Where to Start? So Many Questions!

I haven't really followed atang's posts, but I do have a (large-ish) shortlist of suburbs and type of IP/demographic/infrastructure, etc in mind.

But the interesting thing that writing out my questions has shown me is this: at the end of the day, it does boil down to whether or not you want to be "different" from the crowd. Putting down a deposit and taking a 30-year mortgage to enjoy a dream ppor is understandable by everyone. Renting out your perfectly nice ppor (which hubby and I both do love - it's very attractive, hence the CG and the CF) and then living in a rental while you buy IPs and delay (maybe indefinitely) buying the dream ppor sounds crazy to most.

It's been really great to read all the law/tax posts especially, since the details clarify the possibilities.

 

Sure. Here's what the writerly life gets you:

- Very high possibility of never selling anything, since for some reason the market just doesn't appreciate your masterpiece.
- Sleepless nights filled with stress and despair over the lack of income
- Nightmares/paranoia/minor insanity caused by research into the darker side of humanity
- Loss of social skills, due to not having to interact with other human beans
- Disbelief and impostor syndrome when you finally start selling
- People looking at you like you're nuts when you tell them what you do and/or thinking that you really just mooch off your spouse/government/parents/siblings/friends and/or that you've got some other kind "side business " going on
- Hate mail from people who didn't like what you wrote, or even just the first sentence of what you wrote
- Certainty that at any moment, you'll stop selling and/or become unable to write anything new.
- Cycle back to sleepless nights filled with stress and despair over lack of income...

Oh, and add in that if you're single, it'll be near impossible to get a partner. And if you've got a partner, you risk losing them unless they're preternaturally endowed with a huge, massive ... amount of patience

Yeah, being a writer is great

Did I mention this was always my dream? (But in all seriousness, there are far easier ways to make money! Nobody ever becomes a writer for the money, and there's a reason for that )

 

@SerenityNow wow! That's commitment! you probably don't even use the speel checker!

 

Hehe. Just doing my bit to ward off the competition

 

Yep, will definitely look into some kind of nanny arrangement when the time comes

 

My wife and I are in a similar position as you except she isn't a writer earning 200k and we also have 1 child (with plans for 1 or 2 more, still being debated).

What I would do if I was in your position is one work out where you both want to go but things I would address.

1. 200k in cash - put into an offset account. Rather than earn 2% interest and pay 1/2 in tax I would rather save 4.5% off my mortgage (which in turn means I earn 4.5% tax free!).

This difference alone would of $2,000 p.a. earned in interest (after tax) compared to $9,000 saved on your mortgage, I just gave you $7,000 p.a for a quick phone call and a quick bank transfer. If you want to give me 50% of the difference per year I will give you my bank details .

2. Super, you really should be investing in your super. 1 no one can touch it yes it is restrictive but it is a great place to hold shares (once you get enough in there). This leads to your portfolio being diversified. To give you a comparison my wife and I have about 5x more super than you guys (not trying to gloat).

3. Buy an investment property (or a new PPOR), depends on how and when you want to get to your goals will determine what you want. For us we chase the growth of a property and not the yields. This is because I have seen my parents retire at 50 without any inheritance and dad started with $50 in his wallet. There is a number of debates on growth or yield which is the best strategy but select one you feel is best and suits your risk/plans.

4. Insurance, the line every insurance person basically uses which is true if you cant afford to lose it insure it. I cant afford not to work (like basically everyone) so insure yourself, with the thoughts of children your insurance should increase dramatically as you want to make sure the family is looked after for the next 20 years if you were not around or unable to work. For us we have 2.5M in cover each and would be looking at changing this in the near future. Sounds like a lot but when you realize that it pays off the PPOR and gives you 50k each year for 20 years it doesn't sound as much.

Just recently I had a car incident which a car hit me in a 40km zone, they were most likely going faster as the cost to repair was $17,000 just for my car! However it only cost me $500 excess as I was insured and I keep my rating 1. For the $1,000 a year it has been well worth it.

5. Read and educate yourselves, just like everything in life you need to learn. Reading the forum is a great places, there is a great list of books that are mentioned on the forum. Another thing you might look at is finding a mentor, for me it was easy as I have seen my parents go from nothing to retirement, if I can emulate what they did I would be a happy person. Dad thinks I will do it faster than him as he had to learn it all himself and had to find his own mentor + started later than me.

 

Bit of an update: the husband is on board re: renting, delaying second ppor purchase and investing in IP. Now for the fun part - shopping!
(Well, ok, talking to some professionals first. But window shopping, at least )

 

Hi serenity,

Im in a slightly similar financial position to you, so will be watching your journey with interest.

