More Real Estate Shit

At around the cost of the high A$300k, you will get a good new 3 Bedroom, 2 bathroom, automatic shutter garage fit for 2 cars house on a 300+ sqm piece of land. All yours. That is by no means affordable housing in my standards, unless one is raking it a A$100,000 per annum salary. As we are operating as a single income family, and me being engineer trained, I will never include a dual-income calculation as a safety factor. Don't get me wrong. It isn't wrong to do so. Most of us operating on dual income will stay employed for 25-30 years. Most of us will not be unable to work due to illness. Most of us will be fine and will pay up the last drop of blood to the vampires at the end of 3 decades. Then what next? How would we live off the big house, aged with old fashioned cladding and sickly like their owners by then. Learn to unlearn the years and years of confusion by the Singapore property dymanics. It has been artificially manipulated. Never assume what we experienced is how real estate markets work elsewhere.


An old house will cost next to nothing. No one in the right mind will pay the same price for an old house, not to mention a higher price unless it is of a vintage or heritage status. If this sounds new to you, take a look around and you'll find this applies to everything. Computers, handphones, cars, dusty Hello Kitties, whatever. No one will even pay more than $10 for brand new Nokia 3310 in mint condition today with the only exception, vintage level. When it comes to houses, we have to approach it with the same logic in mind. All old houses have a base value. Just like old cars, there is a base value you cannot go below no matter how old or poor condition it is. But that doesn't mean you have to buy it just because there are no cheaper car in the market. So we should never assume someone will buy our old house at all, unless it is special in some way such as a unique design - shaped like a shoe or a football for example. Or special because you ended up bowing down and lowering your price to the rock bottom base level, not much more than what your land value.


Yes, the land value will be likely to appreciate over time. If you bought the land with cash, you will be likely make a profit if you are patient enough. If you purchase it with a huge bank loan on high interest, your profits will be greatly eroded. If you also get a big loan to build that house on the land, with the house depreciating rapidly over the years, a guaranteed loss, you'll end up having no or very little profit in total. Let's hope the Australian Tax Office does not tax your 'capital gain' by lessing the sale price over buy price. I'll cry if they do, because most of these 'capital gains' came from my own pocket by paying interest to the bank. (Remember the last lesson?) So how do we monetize our old house? Sell up and buy a smaller house, which will be very, very expensive by then. It better be very expensive, because if it isn't, we will be holding negative equity. In both cases, we are fucked. So we like the idea of downgrading to en-cash for retirement, why didn't we start with that small house in the first place? Imagine the interests you save, imagine the depreciation arrow that you dodged. You'll be a grinning muscat, jamming with other old punks everyday like those chaps in the Coles Advertisement.


We viewed an old house in Gosnells last year. It was a very old house, 50 years of age, sitting on a good plot of land, almost 800sqm in size. The owner was asking for A$320,000. It was a classic case of the house being close to its base value. The asking price could probably be beaten down by a few good percent, bringing the final price not very far from its land value. Try to look around for a 800sqm land these days and see if how much it will cost. I didn't buy it because I was piss-poor, along with other considerations which I don't want to tell you. In fact if I do, you'll probably think I'm bullshitting, like the previous 2-3 post this week.


I realised I went off-topic. I actually wanted to compare a 3x2 house in Perth to a 4 room flat in Singapore and justify why a 3x2 is decent, even at a higher price than the HDB 4 room BTOs. Maybe next time. /rant

4 comments:

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    1. No exceptions for me. A man has to make the decision, otherwise the wife will simply follow what the government, social norms and peer pressure beckons. Especially so for point 3. If I want to go through this, I might as well return to Singapore and join in the viscous cycle.

      I don't believe in buying something just because we like it but in fact will make us financial slaves for the rest of our working lives. What values are we instilling in our children by doing so? The irony of getting them into good schools but setting a bad example at home. Perhaps there may be exceptions bro, but most likely not these for me.

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  2. there comes a time when one has to have a bit of luxury so don't begrudge yourself, its only money and it can be earned back tomorrow.

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  3. We have to join force with our agents to pursue our goal for our Property Investment. It is not important whether it takes a long time to be successful as long as we are getting into it. We must not stop and always pursue our goals and achieve what we can achieve in this business.

    http://investments-in-real-estate-australia.blogspot.com/2013/08/property-invesments.html

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