Hi there, my partner and I are looking for a financial adviser experienced in property investing but also all round as we need direction with superannuation, savings etc. We currently own one house (mortgage on it), one block of land (mortgage on it) and building a new house on that block which we will move into and then sell current house. We would like to invest our sale of house proceeds into some new houses and are wondering if that is the better way to go? We make $220,000 a year combined in gross income plus super.
Andrea from Melbourne
Top answer provided by:
Thank you for your question.
There is no simple answer, as everyone’s situation is different and it is harder to answer without understanding where you are today and what you want to achieve.
It is important to find a financial adviser who can help you identify your goals and then provide strategic based advice on helping you achieve them by looking at your various options, not just investing in property. I would highly recommend interviewing several Qualified Financial Advisers and finding someone who suits you, prior to making any investment decisions, and ask them for case studies of how they have helped people in similar situations.
Looking back at your question, I think firstly you need to consider exactly what the purpose of the investment is. For example is it to fund your lifestyle in retirement or for your children’s education?
Some of your key investment considerations are:
- Investment Return - what type of investment return do you need to achieve your goals?
- Time Horizon – how long until you need or want to access your investment?
- Risk Tolerance – what level of investment risk are you willing to take or do you need to take in order to achieve your desired return?
- Liquidity – do you need access to funds you have invested?
Once we understand the above, we can then consider the right investment and structure for you.
You have mentioned you are interested in new houses and property. ASIC’s Money Smart Website offers some good information about Property Investment (https://www.moneysmart.gov.au/investing/property)
A few considerations to highlight when Property Investing:
- Property is a long term investment and the suggested minimum investment timeframe is 10 years. It is not clear from your question how long you have to invest and if you can afford to hold the property if things go wrong.
- Leverage: By borrowing to invest you can magnify returns, but you also risk magnifying losses. With this in mind, property can be a good asset to generate wealth as you are able to borrow at reasonable low rates to acquire. In saying this, you are also banking on the property going up in value.
- Buying/selling costs can be expensive when you factor in things such as Stamp Duty, Agent Costs, Building Inspections, Legal Costs etc. If you really want to purchase more property, have you considered holding onto your existing house as an investment?
- Property Selection is important – not every property goes up in value. The Melbourne property market has boomed over the last decade and has made people a lot of money. But that doesn’t mean everyone makes money. I have seen it numerous times first hand – people who have selected poor investment properties and actually lost money during this period. You can never guarantee investment return, but a good way to minimise the risk is to do your homework and if you are not confident, consider an Independent Buyer’s Advocate.
- Beware of property spruikers. I often see internet advertisements promising fabulous and easy returns from property investment. If it seems too good to be true it often is. So be careful!
- Long Term Strategy: If you decide property is your long term strategy, it is important to plan ahead, in particular considering the structure of your purchases, taxation implications and finance. Setting up incorrectly from the start can be very costly, and with finance becoming harder to obtain, it could potentially halt your ability to purchase.
The above is not meant to scare you off property as an investment, but I just want to highlight that you need to consider both the pros and cons of any type of investment, and the most important thing is put a long term plan in place.
While the Adviser Ratings Website facilitates the question and answer functionality, all such communications are between users and authorised financial advisers, of which Adviser Ratings has no affiliation. Adviser Ratings is not the advice provider and does not provide financial product advice and only provides information that is general in nature.