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| Owning
Your Own Home as a Profitable Investment |
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| Profits. It's
the word made new again for this decade. If the late Nineties held 'com
au' as the chic buzzword, the share market punishment of 'no profits com
au's' has seen a flight back to old economy shares. Or even property investments!
For most of us though, whether you invest in internet or mining stocks is
pretty much a non-question. The average Australian punter is flat out meeting
their mortgage payments, or worse, their landlord's mortgage payments. There
was a time once however, as recently as the 1980's, when just paying off
the family home made some very good profits. Mike Doonesbury, author of
the comic strip by the same name, quipped then that he felt like staying
home while the house worked for him. Could these times be returning? Or
more pointedly, can smart profits be made by the 'wanna be' homeowner chasing
the right house in the next hot suburb. Can owning your own home be a top
financial investment? |
| The Professional
Investment View |
| The average professional
investor tends to argue that owning residential property loses your potential
profits. Their argument is based on averages (and a little bit of bias).
Historically the share market has performed much better than property investment,
at least over the past decade (by some reckoning as high as 20% yield, but
commonly 12%). However, in the 70s residential property investment was profitable
because the baby boomers wanted their own home as they settled down to make
their own families. The 80s market also was partly fuelled by these same
boomers upgrading their houses for their expanding families. Nowadays, however,
speculative profits on the baby boomer phenomenon are more likely to be
taken in investing in retirement funds and maybe later funeral business
shares! Property investment currently has more like a 6-7% yield, (but you
follow some smart 'profits path' tips you can beat averages). |
| So this 'professional"
argument believes that the idea of owning your own home being the best investment
that you could make, is actually based on an historical anomaly that is
unlikely to return again in the future. Their advice is 'rent your own home
and invest the money saved in the stock market'. |
| That is fine
if you wear a suit on the weekends and are financially disciplined. But
remember Australians have one of the highest rates of credit card debt in
the world. Home mortgages may be seen as a burden, but at least they force
us to be putting money aside each fortnight for our future. Also, and here
is a cultural bias, Australian's like to own their own home. It is the "Great
Australian Dream, isn't it?" We like to slouch around our fully paid off
pad, our own little kingdom. And we don't like rental inspections or the
perceived master/servant relationship of being a renter. Tastes are in fact
changing with the generations, with young people more and more liking the
flexibility of renting. But still the majority of Australians aspire to
being an "owner". |
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