Starting with $3,900,000 - what would you do?

What would you do if you were beginning your property-investment journey with $3,900,000 in cash and shares? This is the situation that my partner and I are extremely fortunate to be in, and we need your advice on how to get started right in property investment.

I'm 37 years old and recently moved from the USA, and she's 35 and Australian. We have no children. We live together in Melbourne in a rented terrace house at $740 per week.

Our financial position is as follows;

Me:

• Assets:
  • Cash:
    • USD 110,228 (approximately AUD 152,280)
    • AUD 34,239
      • Total AUD value = 186,519
  • Shares (held in a US account):
    • USD 2,476,410 (approximate AUD value = 3,421,164)
      • Note: these shares have had a capital gain of USD 1,333,754 (AUD 1,842,583)
  • TOTAL AUD VALUE = 3,507,683

• Physical assets: None, except for my car. We rent our current home.
• Debt: None
• Earned income: AUD 45,000

Her:

• Assets:
  • Cash: AUD 296,000

• Physical assets: None
• Debt: None
• Earned income: AUD 65,000

TOTALS:

• Cash: USD 110,228 + AUD 330,229 = AUD 482,509
• Shares: USD 2,476,410 = AUD 3,421,164)
• GRAND TOTAL = AUD 3,903,673

******

Though we've successfully saved our earning and invested in shares over the years, we don't own any property - neither a home nor investment property - and have little idea how to begin, but we want do things right from the start. Measure twice, cut once...

So, if you were in our position how would you start, and why?

Thanks in advance for your help.

Best,
FFTB

 

Well that is an unusual starting point! I am sure the curiosity posts about how you got there will flow, but the very first question to ask is what do you want?
If the money was generated from share trading, and you are that good, I would say keep going. If you really want to diversify of course property offers you that, but at the cost of having assets that require work and are not as passive.

 

Further there is a recent post on Defining a Strategy where I and Rix plus a few others made some points about setting a plan and moving forward from there.

Defining a strategy

 

The first question is always what is the end goal? For many, your current asset base + a paid off home is the goal

 

Nothing to add advice wise really from me... I'll just say that is an amazing position to be in... you could do anything...
Even stick to what you know or stay conservative and you'd be fine...

But if you want to grow it.... hmmm.... buy a solid, well located house in each state and territories (but not Darwin or Perth right now).
Note, I do not advise on shares due to my lack of knowledge on it, but that obviously could be a way to go too.

And also note, I am not a financial advisor and you must do your own due diligence.

 

Are the shares paying dividends? If so, one valid answer may in fact be to do nothing.

What is it you'd like to do?

 

Geez - nice position. Your biggest problem is probably going to be tax (which is a nice position to be in).

If you were non-resident previously the date your became permanent resident is consdired to be the date of purchase for CGT. So if you have only recently become resident the CG may be a less (hence less tax if you sell). Proffesional advice is required.

If it was me, I would use the cash and sell down a few shares to by the house I want. Then go with @DT's advice and do nothing. I would quite my job, and travel around Australia for a while.

Given the tax position I might look to leverage into a couple properties (NRAS?) and let my taxes pay for the property. I would hold a very conservative position, and live off dividends and rent while I traveled, studied and volunteered. I might do the odd day of work that interested me.

In the mean time I would educate everyone on PC how they too can generate $3mil in liquid assets with no debt.

But that is just me.

Blacky

 

As mentioned, do nothing. Retire.....to the lounge via the fridge to grab a beer, sit down and watch some telly.

 

There are advantages to holding assets in both countries.

From what you have described, you have sufficient cash savings to use towards a deposit for both your own family home as well as investment property.

I agree with Blacky. You need to weigh up the benefits of cashing out on stocks vs your tax implications in both Australia and the US.........as well as transferring USD into Australia vs the benefits of leaving it in the US and buying your investment properties there.

I disagree with popular opinion - do nothing. Seek advice from both a tax attorney and financial adviser in both countries. My biggest concern would be diversification.......and investing/holding the majority of your financial wealth in one asset class (ie stocks)

 

I should clarify... by "do nothing" I meant "have no J.O.B". Make yourself a 'funds manager'.
That is your 'full time job' should be looking after your fortune and yourself and your family (not in that order).

Blacky

 

That's an awesome place to be in. Considered buying a home (PPOR)? Then taking equity out for subsequent purchases?

Given your incomes - if I read correctly - you may not be able to leverage as much given the recent tightening in lending.

Though to give you an idea, even if you put in $1.8m in your PPOR and didn't take the equity out, and used the remaining $2.1m for investing, at 20% deposits + 4.5% purchasing costs, you could buy up to $8,500,000 in real estate (approximate). This would of course come down to your loan servicing.

It would also come down to the rental return on the properties. You don't want too much negative cashflow on these as it won't be sustainable.

Alternatively, you could continue renting and permitting servicing at 70% LVR, purchase ~ $11m in real estate. Though it may not be so wise to put all your eggs in one basket given the position you are in.

I would speak to an accountant specialising in property and a mortgage broker who can look at the big picture and your goals to structure well upfront.

Good luck.

 

wow $3.9m,

I can call you Dad anytime

 

LOL....stop showing off, and please, don't say your another one who wants some ridiculous amount of resi property.

 

With that sort of position don't waste your time on resi property

 

Blacky, I work part-time with an elderly couple in San Antonio - assisting them manage their personal fortune and life in general.

Managing their complex LLC structure and diversified investment portfolio is a huge undertaking.

I agree with you. That is a full-time job for @Fortune Favors the Bold .....plus a full-time job of others as well.

My point being, the starting point has to be getting a good support team of tax and financial advisers to ensure that your fortune is protected and continues to grow. It has to be balanced approach.......because the tax system is so different in the two countries.

While in Australia, there is no tax benefit to servicing a home mortgage for example (as there is in the US).......it's equity can be used to fund other investment opportunities. So, there is an advantage of buying their personal home outright........while still leaving the majority of their assets in the US with minimal tax implication.

But being a resident of both countries exposes you to tax in both countries unless you set yourself correctly with the right investment vehicle.......hence the need for a good advisory team to support whatever @Fortune Favors the Bold decides to do.

 

I would look at USA properties, commercial and residential.

 

why do that to someone you don't know. why suspect the worse.......when there is absolutely no reason or financial benefit to boasting about personal circumstances. this isn't a dating website. we have nothing to benefit from each other - other than learning from others opinions and experiences.

 

Very few on here have @ $4million in net assets so for those offering you opinions, it might be more appropriate that you should be telling them how to invest, rather than asking their advice

Really though, it sounds like your strategy with shares has delivered superb results to date, so sticking with what has worked for you may be the best advice

If you really do want property - a PPOR here should be purchased using your cash and funds from selling off some shares to pay for it outright

Then, if you also really want INV properties, you can then use the equity from your cash bought, unencumbered PPOR to get started on that side of things.

This would allow you to grow your footprint /diversify your position using the most tax effective strategy , while having the minimal impact on your large share portfolio.

 

FF the Brave, give it to me and I'll do nothing for ya. I'll return it in five years. Hopefully intact.lol

 

Gift it to someone on this forum