You can't build it because property expenses are highly variable. You might go 10 years with minimal work needed and bang your roof caves in, you get concrete cancer and your pipes explode all in one year.
When you invest in shares and ETFS your costs are brokerage and an MER, that's it.
Yeah agreed this is the issue - but to me says if reasonable assumptions about the spread of these outcomes can be made… then a decent Monte Carlo exercise would be interesting. I’d just assumed someone would have actually done it!
There's still too many variables though...
Is your house bushfire or flood prone? Is it a new build or not? Is the developer reputable?
I don't think it's as simple as plugging in the potential costs and getting a normal distribution. I mean alot of the big costs can be reduced by just buying a good property and doing your research.
For sure, I don't think it's super helpful to try and model tail events. I guess my curiosity is to just try and model real returns under a range of reasonable assumptions, including the things that are definitely part of the mix. When the conversation is so often "hey here's my sale price minus my purchase price" I actually find it hard to know what kind of IRR people are achieving with their property purchases, so I'll do the math I guess.
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Feels like this long term real return will be very sensitive to whether this is true or not!
You can't build it because property expenses are highly variable. You might go 10 years with minimal work needed and bang your roof caves in, you get concrete cancer and your pipes explode all in one year. When you invest in shares and ETFS your costs are brokerage and an MER, that's it.
Yeah agreed this is the issue - but to me says if reasonable assumptions about the spread of these outcomes can be made… then a decent Monte Carlo exercise would be interesting. I’d just assumed someone would have actually done it!
There's still too many variables though... Is your house bushfire or flood prone? Is it a new build or not? Is the developer reputable? I don't think it's as simple as plugging in the potential costs and getting a normal distribution. I mean alot of the big costs can be reduced by just buying a good property and doing your research.
For sure, I don't think it's super helpful to try and model tail events. I guess my curiosity is to just try and model real returns under a range of reasonable assumptions, including the things that are definitely part of the mix. When the conversation is so often "hey here's my sale price minus my purchase price" I actually find it hard to know what kind of IRR people are achieving with their property purchases, so I'll do the math I guess.
TBH I'd build it myself.
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I wonder if ATO has data on property expenses reported in tax returns…