How best to use $350k cash

Discussion in 'Financial Planning' started by umbro2, 14th May, 2019.

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  1. umbro2

    umbro2 Member

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    I am an amateur property investor and recently cashed in $350k cash. Any advice on how best to use it to achieve financial freedom?

    Im currently 38yrs old and am in a full time role earning average salary. I have just gone back into the work force from being full time stay at home mum but am interested in having freedom and flexibility of potentially being my own boss again and grow a portfolio to leave for my children.

    Any advice would be much appreciated.
     
  2. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Impossible to answer as its financial advice and also nobody knows a single thing about you etc $350K is unlikely to achieve financial freedom. Your risk profile may mean you want to go red/black or may like absolute security.
     
  3. datto

    datto Well-Known Member

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    350K cash. That's a bit of coin.
     
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  4. Shady

    Shady Well-Known Member

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    Cant advise how best to use it but two things I wouldn't do is 1) waste it on shiny things and 2) leave it in the bank. Doing nothing is not far off wasting it on shiny things ;)
     
  5. euro73

    euro73 Well-Known Member Business Member

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    Do you have a PPOR? spouse? Kids? Other properties ? Other debts?
     
  6. umbro2

    umbro2 Member

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    No PPOR, was hoping to use bit of that as deposit for PPOR. Am married with two primary aged school children. Have one other investment property shared with siblings, have agreed to sell it towards end of this yr as it's too difficult to manage overseas investment property and no debt.

    I suppose what my question really is, what would you do in my circumstance? For many average people I'm considered to have a slight advantage already. It may not be a huge amount but at least it's something.
     
  7. euro73

    euro73 Well-Known Member Business Member

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    I think the first decision you and your partner need to make is whether you want a PPOR or whether you would be satisfied renting and investing the money elsewhere.

    If you want a PPOR, the 350K represents a really healthy deposit . Obviously though, if you buy a PPOR, you'll be carrying non income producing non deductible debt and while that's wonderful for stability for your family, it has a negative impact on borrowing capacity

    If you are happy to keep renting, then the 350K represents really healthy deposits on 2 or 3 INV properties, and you'd have some advantages with borrowing capacity

    1. you'd be paying rent rather than a PPOR mortgage - rent is not sensitised on a calculator. PPOR mortgage will be

    2. You'd be generating rental income which aids borrowing capacity when compared to buying a PPOR where no rental income exists

    3. you'd be generating some interest add backs/neg gearing addbacks which aids borrowing capacity when compared to a PPOR where no addbacks exist

    In very simple terms, you can very likely borrow more money to invest if you do NOT purchase a PPOR. But while INV properties are mathematical decisions, a PPOR is not a mathematical decision, so its not that simple.

    So we come full circle to.... I think the first decision you and your partner need to make is whether you want a PPOR or whether you would be satisfied renting and investing the money elsewhere.

    For me personally, owning a PPOR for myself and my family is priority #1. Whatever else goes right or wrong in life, I have a roof over their heads and mine.

    However, if you decide to rent and put the money to work instead ... subject to borrowing capacity, you may be able to do quite a bit , and quite aggressively .... especially if you focus on cash cows and paying them down within 15 years. If for example you could get into 3 cash cows where you contributed @ 110-115 K of cash towards each, and paid them off within 15 years , then you'd have those income streams at your disposal in 15 years time.... which is what you have said your goal is.

    BUT... that means going without a PPOR

    So again.....we come full circle to.... I think the first decision you and your partner need to make is whether you want a PPOR or whether you would be satisfied renting and investing the money elsewhere.
     
    Last edited: 16th May, 2019
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  8. Trainee

    Trainee Well-Known Member

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    Op, investing should be done as a family. Or at least one person does it and the other knows what the person is doing.

    Think of the goal first. $x by age y. That tells you how much assets you need. Then work backwards. Some of it will be working out how your goals are different. Is some asset class off limits? Eg someone doesnt like shares. Or cheap property. Or whatever. You both need to agree on a plan. Which may be only one person makes the investment decisions.
     
