On Wed, 30 Sep 2015 03:43:30 +1000, Sam Thatch wrote:

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.

You buy a £100k house.
You get £6k rent, which is £5k income/year after £1k costs.

Except... You got an £80k mortgage, on which you pay £4k interest/year.

You are getting £1k return on your investment.

If you're ignoring the borrowed money, how on earth do you take the
interest in to account? If you ignore the borrowings, you might as well
just say "Well, I'm getting £5k return on my £20k investment".

And when negative gearing is allowed by the tax regime, the return can
be much better when geared.

Yes, because you're paying the interest out of before-tax money, not
after-tax money.

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.

Exactly.

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

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.

Exactly.

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

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

Oh, indeed. But what was claimed was that they rise at around the rate of
inflation in the long run.

Do you want to bet on it continuing to do that in the future? There have
certainly been short-term periods where they've fallen - let alone risen
at less than inflation. In many parts of the country, that's still the
case.

B'sides, since when was buying AFTER a long-term above-expectation rise
in values a smart move...? Just means you buy at the peak of the bubble.