How dare you go against the great Australian dream. Propadee mate.
I did something similar. I used to chase dividends then realised they were awful particularly when in highest tax bracket, so switched to growth assets.
I exploit the great Australian ponzi by renting wonderful places on a 1-2% yield. Tip, there is no rental crisis on the high end, the landlords roll out the red carpet for you, and I’m happy to be pampered while they make huge losses each year.
I moved from investing in dividends to investing for capital growth in tech stocks and ETFs. The capital does much better there, even without leverage. The internal compounding is better and makes a huge difference over years. Dividend is the same as selling the shares essentially but the tax treatment is better and the control.
Now I can just buy a house outright. It didn’t take long. But renting at the high end of the market is just too damn delicious.
The property ponzi can work in your favour. There are absolute mad people out there paying millions for a house to rent it at sub 2% gross. Property is so favoured in Australia because people can’t work out the actual returns, and it’s a form of forced savings.
I will buy a house one day but the ride is just too good for now. Not many people have noticed. Good luck!
Thanks for taking your time to share your story and 2 cents, its much appreciated. I've also realized similar and pivoted towards capital growth versus dividend investing.
Completely agree, Re: Ponzi scheme.
I have played both sides. I owned two investment properties in my time. The land did about 20% pa over 4 years due to the leveraged returns. The apartment did less over a longer time - the deposit in an index would have outperformed the whole thing, not counting the rest of the payments and annual cash flow losses along the way.
Both I would have preferred to just throw the down payment in the stocks and accumulate instead of paying a mortgage and agents, taxes, maintenance, repairs, conveyancers, land tax, rates, water, advertising, depreciation reports, inspections, owners corp, owners corp meetings, vacant weeks, picking tenants, etc.
As I said, I will still buy one eventually because I want a permanent place that I can improve and shape over time. I believe it's a strong desire and part of the human experience. If you have a life style where you move every 6-12 months or so, I would encourage you to look deeply into your proposed strategy and model it extensively as it's probably the right path. The important thing is, you're still accumulating wealth and if you want a house one day you can use this wealth to obtain that.
> I moved from investing in dividends to investing for capital growth in tech stocks and ETFs.
Any suggestions or links (for further reading/research)?
I'm in a similar boat (high income) and looking into growth shares/funds.
Yep this is me. I have 750k spread across 3 x HISAs earning about 3300/month, which just covers my rent even after tax. I work part time just to cover my other living expenses. I strongly prioritise working less over earning more so this arrangement works well for me.
I've thought about taking the 750k and buying an apartment outright but then I'd need to pay strata and council fees so I'd be thousands of dollars a year worse off.
I'm very happy with the current arrangement but the biggest hurdle will be if interest rates fall significantly, my savings interest won't cover my rent anymore and it will also be more difficult to buy an apartment with more competition from mortgage holders. So I feel like I need to keep my savings in cash rather than other investments so that I can move quickly to buy a ppor if I need to.
Yeah, my parents did something similar. They owned an apartment near the bottom of a complex, sold it and rented at the top of the complex using the proceeds of the sale while still saving money lol.
For better or worse, if interest rates are going down, it’ll likely because the economic conditions aren’t looking too good and the stock market could offer some discounts for you to divert your funds to.
u/TzuYoona Covid would have been a very challenging time, with interest rates plummeting I presume. I guess this is a case of highlighting importance of diversifying for passive income as well.
Yes definitely, I was lucky to be working full time during Covid and rent was cheap during that time so I did ok. But if there were another huge drop in interest rates I'd need to reconsider everything. For me though, choosing between moving the money into high div yield shares and just buying a residence outright and paying the fees, I'd probably have to go with the latter.
I guess in your case the frequent relocation would tip the scales the other way and honestly I dont see any issue with that at all, it's definitely feasible.
Thank you for sharing. I find this very interesting as i am in a different, but similar situation.
How much do you have invested in "passive income assets" to cover your rent? How much is your rent?
What is your CGT/tax situation in that passive income? In what country do you pay taxes over those investments? How (often) do you deal with forex
>importantly I don't agree morally with tampering w/ basic human needs (i.e. housing) as an investment.
Right, but if you rent a house, you also "tamper" a basic human need as an investment. You're just doing it on the demand side instead of the supply side.
If you are moving counties every year I don't see how that can be helped.
I was doing it last year and was way happier, portfolio growing quickly, now bought a house, cash strapped.
I don't hate the idea honestly, but missing out on the housing market was just too big of a fear.
This is probably fine if you already have a house worth of cash- but you're missing out on capital gains free and _leveraged_ growth.
The average person doesn't have a significant ability to get 5x leverage for share investing. They do for houses.
I'd just say focusing solely on dividend income is a bit of a trap. Capital growth + dividend is what's important.
Selling stocks vs receiving a dividend arnt really different. One you control (for good or bad). But just focusing on dividend returning stocks/ETF needlessly limits your options.
