Experience – Thinking into Results – Prologue

Last week I decided the participate in a personal development course called Thinking into Results from Proctor Gallagher institute. Below is a recording of my activities after I signed up, but before starting the course.

Tl; dr;

  • Waking up earlier is not an easy thing, but it frees up a lot more time to work with.
  • Start thinking about my long term goals proves to be the hardest thing I have ever done.

Why start my day early?

early bird gets the worm

Throughout various books about success building and personal developments, there is one thing that resonates with me. “If you want to be like other successful people, you need to mimic what they are doing.”. It was repeated to me by the mentor and apparently one habit that the successful people I read about is they start their day much earlier than other people.

The mentor proposed waking up at 5am in the morning, however I have only managed to waking up at 6am for the last few days. Slowly but surely transitioning to a lesser goal of starting my day at 5am.

Thinking about long term goals

short term, long term street sign

Have I ever thought about what I wanted to become in the future? Maybe, but I did not have a vivid picture of the future me. And I still don’t. People take quite a bit of time to develop the image and that is why the first few weeks of the course I will learn how to do that.

I attempted to start building my ideal image and it turned out to be much harder than I expected. Surely imagining myself being a successful person is easy, but how to imagine what that persona (he) think, what he eats, how he treats people, what exactly his day is going to be like. That is a real challenge.

Summary

Starting to know the importance of growth is quite revealing for me. Personal development is a vague topic that is not discussed in households. Only by knowing that you need to improve yourself to make your life better, you start looking for answers. And I hope Thinking into Results will deliver that answer.

“You can have more than you’ve got because you can become more than you are.” – Jim Rohn

By Tuan Nguyen

property investment

Discussion – Do you NEED a home?

As someone who is familiar with migrations, I moved from Hanoi to Ho Chi Minh city when I was little. Moving from Vietnam to Australia when I was 18, and moving from Ballarat to Melbourne 5 years later. I feel like I experienced a different way of living, in contrast to how our predecessors have been living.

Tl; dr;

  • We WANT a home and we NEED a place to live.
  • Sense of ownership and jealousy often clouds our judgement when it comes to purchasing our dream house.
  • There is nothing wrong renting for the whole life. It just needs more planning.

Housing is a basic need

According to Maslow’s Hierarchy of Needs, a place to live satisfies the safety needs, and some of the physiological needs.

Having a place to feel safe, to keep ourselves warm, to be able to rest is a must for any human.

Back in the days, we normally stay in the same community throughout our lives. We were born and raised in the same house, even live in the same house when we became adults and gets married. At the end, we probably died on the same bed that we slept as a kid.

With that context, it is no surprise that most people who experienced that lifestyle, including my parents, think that one needs to own his/her own house because it is an absolute necessity.

An alternative aspect

Let us take a look at some statistical facts.

Back in 2012, a social indicated that 43% of Australians moved house in the last 5 years. The number is a staggering indication of how much we move around these days. We do not stay in the same geography for a long time due to various reasons, such as changing life styles, kids, work opportunities, etc.

In the new working environment, the idea of job hopping is becoming the norm. People are encouraged to change employers every 3 to 4 years to increase competitiveness and enhance their skill set. Sometimes changing job means that you need to move to another area, and I do see people renting out their own home, move to a rental property to be close to their new workplace.

The question is, is owning our own house a necessity?

To think about an answer, we must take a step back and look at the reasons why we purchased our home.

  • Is it because our parents told us, “You need to have your own home!!”
  • Or it is because your friends all have their own home?
  • Is it because you feel like owning a piece of real estate satisfy something within you?

There may be other reasons, however the above 3 is what I feel when looking back at my previous home purchase. Those reasons are not about what I need, they are all from external factors. And the one thing that inspire me to purchase is just because I wanted the feeling of ownership.

Therefore, it is never about my needs to buy my own home to live in. It is more about what the society expects from you, what I want to achieve in life.

