New Investor Looking for advise – What would you do with $1 million ??

• Formulate your goals & timeframe

• Determine your risk profile (do you want resi/industrial/retail/offices/service stations/marinas etc), where, how many and what mix.

• The profile will determine how much you can borrow. (You can borrow a higher % for resi compared to commercial property however the return may not be as good).

• Are you investing for capital growth, cashflow or both?

• Determine the legal structure of ownership (trust, smsf, company, personal etc) and the implications of each structure – you will need to discuss this with your legal/accounting bods.

Eg: if you were to invest in Residential Property, $1M (would allow you to borrow an additional $4M approx using 20% deposit), ignoring stamp duty etc. That is a sizeable portfolio even when the median house price in Sydney is $600k. Would you feel comfortable with $4M of debt? Would you consider borrowing less but paying more tax (as your properties would be positively geared)?

Alternatively, you might throw $1m into commercial property however you could only borrow an additional $1.5M (total $2.5M investment). This may get you a small shopping centre in the bush or a few industrial units or a small office building etc. How are you going to handle vacancies (these are usually longer than residential vacancies)?

Then again, you might think up of a mix of investments which will suit your profile – some resi for stability, commercial/retail for higher returns or vary the investment strategy buy using your new investment structure (trust or company) combined with your super fund (super fund will only pay 15% tax on its net income).

I would look at paying off all personal debt if you haven't already. Then speak to a tax advisor about gifting the remaining money to a discretionary trust. From there buy a few properties using 80% LVR loans with the spare money parked in a 100% offset account.  Also look at buying some shares too and be very wary of investing in business or developments or you could lose a lot. Spread you risk with shares and property too – different areas etc.

Focus more on growth than cashflow – no sense in buying somehting that doesn't go up in value.