Investment scenarios for a home owner with a mortgage

someguycalledpaul on 28/12/2018 - 14:25

Hi there,

I'm trying to review some scenarios on what to do to increase net wealth over a period of time. I have a few scenarios I'm considering, and would like to determine if anyone is aware of some calculators, or fancy spreadsheets that can assist with working through these options.

I'm intentionally making this vague to ensure the feedback/discussion drives relevance for others too!

Context

(lets call him Bob!).. Bob has:
* A wife called Betty and a child under 2 called Barney.
* A home with a loan (LVR of approximately 70%.), with 15% of the homes value sitting in an offset account.
* Bob and Betty pay alot of tax
* Bob and Betty dont have any investment properties

Scenarios we're considering:

Scenario 1 - The continue as currently planned:
* Continue to live in the PPOR and pay off as much of the loan (via offset) as quickly as possible

Scenario 2 - The partial diversification into ETFs:
* Commence partial diversification of assets via slowing the contribution to the offset account and invest in ETFs (i.e Vanguard)

Scenario 3 - The full diversification into ETFs:
* Make min repayments to loan, and move all offset equity into ETFs.

Scenario 4 - Getting bolder..:
* Move all equity to ETFs
* Move to a modest rental property in the same area as to where we are now
* Rent out PPOR for a max of the period where you can claim CGT exemption (5 years?) At this time then move back and think through what to do next.

Curve Balls to consider:

  • What if Bob loses his job, and we need access to the ETF funds - implications on CGT..
  • What if the interest rates go drastically up would need to understand the impact
  • What if the government changed the rules on the Negative Gearing.
Financial

Comments

  • mskeggs on 28/12/2018 - 14:38
    +1

    Also consider, what if property prices fall another 10%, what if etf returns are sub-par?

  • dcep on 28/12/2018 - 14:40

    it's about timing unless you're going for long term even then good timing netts you a better position upfront

    stocks are peaking, you know what comes next

    housing just slipping off the tits, let it bleed further

    pick your window wisely

  • vinni9284 on 28/12/2018 - 14:46

    I understand that this is not one of your scenarios but wouldn't you consider of purchasing an investment property considering that the prices are falling?
    It seems like you are in a good position and eventually the value or the property will increase over time.
    Cheers

    • dcep on 28/12/2018 - 14:49

      never catch a falling knife

      • vinni9284 on 28/12/2018 - 14:50

        Hmmm .how much do you reckon housing will further drop?

  • Baysew on 28/12/2018 - 15:04

    What are Betty's thoughts?

    • someguycalledpaul on 28/12/2018 - 15:06

      Bob mentioned that Betty helped craft this and is equally looking forward to your response.

  • mskeggs on 28/12/2018 - 15:17

    Are you both contributing the max to super?

  • CheapSticks on 28/12/2018 - 17:02

    If I were Bob, I wud continue living in the current property, buy an investment property where the value can be added, start investing monthly say $500 to ETF - can use something like RAIZ to build meaningful scale before buying ETF

  • mskeggs on 28/12/2018 - 17:10

    How old is Bob and Betty?

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