With that being said, there is nothing wrong in purchasing a house of your dream. However, you need to think about the WHY are you buying as the very first step. If there is no good reason to buy, it is ok to keep renting.

The renting hassles

I used to rent for over 3 years when I arrived in Australia, and have resumed renting for nearly a year now. What did I encounter?

  • I lost all bond because of a dodgy tenant who sublet the room to me.
  • Living in a house infested with mice and I had to arm the traps every day.
  • I lived in a cold room with no heater for an extended period of time. In Ballarat winter, you wouldn’t like it 🙂
  • I lived in a house that had a break-in.

It is fair to say that I have quite a bit of experience as a tenant. Most people fear the stories of renting, and fear the hassles of moving houses, of being kicked out by landlords.

Fortunately, in Australia, if landlords want tenants out, they need to have formal notice and give the tenant a reasonable amount of time to find another place. Rental is a heavily regulated topic, and most of the regulations actually favour tenants.

And the moving, it is much easier nowadays with removalist services. When I last moved, it took me like a week to pack, a weekend to move, and another week to unpack. Yes there were some work to do, but then again, don’t we do the same thing when we move home?

Summary

Owning our own home is not really a necessity, but it is more about what we want, and how do we fit into the society.

Always questioning the reason why you purchase a property, and you will be more aware of your goal.

“We live in this bubble of ignorance. Most people know nothing about history, or the historical context of the traditions they still follow today. People do things without knowing why they’re doing them.” – Oliver Markus Malloy, Inside The Mind of an Introvert

By Tuan Nguyen

Discussion – Superannuation contribution

Recently I have been in discussions about superannuation contributions. And I think some information needs to be spread out to help you in building a stable retirement.

Tl; dr;

  • Employer must contribute super for their employees, minimum of 9.5% of the gross salary per annum.
  • The amount of contribution is taxed inside super account at 15%.
  • You can voluntarily contribute more money into super and take advantage of the low tax break, however it will only be at maximum of $25,000 per annum, including the amount contributed from employer.
  • You can contribute to previous financial years, starting from FY 2019.
  • There are ways to access super to buy assets before reaching 65, mainly via SMSF.

What is super?

superannuation jar
Source: sbs.com.au

Superannuation, or Super in short, is the money put aside by the employer for you to take care of you during your retirement.

The required amount that the employer is required to contribute equals to 9.5% of your ordinary timed earnings per annum, at the minimum.

You cannot access the money inside super account until you are 65 and above, or under certain circumstances.

Why should I contribute more into super?

Since I cannot access it until I am 65, why should I contribute my hard earned money now instead of taking it to buy some investments now?

First off, you are spending money to fund your future retirement, ensuring that you have a better future.

Secondly, most super accounts have investment settings built in, and it is highly encouraged that a young individual as I am, should put all super money into high growth investments. Since I cannot pull the money out in another 30-40 years, it is reasonable that I will see some substantial return thank to compounding effect.

Thirdly, you save tax money when putting more into super.

super contribution comparison

Suppose that the tax is flat out 32.5% for simple calculation. In the case of progressive tax rate, the difference may be lower. But generally, you still save some tax money and increase your net worth better. The tax charged inside super is a flat 15%, and it is substantially lower than our tax bracket. Of course if your tax rate is smaller, this will not make sense.

How do I use my super money before retirement?

The most common way to “access” your super money before retirement is to transfer all of them into a Self-managed Super Fund (SMSF). You will be in charge of this super fund, and therefore has the right to control the money. However there are quite a lot of restrictions that come with the structure. It is best to consult with a financial advisor or an accountant to know more.

Another uncommon way is that some Superannuation company, e.g. AustralianSuper, has an investment product called Member Direct. You can subscribe to this product, and basically it allows you to buy certain shares of your choice within the scope of super. There are also some limitation of doing it this way, and you can only purchase shares.

What I am doing?

It may be best if I try to top up the maximum amount of contribution each year, and later on I may pull them out into an SMSF to purchase a property.

