Strategy: Selling Property on Retirement to buy shares

May take you a while to sell that many Sash

 

Yeah 1 a year about 30 years could be dead by then.....2 a year 15 years......

 

Ain't that the truth.

PS: Blame @Redwing for the current infatuation on images.

 

Hi austing. Would you invest differently if you had a chance and were to start today? E.g. invest in shares only, no property?

As mentioned above, one of the features of property investing is that one can use leverage (although also possible with shares I see the risks with margin loans as much higher). Doesn't it make sense to use the leverage in property in the accumulation phase and then transition into shares once there are some CGs?

 

Oh my God, knowing what I do now it would be dividend focused shares / listed funds ONLY right from the beginning. That is, as soon as I started earning an employment income or before if given money.

Then it would be eventually owing a PPOR if settled in the one place and using Dividend Recycling (at the right time) against the PPOR like the following:

Source: Peter Thornhill (Motivated Money)

Property investors will typically use the greater leverage argument. But you have to ask yourself in the case of Industrial shares with its generally much higher income than property compounding over a long period, is the risky high level of leverage needed? High leverage is not a guaranteed way to wealth, the risks are much higher than what most are led to believe.

The following chart shows the magnificent compound growth of Industrial shares. Note that franking credits are NOT included which way understates the growth:


I personally don't believe that high leverage is needed when investing in Industrial Shares. But leverage can be very advantageous in times of gloom such as during market crashes in purchasing future income streams at bargain basement prices.

My preference for leverage is conservative use of the equity in one's home. Alternatively Margin lending used sensibly and very conservatively is another option.

Of course the above is based on conservative investing over the longer term. There are some who have taken on high leverage using aggressive strategies with property and / or shares and have done exceedingly well in shorter time frames. But there are plenty of others who have gotten into a terrible mess.

Probably best I don't say anymore as this thread is outside the "Other Assets" section of the forum. To say I'm seriously outnumbered here on a property forum would be an understatement. Time to retreat back to the safety of "Other Assets" territory.

Not liscenced to give advice, personal view only.

 

I would love to see a comparision, using historical data, that compares leveraging into property compared to unleveraged share investing. It hasn't been done as far as I know.

 

I'm not suggesting no leverage, just conservative use if it. I shudder at the leverage a number of property investors use at times.

Importantly when comparisons are done they're often against an inferior index being the All Ords. Look at the chart again when comparing Industrials vs All Ords vs Resources. There's a huge difference:

 

We've had a couple of properties with good CG have problems renting as they are older properties needing repair or renovation, with CG buoyed by the overall market

 

@kierank, may I suggest you spend $410 odd dollars and get yourself to a 1 day Peter Thornhill class? It will pay off handsomely for you....

 

Ever since I was a kid reading comics I really loved the image of Scooge diving into his money (and aspires to doing the same).

 

Oh if you insist.

Yeh I did that for a while - investing in an index fund.
After 10 years the index fund had moved less that inflation, so it would have been better to put my money into a bank where at least I did not lose value (never mind the loss of making even a modest profit).
Shares are nice in theory, but in practice, how much can you afford to lose once you have retired and can not recoup the losses?
I would say not much.

You sure could!
If you could predict the future and know that you are in a dip instead of a correction.
Luckily we can all predict the future.

Don't ya just love how easy shares are? I know I do.

Why is it so often when people talk about shares, they say "you could lose everything but blah blah blah it somehow is no problem so just ignore this point", and then continue as though they have covered the point well enough to make it not seem such an enormous deal?

 

Shares are certainly risky and not for everyone.

 

Did you buy the index fund for CG or income? What was your criteria for choosing that index fund?

 

Which fund @Anthony Brew

 

Probably Babcock & Brown.

 

Which index fund was that? I am asking because I was thinking about investing in either one of the Vanguard ETF index funds or iShares.

 

How come @Terry_w ? That will trigger a CGT event and potentially a huge tax bill.

 

Transfer of shares will result in a CGT event.

 

Maybe Terry is differentiating between Stamp Duty and profit (CGT) payable, although I didn't think stamp duty was ever payable on purchase/sale of shares?

 

I think that quote of mine referred to me saying getting the ownership structure right with shares wasn't as vital as getting it right with property. This is because of stamp duty and the lumpiness of property and the fact that property is usually mortgaged.

Any change of ownership of shares can result in CGT though, so getting the structure wrong is not great, however this can be more easily managed by selling small parcels and other strategies than it could be with property.