{"id":2707,"date":"2022-06-01T07:08:53","date_gmt":"2022-06-01T07:08:53","guid":{"rendered":"https:\/\/royabhishek.in\/urbanbuyer\/it-is-what-you-buy-not-when-you-buy-or-what-you-pay-that-matters-most\/"},"modified":"2022-06-01T07:08:53","modified_gmt":"2022-06-01T07:08:53","slug":"it-is-what-you-buy-not-when-you-buy-or-what-you-pay-that-matters-most","status":"publish","type":"post","link":"https:\/\/royabhishek.in\/urbanbuyer\/it-is-what-you-buy-not-when-you-buy-or-what-you-pay-that-matters-most\/","title":{"rendered":"It is what you buy, not when you buy or what you pay that matters most"},"content":{"rendered":"

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The price you pay for an investment property will only matter if you purchase the\u00a0wrong<\/em>\u00a0asset.<\/strong><\/p>\n

An investment-grade asset will, in the long run, mask any purchase price errors that you may have made.<\/p>\n

That is why focusing on the\u00a0quality<\/em>\u00a0of the asset is easily the most important thing you must do when investing in property.<\/p>\n

Simple math proves timing the market or buying below fair value is relatively meaningless.<\/p>\n

Purchasing above or below intrinsic value<\/span><\/h2>\n

Let\u2019s face it. \"Property<\/p>\n

We all want to get the best deal we can, and no one wants to pay any more for a property than they have to.<\/p>\n

It is my guess that the desire to buy well is driven mainly by two things; ego and misinformation.<\/p>\n

Most people feel stupid if they subsequently realise that they overpaid for an asset \u2013 and none of us like feeling stupid.<\/p>\n

The misinformation problem is that most people think the price they pay for an asset will have an impact on its performance.<\/p>\n

But that is not true for investment-grade assets.<\/p>\n

Show me the numbers<\/span><\/h2>\n

Anyone that has followed my blogs for any length of time knows that I love to dive into the numbers.<\/p>\n

This topic is no different.<\/p>\n

My findings are summarised in the table below.<\/p>\n

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\"intrinsic<\/figure>\n<\/div>\n

I compared the after-tax compounding returns resulting from investing in a $750,000 property, holding it for 20 years, and then selling. <\/p>\n

I assumed that you borrowed the full cost of this acquisition (including stamp duty).<\/p>\n

The only cash you had to contribute to the investment is the holding costs i.e. the difference between the loan repayments and net rental income.<\/p>\n

I then calculated the internal rate of return \u2013 which essentially is your annual compounding investment return after tax.<\/p>\n

I then varied two assumptions:<\/strong><\/p>\n