  9. Shogun

    Shogun Well-Known Member

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  10. Jess Peletier

    Jess Peletier Mortgage Broker & Finance Strategy, Aus Wide! Business Member

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    I think she IS the wife. ;)

    Planning is going to be a major factor in this kind of decision-making. There's emotional and financial considerations to think about, and what we would do may not be the right thing for you and your family. :)

    But - for me?

    I'd buy an acceptable but not amazing PPOR with a 20% deposit, chuck the remaining cash in an offset, and renovate the property. I'd then debt recycle the left over cash into the property to reduce the non-deductible debt and have a 100% lend on any investment purchases, whether they be property or shares. I'd also access any equity manufactured by the reno to use a further deposits/investment purchases to gather enough assets to help me retire/be financially free when I want to be. :)
     
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  11. euro73

    euro73 Well-Known Member Business Member

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    This is what I would do too - but the effectiveness will / may be limited by borrowing capacity . Ie Taking on PPOR debt may not allow for the other stuff ...: So consult a broker and find out what both options look like , borrowing capacity wise ...
     
  12. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    You are asking a question that shouldnt be asked.

    You are asking unlicensed people to give you financial advice on a public forum. All replies are contrary to law and its akin to seeking instructions on how to perform surgery and thinking that the best sounding reply will solve your problem.

    If your primary concern is a home then seek broker guidance on borrowing capacity and servicing and they may indicate some strategies to use a offset so the cash reduces interest but is capable of being drawn for other uses etc. Alternatively they may indicate a lesser borrowing. Depends on your risk aversion too. I know people whose sole ambition is to clear all debt on their home and they dont care about a offset.

    Credit advice first may help narrow your further questions that may then need financial advice.
     
  13. umbro2

    umbro2 Member

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    Hi Jess, thanks for your reply. Yes I'm the wife . Unfortunately although my husband is a really talented guy, his career so far has been a grime one. His parents had the traditional mindset that if you study hard at school, you will get a well paid job and you'll be set for life. Unfortunately he's gone through 4 redundancy and is currently contracting. With no certainty of extension. Good news though, is he has finally woken up and am working on sonesomet which hopefully will turn into some. I myself come from a family with business background and always knew 9-5 is not the answer. But with 2 young children and limited energy was hard to get anything started.

    Any advise/knowledge that anyone give here is food for thought for me in my opinion so I don't see any previous comments made by other members can be made lawfully liable. My purpose is just to pick people's brain in the hope I can better educate myself.

    Jess, or any others reading. What do you think of this scenario?
    Down approx $100k-150k for a humble PPOR.
    Than invest $100-$150k for 1 investment property.
    The remaining amount $100k use to buy a small existing business, obviously I can only borrow certain amount.

    My question is, is this scenario doable? Kill 3 birds with 1 stone. Can I utilise the equity which I have downed already for PPOR and investment property towards the business?

    Many thanks for those who take their time to give constructive feedback. No I'm not planning to buy blings although that would be nice.
     
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  14. umbro2

    umbro2 Member

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    Thanks for your comment. Just let you know I have been listening to all your podcast on my way home to and from work. Will be listening to #12 today :).
    I must thank you as it has started that spark in me again which I have lost. So with both kids in school now, it's time for me to roll my sleeves up again.
     
  15. umbro2

    umbro2 Member

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    Anyone know where I can get a copy of my credit score?
     
  16. Jess Peletier

    Jess Peletier Mortgage Broker & Finance Strategy, Aus Wide! Business Member

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    I'd love to have a chat with you about this - there's a better way to go about it but it's a bit complex to go into on a forum and would be best to relate it directly to your plans. What you can do is also going to depend on your borrowing capacity to a large extent. :)

    You can get a free copy of your credit score here - Can I get a free copy of my credit report? | My Credit File
     
  17. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    I think that is a bad way to do it. If you really wanted to do that, and I am not suggesting you should, would be to structure things so that you could claim the interest on the $100k used for investment and $100k for the business - doing right could result in an extra $10k per year in deductions plus potentially allow you to claim a capital loss of $100k or more if the business fails.
     

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