FranLab is getting evicted

[tom66]

That's what I don't get by people saying property is a good investment, it's really quite an average-to-poor one by historical standards.

I always thought they meant "compared to renting and investing elsewhere".  In other words, that renting, long-term, is such a negative "investment" that as soon as you can, you should buy your own property to live in.  It is a much better strategy than renting but investing in some other instruments, unless your work requires you to travel all the time (so you end up renting anyway).

Yep, no disagreement that owning the place you live in is a great idea.  If only because I want to paint, remodel and change things about without having permission from the landlord all the time.  And there's the security knowing the landlord won't just want to sell and leave you to find somewhere else.  It's a shame it's a goal out of reach for so many (partially because there are so many landlords!)

[Bud]

Time is ticking fo Fran to age enough so health may become a problem, no more or much less youtubing. A person has to live somewhere and support themselves as they get older. I do not know what Fran is thinking about.

[Kasper]

Oh, totally different story for an investment property.
Pro Tip: No one ever gets genuinely rich from investment properties. Investment properties are more what you have when you are already pretty well off and want to diversify your investment portfolio.
Huge numbers of aussies don't understand this and think you'll get rich if you have 10 investment properties all negatively geared (making a loss which is tax deducitible here) 

A lot of people focus on the monthly cashflow and the likelyhood of home value increase but most seem to ignore the fact that your mortgage is being paid off.  You get to keep the portion of rent that goes towards paying your principle down.  That alone can be substantial even if you have a small negative monthly cashflow and home prices and rents stagnate.

Odds are rents will increase enough to make you cashflow positive eventually, particularly if you do renos.  Home value will also likely increase.

I would like to be a landlord since I really enjoy doing home renos but I haven't done much of it because of the provincial legislation that allows tenants to live rent free and destroy a home for months before they can be evicted.

[Bud]

I haven't done much of it because of the provincial legislation that allows tenants to live rent free and destroy a home for months before they can be evicted.

You hit the nail in the head, every wannabe landlord should think about this before getting into it. I myself have friends who got burned by this.

[unknownparticle]

Sounds great, right?  But that's only a compound of about 5.5%.  Meanwhile, the S&P500 over a similar timespan has seen about 11.8% per annum (https://www.investopedia.com/ask/answers/042415/what-average-annual-return-sp-500.asp)

Less income tax.  And how would you pay for somewhere to live whilst paying into your portfolio, assuming you didn't have the gross capital to invest at the start?

[james_s]

I would like to be a landlord since I really enjoy doing home renos but I haven't done much of it because of the provincial legislation that allows tenants to live rent free and destroy a home for months before they can be evicted.

Yeah in the current climate I would not be a landlord either. The stuff at the state level is not so bad, but at local levels Seattle passed a tenant rights law that resulted in the rapid loss of over 5,000 rental units as it is now just too risky and other locales are proposing similar laws. The end result is that rents rise even higher due to scarcity and the climate strongly favors big corporate landlords that can spread out the risk, exactly not what people actually want but most people act based on emotions and don't think things through. It may feel good to try to punish the big bad greedy landlords but the fact remains that there are a lot of people out there who can't or don't want to own, and landlords provide them a valuable service.

[unknownparticle]

Same is happening here in the UK.  Due to the lack of social housing, the rental market is now private landlords but due to ever more restrictive tenants rights and now rapidly rising interest rates they are bailing out en mass.  I'm not saying tenants shouldn't have rights but when it's so difficult to evict a tenant when they haven't paid rent for months, sometimes since they took occupancy, it makes being a landlord much less appealing.  Some tenants now are serial non payers, just moving from property to property and never paying rent, just moving out before the eviction notice is about to be enforced and often leaving the place wrecked. Then because they have no fixed address it's virtually impossible to get them into court for the unpaid rent and damage.
Successive governments have never managed to resolve this problem, either due to lack of political will or because the cost of rebuilding the social housing stock is too expensive, who knows.  It seems evident though, that there are now a hardcore of people who just want an easy life on welfare payments, living in cheap housing and a lifestyle of never wanting to work.

[nctnico]

Sounds great, right?  But that's only a compound of about 5.5%.  Meanwhile, the S&P500 over a similar timespan has seen about 11.8% per annum (https://www.investopedia.com/ask/answers/042415/what-average-annual-return-sp-500.asp)

But to get that 11.8% return you would firstly have to have the entire £90k upfront, and secondly essentially lose it for the term. Meantime you're still paying an increasing amount of rent. That's like buying the house for cash AND then paying for a mortgage on it.

