Bitcoin, and other tulips


#746

Comparing Cryptos to shares is redundant.


#747

By the time the average punter learns of the crash it’s too late.
Just ride it out, I have been through two, 50% of the shares recover to previous levels quickly, 20% remain dogs and the other 30% do very well, probably because the opposition has been wiped out.
Just buy shares a company with a good dividend history (4%-5.5%) and a stable increasing share price. If you are going to speculate keep it below 20% of your portfolio and regard them as tattslotto.


#748

That bit is how you should treat crypto as well


#749

Interesting way of seeing it. I would then argue that the government deregulating it actually created that situation. Regulations are not always a bad thing…


#750

Easily actually. For example, at the moment the rental market here is ultra hot. A decent house within 15 mins of the cbd costs from 380-600 per week to rent depending on the suburb. Lets take the bottom range of 380 which equates to $1520 per month. The repayments on a loan for the same property would be 1247 per month. Thus leaving you money to put aside for maintenance and rates etc.

Sure its a lot more complex than that but a sound rental history is usually a very good indication of a borrowers ability to service a loan.


#751

It’s actually not a whole lot more complex than that.


#752

Not sure i follow that math.

If i’m renting a house for $380 per week and that house’s value is equivalent to a 3.5% gross rental yield (which is about right for Melbourne CBD stock - typically ~4% for apartments and ~3% for houses), then the same house would cost (380*52)/3.5% = ~$550k to buy. If i have a 20% deposit saved, i’ll need to borrow $440k. $440k borrowed over 30 years with principal & interest in a standard variable mortgage (currently at ~5.2% p.a.) gives me a monthly repayment of ~$2,400, well above the $1,247 you have.


#753

Wouldn’t mind seeing your portfolio. I’ll show you mine if you show me yours :wink:


#754

I’m no big fan of cryptos (though I do own a bitcoin) but the comparison to shares isn’t apt.

A better comparison is to gold. Gold doesn’t have an intrinsic value, it is worth money because society / the market say it is. Theoretically, the world could wake up tomorrow and say gold is as worthless as the dirt it’s found in.

Cryptos are the same concept aren’t they? They are valuable because we say they are. Much much much riskier, but the same concept.


#755

Sorry…I’m in tassie…numbers are completely different


#756

Fair enough, the yields are a bit higher in Tassie so the numbers would be slightly different. That said, to get $1,247 repayments per month on a 30-year P&I standard variable implies starting principal of ~$230k which, if you put down a 20% deposit, implies a home value of ~$288k. A $288k home value renting at $380 per week gives a gross rental yield approaching 7%, which is way too high - SQM reckons gross rental yield is 4-5% for a house in Hobart: http://www.sqmresearch.com.au/property-rental-yield.php?region=tas%3A%3AHobart&type=c&t=1


#757

In the city yes. The figures I was quoting were for the Northern suburbs where prices are cheaper (for now). I know they’re accurate because I based them on our investment property ::slight_smile:


#758

Gold actually has value now in the world of computers.


#759

But not anywhere near its actual value.


#760

Fair enough. If it’s an investment property you’re presumably paying interest only (?) so the repayments would be lower than owner/occ, which is typically P&I (which is what i assumed).


#761

LOL God no! I hate interest only.


#762

OK. Going back to the original point, though, for the vast majority of Australians who live in areas where rental yields are well below the mortgage rate, renting will be substantially cheaper than owning the equivalent house…so someone who can afford the rent on a given property quite often won’t be in a position to make the repayments on that same house.


#763

If you know anyone paying the standard variable rate, you should slap them silly.


#764

Not on the same house, but certainly on a house. Gets you at least on the ladder.


#765

Ummm, not sure i follow. My basic premise is that, in the vast majority of cases across Australia (except regional / satellite areas where rental yields are high), cost to rent is substantially lower than repayments would likely be for an equivalent house under any normal set of loan parameters. Ergo, someone who pays rent on a house reliably is not necessarily in a position to buy that same or an equivalent house and make the repayments.