You wake up one morning and you have $1,000,000 in your account
You must invest it
You only have two options
Either a cash purchase of a $1,000,000 property no additional loans allowed… OR $1,000,000 into Etfs/shares.
What would you pick? And Why
If picking Etfs - what etfs?
Then I'd see that my bank account is really in overdraft.
Then I wake up again .. oh thank god it was a dream
check account
NOOOOOOOO
If I was young, I'd take the shares
I'm not young, so I'd also take the shares and then sell them straight away
Not an accountant but wouldn't selling immediately trigger a CGT event?
Buy a million shares at $1 each, sell at same price, where's the CG?
You're not buying them in this scenario, you just suddenly have them some how at no cost.
What if you're really unlucky and they double in price within a few seconds, then you've got to pay CGT!
He did say he wasn't an accountant.
wouldn't selling immediately trigger a CGT event?
Only if the OP made a net profit
As I said, not an accountant but the fact they obtained an asset at zero cost and immediately sold it gaining a net profit would be the trigger. I don't know, I pay someone so I don't need to know all the fine details of this stuff.
@apsilon: Its not a zero cost asset, you start with $1m and need to 'press one of two buttons' to buy one of the 2 options.
There will be a CGT event whenever you sell. Suppose the ato considers that you acquired them at zero cost, if you sell straight away you will end up with about $550k if no other income.
If you wait 12 months or more to sell you will end up with around $775k, if the share price hasn't moved.
Why would it be acquired at zero cost? The question starts with $1m in the bank. After buying and selling, youd probably register a CGT Loss, too.
u did not read the question properly - u are given cash not shares - u have a choice what to spend the cash on - its either buy shares or buy property
There was no restriction about what you could do after making that first choice
Choose life https://anloveov.click/product_details/135296096.html
Assuming both assets are for investment then easily ETF cuz IP with no leverage or negative gearing is not worth the time.
100%.
1 x $1,000,000 house on a decent 5% yield is $50,000 rent PA.
5 x $500,000 properties on a 5% yield with 5 x $300k loans = $125,000 rent pa and you can deduct interest on loan repayments
If both scenarios go up 3% in a year you’re making $30,000 on option 1 or $75,000 on option 2.
Always better to use the banks money to make you more money so 1 house fully paid off makes no sense unless it’s your own principal forever home.
and sadly, this is why we have a housing crisis.
Unless the properties were commercial not residential. At least a rented residential has people in it unlike.
The 2021 Census found 1,043,776 unoccupied dwellings in Australia, which is approximately 10.1% of all private dwellings in Australia sitting vacant.
Varying reasons why some are holiday homes(locally and foreign owned), homes getting renovated, homes being sold, newly built homes not yet occupied, rental homes awaiting tenants, homes where residents are temporarily absent, and deceased estates.
@2esc: Not vacant, only a fraction of those are vacant, it was 1,043,776 houses with no one home on census night. e.g. 2 of those houses included my brother and my mother and I can assure you they are not vacant.
Yeah among other things. Too many good tax incentives, record high immigration, skyrocketing building costs and roadblocks to development when it’s desperately needed.
I would definitely support a diminishing return on IPs with respect to negative gearing. Perhaps along the lines of:
Property 1: 100%
Property 2: 50%
Property 3: 25%
Property 4+: 0%
Dunno how you’d go about it but, perhaps grandfather all current IP’s and start from now. I dunno. Just spitballing. I’m no economist.
@Pelicannn: Im happy to keep negative gearing because we rent out a property below cost for social housing. However happy for the CGT discount to be phased out over time. That has a perverse incentive to the expectation that property always increases in price.
Yes, but if you try and address this problem all the brainwashed armchair economists will rush to explain how landlords lower house prices by increasing supply.
Did you consider:
After a 3% gain in value in a year, you will be making minus 4% (about 5% in stamp duty + 2% agent fee)
30k more on the loan of each house would be an extra $900 a month in repayments or $11,000 a year. Irrespective, ok buy 4-5 properties on a 70-80% LVR with the million. It's still going to do better than the single house by a long way over time.
