Is my financial planner giving me good advice?

As a local (read biased but local knowledge), there's not much being built/coming out of the ground or nearing completion. Vacancies have peaked and will be decreasing as supply dries up (rents should follow).

The area is well situated with good transport links and close to white collar jobs, uni etc.

It's a hold from me.

As for Burwood, what will it take to get it into a state that it'll get true market rent?

I like the diversification across the east coast so would be considering losing a Qld property.

 

I'm wondering what super your FP is recommending ... I'm not getting the feeling this is unbiased advice, getting you to put money into a product and I'm thinking there is something in that for him/her in comparison to staying in property.
(Having said that - the return has probably been better in super ...)

 

of course there is no right or wrong. However, if you want less stress in life mitigate your cash flow.

So if you are freeing up cash flow and reducing debt and reinvesting in super or shares outside of super not a bad move, you will still increase wealth.

current environment is tricky as those Interest only loans revert to P&I, thats 40% increase on repayments per property

Its difficult to retire on rents from property, need to be strategic and diversify or trade property.

building a property portfolio is the easy part its how you turn it into income streams is what really counts
Dont let debt rule your life

just my 2 cents worth.

 

When you say this, is this “retirement fund” for income or growth?

I need to know this before I can make any comments.

 

I currently get $200/week for the run down property (Dandenong), I could probably fix it up for maybe $10K at the least, but then the most I could probably get for it is $400/week if I'm lucky so not sure if it is worth the effort and the difficulty being in Melbourne when I'm up in Brisbane? The block is almost 700 square metres and I always thought I might put some units on it one day but my lending is currently maxed out with the banks so not sure if it will be ever possible

 

Good question! I hadn't really though that much into it. I guess what I mean by retirement fund is I would like to have a reasonable income coming in when I retire so I don't need to rely on the pension, as well as having a bit banked away for extra spendings

 

Good point, my FP has me in Asgard which has done really well the last few years, definitely better returns than property, I always thought that I don't mind if there's something in it for them when I'm seeing the benefits myself as well, but like you say I should keep that in mind when hearing their advice

 

Hi Terry you've lost me a bit sorry, by main residence do you mean main investment property or PPOR? And if you mean PPOR how do I have that as deductible debt at owner occ rates?

 

TBBH, you need to give this a lot more thought and it shouldn’t be something that you are ”guessing”.

To be successful at investing, you need to have clear focus, a well-understood strategy, a clearly defined plan that you adhere to ...

Otherwise, you will end up with a whole of investments that don’t meet your needs.

Typically property is really crappy for generating net after tax income BUT great for growth and it takes a long time for compounding to weave its magic.

I will give you a personal example. We bought our first IP in 1992 in Brisbane for $125,000. It was renting for $165pw. Gross yield 6.9%

Today, 28 years later, it is valued at $620,000 and rents for $450pw. Gross yield 3.8%

We are in retirement and we couldn’t survive on a property portfolio like that.

I am not saying that you should sell any properties. My gut feel is that you shouldn’t.

What I believe you need is a plan to get you from where you are now to where you want to be in retirement.

As they say in the movies,

“if you don’t know where you are going, any road will get you there”​

But when you get there, it may not be where you want to be.

The good news is that you have time on your side ...

 

As far as I understand financial planners are only qualified to give advice for stocks, so they will always recommend to sell down property and invest in shares.

If you can manage to hold your portfolio for the rest of this cycle and then possibly look at selling down one or two properties to pay off debt I think that will put you WAYYY ahead of what this FP is suggesting.

My opinion only, but we have just started the next mortgage cycle which has a solid 24-36 months more of growth in it, property gives you low risk leverage unlike shares. I think you got into this position because you have done your research and built an epic asset base, why change your strategy now to something that doesn't make sense?

P.s. Ask your FP how many investment properties he has and what he invests in.

 

Main residence is exempt from CGT if it meets all the requirements - generally it is the place you live in.

Security for a loan doesn't determine deductibility of interest. You can borrow to invest at owner occupied rates.

Have a read of some of my strategies tips

 

There is no basis for this understanding. Financial advisors can give advice in many areas and this includes property. They will certainly not always recommend people selling down property to invest in shares.

It is irrelevant how many properties a financial planner owns. If they owned 40 would it change the value of their advice?

 

For me it would change the value of their advice for sure, I wouldn't want to buy a car from somebody who sells white goods. People will always be biased towards their preferred investments like anything else.

"6. Financial planners — While financial planners are licensed to sell financial products, most are not able to advise on real estate.

Not only because they lack a sound understanding of property, but the company they work for doesn’t allow them to. Those who do recommend property usually have a biased view as they make commissions based on the investments they sell from their “stock list.”" - How to Choose a Property Advisor

It's a service for money, not necessarily for the clients best interests. This has been proven many times during the Royal Commission. - https://fpa.com.au/wp-content/uploads/2019/03/FPA-Royal-Commission-Wrap-25-Feb.pdf

 

You will have to come up with something more authoritative than that!

What a load of crap that quote is. Look at the qualifications of the person who wrote it.

'the company they work for doesn't allow them' - yes some authorised reps do have AFSL licensee which do not allow them to advise on property. But certainly not all. There are many advisors reading this forum that are allowed.

they make commissions based on the investments they sell from their “stock list.”"
This certainly happens, but it is not restricted to licensed advisers. AFSL holders are regulated by ASIC and the corporations act so it would be very unlikely for them to be receiving kickbacks these days. Non-regulated advisers have virtually no restrictions.

Service for money = What else is there? Service for non money - this would mean the adviser getting kick backs.

 

Would you buy a Toyota from someone that drives a VW? Would you care if they owned 1 VW or 10?

 

As long as today’s dog doesn’t become tomorrow’s beauty queen.

The property I posted about earlier in this thread did noting for the first 8 years. Our advisor told us we bought a “lemon” and we should get rid of it. We didn’t.

Today that “lemon” is making beautiful lemonade.