nerves. In reality we get the situation when to fix power point you need a license. To fix kitchen tap you need a license. To the contrast - to make new people you do not need a license, even if you are alcoholic and drug addict. Problem is, these kids will need housing. To build housing you need land. And nobody can create new land even if Government gives them license.

5. From the moral point of view, getting money for doing something is much better than what you propose - getting money for doing nothing.

[notpom]

with regard to how much income you really need:

 

from personal experience, it's probably a great deal less than you think, and certainly a great deal less than the consultants (-and your family/friends) will tell you.

 

The trick is to stop thinking about lump sums and money in the bank and start thinking about an income stream that will keep up with inflation. Perhaps this means you also need to look at Annuities, as part of the mix.

 

JB

 

 

Of course, live under the rock, eat baked beans and drink rain water.

 

You miss the point. To determine how much you need you first must determine what kind of lifestyle you want in retirement.

[John Browning]

Not Pom,

 

-I don't live under a rock and live on Baked Beans

 

Your responses are becoming increasingly hostile and difficult to follow.

 

JB

[John Browning]

NotPoM,

 

a) the whole idea of an Annuity is that you get a guaranteed annual return, from investments spread out over a very wide range of Australian and Foreign stock (-as well as Commercial and Residential property, worldwide).

 

An index-linked Annuity gives you that, and also keeps up with inflation.

 

b) of course the people who run Annuities charge for the service, -why shouldn't they?

 

c) No, Annuities are not free

 

d) You ask the question " What are your options? .... If property 'not the only' - what it is then ?"

 

However,you then fail to consider alternatives to putting all your trust in the local Property Market.

 

 

So here's a question for you..

 

-in what way do you believe you are helping new arrivals to this country from the UK, with these posts?

 

 

JB

[notpom]

Not Pom,

 

-I don't live under a rock and live on Baked Beans

 

Your responses are becoming increasingly hostile and difficult to follow.

 

JB

 

My friend,

 

Like it is said, wherever you go, there you are.

 

I explain.

 

Imagine yourself on the road which has two ends. One end leads to the rubbish dump, the other - to the beach.

If you chose to go towards rubbish dump, it would be highly unlikely you will get to the beach. Yes, in theory if you have unlimited time you can go around the globe and reach somewhere nice, but problem is that you don't.

 

With retirement income you have got two directions - one to increase your earnings so you can meet your own demand, or cut your demand so it matches your earnings. If you chose to cut your demands - then rock, garbage bag and baked beans are final destination of your road.

 

As to GUARANTEED income, you shall understand that what is guaranteed - is the rate of inflation, in other words - zero income in real terms. This is the catch.

The second catch with cash capital - it is that it is constantly eroded by inflation.

 

I will give you a real example. My wife's friend sold her late mother's unit in Randwick (Sydney) in 1990 in an expectation that "property bubble" is going to burst. In 2010 she has bought a house 150 km away from Sydney CBD, $450K

 

She was shocked when I revealed that in 2010 unit she has sold worth slightly more than a million. And house she has bought in the 1990 dollars worth just $90K. In other words, by sticking to "cash investment" she has lost $990K in capital, or $50K a year on average over 20 years.

 

You are the person number 989765432 to whom I have to explain what is blatantly obvious. An trust me, it is tiresome.

[V-Bird]

 

You are the person number 989765432 to whom I have to explain what is blatantly obvious. An trust me, it is tiresome.

 

You volunteer your opinions, and then bemoan the fact that you find it tiresome.

There's a solution there somewhere, I just can't put my finger on it...

[John Browning]

"what is guaranteed - is the rate of inflation"

 

---well no inflation rates have been all over the place in Oz since I arrived. -Surprised you haven't noticed

 

"The second catch with cash capital - it is that it is constantly eroded by inflation"

 

--which is exactly why I mentioned an indexed linked ("inflation proof") income stream

 

Really not pom, I'm beginning to think you aren't reading anyone else's posts. All of the points you are making, I've already covered

 

By the way, you still haven't answered the question:

 

-in what way do you believe you are helping new arrivals to this country from the UK, with these posts?"

JB

 

PS "rock, garbage bag and baked beans are final destination of your road".

 

 

well no..... I'm debt free, rent free, transport free, and have not one, but three,very adequate inflation- proof, fully- indexed income streams.

 

And no, I didn't get there by listening to unwarranted, unsupported, condescending rants

[chrisda]

What the!