Financial advice

[Not_An_Abba_Fan]

This may sound harsh but I'll say it anyway. Putting money into a term deposit that earns you 6.05% when you are paying roughly 7.25% interest on a mortgage is not very good money management. You are paying more in interest than you are earning. You are better off putting it all into your mortgage to reduce your interest then if you can afford to put some money each week into a managed share fund.

We have 2 rental properties also which the interest, rates and maintenance are fully covered by the rent return we get. We make no money from the rent but when we sell them in 3 years, (that is when the interest only period of those mortgages run out) we will make enough to pay out our current mortgage.

Having savings is good but not when they cost you money. I don't have a cent towards savings, apart from super, and all my extra cash goes into the mortgage. Keeping the interest down and paying it off sooner will give us a better quality of life down the track. We are not struggling by any means but we do forego some luxuries for the long term picture.

 

[Bravotwozero]

This may sound harsh but I'll say it anyway. Putting money into a term deposit that earns you 6.05% when you are paying roughly 7.25% interest on a mortgage is not very good money management. You are paying more in interest than you are earning. You are better off putting it all into your mortgage to reduce your interest then if you can afford to put some money each week into a managed share fund.

We have 2 rental properties also which the interest, rates and maintenance are fully covered by the rent return we get. We make no money from the rent but when we sell them in 3 years, (that is when the interest only period of those mortgages run out) we will make enough to pay out our current mortgage.

Having savings is good but not when they cost you money. I don't have a cent towards savings, apart from super, and all my extra cash goes into the mortgage. Keeping the interest down and paying it off sooner will give us a better quality of life down the track. We are not struggling by any means but we do forego some luxuries for the long term picture.

Yeah this seems to be the best option I would have to say. Cheers! :thumbsup:

 

[minux]

I still firmly believe and so does my financial planning group that the property boom has now finished and although there has been great returns over the past 5-7 years people need to continue to look for the best investment return.

I completely agree with you here, we bought for long term investment though, we currently have a 3 bedroom place in camberwell, and 2 places in geelong that we lease, we figured in 20 years time they will be worth quite a pretty penny.

 

[Reaper]

Hi all.

My wife and I have recently bought a block of land which we plan on building our new home on. Currently we have a home that will be sold to fund the building costs of the new place. As it stands, we have roughly $70,000 equity in our current property.

So at the moment I'm thinking of doing 1 of the following:

1: Using the equity in our previous property as a deposit on the building of the new property and lowering the mortgage.

2: Financing most of the new house less about $10,000 deposit and investing the remaining funds into something else.

At the moment we're not too sure which way we should go. Any financial advisors or accountants on here who could give give their opinions, they would very much appreciated. Also, if the second option is a better one, what would you suggest we invest the funds in?

If it makes any difference, the new home will be our main dwelling which we hope we won't be moving out of in the next 20 years or so.

I'm not expecting many intelligent replies to this thread but I live in hope. This sounds like something for Minux so I'd appreciate your reply mate! :yeah:

The best thing you can do is to find a licensed (independent) adviser in your area and pay for it. By independent I mean just that - not somebody who works for a bank. This person can look at your whole situation and take all of your long and short term objectives into account and then put together a proper plan to move forward.

Furthermore, it is specifically illegal to offer any financial advice unless you have the appropriate financial planners license. Anybody who does offer such advice opens themselves and the owners of the website to prosecution from ASIC.

Cheers,
Reaper

 

[Not_An_Abba_Fan]

Ummm....I beg to differ there, we are offering an opinion and personal details. Also, a professional advisor can still only offer an opinion and it's your choice to take their advice or not. If you take it and lose out there is no comeback on the advisor. Just like a tax agent doing your return, stuffing it up and costing you money. The agent is not liable for it.

 

[Reaper]

ah huh, i agree with what you are saying, i nor no one else here is qualified to give advice.

Precisely - In that light I hope that nobody offers such. In a more general form, a discussion of the pros & cons of different asset classes and strategies might be helpful for some people.

I have 4 houses, of 1 i own completely, of the others tenants pay for them to an extent. My aim is to own this land so that when i die my kids have something to sell. With where i own the house and land it is already 2.4 times my purchase price to sell today. Thats is more what i was aiming at.