Let’s say I top up maximum of $25,000 per year, after 10 years I theoretically have $250,000 inside super. During that time, if the share market goes the way it has been going in the last 100 years, my investments will compound about 7% per year, leading to the final figure of around $410,829. With this figure, I should be able to purchase a property to sit inside my own SMSF and net me some healthy return.

Summary

There are a lot of interesting things when it comes to Superannuation. I just listed the most common ways to deal with it here. It is crucial to consult professionals who can advise you on the matter. However, it is good to know that there are other solutions out there, all you need to do is ask.

By Tuan Nguyen

Discussion – Cost of home ownership

As someone who used to live in my own house, I gathered a bit of information about the associated cost of home ownership. For this post, I would like to share my experience of the matter.

Tl; dr;

Cost of home ownerships can come in many ways.

  • Closing cost (when purchasing the house)
  • Moving cost
  • Mortgage repayment
  • Insurance
  • Rates (council and water)
  • (Situational) Repair/renovate cost
  • (Situational) Body corporate fee

Assumptions

All figures will be based on the following data (close to what I used to pay, but rounded to make it easier to remember)

  • Purchase price: $400,000
  • Interest rate: 4% pa
  • Rental (in the same area): $350 per week
  • Council rates: $2000 pa
  • Water rates: $800 pa

Starting the journey

To live in one’s home, one needs to buy it first. Here are a quick look at what are the costs to purchase a home.

Total closing cost of buying a house

This, of course, does not include the numerous hours I researched, went to inspections/auctions. But as a rough figure, it is easy to see how much does it take to conventionally take ownership of a house in Melbourne, Victoria (The figure is back in 2016).

Nowadays, there are schemes that help easing the pain when purchasing the first home. For example, you can waive the stamp duty as part of the First Home Buyer scheme; or even be able to borrow up to 95% without triggering Lender’s mortgage insurance. However this is another topic for another time.

For Victoria, there is a way to calculate your expected stamp duty via the government calculator page.

Living in my own house

It is a great feeling of owning a house to live in. Once I moved in, the first cost that I needed to spill out of my pocket is the moving cost. It can vary between $100 to, say a few thousands if you are moving interstate. Luckily, I have a few friends who helped me moving from Ballarat to Melbourne with minimal cost associated. Let’s say it was $600 for hiring movers to do that.

Then, the mortgage repayment kicks in. At $320,000 total mortgage, the P&I repayment each month came down to $1,528. Which means I needed to fork out $18,336 each year from after tax income to satisfy the mortgage repayment. Once in a while you can call the bank to ask for a reduction in rates, which can happen when RBA reduces interest rate, or the bank is running a promotion.

After signing the contract, I was advised to purchase home and content insurance, which came down to about $140 per month. This is because once I sign the contract, all damages (if occur during settlement time) are my responsibility. Since my loan was with ANZ, I had a choice to bundle car insurance with home and content insurance to have a better premium. You can take a look at this to reduce the overall insurance costs.

After a while, local council and water company will start sending you bills regarding the rates. In my case it was $500 per quarter for council rates and $200 per quarter for water rates. These fees you need to pay as part of home owner costs. There is no negotiation on this part.

Situational costs

My house was an old one, so repair and maintenance is kind of compulsory. I normally fork out about 10% of the expected rental in the area, which was $350 per week at the time. Each month the rental income would be $1,516.66, which means I needed to keep about $151 per month, ready for repair. This, should be a part of home ownership 101.

This came in handy when the hot water system failed ($5,000 replacement), and the cooking stove “exploded” ($1,000 replacement). Of course if you live in a brand new house, there is less chance to repair anything. You can ignore this part.

Another cost that can be considered is body corporate fee. This happens when you live in an apartment complex, or a block of units. There is a fixed fee that the body corporate charges each unit, and the owner of those units have to pay for it. The money is used to maintain common areas, such as drive ways, common gardens, etc.

