Strategies for growing portfolio

Hey all,
Im new to the forum and i appreciate your input and interest in this thread. Im 17 turning 18 in a few months and was wondering what actions i should take. A relative of mine has left me a 1.8 million dollar home, im not sire on what action to take to grow my portfolio. Any suggestions?

-Thanks Jake

 

Wow! That's an amazing start. My suggestion is to read, read, read, as much as you can before you do ANYTHING.

 

Welcome!
You have been given an amazing starting opportunity and are miles ahead of where most people would be even at 28 or even 38 let alone 18 so I would say you do not need to rush in to any decisions at all. Make sure you do your research and pay for any help necessary to stay in such a strong position

 

Sell it and put it all in Bitcoin
But seriously, get some financial advice.

 

what do you want to do?

 

What are your goals? That's the most important question that needs to be answered and it's something that only you can do.
You might not well have the answer to this yet, so have a good long think about it. Where do you want to be in 20 or 30 years?

Just make sure you don't waste this opportunity, but it sounds like you're on a good path posting on here.
Given how young you are (I'm more than twice your age and don't have the same networth yet), be careful, and don't automatically trust anyone's advice, try and assess whether you think it makes sense to you.

It might not be a bad idea to keep this somewhat under wraps and not tell everyone about it.
Some of your friends might otherwise want to convince you to sell up and splash some of that cash around. You could do that, or you could use this to set yourself up for life.

Might be worthwhile asking on here if anyone has a recommendation of a financial planner that might be good in this situation. Usually, I'm not a huge fan of financial planners, but I think in this scenario, I can see the value in it!

 

Is it currently rented out? If not, you might want to do so (unless you live in it yourself, but even then, you might want to get flatmates). Ask for a recommendation for a good Property Manager (PM) on here for the area that it's in. A PM is one of the most important professionals in your team and their quality makes a huge difference.

 

As others have said you need to read. Books like bogleheads guide to investing, random walk down wall street. After doing some reading, you need to clearly articulate on paper what you want (not money, lifestyle things like travel, education, setting up future dependants etc). Then calculate what that costs along with your living expenses. Now you have a $ end goal to be completely financially independent.

I recommend reading Passive Investing Australia end to end - it's a great resource, along with this forum.

For context $1.8m invested in a mix of equities (say 70%) and defensive (say 30% cash or bonds) allows you to draw down $54,000 per year in perpetuity, adjusted for inflation over time and assuming a conservative 3% annual withdrawal.

 

While that's probably true, I'd say it's probably also not what he should be doing (I'm not saying you implied he should, but merely gave an example).

What I personally would do in this situation is the lazy option: Borrow $1.5M against the property, then borrow another $1.7M and buy a $3M commercial investment property. That should be cashflow neutral or thereabouts.
Then ignore this for the next 20 years, pay down the principal, get a job in a field I'd enjoy and then, boom, when I'm my current age, I'd be able to refinance both loans to 30 year mortgages. This would give me a nice passive income stream that's larger than my current salary.

That's obviously not a recommendation though and likely wouldn't suit most people.

 

Nice idea, if one could afford to borrow that much

 

Yeah @spludgey if the OP sees kids in his future, then he might focus on building a career in an area that is highly satisfying to him, let the nest egg grow (10 years growth on that and he'll be absolutely rolling in it). Commercial IP though, isn't that a bit OTT for a teenager? I thought commercial IP came with a lot more volatility and vacancy. Unless you mean a commercial REIT?

ETF's are pretty simple to grapple, so it's not hard to steer a newbie to the likes of VAS and VGS for instant low cost global diversification.

 

Hey Terry,
Thanks for the response. My goal in the future is to generate 6 figures passively so that I can focus on other goals. I would like in the future to create a building company and hopefully the income generated cpuld help me get off the ground
-Thanks Jake

 

Hey,
Unfortunately its not being rented out. Its located in south melbourne but im unsure on which property managers around the area are reliable any recommendations? Im also in seek for a mentor but not sure where to find one
- thanks for your response

 

None of mine are in VIC, so I can't help, sorry. But others on here might, plus there's almost definitely threads asking for recommendations in that area on here somewhere.

It's great that you're eager to learn. My one recommendation in relation to mentorship is that I don't think a mentee should ever pay for one (other than paying for dinner/coffee beers). Now I do realise that this makes it very hard to find one and I was extremely lucky that one of my mum's best friends was into investing and was constantly talking to me about this boring real estate crap , but paying for a mentor means that you're often paying someone that just wants to be paid and might not even have the relevant experience.

Another recommendation before lunch: Stay clear of OTP properties!

 

I am 100% with you about the mentor dilemma! I would love to have someone who isn't necessarily an expert but is similar minded and a few steps ahead of me so I could ask questions and just chat about finances and property with because I don't want to talk to my friends about it and come off as bragging or anything plus none of them seem to have the same interest.

This forum collectively works pretty well as a mentor but I think having someone who I physically caught up with would be amazing.

From reading historical posts there have been catch ups in various cities before which haven't happened for a while for obvious reasons but they may start up again in the next few months and I definitely planning on going to one so that may be a good chance for you to speak to some people well versed in the world of finance and property

 

what sort of rent could you get?
Do you want to live in it?
Was it the main residence of the deceased at the time of their death?

 

It could get me around 42k gross. Im nit interested in living in it because of the amout of income it could produce. She wasnt in the residence

 

You shouldn't do anything but protect this asset.

 

This income is not enough to meet your passive income needs but it is 42% of 6 figures.

If you sold the property the cost base would likely be the cost base of the deceased which would be about the purchase price originally - unless pre1985.
So selling it could be costly.

You might be able to borrow against it and start investing though.

 

@Lil Skater is an experienced Property Manager & services Melbourne. Have a talk to her.