Ofcourse not. Put the money into the fund piece by piece (like a monthly payment). Property by itself is not a good investment; you need to be able to rent it out and basically be able to write the property off after 30 or 40 years. Beyond that the risks get high. For example: Over here in the Netherlands owners of older properties (both commercial buildings and homes) are currently faced with spending massive amounts of money to improve the isolation of their buildings in order to meet government regulations where it comes to energy consumption.

A couple of years ago I read an article in Forbes that compared how well the investments of rich people did over the period of about 25 years. Their benchmark is the stock index which achieved 700%. At the bottom of the list there is Trump (with mostly property) who did 400%, Warren Buffet at the top did over 10000%. Interestingly most of the best performers invested in companies. In the same time the inflation cut the value of money in half.

[Kasper]

Ofcourse not. Put the money into the fund piece by piece (like a monthly payment). Property by itself is not a good investment; you need to be able to rent it out and basically be able to write the property off after 30 or 40 years. Beyond that the risks get high. For example: Over here in the Netherlands owners of older properties (both commercial buildings and homes) are currently faced with spending massive amounts of money to improve the isolation of their buildings in order to meet government regulations where it comes to energy consumption.

That is quite different than Canada.  Homes hold their value quite well, partly due to cost of land and partly due to most of the demand being at the bottom of the market where the old homes are.  We get rebates for certain insulation improvements but it's not mandatory that I know of.

[Kasper]

Same is happening here in the UK.  Due to the lack of social housing, the rental market is now private landlords but due to ever more restrictive tenants rights and now rapidly rising interest rates they are bailing out en mass.  I'm not saying tenants shouldn't have rights but when it's so difficult to evict a tenant when they haven't paid rent for months, sometimes since they took occupancy, it makes being a landlord much less appealing.  Some tenants now are serial non payers, just moving from property to property and never paying rent, just moving out before the eviction notice is about to be enforced and often leaving the place wrecked. Then because they have no fixed address it's virtually impossible to get them into court for the unpaid rent and damage.
Successive governments have never managed to resolve this problem, either due to lack of political will or because the cost of rebuilding the social housing stock is too expensive, who knows.  It seems evident though, that there are now a hardcore of people who just want an easy life on welfare payments, living in cheap housing and a lifestyle of never wanting to work.

I agree.  It should be possible to have rights for tenants while also quickly dealing with the small portion who destroy homes and never pay rent.  If they sorted that out, things would be better for everyone.

[tom66]

Less income tax.  And how would you pay for somewhere to live whilst paying into your portfolio, assuming you didn't have the gross capital to invest at the start?

I'm talking about property independent of living in it, i.e. being a landlord, as an investment.  Certainly for the UK it doesn't make much sense, but seems to be seen in great regard by many.

On stock market investments:  ISAs are tax free up to £20k contributions per year with indefinite gains, but even then you'd only be taxed on the gain at capital gains rates if you want to invest in more than that in a GIA.  You can also contribute up to £40k into a pension tax free.  To be able to max both of those out you need to have a very decent income for the UK, top 95%.

Obviously not all countries have income tax free investment accounts, but almost every country has a pension system at least which has favourable tax treatment.

[james_s]

A couple of years ago I read an article in Forbes that compared how well the investments of rich people did over the period of about 25 years. Their benchmark is the stock index which achieved 700%. At the bottom of the list there is Trump (with mostly property) who did 400%, Warren Buffet at the top did over 10000%. Interestingly most of the best performers invested in companies. In the same time the inflation cut the value of money in half.

It's all a tradeoff of risk vs reward. Property is very low risk, housing is something everybody needs so owning a rental property provides fairly reliable income. Housing prices have always gone up over the long run so your asset is virtually guaranteed to increase in value. You may be able to earn more by investing in companies but you can also lose more.

[james_s]

I agree.  It should be possible to have rights for tenants while also quickly dealing with the small portion who destroy homes and never pay rent.  If they sorted that out, things would be better for everyone.