Once thing to note is that you need to read the body corporate paper carefully. Sometimes the body corporate already purchases home insurance. In this case you just need to purchase content insurance. However check with your insurance provider before deciding.

Summary

Ongoing cost of home ownership

The above is a summary of running/maintaining a house for a year. This is not meant to scare you, but to prepare you for what is to come when you decide to settle down and claim home ownership. Figuring out all the numbers before committing is the key of financial stability.

That is all my experience regarding the financial side of owning my own house. These figures of course not accounting for any capital appreciation aspects of owning real estate. However we can go back to it at another time.

By Tuan Nguyen

Discussion – Why am I renting?

Owning a home is the ultimate dream of many people. Some even say it is the biggest investment of one’s life. After almost a year of renting, I now have a better view at renting versus living in my own house.

Tl; dr;

  • Rent when: you are not ready to settle down; you have debts that have high interest rate; you want to speed up your financial state
  • Live in your own home when: you tired of moving around; you can financially support the mortgage; you are aware of costs of owning a house.

Why renting?

I used to live in my own house. It is the Vietnamese way to live in your own house and not paying other people’s mortgage.

However, after a number of years, I came across a concept called rentvesting, which I considered intriguing to understand more. Rentvesting discusses that by renting, you end up saving more money than the cost of owning a home. And by redirecting the difference into purchasing investments, you can get ahead financially comparing to people who are still paying off their home loan.

There are 2 points that needs to be done for this strategy to work:

  • Your rent is cheaper than your would be costs of owning.
  • You redirect all the difference into investments.
home vs rent in the same area

Above is the comparison for my own situation when I tried to figure out whether I should move out of the house or not. The number checked out, netting me $306.89 per month, or $3682.72 per year back in my pocket if I chose to rent somewhere in the same area and rent out the house. Then I can redirect it to the offset account, or saving up for another investment deposit.

home vs rent in the city

But why stop there? I decided that if I rent in the city, it is more suitable for me. Assuming that for each hour commuting I can put into work to just make $10/h, and I waste 3 hours each day commuting at that time.

At my age, settling down is not really a thing to consider. I am happy to move around, exploring different suburbs and enjoy the lifestyle that the city gives.

Benefits when you rent

  • Landlords handle all repairs.
  • Cost of living is fixed, therefore cashflow projections are more reliable.
  • Enjoy lifestyle.
  • Easy to move around.

Why buy a home and settle?

Someone once said: “A man needs a home when his wife says they need a home.” With that in mind, the suitable time for someone to live in their own house is when they want to settle down and ready to live in a particular location for the next 5 years or so.

Why 5 years? Statistics say that Australians tend to move house every 5 years on average. Maybe the kids are grown up and parents have to move to another location closer to schools. Or one person finds a job that are far away and therefore decides to uproot the family.

However, you need to be aware of the costs of holding a house before jumping into the water, which I will discuss in my next blog post.

Summary

Renting versus living in own’s home has been a great discussion over generations. However when we put emotions aside, and focus on what is quantifiable. There are a lot of benefits that can come out of renting, provided that we follow a set of strict rules.

Disclaimer: the information on this website is for general information only.

By Tuan Nguyen

property investment

Investing – my thoughts on comparison rates

So I recently completed a refinance. It took me over 3 months from contacting the broker to the day the account is created. I just want to share some thoughts on the difference between interest rate and comparison rate. And when one is more beneficial than the other.

Tl; dr;

  • Interest rate is the pure rate charged on outstanding loan balance.
  • Comparison rate is interest rate plus certain fees, defined by the banks.
  • If your goal is to smash the loan as fast as possible, high comparison rate is not really an issue.
  • If your goal is to keep the loan for as long as possible, give some thoughts to the comparison rate.

