Hi
Currently I have a property in Sydney rented for $225 per week I have $50000 saved in managed funds and shares and I owe $235,000 on that property, should I just put all the money into that property rather than put in funds etc which attracts capital gains, I earn roughly $64k per year, I am 26
What should I do?
One of the schools of thought with investment debt is you shouldn’t or don’t need to pay it down as it is a tax deductable expense. You should instead pay down any PERSONAL debt first such as car loans, credit cards etc as this debt is not tax deductable.
If you sell the other investments you have and put them into the I.P loan, you will pay cgt on those investments when you sell, and you will lose any future cap growth because you don’t own them any more.
Sure, you are tranferring the money to another investment which will hopefully go up in value, but at the moment you have 3 different investments all growing in value at different rates. While one is stagnating, the other two may be gaining.
You are earning a very good wage for your age, my advice would be to re-assess your lifestyle to free up more income for debt reduction on the I.P so you can improve the cashflow from it (i.e. get rid of the Beamer and buy a 2 year old Honda Accord), and hold the shares and managed funds if they are performing o.k.
Incidentally, managed funds are still shares – they are just picked and managed by someone you ‘hope’ knows what they are doing and you are paying them your hard earned to do it. It is the investment of the uneducated, or lazy, or time challenged ( a lot of people are all 3).
If you have a bit of a clue about the share market, do it yourself and save some commissions which you can use towards the I.P loan.Lastly, have you had a Depreciation Schedule done for the I.P? If not, do it asap as this will give you possibly a few $k’s more per year on your tax return, which of course you will re-invest into the I.P loan; won’t you?! It’ll cost about $400-500, but will pay for itself in the next tax return. Speak to your accountant on this.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Paying a fund manager can be a small price to pay if you find the correct one. They have a wealth of information at their finger tips that the novice does not. The novice often goes by the News reports and general hear say etc. The funds managers will have already factored this in.
Buying shares if you do not know what you are doing can be quite risky in saying that if you have oodles of time to research you may be able to do it yourself. Some things are better left to the experts
Wayne
Mortgage Adviser
Email [email protected]
http://www.alphamortgagesolutions.com.au
Refinace, Loan Consolidation, Owner Occupied or Investment Finance. Free Service we come to you!What sort of return are you getting on your managed funds? There is one that returned 76%pa last year.
Pulling your money out for tax reasons only may not be wise. You will end up paying more tax on the property anyway.
If you have personal debt, then it is a different story. Maybe better to pull the money out, pay the personal debt down, and then reborrow it and put back into the managed funds/shares.
Terryw
Discover Home Loans
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Send an email to get my newsletter.Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Firstly the idea that a fund manager has any more of an idea than a novice is funny in itself. Yes some do well one year and then not the next. Someone always shows up with some fund manager that made massive returns LAST YEAR, the problem is so many only track the index after fees.
I would suggest you invest in an area that you have an interest.
Maybe you need to invest some on your education.Keep it real. [specool]
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