If you had $100k, what would you invest in and why?

I had 3 properties.. and let me tell you, the negative gearing almost sent me broke.. unless your earning 6 figures... this is not realistic. And I doubt a bank would loan you 95% LVR on 3 IP's

 

Agree.. I'm not saying IP is a BAD investment... I'm just saying it has costs and issues associated with it. I would agree with starting a investment portfolio with say 1 IP to get the high leverage could be something worth considering, but gearing so high in your 2-3rd property is putting a large strain on the investor.. I believe investments should stand on their own two feet, and setting up 3 investments all costing you $10k PA each is not a wise thing to do. How long do business's last selling at a loss? They can do it for a while, but eventually it catches up with them.

It could be possible at 90% as I got away with this.. but really if the bank declined my 3rd property, they would have done me a favor.. it was the 3rd were I went to far... over gearing was my problem.. combined with years of static rent. 1 IP could be good, as you can continue to re-gear it at 90% and draw down equity... if you have 3 properties... then really you need to have your rent covering your 3rd IP.. hence any equity in that property is useless unless rent goes up to cover it. Since rental yield is still so low, many people would have equity in their IP's which they can't access due to serviceability.

 

i think this is all relevant to the cost of the assets as well. @ 95% you can borrow 2mil for property, so yes most people will struggle with covering this. If you spend 900k on 3 properties its a very different story.

I personally dont like LPTs as im an accountant i see how much money is lost before the investor gets there hands on it. Large audit fees, six figure tax bills, resonsible entity fees, underwriting fees.. Your lossing a lot of the money here by taking a simple way out. I guess you can use the example of Do you wash your car, or pay someone $30 down at the local shopping center to do it for you???

 

Hi crc_error,

I wouldn't touch those 100% products with a ten foot barge pole. I can get 95% on direct property at pretty decent rates (at the moment). With 100K, as voigstr said I can buy 2 or 3 properties and still put some money into Navra to secure an income stream.

We set up structures like this all day, every day for clients, I don't see any reason why I wouldn't want to do it for myself, seeing as it works so well for so many others.

Mark

 

Mark, So how many IP's do people usually get? At what LVR?

You say you wouldn't touch the 100% products.. why not?

As far as I can see, the only benefit of property is its ability to gear highly.

 

Thats the thing.. you purchased well.. I would say there is a element of luck there as well. As you mentioned you bought in Adelaide which was out of flavor at the time.

Doing what you did then, would be impossible today.

Are you continuing to buy IP's or are you now investing the equity into managed funds?

 

It's amazing how lucky one can get when they spend many hours doing research, maintain focus and buy when they see good value.

Really? I'll be sure to tell the guy I know who bought in January this year at low 200's who's place is now worth low 300's based on the sale price of comparable properties in the area.

With all respect crc, just because your experience with property was a poor one doesn't mean everyone else's is or will be the same.

Mark

 

It depends on the person. We have clients who are just getting into their first properties and we have clients who have 7 or more in their portfolio.

Too complicated, too inflexible.

So you don't think the capital growth is a benefit?

Mark

 

Some are, some aren't.

The PPI series aren't.

Too complicated, a put option under a managed fund?
Too inflexible, pull your money out whenever you want?

Regards,

Dan

This is not advice. Before investing speaking to your FPA registered Financial Planner, Accountant or Tax Accountant.

 

Yes this is true.

Really? So you can pluck 50% return in 8 months from property? Well prehaps we can compare that to a gambling company called Aristocrat which was $1.50 only to be $15 2 years later....

I never said all property investment is bad... many people made lots of money from it.. however going by your quoted figures here, making $100,000 on a $200,000 property, really your not quoting sustainable returns, nor returns 99% of people would be getting. Anyone can get a 1 hit wonder, but this doesn't mean everyone will achieve such returns.

Plus your telling me structured products are to complicated? Whats complicated about them? They are no more complicated than a house loan which is over 100 pages long with conditions..

Plus I'm not saying structured products are be all end all.. I actually got out of mine, but I was just illustrating the fact you can gear highly into managed funds just like you can into property.

 

Yes it is, but its not unique to residential property.

 

One hit wonder? Ask anyone who bought and held in the last boom whether they consider their returns 'one hit wonders'. There are people on this forum and others who have achieved similar returns from their 'one hit wonders' in Brisbane over the last six months. From what I've read Melbourne seems to be picking up quite nicely as well just now.

I never said it would always be so, there will be periods of slow or no growth, but you're the one that made the statement that it is impossible to replicate what Sim was able to achieve in today's market.

Mark

 

I must say that its fantastic to see a financial planner debating the topic of purchasing residential property so strongly. For something that has no trail commisions its great to see you push people away from lining your pockets.

If only the finacial planners who got banned today had this intergity....

I believe in real estate as many people on this forum do, Sydney will have another boom again soon, its all in supply and demand. Its all about picking the right spot to get good returns...

 

So lets use averages... and we all know the long term growth of property is about 8%PA. So using examples of $100k profit in 6 months on a $200k property is just a silly way to model a outcome. Sure there may be a spike and lulls along the way.

 

Its that is a good sign! But how do you know how he makes his money? Does he have a deal with a devoloper and make comission on a sale? Does he sell the finance and collect trail there? I'm sure he also charged $5,000 a pop to make up this plan.. nothing is free, and nor should it be..

 

Hi Dave,

Thanks for the kind words. I've always been a fan of property and I believe in it as a vehicle as part of achieving one's financial goals, should one wish to have it as part of their portfolio. I consider myself to be lucky - I work with someone who has achieved financial independence through property and who's knowledge of the property market in Brisbane is unparalleled.

For me, I don't do what I do to pay the bills. I do what I do because I want to help people achieve their financial goals. It's in my nature to want to help people be the best they can be. Although I'm not financially independent yet, I know it's only a matter of time before I am so it gives me a different perspective on how I deal with clients.

crc_error - such cynisism! Sure, we make money from clients buying property and we make money from clients putting money in managed funds and we make money from clients buying insurance and we make money from clients getting plans written for them. I'm not going to apologise for that - we run a business, not a charity.

But I put this challenge to you crc_error - find me one single client whom I work with directly, who has realistic expectations of what it is that we can achieve for them who isn't happy with the service I provide. I take great pride in trying to provide the best service I can to our clients and while I don't always succeed in that endeavour - hey, I'm human afterall - I will always try and do my best for every client.

As I've stated elsewhere, it never gets old when a client says to me something along the lines of 'If it wasn't for you guys, I wouldn't be where I am today'. There are no words to describe the feeling I get every time I hear that. When someone says that to me, I know I've done my job.

We are most certainly not your average, run of the mill planners and for that I am proud. As stated, we make money from clients buying property from us, but this is a percentage of the standard commission paid to all real estate agents and is fully disclosed to the client. There are no kickbacks, no hidden extras, no gifts or incentives or any of that rubbish. We don't sell high rise junk - or any other junk, for that matter - we source property that meets the specific Navra criteria - read Steve's property articles to get an idea of what these are. Is it a bad thing that clients come to us, wanting us to help them find good property?

Many of our clients don't have the time or expertise to source their own property, so with this in mind, do you think we are doing them a disservice by sourcing property for them? God forbid we actually get paid for doing so!

Mark