Sunday, February 15, 2015

$1 reserve house in Blacktown .....or was it ever in doubt?

A friend of mine on facebook posted about a $1 reserve house for sale in Australia

Was it ever really selling for $1..... (sold for $565,000) -
Neil Tyagi took a big risk by placing his Blacktown house for the auction reserve price o

My response/thoughts below;

Paul $440pw rental ISNT 4.1% return, that's before running costs are taken into account, on a property in Blacktown $5,000pa in running costs and maintenance wouldn't be out of the question bringing the roi closer in line to 3.1%
(or fairly close to where i expect my investment properties deliver on average.....)

Keep in mind this is ignoring capital returns which CANT be ignored and in Blacktown  if you use the previous 5 years sales data they have been earning 8.1% so excluding borrowing costs an investor could have been making a solid 11% pa for the last 10 years which is a good return in anyones books.......
$1 reserve marketing PR aside considering the Tyagi's purchased their house in 2004 for $300k and sold it in 2014 for $565k excluding stamp duty and sale costs (CGT if not your PPOR).....made them a nice return over 10 years......

This is why people still choose to invest in housing in Sydney and until people choose to live in Nowra/Kiama/Orange/Bathurst/Foster/Newcastle etc....its going to continue to do so.

As an investor my advice is you CANT afford to be in cash because the government is ripping you off 4-8% each and every year with government induced inflation (both reported and hidden), each and every year a person stands by and isn't leveraged into appreciating assets is a year that they are going backwards to the tune of 4-8% regardless of how much.

Are we coming to the end of the mum and dad both working 40 hour growth cycle...yes but as all other investment returns are also collapsing so the risk spread is lower its not that big of a concern.

Will we have a crash in 1 year or in 10 years.....who knows and most investors shouldn't care as any crash represents a buying opportunity for when you sell in 20-30 years and any crash is tempered with the loss that your cash will incur sitting on the sidelines until that crash comes.

Review every investment opportunity on its own merits, don't over invest on what you can service, understand that dips are opportunities to zig while others zag and understand that its when you get in and out that really counts.

Also understand that unless there is a crash and you need to sell because you miscalculated your ability to service......inflation is your friend, make it work hard for you and its money in the bank.

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