Financial / Property Advice House Paid off What to Do!

Lwhyisthissohard on 16/04/2024 - 14:09

Hey Ozbargain Fam,

Seeking some financial wisdom here. So, I'm 40, single, and happily debt-free on my home, thanks to offset funds. I'm earning an average wage and keen to secure my financial future. While the stock market makes me a tad nervous, my property has been a solid investment, doubling in value over the last decade. Considering the tax perks and potential rental income, I'm leaning towards property investment.

Here's the scoop: My current home is valued at $750K, with around $600K in equity. Renting it out could fetch $450 - $550 weekly. My primary job pulls in $6000 monthly pre-tax. Plus, I've got $100K stashed in super and a tax-free government gig bringing in $5500 gross, $5200 net year-to-date. My home loan sits at $230K, but my offset account boasts $280K. Dad's also kindly offered $100K towards my next property move.

My expenses are minimal, roughly $15K - $20K annually, thanks to some savvy OzBargain skills. So, what's a comfortable borrowing limit and repayment plan? I'm eyeing a new house in Melbourne for rental purposes, with depreciation benefits in mind.

I'd love to hear your thoughts and strategies. Let's keep it focused on financial options rather than suggestions to boost income through upskilling. Early retirement is the dream, though I know it's not an overnight affair. Tried the globe-trotting sabbatical a decade back, but reality beckoned. Appreciate your insights!

Financial

closed Comments

  • Muzeeb on 16/04/2024 - 14:14
    +16

    I think you meant to make an account with ozbraggin not ozbargain.

    • DashCam AKA Rolts on 16/04/2024 - 14:17
      +3

      OzBargain only makes cents. Cheers.

    • JIMB0 on 16/04/2024 - 15:55
      +1

      This isn't enough for ozbraggin. Less than $1m net worth and not even a six figure income.

    • whyisthissohard on 16/04/2024 - 16:48

      I soo didnt want to come across like that, I know alot of people are doing it rough

  • Brick Tamland on 16/04/2024 - 14:19
    +1

    How are you debt-free if your equity is $600K at a $750K valuation? If joint-owned why not buy it out?

    • bohn on 16/04/2024 - 14:26
      +1

      offset doesn't count as equity.

    • Duckie2hh on 16/04/2024 - 14:37
      +3

      Equity as in the bank will only allow you to pull out 80% of the value of the property.

  • samyall on 16/04/2024 - 14:20
    +2

    If you are looking to secure your future I would max your super contributions before considering anything else.

    Your probably only putting about $8-10k into super at the moment so you can lock away almost $20k more a year with a tax saving in the thousands. Remember your super is invested in the stock market so these saved tax dollars will grow significantly.

    I would then use what is left over (~$20k a year by my estimation) to look at an investment property or a new PPOR and renting your current place.

    • dogboy on 16/04/2024 - 14:33
      +3

      Better to stay in the paid off home as PPOR and rent out the new investment property to take advantage of negative gearing.

      • JimB on 16/04/2024 - 15:00

        Agree… don't rent out PPOR.

        I personally think negative gearing isn't the best investment strategy but it's better than buying an new PPOR on a 80% LVR and converting your PPOR (with 30% LVR) into an investment property.

        Unless you absolutely love the house you live in and where you live, yeah, I'd take dad's money and upgrade into a better area/newer house.

  • geekcohen on 16/04/2024 - 14:29
    +2

    Member Since
    1 hour 21 min

    Okay…

    thanks to some savvy OzBargain skills

    Right…… yet only a member for 1 hour and 20 mins.

    • ForkSnorter on 16/04/2024 - 15:05

      I believe you can browse the bargains without an account.

      • geekcohen on 16/04/2024 - 15:17
        +1

        Yes you can, but a true OzBarganer has an account.

        • whyisthissohard on 16/04/2024 - 15:35

          created a new account for this topic btw, been a ozbargain user since 2010!

          • lachhelix on 16/04/2024 - 15:46

            @whyisthissohard: Why not just use your existing account?

          • freefall101 on 16/04/2024 - 15:48
            +2

            @whyisthissohard: You probably shouldn't admit to that

            Multiple accounts held by the same individual or entity are subject to immediate termination unless expressly authorised by OzBargain.

  • sumyungguy on 16/04/2024 - 14:29
    +1

    You need to see an advisor, and with the changes flowing from the Royal Commission there should be some lower cost options available. Looks like your super balance is just average (bad), your living expenses under-declared (unless you live at home and don't pay board), you still owe $180K on your mortgage (solid). First stop should be your mortage lender to find out how much extra you can borrow (plus $100K from Dad). An advisor will be able to model several options which will include residential real estate investing. It's good to go into these discussions having done some research of your own - from which you'll soon realise low-end residential property isn't such a great earner.

    • cashless on 16/04/2024 - 16:21
      +1

      You need to see an advisor

      I wouldn't advise this. You'll be out of pocket very quickly

    • May4th on 16/04/2024 - 16:43

      An advisor will be able to model several options which will include ones with the highest commission yielded

      fixed

  • ihbh on 16/04/2024 - 14:34

    Don't put all of your eggs into one basket. Diversify, asset class and vehicle. Super is very tax attractive so build this up.

    secure your future

    Take a one plus year career break. Do something you love; why wait until you're old and retired to pursue it?

    It will also help you understand how to secure your future better than any advice someone can give.you.

