Hi guys,
I understand this is a site intended for real estate investors, but seeing that there are so many bright and knowledgeable people in here, I thought I'd try my luck to see if I could some ideas about the best way to go abouts with financing for shares
A little bit about myself…. I'm a 23yr old Pharmacist, earning $70,000 pa, and have $20,000 of savings… My current goal is to have at least $50,000 of mining shares before the end of 2011…
Here are some options I have thought about
Option 1: Saving
Saving $2,000 per month and buying shares in cash. This method is slow, but may be the safest. My only concern is that I may miss out on significant gains if prices spike before 2012
Option 2: Margin Loan
From my understanding, this type of loan involves using shares you own as security, and E-trade Australia charge 8.75-9.49% interest rate. What I don't quite understand is how much I could borrow, and how much principle repayment I would have to make in addition to the interest charges
Option 3: Credit Card
Getting a $25,000 Cash Advance from SCU or Mecu Mecu Visa Card at 10.49%, and then transferring it to a Suncorp Platinum Card, which charge 3.9% pa on the life of balance transfers. The low interest charge seems enticing, but there may be other fees and charges that I haven't taken into consideration. I remember reading somewhere about 2.5-3% min principle repayment per month
Questions
· What do you guys think about the above options?
· Do you have any other ideas about how I could go abouts to obtain finance?
· Are there any major issues you think I have not considered?
Other thoughts lingering on my mind
· Tax implications – Can I claim interest repayments on my tax return?
· Business – do you need to setup a business if you trade over $20,000 of shares per year?
· Should I consider holding the shares in a Family Trust structure?
· Should I leverage myself with Call Options? Are there call options that last for 2 years?
Any thoughts, ideas and comments would be greatly appreciated!
Here are a few points:
– A discretionary trust would be great, but it may cost a bit to set up and there are issues with losses (minor).
– no need for a business
– to write options you generally need parcels of 1000 shares in Australia. In USA it is 100 I think. There are options that last for 2 years or you could write shorter ones and redo them when they expire.
– becareful about putting all your eggs in the one sector such as mining.
– You, or the trust, can claim the interest on money borrowed to buy shares.I would suggest you keep researching a bit more. There is an excellent interview with Keithj on the Somersoft forum re a strategy he used involving shares and property and that is well worth looking up.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi kong, You could use defered purchase agreements. You can use the Royal Bank of Scotland for a 100% loan with 3 years interest in advance. the interest rate is about 3-4 %, there will be a cost of about 1% for hedging and 1% for capital protection insurance. Total cost of loan is about 6 %. I think you have your sights set low your $20,000 savings could get you about $140,000 worth of shares now. you should also get a divedend of 4-8 % every year on the $140,000. The minimum loan is $ 50,000 if this is all you want it will cost about $7,000. After 3 years the loan will have to be repaid. it is a non recourse loan. the interest rate is low because you have insurance against your assets falling in value. All you have to lose is the interest you paid up front. Kong where are you, I may be able to point you in the right direction.
Thanks for the input guys…
Just another question…
My tax accountant mentioned something about only paying tax on 50% of the shares if you hold them for at least 1 year – Does this only apply if it is under my name? Or would this also apply if it is under a separate entity such as a business or discretionary trust?
Also are there any particular online share brokers you would recommend? Most of the companies I would like to invest in are overseas…
He would be referring to CGT there. If held for more than 12 months individuals can get the 50% discount. so if you buy $50,000 worth of shares and they jump to $150,000 the gain is $100,000 but you are assessed on $50,000 of this only.
Companies do not get this discount. Trusts usually distribute income and if they distribute to an individual they would get it. A business is not a separate tax entity (unless you mean company) and it would be the entity behind it that is taxed. A trust is also not a separate legal entity really but is treated as one for tax purposes.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
I am currently away on holiday so will keep the response fairly brief.
Terry is correct in the US 100 shares make up 1 option Contract and with some
stocks you get 2 expiry dates in the same month.
BP & C (citibank) are 2 examples of such stocksBack to Australia have you considered a long dated instalment warrant.
In the US try a LEAP.Richard Taylor | Australia's leading private lender
Method of lay buying shares
http://www.atcbiz.com.au/journalarticles.php?new=r8fh4cm8u9&num=5
https://www.rbsmorgans.com/download.cfm?DownloadFile=939DBBB7-D60D-540D-6808B2C4E8B62D2C
depending on your time frame if ten years you could go endowment warrants
http://www.switzer.com.au/your-money/investment-advice/share-trading/endowment-warrants/
Not a product recommendation or financial advice – More educational information on available investing product / methods.
As I do not know your risk tolerance or personal situation I can not accurately provide financial advice and I am not licensed to give financial advice.
You must be logged in to reply to this topic. If you don't have an account, you can register here.