Interest rate vs comparison rate

This is an example of loan package that outline the interest rate and comparison rate, along with the fees associated.

westpac home loan
Westpac investment loan

One thing to note is that when calculating comparison rate, banks like to use these figures: $150,000 loan size, 25 years loan, Principle & Interest payment.

As we can see, the interest rate is 3.84% per annum, which means for a loan of $150,000, you need to pay $779 per month in mortgage.

However, looking at the comparison rate, it is 4.24% per annum, essentially means you need to pay roughly $812 per month in mortgage.

The difference for a year is roughly $395, which equals to the annual fee that they note down in the image above. The fee could be higher if the banks also calculate the account opening fee into the comparison rate.

tables showing the difference between interest rate and comparison rate

When do we need the lowest comparison rate?

This is a bit weird for people like me who just got into property investment. But for investment properties, I want to drag the loan out as long as I can, so I can utilize the borrowed money to keep purchasing. I am willing to pay interest only for as long as I can, because it makes the cash flow better and more predictable.

With that in mind, obviously the higher rate is, the worse the cashflow will be for an investment property. So when I try to find a loan, it is in my interest to find something that has a low comparison rate, only if I intend to hold the loan for a long time.

So when do we want a high comparison rate?

Home loans often have the best interest rate, but sometimes go with a terrible comparison rate because of all the fees associated with it.

However, if my intention is to pay it out in the next, say 10 to 12 years (surprisingly, it is not that impossible to do). I can take the package with low interest rate, but a bit high comparison rate. The reason is that comparison rate is calculated based on a gradual payments for a long time. So by paying extra and/or change the payment period, we can reduce the real rate down to a ridiculous amount.

Example: given the same rates above, let’s say that we want to pay $300 per week into the repayment. With the assistance of moneysmart website, we can calculate the total repayments and how long does it take, as well as guessing the actual comparison rate.

calculations showing early repayments

As we can see, by paying extra into the home loan with the intention to finish it off, the actual rate is even less than the interest rate, since we finish the loan much earlier than expected of 25 years.

Summary

Loans are complicated, and there are a lot more that I cannot cover. It is best to go to a broker and discuss with them your goal. Trust in their expertise to find a perfect loan for you. And if things don’t work out the way you want, a refinance is always an option.

By Tuan Nguyen

stock investment

Investing – Types of orders in stock market

As a novice stock market investor, I often find it confusing about different types of order when buying ordinary stocks. Here are the information I collected for the different kinds of orders.

Tl; dr;

  • Stop order: triggers buy/sell stock when stock price reaches a predefined price. When triggered, stop order becomes market order.
  • Market order: matched the closest orders in the current market, the condition is different between buying and selling.
  • Limit order: Sell price >= trigger price, or buy price <= trigger price.

Stop order

Probably the most complicated one when it comes to buying stock in the normal way.

Supposed that you want to buy 10 stock X, currently trading at $9. You put in a stop order at $10. The market depth is as follow.

Stop order market depth

Now, the order will be fulfilled as follows:

  • 4 stocks for $10 each
  • 1 stock for $9 each
  • 3 stock for $11 each
  • 2 stock for $12 each

Why is this happening?

The stop order triggers at $10, so it starts buying all stocks that are selling at $10, in this case there are only 4 stock. After that, the order becomes a market order (more on that below). And with market order, it will buy stocks from lowest to highest price available in the market, until the buy order is fulfilled.

Market order

When you buy a stock with market order, you don’t care how much you’re paying for it, as long as someone is willing to sell, you are going to buy. The same happens when you sell a stock with market order.

Market order market depth

Let’s examine the same market depth, only difference is that the buying price now is the market price. The order of buying is as follows

  • 1 stock for $9
  • 4 stock for $10
  • 3 stock for $11
  • 2 stock for $12

As we can see, we end up with the same total as the example in Stop order, however the order of purchasing is different. We buy it from the lowest price first, and work our way up. In the sell order, the order is reversed, we sell with the highest buying price first, then work our way down.