    • quietsarcasm on 16/04/2024 - 15:55
      +2

      vehicle

      So you're saying he should get a high yield investment car? đź‘€

  • Duckie2hh on 16/04/2024 - 14:36
    +1

    1) Maximise your super concessional contribution
    2) Decide if you want to invest in property or shares. Pros and cons to both.

  • cloudy on 16/04/2024 - 14:37

    If you think you can double your house price every 10 years you gotta ask yourself. What was the interest rate 2014-2024 on average, and do you think that will be the case 2024-2034?

    As they say, past performance is no guide to future returns.

    • JimB on 16/04/2024 - 15:02

      I don't think property will double in the next 10 years.

      There's only so much the prices can go up based on current interest rates

  • JimB on 16/04/2024 - 15:05

    "Considering the tax perks and potential rental income, I'm leaning towards property investment."

    tax perks = losing money

    I own a few investment properties. I have the funds/equity to buy maybe one more today. I think property today is poor value therefore haven't invested further.

    I'm just paying down the loan rather than taking on more debt to buy another investment property.

    I'd stick it in super.

    • redfox1200 on 16/04/2024 - 15:12

      tax perks doesn't mean you are loosing money, you could still be positive cashflowing and still get money back from depreciation. and who wouldn't want the gov to pay a 1/3 of your loan, tenant 1/3 of the loan, and you 1/3 of the loan. basically get a house for 1/3 of the price.

      • JimB on 16/04/2024 - 15:17

        True that depreciation is valuable.

        Still remember, you're losing money on depreciation. It's not free.

        All things being equal, an old house on land will have greater capital growth than a property of equal value, that is newer with smaller/lower/no value land.

        And when you sell, you have to add back the depreciation onto the cost base.

        I've seen the way tenants treat a house and the quality of newer houses.. therefore I've never purchased a new house to rent out.

  • redfox1200 on 16/04/2024 - 15:09
    +3

    why would you have more in your offset than on your loan lol, atleast put the extra 50k in a high interest savings account, that could be worth 200-300 per month

  • freefall101 on 16/04/2024 - 15:51

    tax-free government gig bringing in $5500 gross, $5200 net year-to-date

    There is no such thing as a tax free gig, government or otherwise. There are some pensions with tax offsets or super (which is already taxed at lower rates), but I'd double check how tax-free it really is.

    At least you've got the spare cash for a tax bill though.

    I say you need to talk to an accountant or financial advisor, as most of your questions and issues are tax ones and long term investment ones.

    • whyisthissohard on 16/04/2024 - 16:39
      +2

      They offer Maxxia salary packaging, around 9k for mortgage / rent and $2600 for meals / entertainment, pay goes from the company to Maxxia to your bank account tax free been doing it for years but only for non profit / healthcare companies that have arranged it.

      • freefall101 on 16/04/2024 - 16:45

        Ah, gotcha. I read it as you had a seperate side gig bringing in income. Salary packaging is amazing.

    • Hardlyworkin on 16/04/2024 - 17:33

      Is the Army Reserve a tax free government gig?

  • Porker on 16/04/2024 - 15:57
    +1

    Best talk to a financial planner to assist - they'll be able to advise on the areas that you may not be aware of. Plus, they may be able to assist in helping set up the loans, paperwork etc such that you maximise the benefits.

    Since speaking with one myself, I've realised that I could have saved/earned lots more had I set up my portfolio differently.

  • JIMB0 on 16/04/2024 - 16:03

    Rental property isn't exactly a passive investment. There's bills to pay, insurance to organize, repairs/renovations, picking tenants, dealing with tenants problems etc. Shares are a much better choice, just sit back and collect the dividends.

    • whyisthissohard on 16/04/2024 - 16:41

      Totally agree, will also man up and get on the shares bandwagon

  • cashless on 16/04/2024 - 16:27
    +3

    I'm 40, single, and happily debt-free

    Easily sorted.
    Get married, have kids and then you'll be so poor you won't have to worry about where to invest.

    • May4th on 16/04/2024 - 16:45

      snorted. it's funny because it's true

  • Top G on 16/04/2024 - 16:44
    +1

    DJ Khaled got the answer: “another one”. lol

  • whyisthissohard on 16/04/2024 - 16:45

    Thanks for all the feedback, Will work on the following:
    High interest savings account for the excess, dump some more coin in super, already put 10k in this year, will send another 10k now. Will arrange a financial planner and will continue to look into shares and maybe a cheaper investment property.

  • May4th on 16/04/2024 - 16:46

    I'd debt recycle by taking out a business loan against the equity in your PPOR and use it to invest in ETF/shares if you want to diversify, and make your non-deductible debt deductible. if shares perform at a relatively conservative 7% pa you will be better off considering the cost of the loan is your mortgage rate ie. 6.x% x 70% (marginal rate) = 4.x%

  • Drakesy on 16/04/2024 - 16:48

    I think you're lost
    This isn't r/Ausfinance.

    • whyisthissohard on 16/04/2024 - 16:49

      I got my education from The Simpsons and my financial advice from Oz bargain!

  • localhost on 16/04/2024 - 16:55
    +1

    Speak with the bank, they will do the evaluation.
    And when they offer you like $1m - get 60-70% of it. Just to play safe and be happy with the repayments.

  • payless69 on 16/04/2024 - 17:14

    Consider early retirement and enjoyment.
    Else the comrades will strip it from you anyway.

  • AustriaBargain on 16/04/2024 - 18:02

    Do you want kids before you die?

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