I think we are also similar in that im driving the desire to invest, especially in property, and my partner is interested but not doing any research. Im also very melbourne centric and interested in capital gains and a buy and hold strategy. Having said all that i dont have any more knowlege or experience than you so i dont have any pearls of wisdom for you.

What we have decided to do at the moment is get advice from a financial planner. Im hoping to find someone who can help us work out our goals as well as advising on strategy. Im keen on property but i think my partner might be leaning more towards shares.

We have seen one guy who wasnt the right fit for us and have another two or three to meet with. One was recommended to us by a friend who is into PI and the other is 'independent' and we will pay a fee for that meeting.

I think they will all be very happy to sell us insurance and check our super as well as giving us a plan for investing.

Im off to read your other thread on a 1m portfolio.

 

Hello, me

I'll be talking with a financial planner as soon as I wrap up my current work project (ie in Jan/Feb 2016)

My husband would also rather invest in shares, but here's what I pointed out to him:
1. Share portfolios fluctuate daily, so you need to be able to handle daily portfolio value decreases, and decreases can be a lot if you use leverage. Psychologically, this would be very hard for us beyond a certain point
2. Easier to get leverage for real estate, and leverage is what leads to crazy ROI. Eg, invest 100k on a 500k property, in 10 years, that property is 1mn - 900k profit on your 100k. Ah, the magic of leverage. Or so I hope
3. Huge tax advantages. Another thing I need to talk to a planner about, but tax is a big one

Keep us updated on how you go

 

@SerenityNow - those are all excellent points, particularly on leverage. Shares can work well but it's so easy for people to overlook the profound implications of leverage (which, in the case of shares carries enough risk that I'd be too much of a wimp to do it) and compounding over time.

@Esel, hope it goes well. Seems finding good financial planners who can help you achieve your goals and work to your strengths is really tough. For every "This one was fantastic and really helped us" I hear a lot more "This one tried to sell me managed funds and said I had way too much property because I have a PPOR and one IP and said not to buy any more".

Not that there's anything wrong with have diversity in your investments, but this forum is full of property-heavy investors who have done very well and funnily enough, few of them were advised to use property as the vehicle by a fin planner.

There are some great ones out there though. Just hard to find.

Kind like locating a good investment-grade property I guess. There are a lot on the market but few worth buying.

 

Majority of both quality shares and properties will grow over time.

For me personally id rather use my own personal funds for property and use my super for shares.

This way you get best of both worlds (or worst).

Main reason being is you cannot sell 1/2 a house and/or draw against the equity in the property to buy more houses if the house is in super. However you can sell half your shares

 

I know what you mean steven. The FP we just met with (recommended by accountant) only seemed interested in putting the hard sell on us about insurance and was very conservative and not interested at all in property investing. He wasnt very inspiring at all. i think we have a couple of better ones lined up. If none of them are very encouraging we might just move on to a mortgage broker who is enthusiastic about Investing.

I need someone to inspire and explain it all to my partner. He doesnt really have the time or the energy to research it and he wouldnt read a forum like this. And im not really the details or numbers person in the relationship so hes a bit dubious about my ideas.

One of the FP we are going to meet with after xmas is definitely knowledgable about IPs so it will be interesting to see what he says.

 

I'm definitely a numbers person! I think my husband is, too, and I ran heaps of figures/projections/what-ifs past him; the what-ifs were negative scenarios (Eg all properties untenanted for a period of time, etc). If you sit with an excel sheet and input growth formulas with 20% deposit, it's really impressive to see how your 100k deposit turns into 500k profit in 10 years, all while saving you taxes. In our case, what I want to do will leave us net negative even after saving on taxes assuming conservative yields etc, and I was upfront about this and explained how/why.

I recommend really looking into numbers and having a think, more for yourself first than your partner, and to see what you can/can't do; once you've impressed yourself, you can impress your partner.

I've read some general "financial advice" type magazine and they seem quite down on property, saying things like, "no-one can predict what property will do," etc. The finance world in general is maybe more educated about shares and other financial assets?

If you'd like to inspire your partner, maybe buy some issues of property investor magazines, they usually have a couple of interviews with successful property investors, detailing what they bought, etc. I think YIP also publishes some interviews on their blog and stuff like this: Game Plan: How to build $1 Million Property Portfolio

A good mortgage broker with a portfolio of aggressive clients will also have some incredible client success stories to share.

 

property is not a financial product and you don't need to see a financial planner for advice on property. If you do critically consider carefully whatever they say, especially their fees. I have found many will charge thousands for basic information which is obvious. e.g. you don't need to pay a planner to be told you should get a will. This is common sense and you could save money by going straight to a lawyer as planners cannot not advise on this area.

Some planners would also be prohibited to give property advice - by their licence holders and/or insurers.. One group that encourages their planners to incorporate property advice is Dover. If they are a member of Dover they should be better than the average planner.