Have an investment property but rent is falling short by €170/mth to cover my costs.

[z106]

Re: have an investment property but the rent is falling short by 170 a month to cover

can you point me at a good long term source of property prices in ireland?

Just stumbled on a post from 2004 tonight. These figures are from NCB stockbrokers.

Real growth in values from 1976 to April 2004

Dublin Property * * * * 386% 5.81% per annum
National Property 255%* * * * 4.62%
Irish Equities 652%* * * * 7.47%

Note that it states REAL growth - add in inflation at say, 4%, then you're looking at 10% nominal terms for the last 30 years for dublin property- which as i pointed out in an earlier post it is the nominal returns that matter most with property not real terms.(assuming gearing)
Keep in mind the example I used earlier was only using 5% - had I used 10% - thereby also allowing more frequent remortgaging and reinvesting - then potential returns would have been far greater. Many multiples in fact.

As you can see equities have outperformed property - however,as discussed throughout this thread,I believe property to be the real winner due to leverage. You simply cannot borrow the same way with equities due to their volatile nature resulting in the investor requiring VERY large amounts of cash in reserve to cover margin calls - cash reserves that instead could have been used to leverage further had the money been used for property in the first place.


See full post here - it's from a few years ago started by Brendan.

http://www.askaboutmoney.com/showthread.php?t=8138&highlight=spreadbetting

 

[Thomas22]

Re: have an investment property but the rent is falling short by 170 a month to cover

Just stumbled on a post from 2004 tonight. These figures are from NCB stockbrokers.

Real growth in values from 1976 to April 2004

Dublin Property * * * * 386% 5.81% per annum
National Property 255%* * * * 4.62%
Irish Equities 652%* * * * 7.47%

Note that it states REAL growth - add in inflation at say, 4%, then you're looking at 10% nominal terms for the last 30 years for dublin property- which as i pointed out in an earlier post it is the nominal returns that matter most with property not real terms.(assuming gearing)
Keep in mind the example I used earlier was only using 5% - had I used 10% - thereby also allowing more frequent remortgaging and reinvesting - then potential returns would have been far greater. Many multiples in fact.

As you can see equities have outperformed property - however,as discussed throughout this thread,I believe property to be the real winner due to leverage. You simply cannot borrow the same way with equities due to their volatile nature resulting in the investor requiring VERY large amounts of cash in reserve to cover margin calls - cash reserves that instead could have been used to leverage further had the money been used for property in the first place.


See full post here - it's from a few years ago started by Brendan.

http://www.askaboutmoney.com/showthread.php?t=8138&highlight=spreadbetting

If you stripped out the bubble like returns from 2000 to 2004 what would Irish property returns look like. Long-term property generally returns inflation plus 2-3% while equities return inflation plus 5-6%.

The only reason the property investment has a higher return is because of the extra leverage. And YES you can replicate this easily with equities.
Property is still well behind mean the equity pension simply because the tax breaks for investing into a pension are so high.

 

[z106]

Re: have an investment property but the rent is falling short by 170 a month to cover

The only reason the property investment has a higher return is because of the extra leverage. And YES you can replicate this easily with equities.
Property is still well behind mean the equity pension simply because the tax breaks for investing into a pension are so high.

We'll have to agree to disagre on this one.
It definitely cannot be done in my book.

The reason being margin calls. Very signigficant amounts of cash would be required in reserve to cover these margin calls which are inevitable due to equities volatile nature.

If you're bored sometime I would very much appreciate an example from yourself using figures.
I would genuinely want to be proven incorrect on this one because if i was then that is the approach i would take in the future rather than property as the returns on averge are better than property.
The intricities of teh workings of equities is their downfall.

 

[JohnBoy]

Re: Have an investment property but rent is falling short by €170/mth to cover my costs.

Equities are certainly more volatile (on a short term basis at least) but they are substantially more liquid, trade in a much more transparent market and have much lower transaction costs. Admittedly, margin calls are painful but you do not have to gear up to invest in the stockmarket whereas almost all property investors do. Blithly predicting positive real returns for propery ad infinitum will always make borrowing to invest look like a wise move. Property cycles unfold over a long periods. After such massive outperformance some underperformance has to be expected. But there is every chance that many of today's property investors are paying mortgages on a depreciating asset - so gearing can be painfull for property investors too.