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Property vs. shares for a 20-Something

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ENP

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Situation is I have roughly $30,000 in savings accounts/term deposits. Safe, secure, etc.

I'm building up towards a first home deposit on a rental property either in Auckland (where I live) or elsewhere. If I was to go down this route, I'd be able to buy within 1-2 years based on 15% deposit (which mortgage broker has told me). However, with rental yields being quite poor in New Zealand and especially parts of Auckland, I'm wondering if going down the property route is the way to go. I'm thinking I could just build up a healthy share portfolio instead for anywhere from 5-7+ years until I settle down, buy a home with my partner, etc.

I've always had the idea of building up a wealth base of property, leaveraging each property and then getting into shares later but I'm really struggling to see how property is a good investment at present.
 
Re: Property vs Shares for a 20 something


That's because it isn't.
But if your going to go the other route
You've around 10000 hrs of apprenticeship
Before considering putting your $30k anywhere

Anyone can lose $ 30,000 but few can double it!
 
Re: Property vs Shares for a 20 something


What a hard decision, at your age and after what we've seen in the last 4 years I would do nothing right now and just work hard and add to the savings, safe and secure. Then in 2 or 3 years revisit this question and re evaluate. As you know things are just so messed up in the world right now and anything can go wrong, good luck.
 
Re: Property vs Shares for a 20 something

Great advice.
 
Re: Property vs. shares for a 20 something

Why limit yourself to New Zealand with regard to real estate investment?



"Ninety percent of all millionaires become so through owning real estate."

Andrew Carnegie (1919)
 
Re: Property vs. shares for a 20 something

Wysiwyg said:
Why limit yourself to New Zealand with regard to real estate investment?



"Ninety percent of all millionaires become so through owning real estate."

Andrew Carnegie (1919)
Click to expand...

Because I live in New Zealand.
 
Re: Property vs. shares for a 20 something

The three options I really have are:

- Buy a rental in a main city (In NZ) for roughly 350-400k. This would take me another year or two to get the deposit, increase my salary to support the borrowings, etc.
- Buy a rental in a smaller NZ town other than Auckland, Wellington, Christchruch for 200-300k I could do this in 3-6 months
- Buy a portfolio of shares for a 5-7 year time frame to build as a first house deposit when I want to buy my own house to live in
 
Re: Property vs. shares for a 20 something

ENP said:
- Buy a portfolio of shares for a 5-7 year time frame to build as a first house deposit when I want to buy my own house to live in
Click to expand...

Yeah but what if something major happens overseas and the market drops 50% overnight? It could take you 7 years or longer to catch up again. Even if you put in a stop loss at say 5% you will lose $1500 worth of your capital. It will take you a year in interest payments to get that back. Sorry for being so negative, just highlighting this could happen. Of course the market could just fly from here but I wouldn't bet my hard earnt 30k on that.
 
Re: Property vs. shares for a 20 something


IMO, the NZ property market is overpriced, plus every man and his dog in NZ is obsessed by property and property investment. Do you really think you will have a profitable edge?

IMO, save half for a house deposit in the future and invest half. Search for a cheap asset class that you are interested in and put some money into it. Enjoy the ride and the lessons. Time is on your side.

Cheers

Oddson
 
Re: Property vs. shares for a 20 something

I think Bills point hasnt been made clearly enough.
The eager investor wishes to accumulate riches NOW.

There are times to hold potfolio's and there are times to begin portfolios in each asset mentioned.
Now in my opinion is NOT the time for either.(Begining).
Keep accumulating and wait to see signs of growth OR exhaustion of supply in either.

The secret to wealth particularly when starting is TIMING.Opportunity is always there--TIMING is swift (Although opportunity in property lasted 5 yrs and the Bull market in stock 7 yrs).

In the meantime become an expert in the signs you will need to recognise in each to effect best timing.
A solid understanding of ECONOMICS will be handy
Perhaps more so the consequences of ECONOMICS--eg a war in Iraq--Gold Oil rise.
Also study RISK mitigation.
 
Re: Property vs. shares for a 20 something

Is there a great rush to invest the full amount in one asset/asset class in one hit??

Not a recommendation but: Managed funds are evil and you have to pay fees and you don't know EXACTLY what they are doing with your cash but it provides an option to slowly build a position (ie $100/week for the next 5 years), reducing the RISK of market timing (ie plowing your money in during 2007 when markets are going nuts).

While you are doing this you can accumulte more cash and learn a bit about how you react to market movements while you have some skin in the game..

If you can see upside in the market and don't want to POTENTIALLY miss out on any sort of recovery (and are willing to take the risk) this may be a consideration. Otherwise nothing wrong with cash and having a smaller mortgage down the track (see the Investing vs Paying off debt thread).
 
