Financial advice

[Bravotwozero]

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:

 

[Marco-EFIVL]

Well for starters mate, have you got your current property evaluated? How much do you and/or an agent think you can get for your current place of residence? If you've got $70,000 equity in your current property, then how much is not paid off?

 

[Bravotwozero]

Currently have $70,000 equity in original purchase price of $220,000. Property has been valued at $280,000-$300,000. Amount owing on mortgage is approx $150,000.

I didn't factor in the $20,000 deposit paid when property was originally purchased so equity is more like $90,000. I don't want to factor in any profits from a sale until the property is actually sold.

 

[Marco-EFIVL]

Well if I were in your shoes. I'd place down a deposit $60,000 on your recently acquired property and then when you've sold your existing place, I wonder if you'd be able to set a clause with the bank that when the transaction goes through from your sale, then you'd find yourself able to beef that up another $15,000. So you have a deposit of $75,000 and I'd suggest you leave the remaining $15,000 in an account so you have some leeway to pay off your morgage and tackle any unforeseen expenses, if your in any other debt, I couldn't more strongly suggest you under take debt consolidation.


Lastly, are you a share holder? Do you own any shares? If you do I'd suggest splitting your dividend and channelling some into paying off the mortgage.

 

[minux]

Can i ask why your selling the existing property? You are far better off leasing it and having tenants pay your mortgage for you. It is well worth looking into especially with how hard it is for people to find rentals. Only 2 weeks ago we were able to push up one of our rentals $50 a week because people were desperate.

 

[ivaninoz]

It is well worth looking into especially with how hard it is for people to find rentals. Only 2 weeks ago we were able to push up one of our rentals $50 a week because people were desperate.

Similar put here,
No Rentals at all.

Though Ppl here might not be as Mercenary as you;
up $50.oo from what to what,
it is relative.

 

[spice weasel (BAM)]

I don't care what anyone says, the average RESIDENTIAL property income return (rental income) is absoloutely poor. You can get better investment returns getting 6.05% in a direct deposit fund. The average return for a rental property is only around the 3.5% less tax and you don't even get the advanage of an imputation credit if say you have some australian shares paying franked dividends.

The only reason you would want a rental property is for the capital growth and in my opinion the housing boom is finihsed and we will see no major growth in the next 2-3 years, whilst the australian stock market has now seen record highs (over 6000).

the only reason people are so attached to propety, is one of two reasons, either they are still hanging on because of the boom that has just been, or they like to be able to go up to the property and say, this is mine, see i can touch it (tangible) as opposed to either units in a managed fund (pooled investment funds for investing across a wide range of investment assets) or direct shares which is just a bit of paper.

It has also been shown that the share market has outperformed property in almost all ten year rolling periods.

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.

I personally think it is not a simple question of whether or not you just keep two houses, but what this means exactly in the context of all your wealth enhancement goals, as a financial planner myself the only piece of advice i will give you is this, DO NOT take any advice from unqualified people on this site, go and see a financial planner who can give you advice on your overall position and also the tax consequence of what you are doing, because once you have multiple properties you now have capital gains issues and you need to determine what you intend to elect as your primary residence.

Sorry if im ranting i just hate it when people without the qualifications think its ok to give people advice on these matters when it can HUGELY affect their life and financial stability

 

[minux]

I don't care what anyone says, the average RESIDENTIAL property income return (rental income) is absoloutely poor. You can get better investment returns getting 6.05% in a direct deposit fund. The average return for a rental property is only around the 3.5% less tax and you don't even get the advanage of an imputation credit if say you have some australian shares paying franked dividends.

The only reason you would want a rental property is for the capital growth and in my opinion the housing boom is finihsed and we will see no major growth in the next 2-3 years, whilst the australian stock market has now seen record highs (over 6000).

the only reason people are so attached to propety, is one of two reasons, either they are still hanging on because of the boom that has just been, or they like to be able to go up to the property and say, this is mine, see i can touch it (tangible) as opposed to either units in a managed fund (pooled investment funds for investing across a wide range of investment assets) or direct shares which is just a bit of paper.

