I earn $55,000 a year have $200,000 cash from an investment.
How do i build wealth? i am 39 y/o.
SHould i buy a property and fulfil the Australian dream ?
I Have $200,000 Cash - Should I Buy a Property?
Sam Sharik on 04/12/2019 - 16:47
Comments
Well that would have been a bad idea. lol.
Sorry for the long post guys, first time poster and got carried away but thought I could help here.
Given you clearly have other financial interests would suggest property would be a great option for you at this stage of your life. You seem to have done well in other areas so spreading your interests to complement that with bricks and mortar and should only serve to assist you overall in my opinion.
I would suggest you keep it all business and leave emotion out of it. Something in a growth corridor or where major infrastructure projects (roads, schools, transport etc) are underway or planned . CBD’s are oversatured and don’t provide as much growth as what they used to do don’t concentrate on anything too close to the CBD which has already peaked. Every state has “upcoming areas” due to these projects and will increase in value as the area develops. Look for the respective sweet spot.
Capitalise on said projects in growth corridors with good infrastructure so you can continue to make money. If anything it is a passive income to supplement and diversify your other interests.
Nothing too risky, stay relatively conservative and nothing too expensive. In QLD particularly you should be able to get something around $400k that should double in 10 years. If possible try find something you could live in but its not essential.
Your clearly educated and your earning capacity would be relatively healthy so if you elected to do more hours for a 5-10 year stretch then you could smash the mortgage perhaps? Doesn’t matter whether you do or you don’t however it depends on your circumstances as at that time. You can make the appropriate call at that time.
Naturally, it will require some research but something tells me you certainly aren’t lacking in that area and could teach us all a thing or two lol.
Property will give you a something tangible that could benefit you for the remainder of your life in that you will always have a home to go to if shit hits the fan in your life. (Sickness, family issues etc etc) whether temporarily or even permanently if the situation arises.
If anything it will also give you a place to stay in your life. It becomes harder as you age, think pensioners now who never owned up against the landlord sword. By having property up your sleeve at this stage of your life it gives yourself the option to not have to put yourself in that position and fall back on property if you ever need a place to stay.
Put up just above the minimum for the investment property and put the remainder of your $200k into on offset (or not perhaps if the tax implications work against you) and either rent it or if, for a short period, it could give you a breather as a tenant yourself. That way you have access to most of your cash if need be and can pull it out without selling the property. Savings give you 1%, an offset in a montage pays you 3,4,5% depending on what you can negotiate.
Look at something you may wish to potentially develop in the mid to long term future if you can get something will land that is within a growth corridor down the track. (Think Sydney Metro) It then represents another “investment” down the track you carve up the block and even keep one. This is difficult as there are many variables however im confident you should be able to sniff out these areas. Personally I think stocks are much harder to determine so hats off.
Sorry for the long post, hope this helps you and wish you all the best
Thanks Gustav23. I really appreciate your post. You certainly have listed some very good points. Thanks again
Look into NAB equity Builder. Tax benefits, leverage, bringing forward dividends, no margin calls. Carpe dividendum did a really good post on it.
Got a link to Carpe Dividendum ?
Found it here https://carpedividendum.com/2019/02/14/equity-builder/
Yes, you have missed the boom. I bought a 2 br. unit near the Adelaide airport for $72,000 in 2001. Sold for $205,000 in 2009. The same unit sold recently for $210,000, the boom has finished, at least here in Adelaide.
Or the airport grew?
Or gazza just bought a house in a flight path that no one wants to live in so house prices there are stagnant…Cough West Richmond…
Adelaide the 2nd highest house average increase last year at 0.7% behind Hobart at 2.6%.Ever so steadily increasing since 2013.
Or because it's just a unit and the only thing that matters is what someone is willing to pay come 'For sale' time.
Start looking at the housing market. Properties close to the city seem to be trending up. Buy as close to the city as you can afford comfortably. Consider public transport access. Your income might make it hard for you to get a decent home loan rate, despite your capital. Nobody knows the future but i don't see land in high value places going down in price anytime soon
This is not advice but my view is
Property is for leverage in a rising market (never cash buyers)
At 39 I would be putting it into Super. Over 21 years at 8% = $1m
That would give you $80k a year as a retirement income on top of your existing super and contributions until you're 60.
