just wait and see

I have a few friends who have managed to save up decent piles of money. Its not because they work especially hard or anything but simply because being young with no debt means low expenses (especially if living with parents). When discussing what to do with their money they usually say they want to buy a house. Probably because owning lots of houses is a good way to retire.

This is where I kinda cringe, from an investment point of view property is a very hit or miss area. Sure there are plenty of opportunities to make riches, but you have to be skilled at finding the winners and spotting opportunities (The learning curve would suggest this happens after buying and selling dozens of houses).

Most ordinary people can’t put together the complex transaction successfully for it to be profitable.

For an investment you want money in to be greater than money out. Things like maintenance of the house, interest on the loan, taxes etc eat up the meagre rent payments pretty quickly. This is why most houses these days are negatively geared (lose money for tax reasons).

Negative gearing is fine if you make lots of money, but ideally you don’t want your investments to lose money.

So what do you do? live your life saving and making smaller investments (conservatively in the stock market for example). Until you have enough to buy your house outright.

Or even better, get skilled in an area that you can invest in (Which is almost anything – Including Property). Or open a business or something.

You have to sit down and do some number crunching when it comes to money. Unfortunately property is well known as a safe investment, so the market has equalised it by making it overpriced.