It has also been shown that the share market has outperformed property in almost all ten year rolling periods.

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.

I personally think it is not a simple question of whether or not you just keep two houses, but what this means exactly in the context of all your wealth enhancement goals, as a financial planner myself the only piece of advice i will give you is this, DO NOT take any advice from unqualified people on this site, go and see a financial planner who can give you advice on your overall position and also the tax consequence of what you are doing, because once you have multiple properties you now have capital gains issues and you need to determine what you intend to elect as your primary residence.

Sorry if im ranting i just hate it when people without the qualifications think its ok to give people advice on these matters when it can HUGELY affect their life and financial stability

ah huh, i agree with what you are saying, i nor no one else here is qualified to give advice. However, most people do not make money from rentals, they make the money by selling the rentals with other people paying for them.

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.

 

[spice weasel (BAM)]

Not a problem minux, i get a little touchy on this subject i have seen many bad results of people listening to people they shouldn't be. (not saying you don't know what you are doing for yourself, just that people think that what works for them automatically must fit for everyone else and its like saying because i wear size 11 shoes, they must fit everyone.)

At the end of the day we say to our clients that they need to be comfortable where they are invested. Shares do yeild a higher return and in return for that you accept the higher risk of a negative return. If you can't sleep at night then you are invested in the wrong area. 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.

So i suppose the advice i am giving to you Bravo is that you should seek the advice of a financial planner who can look at your entire financial position and determine what will be most approriate for your individual circumstances to most improve your net wealth, whilst assisting you to remain comfortable across your prefered asset allocation (preferred mix of investment assets).

And i know alot of people claim that it is expensive, but when you are talking your entire future, what is a few thousand dollars in the context of hundreds of thousands, to millions of dollars????

Just my 2c

 

[Bravotwozero]

I don't care what anyone says, the average RESIDENTIAL property income return (rental income) is absoloutely poor. You can get better investment returns getting 6.05% in a direct deposit fund. The average return for a rental property is only around the 3.5% less tax and you don't even get the advanage of an imputation credit if say you have some australian shares paying franked dividends.

The only reason you would want a rental property is for the capital growth and in my opinion the housing boom is finihsed and we will see no major growth in the next 2-3 years, whilst the australian stock market has now seen record highs (over 6000).

the only reason people are so attached to propety, is one of two reasons, either they are still hanging on because of the boom that has just been, or they like to be able to go up to the property and say, this is mine, see i can touch it (tangible) as opposed to either units in a managed fund (pooled investment funds for investing across a wide range of investment assets) or direct shares which is just a bit of paper.

It has also been shown that the share market has outperformed property in almost all ten year rolling periods.

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.

I personally think it is not a simple question of whether or not you just keep two houses, but what this means exactly in the context of all your wealth enhancement goals, as a financial planner myself the only piece of advice i will give you is this, DO NOT take any advice from unqualified people on this site, go and see a financial planner who can give you advice on your overall position and also the tax consequence of what you are doing, because once you have multiple properties you now have capital gains issues and you need to determine what you intend to elect as your primary residence.

Sorry if im ranting i just hate it when people without the qualifications think its ok to give people advice on these matters when it can HUGELY affect their life and financial stability

Thanks for the well thought out reply. For starters I will be getting professional advice before I commit to doing anything. I'm not going to take anything on here as gospel. Just thought some people might have more of an idea than I do.

Ok Minux appreciate the reply. I'm selling the property for one of two reasons. The biggest one being that we plan on starting a family soon and will have to live for a few years on my income alone. So basically I'm not willing to be paying such a high mortgage. Well actually that is the only reason.

As for other debts, I have nothing on finance. No credit cards nothing. So it is just the mortgage. Thanks for the replies so far (especially Weasel & Minux), you've given me something to think about.