Imagine having your retirement taken care of. Then you can almost spend all you want until then as you earn it.
You're welcome
Build a tiny house :o
not a bad idea.
Yes you should. But don’t put all that as deposit. Keep what you don’t spend in offset account.
Try to diversify your savings.
You're too old and earning too little to start property now. You really get the full benefit when youre earning a lot so you can debt recycle into shares and the portion you invest in shares become deductible. And because you're earning a lot you can also quickly offset portions of your loan when you split the loan into mutiple splits. Property gives the wealthy plenty of flexibility to artificially negatively gear their income.
This effect will be very minimal for you and you are risking a lot with your income. You can't fill your offset account very quickly if you need to unless you buy outside of a capital city.
I'll say the best way for you is to look into ETFs and using SelfWealth as the platform!
I think there is an Aussie property investors forum out there? Last time I went there was start of the year. They have a report that they put out for major cities. Brisbane's pick read something like North side, 350 sqm+, certain aspect etc etc. So at that time there were still properties around $450k - $500k that were around 500sqm+. One that I looked at the time had things like an outdoor basketball court. I've seen an inner city property in Woolongabba go for $575k 2km from the cbd in July this year. We passed on a 4000sqm property in Upper Coomera near dreamworld for $575000 in 2015. This was at the high point of the market, but this was under priced at the time. There are deals if you are prepared to constantly look.
Put every cents in: KTD (Check ASX)
Give me 5% cut after 5 years, you are welcome:)
In our big metropolitan cities, Sydney/Melbourne… people who believe a crash is incoming on the property side need to get a reality check. Sure the market will move 5-10% here and there… but a big crash??
Besides the smoke in the last couple of weeks in Sydney, this is a city people really crave to live in. Ask any traveller, backpacker or Just travel the world to any other city besides London/NY and what we have here, there's a reason we pay the big price to live in here. It's f**king good out here. And with that, a premium has to be paid. Whether that means rent or buy, that's your choice … but anyone who says there's a crash incoming …. there's always gonna be someone with more money than you who can afford to pay the premium price. With trouble in Hong Kong, unlivable conditions in certain parts of India due to the pollution, people are looking to move away from their birth-land and seek greener pastures.
Australian Household debt to income ratio is the highest 200% which means that a lot of people can't service debt (resulting in Foreclosures)
Reseve bank has cut interest rates 15 times since 2011 cash rate now is just .75%
Government gives you tax deductions for any losses you make from borrowing to invest in property (negative gearing)
Banks have become sales organisations and become greedier.
All of these are indicators of a crash.
Reinvest in the way that got you the $200k in the first place.
I'm interested to know more about your "200k investment"
The 200k is the profit from the investment.. the investment itself, one would think, would be more than 200k.
OPs full financial position is unknown.
This has been asked, and OP studiously avoids answering this question. Likely because his windfall is something more mundane, like an inheritance, insurance payout, or even a lottery win. Claiming to have earned it via an "investment" though sounds more impressive.
I remember recently reading on Reddit about a guy who received income protection insurance, but when meeting people he would say his money comes from "investments". But he did not know the first thing about investing and had a hard time answering further questions from acquaintances interested in the topic, and tried to be as vague as possible. Reminds me of OP and his "investment".
He carefully didn’t say that it was his investment; could be his fathers.
Dealing drugs = "200k cash"
lmao, obviously its not through a real investment. would he be on ozb asking penny pinchers for advice if he was a pro trader? obvious inheritance is obvious.
Yes buy property..
My advice to OP is to learn by doing but keep it straightforward so they don’t overthink it or procrastinate. OP has approx 15 - 20 years to understand hows to build up some wealth. So firstly, I'd suggest OP go and do something painless, quick and easy that will also offer valuable experience - they should open a share trading account through their bank, I've used commsec and nabtrade but they all do essentially the same thing. Then OP should take $10K and put $2000 each into 4 different big Oz companies across a couple of different sectors, google ASX50 and pick some big ones you know - a supermarket, a bank, resources, whatever. Don’t overthink it, whatever you choose it will probably be fine, they are all hugely successful companies. With the last $2000 buy into an asx listed trust - basically a fund that invests into a spread of ASX companies. There are a couple of very safe, very boring funds that do this.
