This is going to sound perhaps like a debate of Property Vs Shares however thats not really what I want to get into.
I think both are good and they serve their purpose.
Ive a query in relation to the longterm prospects,
Im in the process of filling out an application for an Index Fund and putting most my wealth into it. (Until I went to this seminar)
Last night I coincidentally went to a property seminar run by this mob http://www.investmentpropertyfinders.com.au
Bare in mind ive been to a few financial planners who are pro funds etc,
so my point is I feel like my logic isnt biased by any hard sell.
To me the longterm growth and wealth prospects seem to be in the favour of Property and the reason being is the leverage used and tax breaks through negative gearing and depreciation.
The yield from property vs stocks on average seems much of a muchness give or take but the leverage used and tax breaks seem to be where it gets ahead.
Having said that im still confused, ie the strategy is to get an Interest only loan, so assume $400k is borrowed at 7% = $28k a year.
After rental income, tax breaks and depreciation out of pocket expenses per week is said to be around $50-$100, so for arguments sake, lets say over 10 years ive paid $50k.
In 10 years ive now a $800k property with $400k Principle still owing. (assuming property value has atleast doubled)
If im to sell the property to repay principle, I pay Capital Gains of $100k (assuming im taxed 25% of the 400k capital gain.)
Ive paid $50k over 10 years in out of pocket expenses.
Overall personal gain is $400k - $100k (CGT) - $50k = $250k, therefore annual earning of $25k.
Doesnt seem like much after 10 years.
Sorry for it being too lengthy, I'd love to hear other peoples views and thoughts on this.