It seems like the balance shouldn't be too hard to dial in. Tenants should have rights that protect them from unreasonable landlords and landlords should have rights that protect them from irresponsible tenants. If a person is causing damage to the property it should be easy to rapidly evict them. If they are unable to pay their rent for a few months it should be easy to evict them.

[langwadt]

Same is happening here in the UK.  Due to the lack of social housing, the rental market is now private landlords but due to ever more restrictive tenants rights and now rapidly rising interest rates they are bailing out en mass.  I'm not saying tenants shouldn't have rights but when it's so difficult to evict a tenant when they haven't paid rent for months, sometimes since they took occupancy, it makes being a landlord much less appealing.  Some tenants now are serial non payers, just moving from property to property and never paying rent, just moving out before the eviction notice is about to be enforced and often leaving the place wrecked. Then because they have no fixed address it's virtually impossible to get them into court for the unpaid rent and damage.
Successive governments have never managed to resolve this problem, either due to lack of political will or because the cost of rebuilding the social housing stock is too expensive, who knows.  It seems evident though, that there are now a hardcore of people who just want an easy life on welfare payments, living in cheap housing and a lifestyle of never wanting to work.

I agree.  It should be possible to have rights for tenants while also quickly dealing with the small portion who destroy homes and never pay rent.  If they sorted that out, things would be better for everyone.

here renters have very extensive rights with a few exceptions, not paying the rent or destroying things

[SiliconWizard]

Home renting is a complex matter due to how having a home is a basic need.
So from the perspective of a renter, you want the owner to have minimal possibilities of having too much control over your life. And as a owner, you want the renter to have minimal possibilities of messing with your property and not paying their rent. From each perspective, the other party almost always has too many rights. But of course in most cases, renters have more rights - due to the fact it's their home that is in question.

Apart from hoping all parties will always act responsibly and according to the contract, I don't really have any good idea for improving things. Over here, this has gotten so bad that squatters can be very hard to evict. This is an extreme.

I don't know if renting is the "right" model for housing. But I don't really have anything better to propose for those that can't or don't want to own their house.

[james_s]

Franky I'm of the opinion that most of our problems could be solved by having fewer people. The earth is not getting any larger, there is no new land left to discover, and most people desire to live in a small handful of particularly nice areas. Resources are also limited and the more people there are, the thinner the resources get spread. If the population stopped growing housing would catch up.

[MikeK]

Franky I'm of the opinion that most of our problems could be solved by having fewer people. The earth is not getting any larger, there is no new land left to discover, and most people desire to live in a small handful of particularly nice areas. Resources are also limited and the more people there are, the thinner the resources get spread. If the population stopped growing housing would catch up.

Oh, don't worry...population will certainly decrease when the environmental situation really hits the fan.  I suspect a significant fraction of the world population will be lost in the next 100 years.

[EEVblog]

What I'm less clear on is the benefit to property as an investment outside of somewhere to live.  I think it's overhyped, and the market is due a correction sooner or later.  Probably not a catastrophic one, but I could see prices dropping by 10-20%. I'm in it for the long run, so this doesn't bother me.

Prices are dropping a lot in Sydney right now.
My suburb of Baulkham Hills dropped 18% in the correction of 2019, one of the biggest drops in the country, but then had a record gains during the crazy covid madness boom.
If they keep dropping it could actually make financial sense to buy a small run down place nearby and turn that into the lab and rent the current lab out.

[EEVblog]

Oh, totally different story for an investment property.
Pro Tip: No one ever gets genuinely rich from investment properties. Investment properties are more what you have when you are already pretty well off and want to diversify your investment portfolio.
Huge numbers of aussies don't understand this and think you'll get rich if you have 10 investment properties all negatively geared (making a loss which is tax deducitible here) 

A lot of people focus on the monthly cashflow and the likelyhood of home value increase but most seem to ignore the fact that your mortgage is being paid off.  You get to keep the portion of rent that goes towards paying your principle down.  That alone can be substantial even if you have a small negative monthly cashflow and home prices and rents stagnate.

And every spare cent you earn goes into an offset account that reduces that interest.
2nd best advice is to pay off your loan like crazy in the first 5 years, every spare cent.

I literally paid cash for my lab, took it out of my home loan offset account savings, no bank permission needed.

