UPDATE – see a quick demo of the visualiser in action:
Real time property investment visualiser – Prototype video

Property prices in Sydney are through the roof!

So much so that first home buyers are finding it more than a challenge to keep up with the goal of home ownership, a moving goal post that seems to get further and further away. If you ever read the real estate section of the newspapers you’ll be forgiven for wondering if they’re reporting or creating the market sentiment some times. Clearly it’s something that is effecting any of us that want to realise the dream of home ownership.

As I’ve started to think about the idea of purchasing a place, the scale of the indenture and the commitment of a lot of my present and future hard earned pay I’ve become preoccupied with the question of if it’s the right thing to do, and if it is, where, how big and how much? In a lot of ways it feels like you only get one shot to get it right when you’re an average joe so these questions are daunting ones.

Seeing the future

As the sort of person that likes to analyse and over-think even some relatively smaller decisions I’ve found myself overwhelmed by the complexity and interplay between the variables of home purchasing, and specifically in a macro sense, how it will impact my future. When looking at real estate or home loan websites you’ll notice there are no shortage of calculators for things like home loan repayments, your borrowing capacity, how long it will take to pay of a loan etc. but these are all generally stand alone calculators with no cross referencing. They’ll help you get an understanding of the individual components but don’t provide meaning in terms of your future life, savings and wealth in any comprehensive sense. There are so many options when considering investments and by it’s very nature you want to know which is going to give you the best return in whichever priorities you set.

With property investment there are actually quite a few variables, those that are under your control, such as:

  • When to buy
  • How much to buy
  • What sort of Loan to Value Ratio (LVR)
  • How long the loan term should be
  • Interest only or principal and interest
  • Do you want to pay additional principal
  • Do you want to offset against savings
  • Live in or rent out
  • Tax advantages of having a home office
  • When to sell or to keep

And then there are the variables you don’t control:

  • The rate of inflation
  • The rise of house prices
  • Salary changes
  • The rise of interest rates

Enter the property investment visualiser!

While it’s more of an experiment than a polished app right now (definitely in alpha stages) it’s starting to show potential to be a really useful tool when trying to project the outcomes of different investment conditions. As you can see above with all of those variable at interplay, trying to manually calculate and compare the impact of them all would be prohibitively time consuming (and prone to miscalculation). With the property investment visualisation tool you can:

  • See the long term effect of all of these variables mapped out well into the future
  • See how long your retirement savings will last you
  • Build a property portfolio plan and predict when you can implement each step
  • Answer questions about the net benfit of negative gearing and capital gains tax (CGT)
  • And much more

The best thing about it, and the thing that has the greatest potential to make this an amazing tool, is that it all happens dynamically in real time! That’s so great not only because when it comes to computers fast is always better but also because it helps you get an immediate understanding of the impacts of slight changes in strategy through a dynamic range and not just individual plot points – it’s a game changer!

At the moment I’m still trying to understand how best to move forward with the visualiser and would love to develop it into a polished app but I think it needs a lot of usage testing (and also calculation verification!) though I’ve spent a while testing and comparing the results to manual calculations and with the disclaimer that the results should not be relied on, it all seems to check out. I’ve been surprised by a few of the results but on doubling back over them manually I’ve been surprised to find that they are accurate, and why. So put simply, graphing things dynamically helps you see the interplay of variables at work – and get a better understanding of them.

At the moment there’s more to do to make it more flexible and make the information clearer but pretty soon I hope to release an alpha preview for anyone that might be interested. I’ve got it running on the iPad as well which is great as it’s the sort of thing you can mess around with on the couch, comparing different scenarios and daydreaming about your future and the touch screen interface is a perfect way to move around items on the graph.

Want a test drive?

If you’d like to learn more stick around and see future posts, comments and suggestions are welcome and for anybody that’s interested in some hands-on testing please feel free to send me an email through the form on my Contact page.