In last months Money magazine, I really enjoyed reading about Australian Real Estate Investment Trusts (A-REIT’s). This type of investment interests me but the article lacked enough information for me to make the jump. This type of investment is hard for a mum and dad type investor because a bank doesn’t give you a loan for $100k for a liquid type investment.
Let’s visit my specific circumstances. I have a small unit that cost $60k. The loan is now fully paid off, suppose I sell it because it is under performing. After outgoings it currently returns $2,905 (1.66%). The costs that went into the property total $20k for the time I had it. I sell it for $175k, Real Estate commission and other charges equate to $15k. The profit is $80k, I will have to pay CGT on 50% which is $40k. I have a taxable income of $135k so my tax rate is 39%. So from the profit of the sale I will have to pay $15.6k in tax. So the cash after the sale is $144.4. I now take all of this money into 2 different low risk A-REIT’s with the average annual return of 10-15% ($14.4k- $21.66k). So based on these approximate figures, I would be crazy not to sell and invest in A-REIT’s?? This is a cheaper way to buy a slither of a Sydney property which I simply cannot afford.
I would appreciate your thoughts of experiences investing in this.
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