Strategy: Selling Property on Retirement to buy shares

Discussion in 'Investment Strategy' started by Terry_w, 14th Sep, 2016.

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  1. ttn

    ttn Well-Known Member

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    Thank-you for this topic. Could be my sweet spot.

    Can I have a link to read in regards to superannuation tax in retirement plz? It might help with my strategy on allocation of investing on shares/property/etc...

    I am confused with 15% tax, 30% tax and tax free bits about super in pension mode. At the moment I know that we are liable to pay 15% on our super contribution up to $30K limit including employer contribution. Proposed super changes by the govt in the pre and post election not yet affecting us but better to plan now
     
  2. Blueskies

    Blueskies Well-Known Member

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    They are still up 400% since the GFC so not doing too bad. Kicking myself for selling these a couple of years ago. That aside Heather Bresch is still a great example of someone born into the charmed 1% of America though, even before the epipen pricing issues everything I have heard about the woman is disgraceful.

    Agree with the rest of your post though, I think if you are going to pick individual stocks you do need to regularly review them and have a clear plan for what scenarios you will buy, sell and hold. More and more I can see the benefits of ETFs etc.
     
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  3. RetireRich101

    RetireRich101 Well-Known Member

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    in this specific example, isn't it better in property as the yield from GF is 2.3 times better than shares to justify any toilets or land tax that may need to deal with in a property.

    also I think adding a GF at the back of your ppor or IP, adds nil or very minimal land tax ;)
     
  4. The Falcon

    The Falcon Well-Known Member

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    I think prop investors need to think very carefully before doing this. Much easier to balls up with liquid assets with daily quoted prices and huge noise and opinion.
     
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  5. Terry_w

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

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    Hi Dean

    I don't think shares need to be actively monitored if you are a buy and hold person. I don't monitor mine - but keep peeking every now and then out of curiosity.

    But when buying you will need to assess whether it is better to buy now or wait for a dip.
     
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  6. Ed Barton

    Ed Barton Well-Known Member

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    I probably spend more time managing my property investments (all managed by a PM) than I do my share investments.

    I can't remember the last time BHP called to tell me a tenant had done a runner, the dunny is blocked and the AC broken.

    Also, a bigger dollar value share portfolio doesn't tend to increase the work of managing it. You tend to have the same number of stocks in it, just more zeros on the end. As your residential property portfolio grows you have more leases/toilets/ovens/ac/heating etc that require your time.
     
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  7. Dean Collins

    Dean Collins Well-Known Member

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    Agree with you there.......it is part of share management that you can just pile into the same 10-20 shares over and over again as more cash is available to invest, though same could be said for property eg buy more expensive properties rather than 5 cheap houses where tenants do runners....
     
  8. Hosko

    Hosko Well-Known Member

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    Yes, I'm one of the people left in this world who still use a full service broker. To me it's similar to using a PM. They do the heavy lifting through all the information but at the end of the day it is still my decision where to put the hard earned and it is something that sits comfortably with me even if some of the choices turn out to be duds
     
  9. Joynz

    Joynz Well-Known Member

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    Such a short memory!

    Not every investment that tanks is due to people being greedy or stupid.

    For example, my industry super fund (responsibly run) took a hit In the GFC like others did. Most of the fund's investment options were hit badly.

    It has come back now, but those about to retire would have been badly affected, even if they were in the balanced fund streams.
     
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  10. MTR

    MTR Well-Known Member

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    My g/friends partner is a full time trader, has had great success at this game, I tried it and did not work for me.
    I suck at share market trading, so decided I will stick to what I know that will make me money.
     
  11. Terry_w

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

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    But dividends didn't drop as much as the capital so if someone was retired and able to hang on to their portfolio it would only have been a few years of lower incomes. This is why you need to build in a buffer, and plan for huge drops in value every 7 years or so.
     
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  12. The Falcon

    The Falcon Well-Known Member

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    Ed is right. The GFC destroyed people in heavily leveraged REITs and structured products, those that had to eat their capital due to lack of cash buffer (selling stock at low prices to fund income requirements), those that played around with margin with no idea and all those that panicked selling stock at lows because they subscribed to the hype and believed that the sky was falling.

    All of this is why I no longer advocate for Joe punter to invest in stocks. They have no idea and its far safer for them to hang on to less liquid assets like unlisted property. Unless someone has a real interest and temperament they should stay away imho.
     
  13. wombat777

    wombat777 Well-Known Member

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    My main gripe is all the obscure services that manage each holding. Computershare, linkmarketservices, boardroom, etc, etc.

    Some of them have quite terrible management interfaces. Makes it time consuming to access all the holding / dividend documentation.
     
  14. truong

    truong Well-Known Member

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    We did that years ago when we decided it was about time we retired. Pretty happy about it, although at first we were a bit apprehensive because property had been our mainstay and we didn’t know much about shares. So we took it slowly and only sold half of our IPs over several years. Proceeds went into our SMSF to buy LIC shares.

    Peter Costello did lend us a helpful hand when he made super retirement income tax free and allowed people to make $1 million contributions into their super (double for a couple). This meant we were able to convert property income that was taxable into tax free income from shares held in super. Add to that the better yields and the franking credits and it was literally manna from heaven!

    We’re currently getting income from both property and shares. Shortly however the remaining IPs will probably be sold. They were newish at the time of our retirement but are now starting to need major repairs. They’ll have to go as we no longer have the energy for this sort of worry now that we’re on the move several months every year.
    Fully agree with you here as I'm using the same income stream strategy. After going through the GFC virtually unscathed I now feel even more positive about it. LIC prices did plunge but their dividends only dropped slightly. It was scary to see disaster strike all around us but as long as the income was coming in and we had a good buffer we were feeling fine.

    There’s a bit of misconception, I think, about volatility of shares vs property. I’ve posted somewhere a research showing that while the volatility (in income and capital) of individual IPs is lower than individual shares, it’s pretty similar to that of a share index (or a LIC afaiac). Property investors typically own individual IPs with unique characteristics, not housing indexes, therefore they shouldn’t be lulled by the stability of Australian housing indexes.

    A case in point: the cut in dividend that my LICs experienced during the GFC catastrophe was in percentage smaller than the cut in income I got when one of my IPs was trashed by a tenant. Trashings, I believe, are more commonplace than GFCs!:)
    True. However many property investors, if they’re still highly leveraged when they retire, will find themselves forced to deleverage in order to improve their paltry cash flow.

    As for me, I’m presently content with keeping pace with inflation rather than aggressively pursuing growth. If I can achieve that I’ll still have all my assets intact by the time I die. What more can I ask for?
     
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  15. Terry_w

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

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    That is the ideal - living a good life and spending less than you consume so you can leave something to others.
     
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  16. kierank

    kierank Well-Known Member

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    IMHO, as one approaches retirement, one should have more and more money in cash investments.

    While it might mean that your CG might be lower, it also means that you don't have to sell assets at a fire sale or delay your retirement.

    I am retired and we keep at least 3 years pension payments in cash investments.
     
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  17. The Y-man

    The Y-man Moderator Staff Member

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    ...except where companies (and their money) went missing..... eg Centro :(

    The Y-man
     
  18. el caballo

    el caballo Well-Known Member

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    @The Y-man

    Will I get the opportunity this Thursday evening to discuss this topic with you?

    Cheers
    Greg
     
  19. The Y-man

    The Y-man Moderator Staff Member

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    I better reply to that thread huh? ;)

    The Y-man
     
  20. el caballo

    el caballo Well-Known Member

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    No obligation sir - but I only got about 5 seconds with you - on the way out - that night at Doncaster a few years back. :)