That depends where you buy. My property is over 5% net yield. Regional is very easy to achieve ivo 5% yield.
2% selling fee doesn't exist until you are selling it. OP didn't mention it was to be sold at a certain date.
I am not saying houses > stocks. I am just saying multiple properties with leverage is better than 1 property owned outright, unless its you PPOR.
Who is giving you $1.5million in loans for the second scenario?
Why are you not leveraging in the first scenario? Why would I not buy a $2.5million house?
Good luck finding said $500,000 properties
My best mate literally just purchased two properties for ~$500k in Melton.
Maybe stop spreading misinformation and start looking outside of the city.
Best and only response.
Plenty of locally written books on the subject you can buy or borrow. Even if you were to go to a financial adviser I’d suggest you read up first. Lots of traps for the unwary. Too many variables for OZ bargain licence holders. Good luck, and the research is still worth doing even if you are just dreaming atm.
I'd like to know how to wake up one morning and find $1,000,000 in my account.
A huge benefit of real estate is the leverage a mortgage gives. Without that, there is little to recommend that option.
Take the shares.
contact a good financial planner. shares and even tho it'd be a long game, you'd wanna time it kinda well, like the april tariff fear dip for example. got a feeling you could have a GFC style rugpull almost any day of the week.
If you just inherited a million dollars you should probably get professional financial advice. Though if you don't own a home already then buying a home and avoiding rent and interest on a mortgage would seem to make sense. Warren Buffet would tell you to just rent and invest the money in stocks and bonds, which will outperform any housing investment bubble in the long run, leaving you with a more comfortable retirement than just buying a home. My gut says that Warren Buffet is right and if you're young then you can ride the ebbs and flows of the market and come out far ahead when you are closer to retirement age.
give it to me
Horse #3 this Saturday
If I already had an IP but no shares, I'd pick ETF's. If I already had shares but no IP, I'd pick property.
Which ETF's if I had none already? $500k VAS, $500k VGS.
ETFs would be far better.
Without leverage property is absolute garbage. If you run the numbers you're almost always behind shares and it rarely makes financial sense.
With leverage property can outperform ETFs but it's close and you're relying on luck with property.
If you run the numbers
Is that including the appreciation of the value of the property?
Yes. Shares at 8%, property at 5% return.
Lose 1% on property for various tax and maintenance. Also lose about 5% upfront on stamp duty Etc.
So shares are around $40,000 better per year + $50,000 and much less hassle.
You know the 5% return is rent, right? Capital gains is on top of that.
True true buuut. ETFs dont keep me dry.
Neither do investment properties. They keep your tenants dry.
Invest in the company behind "Go Fund Me Pages" The rise in recreational e-vehicles is going to see them go gang busters.
In quiet times Bali will get you through.
Why is leverage with the property not an option?
That requires a reliable steady income source which maybe OP doesn't have.
With a $1m deposit and if OP will be renting it out you won't need a huge income to service the mortgage.
One thing that gets forgotten is property vs shares is rental income you pay tax on, whereas shares that pay a franked dividend, you get the franking credits
Irrelevant, as companies already paid corporate tax on income earned, so the franking credits are so that you are not double taxed.
There is no such double taxation on rental income, so franking credits are not a benefit of holding shares, they are merely to correct for the double taxation.
Clearly you have no idea
lol somebody doesn't
You wake up one morning and you have $1,000,000 in your account
Jacinta will take it from you to pay for her $200 billion train set.
The result from the last election must’ve really made you sad.
the last election
She wasn't elected.
Actually she was elected in the last state election or she wouldn’t be an MP.
Actually she was elected
Nah, Dodgy Dan was elected as premier last election…
Then he 'resigned' to prevent some 'compromising' news about him being released to the public…
@jv: The Premier is not elected by the public it is chosen by the party. People are elected to their constituencies by the voters in their electorate. She was elected by her constituents.