Limit order

This is easy to remember, the limit order only allows the broker to buy a stock price when it reaches the trigger price, or lower. And to sell when it reaches the trigger price or higher.

Limit order market depth

With the above market depth, the buy order is as follows:

  • 1 stock for $9
  • 4 stock for $10
  • 3 stock for $11
  • Remaining 2 stock in the buy order

The stock broker will not buy any stock that is priced above $11.

Summary

The 3 different types of orders are the most popular order types in buying and selling ordinary stocks. There are a lot more that we can explore on other form of trading stocks. However they are more advanced and allow you to understand the instruments deeper to use them.

Risks come from not knowing what you’re doing.” – Warren Buffett

By Tuan Nguyen

stock investment

Investing – What are bonds?

Recently I have been taking a (free) course about stock investment. And in a few units we discussed about bond and its components. I think it is a good idea to note down what I learned and hopefully it makes me remember better.

6 James Bonds
Not these Bonds

Tl; dr;

  • Bonds, especially government’s, are considered zero risk.
  • Bond values are dependent on the reserve bank’s interest rate.
  • Don’t look at Current Yield, look at Yield to Maturity figure.

What is a bond?

A bond is essentially a loan of money. Considering company A, they want to finance a project for $500 million dollars. They can go to a bank and borrow that money at 5% interest rate for 30 years. The bank gives them the money and create a loan, but then split that loan into 500,000 bonds, each holds $1,000 in value (this is called par value). These pieces can be sold to investors for, say $1,005 per bond (the $5 extra is called underwriting fee, and that’s how the bank makes money as well).

Corporate Bond explained

Once all bonds are sold to investors, the bank is no longer in the picture. Investors and company A will deal with each other directly. Every year, company A will transfer $50 to investors for each piece they hold. Normally it will be splitted to 2 “coupons”, each coupon is $25 and 6 months apart.

After 30 years, company A will then transfer the full amount of the par value back to the bond holders, i.e. the investors.

Government bond behaves exactly the same. We can replace company A with the government, the bank with the Reserve Bank, and the model still works. The reason why government bond is considered zero risk is because the Reserve Bank can print money (or quantitative easing) if needed to pay back its investors.

How to trade them?

There are a list of bonds available here. Which describe the type, when is the maturity date, the interest rate, etc. However, there are only a few stock brokers that can trade them, for example Commsec, CMC Markets, etc. The list can be found in this PDF.

One thing to note is that bonds often have fixed interest rate. Let’s say one that has the coupon yield (technical word for interest rate, or rate of return) of 5%. Then if the RBA interest rate drops lower, its value will go up, since the government will issue new packages with lower rates now, and existing bonds with higher interest rate is considered more profitable. However it goes both ways, if the interest rate rises, existing bonds’ values will go down.

Another thing to remember is that bond value will approach its face value as it approaching maturity date. The reason is once we reach the maturity date, investors will receive the full amount equals to the par value.

Bond yield evaluation

There are 2 ways to look at the yielding value, with simple interest and with compound interest.

Simple interest

We can find the yield simply by dividing the market price into its payment per annum.

current yield of a bond
Bond current yield

As we can see, the yield is lower if we buy with a higher price than its par value, and vice versa.

Compound interest

The calculation above ignores an important aspect of this financial instrument. What happens when the bond matures?

For this calculation, we assume that all coupon payments will be reinvested in something that will return the same interest rate as the coupon yield. And at the maturity date, we also take into account the full returned amount.

Yield to Maturity explained
Compounding bond yield calculation

As we can see, the Yield to Maturity (technical term for Compounding yield) is much lower than the Coupon yield. Bond market will display both of the rates and it is our job as investors to understand them.

To calculate Yield to Maturity number, you can use this link.

So, when to invest in bonds?

Since bond values goes up if the RBA interest rate goes down, I would say if you expect the interest rate to drop in the near future, they can be a financial instrument worth looking into.

