Buying house vs investing in shares

Hi,

Looking for some advice from the savy ozbargain community out there.

I currently have ~80k and able to save ~12k annually after rent / expenses. I have always wanted to crack the property market but living in melbourne thats not really possible with housing prices. Wondering then if I am better off investing in an investment property somewhere affordable or just investing my money elsewhere. End goal is that I would like to have the capacity to buy my own home in 5-10 years.

Anyone have any suggestions for getting quality financial advice?

Comments

  • +3

    Get an investment property in Melton area to get your foot in the door, and then keep saving until you can upgrade.

  • Do you want to own a house, make ok investments or make life-changing investments?

  • +9

    You need to own your home when you retire, anybody telling you otherwise is grossly mismarking risk and needs to be ignored.
    If you are extremely disciplined, you could probably beat the market with share investing over 30 years and take the money you invested that way to buy a house.
    Or you can buy a house, with 90% leverage, pay it off with low interest rates and have a place to live like every other Australian living the dream. You have lower risk because no politician will allow policies that see any meaningful number of people lose their homes.

    Start with a house, then make investments.

  • +1

    Getting your first home is a good investment.
    First home buyers grant, stamp duty concession are your gains.

  • There was a recent episode of the Motley Fool Money (Australia) podcast about this. I haven't listened to it, but it was mentioned in a listener mailbag episode where someone asked the exact same thing.
    They apparently ran a bunch of numbers and came to the conclusion that renting+shares come out ahead, barely, but were weren't sure with the current low interest rates.

    Would be worth a listen. Would also suggest listening to that podcast generally for investment advice. Not clickbait trash "buy these 5 stocks" kind of advice like the website, the podcast is actually pretty decent

  • +3

    Never pay rent, it’s dead money, buy a house to live in !

  • The question I would be asking myself is are your confident you can beat the rising cost of houses with your shares?

    ie your might make 10% on your shares and save your $12k giving you $100k after the first year

    Looks brilliant on paper (and it’s not bad, don’t get me wrong) - but it’s essentially only 10% on your money; as the $12k applies in either scenario

    But if the property you’re looking looking at goes up 15% - you’re actually worse off if you try and enter the market after 12 months

    The most important thing is to figure out what you want - what’s important to you; have a goal and work towards it (for some it might be a 20% deposit to avoid LMI for instance)

  • +1

    Don't forget to consider the outgoings for each investment type.

    Victoria has Land Tax for investment properties. I used to only invest in property but have since sold some and reinvested in shares.

    My land tax bill was over $20,000 a year.

    I went from 7-8% property return to about 30% return with shares, with no land tax for the shares.

    A 'friend', as they all are, told me to invest in a particular stock when it was $0.02 and I was like 'yeah nah'. In about 8 months since then, the stock price rose to $0.26. Her initial $100,000 invested is worth $1.3mil.

    No one has a crystal ball to tell you what's going to happen, but perhaps speak with a financial advisor to best understand how to achieve what you want

    • $20k a year? Did you own a palace? For a couple of investment grade properties in the range of $500 - 600k, I would say land tax should just be around or less than $1k a year…

      • The land tax is calculated as a fixed fee PLUS a percentage of the overall value of the properties. I didn't necessarily pay this much for all my properties, but their combined is over $3mil such that I'm hit with the higher tax.

        The land tax basically negates the capital growth of at least one property. Stamp duty and Capital gains tax are only one off payments which in some ways is fine, land tax is yearly….

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