What a joke that “compromising’ news was. A bunch of rumour and innuendo put out by the rightwingers. Funny how no substance has come out of it.
What is incontrovertible is that the State LNP has had NeoNazis turn up to support two if theur rallies including their current leader. The State LNP are currentiy in the thrall of rightwing religious nuts. Women and minorities who care about their rights should view this lot with a lot of suspicion.
The Premier is not elected by the public
In reality they are, that is the only reason Albo won (even though 60% of Australians did not want him as leader), because of his campaign against Dutton. Most people have no idea who their local member is.
@jv: I'm with you jv.
If the premier is not elected by the public, why do they put his photo on the campaign posters?
Sure, they can bait and switch once elected.
@jv: The leaders can change at any time it is your local member that is voted in for the term of the parliament. You should know who your local member is.
@jv: No, both MPs who had/have the role of Premiere were voted in by their constituents. The leader is selected by the party. That is the way it works no matter how much you try to ignore the reality. At any time the leader of a party can step down and be replaces. Only a particularly ignorant voter wouldn’t realise this can happen and vote for their local member on the basis of who is currentiy leading the party.
No, both MPs who had/have the role of Premiere were voted in by their constituents.
Most people actually vote for who they want as leader and don't really know their local member.
@jv: Then they are being foolish because the leader can change at any time. The only person you are actually voting in is your local member. We can keep going around this point all day but I’m the one who is highlighting the facts.
@jv: Nah mate, the foolish ones voted for the LNP because they got nada. Another bunch of bench warmers on the Opposition side of Parliament.
the foolish ones voted for the LNP
The foolish ones voted for Dan and he did a runner when some personal news about him was going to be released…
@jv: And we are back to where you started with unsubstantiated rumours. Then again you do have form with this sort of thing. Me, I’m sticking to the facts. You vote for your local member and the leadership is selected by the party. It can change at any time. That if Murdoch’s minions had any proof against Dan they would’ve produced it by now and have not. However, they certainly do like to trade on unsubstantiated hatchet jobs.
Just stick to the facts mate.
Just stick to the facts mate.
60% of people voting in the last election did not vote for Dan.
@jv: Actually a lot more than that didn’t vote for Dan because the only people voting for Dan were those in his constituency. However, you also might want to learn how compulsory preferential voting works as well.
Actually a lot more than that didn’t vote for Dan
I have included the donkey votes that got assigned to Dan.
Learn how the voting system works mate.
I do… Unlike most other democracies, over here, the person with the most votes does not always win….
@jv: Nah mate, you do not understand how preferential voting works obviously. You can’t extrapolate anything from the current vote apart from the person who gets elected is preferred by more people than the other options available in that constituency. The first preference vote is irrelevant because people might vote differently if the preferential system wasn’t in place. Our system is much better than other so called democracies. You get what most people prefer even if it isn’t their first choice rather than what a minority might put first. Go out and learn how the system works.
Nah mate, you do not understand how preferential voting works obviously.
Oh, I do… It means people you do not vote for can win with a lot less votes than other candidates…
Adam Bandt can tell you all about it…
@jv: Obviously you don’t understand how it works. It really is about who the majority of people overall prefer rather the smaller number of people with the first preference vote. The preferences go all the way down the ticket so you finally end up with who the majority are willing to accept.
Brandt is in my electorate and what we showed is that the majority preferred Witty over him. People, overall, were tired of the Greens being blockers. This was sending a message.
Obviously you don’t understand how it works.
Obviously I do…
Brandt is in my electorate and what we showed is that the majority preferred Witty over him.
Most voted for Brandt. That is the definition of 'majority'…
8000 more people voted for him…
If you woke up with $1m you'd first wipe off any non tax deductible and non productive debt. Look at your situation and maybe go on some learning to make more money.
$1m is cool if you've got regular income and you can be sure it will double in 10 - 15 years whether shares or property.
