Thanks Chuck a clear explanation & to us with a few miles up pretty
bloody obvious; now about you write something on how we can get our
daughters & sons'-inlaw to actually believe it, rather than believing
the spruiker real estate agents???

K

While I am bearish on the near and mid term potential for property values to
appreciate much, and would not be the least surprised to see some short term
"correction", I still believe that home ownership is a good investment for most
people. A lot of people lack the self discipline to save money. I see case
after case where elderly people get very sick and need to go to an expensive
facility for care, and in those cases where the people
have paid off a home over the years at least there is something to sell so the
kids don't have to go broke as quickly keeping Mommy or Poppy alive at Golden
Age Acres.

To make any real money with real estate, even in a steadily appreciating
market, it is important to own more property than just the piece you're living
in. Short of taking up residence in a pup tent at a highway rest area, we all
need a place to live. If somebody says "your place to live is worth
$50,000" or if somebody says "your place to live is worth $2mm"- it's really
all the same. If you sell it, you will need to do without an equally nice place
to live or spend all the money you get from the sale to replace it. That's one
reason that many people evaluating financial statements mentally subtract home
equity from "net worth", it's too illiquid and is performing a
vital, non-discretionary function.

You might suggest to your daughters that they buy a little *less* house than
they can afford, and put the difference into rental property. ( Caution: Don't
know if that's good advice in Aus. or not, though). In just a few decades,
they'll have built up a pretty decent net worth and be able to live in their
all-time dream home.....if they still have a mind to.

There are some good buys right now in multi plex properties in areas, like
Seattle, where rents are seriously (but hopefully temporarily) depressed. These
properties formula price based on their ability to generate gross rental
income, so prices are way off lately because they can no longer be justified
with the dot.com boom era rent rates. These properties will bounce back some
when rents go back up, but maybe not as fast as rents increase. If rents
increase at the same time interest rates increase, the rising interest rates
put a bit of a damper on the
price of a multi plex.

Like a bond, a multi unit property produces an income stream and the
capitalized value of any given stream is higher when interest rates are low.
(When you can make the same return just parking your money in a CD, the
attractiveness of an investment with "risk" declines.)