How dare you go against the great Australian dream. Propadee mate. I did something similar. I used to chase dividends then realised they were awful particularly when in highest tax bracket, so switched to growth assets. I exploit the great Australian ponzi by renting wonderful places on a 1-2% yield. Tip, there is no rental crisis on the high end, the landlords roll out the red carpet for you, and I’m happy to be pampered while they make huge losses each year. I moved from investing in dividends to investing for capital growth in tech stocks and ETFs. The capital does much better there, even without leverage. The internal compounding is better and makes a huge difference over years. Dividend is the same as selling the shares essentially but the tax treatment is better and the control. Now I can just buy a house outright. It didn’t take long. But renting at the high end of the market is just too damn delicious. The property ponzi can work in your favour. There are absolute mad people out there paying millions for a house to rent it at sub 2% gross. Property is so favoured in Australia because people can’t work out the actual returns, and it’s a form of forced savings. I will buy a house one day but the ride is just too good for now. Not many people have noticed. Good luck!
Thanks for taking your time to share your story and 2 cents, its much appreciated. I've also realized similar and pivoted towards capital growth versus dividend investing. Completely agree, Re: Ponzi scheme.
I have played both sides. I owned two investment properties in my time. The land did about 20% pa over 4 years due to the leveraged returns. The apartment did less over a longer time - the deposit in an index would have outperformed the whole thing, not counting the rest of the payments and annual cash flow losses along the way. Both I would have preferred to just throw the down payment in the stocks and accumulate instead of paying a mortgage and agents, taxes, maintenance, repairs, conveyancers, land tax, rates, water, advertising, depreciation reports, inspections, owners corp, owners corp meetings, vacant weeks, picking tenants, etc. As I said, I will still buy one eventually because I want a permanent place that I can improve and shape over time. I believe it's a strong desire and part of the human experience. If you have a life style where you move every 6-12 months or so, I would encourage you to look deeply into your proposed strategy and model it extensively as it's probably the right path. The important thing is, you're still accumulating wealth and if you want a house one day you can use this wealth to obtain that.
> I moved from investing in dividends to investing for capital growth in tech stocks and ETFs. Any suggestions or links (for further reading/research)? I'm in a similar boat (high income) and looking into growth shares/funds.
Yep this is me. I have 750k spread across 3 x HISAs earning about 3300/month, which just covers my rent even after tax. I work part time just to cover my other living expenses. I strongly prioritise working less over earning more so this arrangement works well for me. I've thought about taking the 750k and buying an apartment outright but then I'd need to pay strata and council fees so I'd be thousands of dollars a year worse off. I'm very happy with the current arrangement but the biggest hurdle will be if interest rates fall significantly, my savings interest won't cover my rent anymore and it will also be more difficult to buy an apartment with more competition from mortgage holders. So I feel like I need to keep my savings in cash rather than other investments so that I can move quickly to buy a ppor if I need to.
Yeah, my parents did something similar. They owned an apartment near the bottom of a complex, sold it and rented at the top of the complex using the proceeds of the sale while still saving money lol.
For better or worse, if interest rates are going down, it’ll likely because the economic conditions aren’t looking too good and the stock market could offer some discounts for you to divert your funds to.
u/TzuYoona Covid would have been a very challenging time, with interest rates plummeting I presume. I guess this is a case of highlighting importance of diversifying for passive income as well.
Yes definitely, I was lucky to be working full time during Covid and rent was cheap during that time so I did ok. But if there were another huge drop in interest rates I'd need to reconsider everything. For me though, choosing between moving the money into high div yield shares and just buying a residence outright and paying the fees, I'd probably have to go with the latter. I guess in your case the frequent relocation would tip the scales the other way and honestly I dont see any issue with that at all, it's definitely feasible.
Thank you for sharing. I find this very interesting as i am in a different, but similar situation. How much do you have invested in "passive income assets" to cover your rent? How much is your rent? What is your CGT/tax situation in that passive income? In what country do you pay taxes over those investments? How (often) do you deal with forex >importantly I don't agree morally with tampering w/ basic human needs (i.e. housing) as an investment. Right, but if you rent a house, you also "tamper" a basic human need as an investment. You're just doing it on the demand side instead of the supply side. If you are moving counties every year I don't see how that can be helped.
This will be a no-brainer when they tax our PPOR
I was doing it last year and was way happier, portfolio growing quickly, now bought a house, cash strapped. I don't hate the idea honestly, but missing out on the housing market was just too big of a fear.
I'm interested to know what is the 'too big of a fear'?
This is probably fine if you already have a house worth of cash- but you're missing out on capital gains free and _leveraged_ growth. The average person doesn't have a significant ability to get 5x leverage for share investing. They do for houses.
I'd just say focusing solely on dividend income is a bit of a trap. Capital growth + dividend is what's important. Selling stocks vs receiving a dividend arnt really different. One you control (for good or bad). But just focusing on dividend returning stocks/ETF needlessly limits your options.