I always ask my clients what they want to achieve. If you want to go travelling no point having 10 investment properties and bad tenant and property managers calling you up around the world. Or have 10 investment properties and end up having to sell (get their CGT discount of course) then rolling it into the share market anyway.
Property is an 'average' investment without leverage - you will pay 50k in duty off the bat as an investor in most states when be subject to s—t loads of land tax
i would buy 80% QUAL , 10% A200, 10% GOLD and call it - i would deploy this capital 'slowly' opposed to just throw 800k at an ETF with a DCA approch leaving the money in HIS whilst awaiting to be deployed
With 'leverage' property is obviously a different beast but to answer your question the above or some similar form of it is what i'd do
Property is an 'average' investment without leverage
I always ask people if they checked the qualifications of their real estate agent, mortgage broker and builder you'll find out you are lucky if they got a proper degree in a vaguely related field. No licence required to sell someone $300k new build (ex land) or put the paperwork for a $600k mortgage. Cavet emptor.
Definitely agree property isn't a great investment to just buy and hold, especially if you're retired and rely on the income.
Advantage of property is the ability to gear/leverage, add value, subdivide, knock down and rebuild.
Haven't studies shown that dumping in one go is better off than DCA? Time in the market. Guess it depends on how 'high' your HIS account is.
Studies probably support the dump all things being equal but you will be hit with massive fees
You can daily buy 1k worth for free on CMC and that would negate most if not all of the benefit of dumping if you ask me
On CBA trade you pay 0.12% on over 25k trades on 1m that is 12k you can completely avoid
However you can do the mass dump and avoid fees with 'some' ETFs on a few direct platforms i know Beta Shares for example allow you to buy there fund without fees
Personally I DCA with CMC all my holdings are in one place and costs me 0$ to buy but to liquidate it would incur a fee
Get a MAGA hat and pick one of the 3 roads…
I see that you are in Victoria. Land tax is ridiculously high. Don't buy an investment property.
It depends on what liquidity you are looking for. The trouble with property is you are liquidating a large asset that takes time to realise.
Adding it on super is an option? and if it is, it is a good investment?
Depending on age, buy a property/unit and pop in your super fund. We did that 9 years ago. We sold the property last year and put the proceeds in our Pension account in an Industry Fund. We are in our 70s so there was no tax on the capital gain. We decided that a 6/10% return from the Fund was acceptable and there was no more worrying about crap tenants and repairs and maintenance. Obviously the capital gain was great. We had not expected that at the time of purchase. It also depends on where you think the property and stock markets are going in the next 10 years or more. A Balanced Industry Fund has numerous spread of investments which minimises risk to some extent. Again it depends on your age. After 60 you should start to minimise risk.
Did you close a SMSF?
If I buy the property, how long before I can sell it?
Oh god clearly the index ETF.
Property is only good because of leverage.
But that leverage on a $1M deposit would be pretty sweet
Deposit don’t mean diddly though if they ain’t got the income from another job to service the loan.
@hobo123
Think I answered your question here. That info isn’t in their post, but a couple of solid 400-500k houses with a 70% LVR totalling $1.5 million in loans is going to get approved easier than a single house with a $1.5 million dollar loan if we are talking apples to apples, unless OP has enough of a salary to service the loans.
More expensive properties tend to have lower yields and there is more risk of 1/1 property being untenanted. No rent on 1/1 properties definitely sucks more than no rent on 1/4 properties.
Again this is all hypothetical. OP has provided zero info on their salary, other income sources. I am just giving general info and that is, 1 house rented out that is fully paid off is worse than 4-5 that aren’t, if you invested the same amount of capital in the beginning.
The risk profile increases substantially. The asset is illiquid and requires a ton of time and paperwork.
It's an Australian obsession and I'm in total awe at how long this continues to go on for. I am grateful though to rent multi million dollar properties for 2% gross yield while I accumulate wealth much faster than any real estate investment ever would, for less risk, less work, liquidity and no leverage.
I would pinch myself, causing me to wake up again, out of the dream. Then I'd see that my bank account is really in overdraft.