Put the remaining $190K into a term deposit at 1.70% pa for 6 months. All that should take no longer than an hour. Then do nothing for 6 months.
After 6 months, most of the shares will go up and some might go down a little and you will have some dividends. $400 in profit would be quite reasonable. The term deposit will be worth $191.615.
Do the 19-20 tax return. Any associated costs are tax deductable and because OP earns 55k he will probably get a franking credit. Through this experience OP will begin to understand the significant tax implications that apply to capital investment. At this point OP should go see a few different mortgage brokers. With an income of $55K, OP should be able to borrow $250K for an investment property, combined with $150K of their cash they will be able to buy a very respectable $400K investment property. OP might even be able to get a first home buyers grant. It could be negatively or positively geared. Finally, depending how OP is feeling, a significant portion of their remaining $50K could go into shares.
Do nothing for 12 months.
OPs 20-21 tax return will get 10s of thousands of dollars of tax credit against depreciation, interest, marketing, insurance, strata fees, rates etc etc etc. Also any costs of the share portfolio: broker fees, maybe a research subscription, a few books etc. OP will start to realise that the ridiculous price of Oz property has little to do with affordability and everything to do with borrowing capacity and the tax benefits associated with property investing.
At a very conservative 5% growth, the investment property now has a market value of $420.000.
The kicker here is that OP doesn’t own their own house. And after 2 years the $500.000 house that OP wanted to buy in December 2019 now has a market price of $550.000. However OP now has around $180K equity in their investment property and could use that to fund another investment property, or into a primary residence, or shares or whatever. Meanwhile their first investment property will continue to offer huge tax benefits while rental income pays most if not all of the mortgage. OP wont see any increased cash flow for several years, however they will be on their way to understanding and building some wealth for retirement.
Put some of that, not all, in crypto.
Bitcoin and a couple of solid medium altcoins such at VeChain and Tron.
The possible returns are great though there is some risk, thats why i would only put a smaller portion of your large amount there.
The crypto market is down right now so it is a good time to buy in the macro scheme of things.
What if the OP has made all money selling off The Crypto?
I'd get Ethereum not those shitcoins.
Even Samsung's crypto is running off ethereum and all the decentralised finance in crypto is basically on etherum.
ethereum is massively down i personally wouldn't touch it although its not a bad coin.
Vechain and Tron are not shitcoins look at their fundamentals. Tron is integrated with samsung phones even, and Vechain is highly linked with the chinese government and has many many partnerships with big companies.
The real profits can be found in the upper middle coins not so much the bluechip coins…
crypto…. there is some risk
there is A LOT of risk. Fixed that due ya!
Always bet on BLACK!
Once you go black, you'll never get it back.
There are number of free advise here, you should meet a good financial planner to assist you or if you have decided to buy property then meet a good mortgage broker. Its good amount of money to invest, property is not a dream just a basic requirement to have.
Maybe
Ahh the great Australian dream of thinking your house is an asset!
Its an asset to the bank and a liability to you.
Spend the next 30 years to pay the house off. You'll be 70 years old before you own the house. That's assuming for the next 30 years you'll be hoping and preying that you or your partner will not be made redundant, not get sick and don't even plan to have kids.
Your wages needs to go up by 3x or the house prices needs to drop by 50% to make it worthwhile.
Good luck have a great life.
i partly agree with you. Getting a small mortgage can be a good option though.
Keep investing in what you know
Some put forward their crypto agendas and some financial advisor agendas. Be mindful.
Man some very detail post, what's the hidden agenda I wonder?
Hmm 5% year on year growth, tell that to the recent unit owners in North Ryde which has drop over 30% from its peak. Asking price and selling price are very different numbers.
I wonder how many people are in real mortgage stress right now in the other suburbs? When their loans convert from interest only to principle and interest which is a 40% increase in monthly payments?
I wouldn't buy a recently build unit due to quality concerns, think cladding catching on fire, Opal tower, Mascot and others. Owners of newly built units don't want to disclose the building issues because they wouldn't be able to flog their unit to the next sucker.
There hasn't been any wage growth for a decade. New immigrate will accept a lower paying job which dampens any potential future wage growth.
Buy an index fund