Yeah the great thing about property is that they aren't making any more of it (well for the most part) and 100 years of history has many people making a lot of money from it. As for the return, in the first few years you might be actually subsidizing the property (more than likely this will be the case) however after a few years of cpi rent increases the property will eventually become cash positive giving you extra income (and equity thru capital growth) to buy another and the thing becomes a self perpetuating snowball almost forcing you to buy more and more real estate (or any other investment) to keep your income (and tax bill) under control.

Cheers,

Reaper

 

[Reaper]

I completely agree with you here, we bought for long term investment though, we currently have a 3 bedroom place in camberwell, and 2 places in geelong that we lease, we figured in 20 years time they will be worth quite a pretty penny.

On a long time frame like that the timing of acquisition is relatively un-important. Timing is much more important for the shorter term investor like the other poster who was looking to sell in the next 3 years or so.

One thing worth noting is that building starts (In Victoria) are now way off their highs of around 3 - 4 years ago. When the December 1/4 stats come out I'd expect to see a rather sharp dip in building starts (seasonally adjusted) as we had a very slow Christmas rush this year. Talking to others I have the feeling it was industry wide with only a few pockets of people busy here and there.

One thing for the original poster to keep in mind is that if his original house was his principal place of residence and then he decides to rent it out, he won't be able to claim the interest payments that he makes on the property as a tax deduction plus the cgt becomes a nightmare when he decides to sell the property. All in all it's very tax in-efficient to do it in this way and even more important to get some good advice.

Cheers,
Reaper

 

[Reaper]

Ummm....I beg to differ there, we are offering an opinion and personal details. Also, a professional advisor can still only offer an opinion and it's your choice to take their advice or not. If you take it and lose out there is no comeback on the advisor. Just like a tax agent doing your return, stuffing it up and costing you money. The agent is not liable for it.

Putting forward your opinion as to what somebody should do in this context is exactly the same as advice and you must be licensed to offer such advice. To offer advice without this license is illegal under financial and corporations law.

I agree though that even if you get advice from a professional, it is an opinion however a licensed adviser is required to stay abreast of all the relevant tax law, investment products and strategies along with all other relevant issues.

Just for the record I have no issue with the principals you have described in this thread although your sunset probably wouldn't work for me. I hope you get the returns you need - paying off your house is a huge step forward.

Cheers,
Reaper

 

[Marco-EFIVL]

People should not be going off half ****ed giving you adivce. You need to see a qualified financial planner. After the budget changes in 2006 there is now serious advantage in placing money within superannuation as it will be entirely tax free after age 60 (including both earnings on fund and also any pension payments) so things like your current age and retirement goals need to be taken into aco**** when looking at your entire financial position, including income details and other assets/debts.

To be very frank I couldn't agree more, I was going to say the same thing but neglected to mention it. Financial planners spend their time doing this professionally and are qualified to give appropriate advice and guidance on these matters.

 

[spice weasel (BAM)]

not an abba fan. Just for your information, we are not even allowed to give our opion on a specific issue without preparing a statement of advice, otherwise we are liable even if the client takes the information incorrectly. As a financial advisor we have whats known as a duty of care to everyone we discuss financial matters with. You should notice i only state general information in what i am saying and not specific to his situation, so you are wrong.

Also i just said the 6.05% in the bank is better than 3.5% income return from investment property, which you also pay over 7% home loan interest rates on your mortgage on in the current market, so in order for your rental income to match your interest on your loans, the mortgage must be substantially lower than the value of the home, which would take years to get there and would lose out hugely on other available income in the market. I suggest before you go off half ****ed you actually get your facts right.

Minux. It is always a pleasure to see someone who looks at the long term rather than the short term it is rare that anyone thinks very further in advance than a couple of years, until retirement panic sets in around 50-55 and by then it is often to late. Anyone who thinks the government pension is still going to be around in 30-50 years is kidding themselves as we are an aging population and unless we do something about it the system will eventually colapse (yes the govt is doing something with super but it is not enough) more than half of people will be underfunded in retirement.