"Adrian" wrote in message
...
On Tue, 29 Sep 2015 19:10:07 +1000, Sam Thatch wrote:

But if you have a mortgage you have not invested the full value of the
property, so the ROI is on the capital you put in.

Nope. You've still put the full purchase price in

Nope.

- it's just that you've had to borrow much of it.

That's what gearing is all about.

Gearing enables you to leverage your cash.

Yes, so you dont have to put the full purchase price in from your own
money.

It doesn't mean you aren't investing £x.

£x is invested, but only part of that is your money, the rest is borrowed,
so
the return you get is the return you get on your own money you invested.

If you were doing a balance sheet, you'd show the
full value of the asset, and the full value of the debt.

But the return you get is on your own money you invested,
not the total invested. And when negative gearing is allowed
by the tax regime, the return can be much better when geared.

And as rents (and house prices) rise with inflation (at least in the
long run) your investment is near enough indexed linked.

That's a... novel... opinion.

Nope.

I wonder if it's historically accurate...?

Yep.

Riiight.

Yep.

So, if we take the house my parents bought in 1980 for £60,000, then
quickly borrow a typical web inflation calculator, it's currently worth
£230k.

Ooops. It's on the market at the mo for £600k.

So that property produced a much better return than he listed.

And, no, it's not in London. Not even within 150 miles of the SE.

The place we sold two years ago, in the SE? Now worth almost three times
the inflation-adjusted price over the 15yrs we had it.

Same with that one.

The place we bought two years ago, in an area where house prices are
relatively low, which'd previously sold at the same time as we bought
that last place? Still at least 50% over the 1998 inflation adjusted
price.

If we look back at the 1976 sale price for here? Oops. Now worth about
four times that inflation adjusted value.

Furthest back sale price I've got for here is 1947 - six months before
the start of easily-referenceable inflation statistics. That price'd now
be worth about £65k.

In fact, if we look back, the biggest jump _relative to inflation_
occurred between 1976 and 1991.

Still a much better return than he listed which means it was
clearly worth doing.