[james_s]

Prices are dropping a lot in Sydney right now.
My suburb of Baulkham Hills dropped 18% in the correction of 2019, one of the biggest drops in the country, but then had a record gains during the crazy covid madness boom.
If they keep dropping it could actually make financial sense to buy a small run down place nearby and turn that into the lab and rent the current lab out.

That's probably good, from what I've read the situation in Sydney is even more absurd than it is where I am, it has all the appearances of a bubble. My house has dropped in value by ~$400k this year and I'm happy about that, hopefully it will stop the rapid increases of my property taxes.

[EEVblog]

Sounds great, right?  But that's only a compound of about 5.5%.  Meanwhile, the S&P500 over a similar timespan has seen about 11.8% per annum (https://www.investopedia.com/ask/answers/042415/what-average-annual-return-sp-500.asp)

Less income tax.  And how would you pay for somewhere to live whilst paying into your portfolio, assuming you didn't have the gross capital to invest at the start?

Yep, tax.
Putting cash into your homeloan is not only a guaranteed rate, it compounds.
Selling your home is also tax free here.

[EEVblog]

Sounds great, right?  But that's only a compound of about 5.5%.  Meanwhile, the S&P500 over a similar timespan has seen about 11.8% per annum (https://www.investopedia.com/ask/answers/042415/what-average-annual-return-sp-500.asp)

But to get that 11.8% return you would firstly have to have the entire £90k upfront, and secondly essentially lose it for the term. Meantime you're still paying an increasing amount of rent. That's like buying the house for cash AND then paying for a mortgage on it.

Ofcourse not. Put the money into the fund piece by piece (like a monthly payment). Property by itself is not a good investment; you need to be able to rent it out and basically be able to write the property off after 30 or 40 years. Beyond that the risks get high. For example: Over here in the Netherlands owners of older properties (both commercial buildings and homes) are currently faced with spending massive amounts of money to improve the isolation of their buildings in order to meet government regulations where it comes to energy consumption.

A couple of years ago I read an article in Forbes that compared how well the investments of rich people did over the period of about 25 years. Their benchmark is the stock index which achieved 700%. At the bottom of the list there is Trump (with mostly property) who did 400%, Warren Buffet at the top did over 10000%. Interestingly most of the best performers invested in companies. In the same time the inflation cut the value of money in half.

Sure, but do that after you own your home, or a good chunk of it at least.

[EEVblog]

Franky I'm of the opinion that most of our problems could be solved by having fewer people. The earth is not getting any larger, there is no new land left to discover, and most people desire to live in a small handful of particularly nice areas. Resources are also limited and the more people there are, the thinner the resources get spread. If the population stopped growing housing would catch up.

Oh, don't worry...population will certainly decrease when the environmental situation really hits the fan.  I suspect a significant fraction of the world population will be lost in the next 100 years.

It won't be caused much by environment changing, but by our political response to changes.

[EEVblog]

Prices are dropping a lot in Sydney right now.
My suburb of Baulkham Hills dropped 18% in the correction of 2019, one of the biggest drops in the country, but then had a record gains during the crazy covid madness boom.
If they keep dropping it could actually make financial sense to buy a small run down place nearby and turn that into the lab and rent the current lab out.

That's probably good, from what I've read the situation in Sydney is even more absurd than it is where I am, it has all the appearances of a bubble. My house has dropped in value by ~$400k this year and I'm happy about that, hopefully it will stop the rapid increases of my property taxes.

I sincerely hope my house plummets in value. Doesn't worry me one bit, just provides opportunities for myself and others.

[sokoloff]

And every spare cent you earn goes into an offset account that reduces that interest.
2nd best advice is to pay off your loan like crazy in the first 5 years, every spare cent.

That depends on a few things, IMO: your level of discipline to actually save/invest somewhere else, and the spread between your mortgage rate and the alternative investment options.

The discipline needed to invest in place X (excess mortgage payments) vs place Y (an alternative investment) doesn't seem that different.

My mortgage is 3.25% fixed rate. I can buy US government I-bonds paying 6.89%. The bonds are taxable federally, but not by the state, but that is still a better return than 3.25% and is as safe as I need it to be. If the US government defaults, I have big problems no matter where I've invested.

If someone can't hold complex advice in their head, or if any spare money is likely to turn into cars, big TVs, and vacations, paying down the mortgage early is fantastic advice. If someone has a fixed rate mortgage at around half the risk-free rate, the optimal advice becomes more nuanced.