Home owner living in another state seeking investment advice, what next?

Hi guys,
my wife
owns property in Sydney (approx value 2 Million, 100% equity)

We rent in Victoria (due to work commitments we moved)

Income/assets

• Wife $92k gross (school teacher)
• Husband/me $110k gross (sole trader) currently claiming more than 80% of my income in deducations expanding business (i don't have too but i figure why not expand by purchasing equipment rather than pay it all in tax)
• Sydney property is rented out $45k per year
• Husband has 4 months ago started buying shares in blue chip stocks for both dividends and capital growth ($10k at present) and can maintain about $2-3k per month at current rate of purchasing.

Super

• Not much super

Debts

• Two car loans
  • $122k - 6 years to go ($457 per week)
  • $104k - 5 years to go ($420 per week) depreciation and loan payments etc claimed through my abn

no other debts

We are seeking a better financial solution/strategy

Selling wifes Sydney property is not our favoured strategy as its currently gaining in value to the tune of about $100-150k per year (very conservative estimate, real estate.com sales figures show much higher than this in the area where the property is)

By the time we pay our car loans, pay for fuel (which costs us about $500 per week), insurances, mobile phone and utilities bills etc,

• and i make all the tax claims i can, i can comfortably save about $600 per week.
• my wife manages to save about $100 per week and

A "rentvesting" sales guy (do we call then consultants?) is keen on us going down that pathway, however, given my wife already owns property that she does not live in, do we have better options?

 

age? - when do you plan to retire and and what income?

 

post updated to show this above. We are 50 years old

 

when do you want to stop working and with what income -> the strategy should be about achieving this. Like if you want to retire now you likely could and then live off the pension at 65 but thats likely not a good strategy.

 

What sort of cars have you bought -(or rather borrowed 220K to buy) ?. Have you read the Millionaire next door...
How long can you maintain the 2K putting into shares?
Why has super not been a focus? Assume you are at least putting in the max concessional amount every year?
Would you move back into he Sydney property? if not when would you sell it? Any requirements to have legacy for any children?
You have great equity position on the Sydney property so that gives you lots of options like borrowing against it to buy property or shares however with interest rates as they are and it does not look like negative gearing would be a big benefit to you.

I would be looking to see how I can maximise my super to then be able to retire off it on a tax free pension-> that would mean selling the Sydney property at the point that you can get the cash into super. Then within super you can allocate it to equities and property (shared based or direct property through a SMSF) . Assuming your wife lived in the Sydney property then she could use the downsizer contribution into super - and I believe you can also even if you dont have ownership - you must both be over 55 and have owned property for 10 years. So potentially you can put in 650K each into super. But you need to do your projections and then work out when you will have enough to live off assuming thats your strategy.

If you go down the purchasing more property outside super route you need to look at the end game and consider if you have enough runway available for it to be worthwhile. If you were in your 40s then likely you do, 50's depends on how long you want to keep working for.

 

Does that person happen to self off the plan investment properties?

Cheers

Jamie

 

I am not sure if they are selling investment properties off the plan, however, i do know that he has made the statement a number of times that they work with property developers and deal in new builds only.

The consultant has stated that they charge a one off fee for first property (about $5k i think it was) and then they get a commission from property developers on the sale. We do not know if they also get loan commissions through a finance broker (i would imagine they somehow do even though I am not aware they are themselves a registered finance broker...i haven't found any approved registrations under their business names on Gov approved registers)

Answer a couple of other questions...

Superanuation
We have stuff all Super...i have $23k and my wife about $48k (we went for years on very low income and my wife didn't work from 2004- 2015 due to us having 5 kids, 4 of whom are still dependant. youngest is 7 this year.)

Super hasn't been the focus because I am not convinced managed funds are where i wish to go...i I do not trust the idea that managers still get paid when the fund (and my super) loses ****loads of money!
I would probably go SMSF in preference if it came to that to be honest.


Age for Retirement
I have no idea what age to stop working...lets just go with 65-70 years of age. (so 15 to 20 years time). At the end of the day, we are really starting out behind the 8 ball with all of this...20 years behind where we should be right now (with the exception that we at least have a house with 100% equity)

Sell existing home
We do not want to sell Sydney property because it is increasing in value by way more than we can possibly save or obtain from investments. It has appreciated in value by $1 million in the last 10 years and most of that gain in the area has been since 2015.

We do not intend to move back into Sydney property at this stage unless my wife's job took us back there (which isn't in the plan right now)

How much can i save
I can maintain 2k per month in purchasing shares for as long as I am working right now...and quite easily. I could actually increase this amount to at least 3k if i were to be a little more efficient in my day-to-day spending and if I chase up more work ( i am not working at full capacity in my business),
I could realistically maintain $3k indefinitely if i were to be a money miser when it comes to buying lunch 2 times a day out on the road (could save $200 week no problem right there)

Answer to Cars question

2019 200 series VX landcruiser (purchased last April for $122k)

2022 Jeep Gladiator Rubicon with 15k in extras from dealer(Purchased in Nov for $115k)
Even though its currently used for my business, I would sell the Jeep if necessary to fund a better future and go back to driving my old ******* Great Wall ute.

 

Anything you can do to increase the returns on the Sydney property - renovations or a granny flat ?

Would think about a PPOR before another IP.

 

Those that are building wealth in these scenarios are usually the "advisors" and the developers - it's an unregulated market so tread very carefully. I can't believe they also charge you a flat fee of $5k and pocket the selling commission too!

Cheers

Jamie

 

The Sydney property is a 1/2 acre block it has state forest on one side and crown lands on 2 other sides and reserve on 4th side and also, no neighbours...we actually have a partially built "twin" 6m shipping container granny flat up the back (about 75% done).

We could squeeze $350-$400 per week out of that small single bedroom granny flat up the back without any problems at all (based on the rental of others in the area).

Also, the house does have a large 8x9m garage that i have clad the inside of. We could turn that into a granny flat as well, however, this would impact directly on the existing house tenants...so we arent keen on that option due to the social problems it would likely cause. We could workaround such issues via fencing and soundproofing.

Thereoretically, we could spend about 40k and increase the Sydney revenue by $700-800 per week...although to be honest, it is a bit of a pipe dream trying to fill a property with tenants and i doubt we could get council approval for more than a single granny flat given the area restrictions.

 

I would be looking at selling the cars and getting rid of those big car loans first.

 

The council process is they issue approval BEFORE work is commenced. Typically ONE granny flay may be OK. Not two. The risks of adding dual tenancies is the first tenants reporting to council. Isnt that their garage ? And...insurance etc

I would also drop the SMSF thought. The amount you have is insufficient. The ATO may decline to issue the SMSF approval as its something they do consider. If you think the managemnet fees are high try considering $2000 PLUS annually (plus initial costs) for a SMSF which would equate to 2.8% fees and I doubt your fund is costing near that. Super has proven a compounding low tax rate environmnet for most workers and losses are a present issue with markets and if you think you can outperform the pros without enhanced risk you have it wrong. Super should be part of your long term strategies.

Agree those cars and loans will hammer servicing and borrowing capacity

I would be very wary of a "consultant"who is out to earn his pay from you. They dont care if its good or bad as long as you buy. I would start with your own broker to determine what borrowing capacity you have before anything else.