However, most investors look at bond like a low risk investment. This is a great way to preserve wealth and ensure that the capital is secured, and earn a bit of profit along the way.

Summary

Bonds are often ignored as its return rate seems to be low. However, if we can utilize its attributes to our advantage, one can actually profit from investing in them and at the same time, preserve his or her capitals.

By Tuan Nguyen

property investment

Investing – the trash talk with Landfill levy

On February, the State of Victoria rolled out a new program, Recycling Victoria. Among many information about what we will tackle the rubbish and recyclable materials, there is an item that could affect us as real estate investors.

Tl; dr;

  • Landfill levy is increasing from $65.90 to $125.90 per tonne in 2023.
  • Eventually it will be passed down to council rates, i.e. the rates will be higher.

What is landfill levy?

Landfill levy, or waste levy, is a tax applied to waste types by weight. The government designed it to incentivise waste generators to reduce general waste, and increase diversion through recycling. Governments also use landfill levies to fund environmental and sustainability programs to improve waste management.

In a simpler term, it is the tax that home owners pay to get rid of their trash, for the trucks to roll in every week and take the rubbish away and process it. As a result, this levy often mixes into the council rates that we pay every quarter.

How much is it increasing?

According to Victorian Landfill guidance, the rates are increasing year by year, and stop at 2023. In details, they are increasing from $65.90 to $125.90 per trash tonne.

landfill levy 2021 to 2023

The levy for FY 2019-2020 stays the same at around $65.90 per tonne.

This increment will put into Sustainability Fund, which funds sustainable projects and improve the waste management system.

The government hopes to reduce landfill amount by increasing the levy. People will be more inclined to use recyclable products. This implies that the increased amount will pass down to rates payers, i.e. home owners and investors. Expecting your rates to increase by a small amount in the next 3 years is not unreasonable.

Summary

It is good to know the government cares about the environment and has some initiative to promote sustainability environment. However with the increment of rates in mind, we need to be a bit more careful on how we as property investors calculate our numbers.

By Tuan Nguyen

property investment

Discussion – what exactly do you own in real estate?

Recently I ran across some interesting matters regarding what do we own in terms of owning the title of a piece of real estate. I think it is useful to note down and share with people.

Tl; dr;

By owning the title of the land, one has the right to the air above and the earth below.

If you find something valuable, e.g. gold nuggets, in your backyard; it belongs to the Crown.

Air rights

dollar signs on the sky

In Australia, if someone owns the title of the land, he or she has the rights to use the air space above the land.

In Latin, this is defined as follows “cujus est solum ejus est usque ad coelum et ad inferos”Property Rights, 2016. This means “to whom belongs the soil, his is also that which is above it to heaven and below it to hell”.

So we own the airspace, but how far up do we own? Surely it is not as far as the airplane altitude, which is somewhere around 35,000 feet, or about 10.6km. According to the Property Rights, it is as high as to “be necessary for the ordinary use and enjoyment of his land and the structures upon it”. It highly opens for debate of how high can an airspace be. One can argue that if a helicopter flies too close to the house and that stops him from enjoying the land, then it is an invasive of the air rights.

Subsurface rights

Well it is not called “Subsurface rights” in Australia, nor defined separately from the air rights. However, this is related to the land and the mining rights of the soil below the land.

Similar to Air Rights, there is no hard limit on how far the owner of the land can dig. However, you need to obtain a permit from The Crown to be able to dig down for minerals and natural resources.

Which brings us to the most interesting facts…

Valuable items found in your backyard

gold nuggets
Gold nuggets

So what happens if you found something precious in your backyard? Gold, precious gems, or even a natural oil vein.

According to the mineral rights, The Crown is the first in line to say about all coal, oil, silver, gas and gold found on public or private property. Therefore even if you found something valuable, it will be the Queen’s property, and should be returned to her.

Summary

Those are interesting facts about owning the land in Australia. Now we know better about what we actually own, and realize that we actually own more than we know.

By Tuan Nguyen