Re: Property vs. shares for a 20 something

Hey ENP,

I'm in a similar situation to you (mid 20's, strong income, no debt and decent savings). I rent a house in Adelaide, have traded shares for many years and work in the commercial property and construction industry. I've also completed both Bachelor and Masters studies in construction, property, finance and investment - which means I know how to lose other people’s money as well as my own!

I currently hold zero shares and have no interest in entering the property market.

After I completed paying off the remainder of my massive HECS/HELP debt, I started pouring all my left over savings and income into online savings accounts and term deposits.

I used to love checking my shares and feeling satisfied that I was making money. I get that same sense of satisfaction checking the markets knowing I'm not losing money.

I'd just keep doing what you’re doing (being disciplined) and hold off investing until everything sorts itself out to a point where we can start understanding the risks associated with these assets again. God forbid, the next generation of millionaires listed in BRW may all get their by simply saving money... would be a pretty boring issue though.

-Liar-
 
Re: Property vs. shares for a 20 something

Im only 18 but took a year off last after school and worked in the mines (mackay) and put away 80% of my wage. I have 25% of my savings in shares and $24000 in term deposits earning the 5-6%. That 6% might seem pretty minute but compared to the -10% odd drop in shares last year its not bad at all IMO.
 
Re: Property vs. shares for a 20 something

Similar position also, forget both...concentrate on trading, 5-7 years (if this is your hypothetical timeframe) of doing so, you will be generating far greater returns (if successful), than what you would otherwise get on rental yields etc.

Strictly speaking, shares > property, it would be 'easier', for lack of a better word, to generate a better return on an equivalent some of money which would otherwise be sunk into a mortgage, for numerous reasons, regardless of the current state of market(s).
 
Re: Property vs. shares for a 20 something


So let me just get my head around this.

A 20 something can simply trade and return better than property or a share portfolio?
Infact all 20 something's can quite simply do this.
Failure is not a consideration?
 
Re: Property vs. shares for a 20 something

tech/a said:
So let me just get my head around this.

A 20 something can simply trade and return better than property or a share portfolio?
Infact all 20 something's can quite simply do this.
Failure is not a consideration?
Click to expand...

Hopefully you are not stereotyping all of us because of one persons post tech. That would nearly be as silly as the original post you quoted...

Kryzz does not represent all 20 year olds. Just the invincible ones.

-Liar-
 
Re: Property vs. shares for a 20 something

tech/a said:
So let me just get my head around this.

A 20 something can simply trade and return better than property or a share portfolio?
Infact all 20 something's can quite simply do this.
Failure is not a consideration?
Click to expand...

Failure/loss is an inherent possibility with most investments, majority of people should know this (may not be obvious to some I suppose ).

I stated quite a lengthy time frame...never said anyone (regardless of age) or everyone could "quite simply do this".

Don't see why it's not possible with persistence and education.
 
Re: Property vs. shares for a 20 something

The idea that 20 somethings can just trade and make money is a very simplistic view...

I'm 25, an IT contractor in the Automation/Performance testing space (which luckily pays me very well) and has enabled me to buy a home in Melbourne's inner city area (in March of 09, so I made a pretty penny - all unrealized so far of-course).

In addition to this, I spent the last 2years mock investing in the share market (researching, making decisions as if that's what I'd bought and checking my progress). Finally, after many many hours, many books and finding my preferred style, I decided it was time to invest [Started in Oct of 2011]. I've now got a $30k share portfolio (using Value Investing techniques), which I am quite confident in.

Now that you know my story, I can only say this...

ONLY invest what you can afford to lose!

Following that, if you're still comfortable going ahead with it, I'd be doing this in your situation (it's hypothetical, not financial advice):

- If you choose houses - Buy a house for investment purposes and rent your Primary Place of Residence (Assuming NZ tax laws don't differ from AUS). This is so you can claim all expenses and depreciation (where applicable) in that financial year.
(There is the 6yr rule, but I won't go into that now)

- If you choose shares, make sure you have control of your funds, not someone who's only interested in taking fees from you.

- Whichever investment you choose, PLEASE DO YOUR RESEARCH.

I hope that wall of text was of some use to you...
 
Re: Property vs. shares for a 20 something


I am a 20 something and I think you would be crazy to do any of these. Right now, at this particular point it time in the world, there does not exist a magic black hole you can throw your savings into and expect any sort of a return - including return of capital.

Sorry bud, you missed the credit bubble by 20 odd years.
 
Re: Property vs. shares for a 20 something


So are you saying cash is the best investment to make?

I feel like I'm achieving nothing having my money in savings accounts.
 
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