Hi All,
My father has came to me for advice RE: investing.
His current situation is that he earns approx $62k pa gross, and has approx $350,000 cash in a term deposit earning him 5.7%pa, giving him another income of approx $20,000. so all up this is about $82,000 – paying tax @ the highest rate.
Anyways would he be better off purchasing one investment property with the cash from the term deposit? Or better to take out loans and say purchase 10 properties maintaining a 80%LVR? spreading the risk around?
He wants to retire in about 5 – 10 years time.
The other option he may have is setting up a trust so it would only be taxed at 30% if i am correct? But neither of us know anything about this!
And finally the other option we thought about would be to somehow purchase a property in my name as a low income earner (35k pa gross salary) in order to decrease the tax payable (at this stage would be looking at properties which create an income each week to help get him soemthing to retire on.
Anyway any help or advice is greatly appreciated because Im not 100% sure on what he should be doing!
Cheers!
Hi dammit
(Like the name!)
Wow, the world is your father’s oyster here.
No-one can tell you what the best way to invest is, but would like to put forward some points for you to consider
If your father does go for the 10 properties option, would he be able to get finance? He’s close to retirement age, some banks might knock him back
What kind of investing style does he aim for? Buy and hold, cosmetic renovating, self managed or hands on?
I would assume he’s looking for income – would that be right? In which case he’s look for high yeild property(s)
Where would he feel comfortable investing? Same suburb, same state or inter-state?
Houses or units?
In any dealings with family, make sure a formal agreement is drawn up – speaking from experience!
Good luck and enjoy the experience!
Regards
Swampy30
Thank you for replying
I’m pretty sure he could get finance, he’s actually only 50 years old but I think he hopes to retire by 55 – 60 yrs old. So not sure what the banks would think of that.
Investing style I think he’d be looking for something thats going to return a good amount of money with minimal fuss/attention from him – so he would have a property manager and would probably buy&hold provided the yields were good enough. He would be looking more for income than for capital gains but on the same token the properties would need to be in growth areas so they do gain a little.
So i guess we just need to look for some properties that have good rents & are of a decent price and go from there, crunch some numbers and figure out what to do! The main thing though is that we would be hoping for a return greater than 5.7% which is the current interest rate for term deposit at his bank.
Thanks for raising those points of consideration
Any other advice greatly appreciated!!Hi dammit,
At 57 years old and a view to retire 3 yrs, we have gone for the 10 properties idea.
As you have read , nobody can tell you how to invest because it is allvery personal .
We have gone for income over capital gain and the next person will tell you something different.
However you crunch the numbers yourself on Dad’s .
Good Luck and Cheere Lensorry for my ignorance as i am only new to this, but what is the 10 property idea?
and how does it work for retires?
harryHi dammit and dammit’s dad…
From an earlier post in another thread. Something to mull over…not suitable for everyone.
I reckon two props would be the ideal number.
1. Buy a nice vacant residential block in a nice suburb hopefully with some sort of view for the full $350K and pay cash and get the title deed. No whingeing residential tenants but still get all of the growth…fantastic, and because it’s fully paid off, not missing out on any of the tax benefits.
2. Walk straight into the Bank and slap the residential title deed down as a 20% deposit on a $ 1.4 MM industrial property renting for 10% nett yield.
End result would look something like this ;
1. Land growing = $ 1.75 MM.
2. Cost of borrowing = $ 1.4 MM * 7.25% = $ 101 K p.a.
3. Tenant pay all outgoings on 1.4MM prop.
4. Outgoings on ressy block = maybe $ 6 K p.a.
5. Nett rent from IIP = $ 140 K p.a.Free cashflow in your pocket = $ 140 – 101 – 6 = $ 33 K p.a.
Growth of underlying land ~ 9% average = $ 157 K in first year. Cranks up from there.
Not for everyone, but I’m happy with the technique. For your 350K, you get about 9.4% income and around 45% growth.
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