Best and safest way to do this?
She is getting this from an Estate and has no idea what to do
Sister Will Have $1.7m after Probate. How to Get 5% Yield Per Year?
Lpoczynek77 on 29/09/2021 - 15:43
Comments
- 1
- 2
How's the commercial property industry going with working from home becoming the new norm? (Especially in NSW and VIC?)
I would assume warehousing, distribution and industrial commercial property - not just office spaces.
Commercial Property is a pretty broad category, just have to buy the right assets! The company I work for purchases Roadside Retail (Service Stations), Shopping Centre (mainly regional with a Coles/Woolies and minimal specialty tenants) and Childcare assets. All deemed 'Essential'. 98% of rent received during COVID lockdowns last year. No office buildings help!
Ok so those Turkey's probably kicking ur butt on returns converting office buildings are in the wrong field ?
what fund is this?
I'd suggest getting into investing in Agri REIT's. Support the nation's food bowl, excellent returns above 5%, and less risk than shopping centre assets (although regional ones are safer, but poorer potential returns, also childcare assets… yikes!)
There's nothing quite like backing a horse called self-interest.
what are the odds?
Make sure they're a fiduciarEEEEE!
Lol i was about to post something like this! You bet me with lots of downvotes. Wow
It looks like people only want 5 finger returns.
Hi Matthew, greetings from NSW on a beautiful morning (after a couple of stormy days)
I wonder if you could give me a steer about how to get started in Commercial Property. I’m currently mainly invested in dodgy mining stocks and want to diversify!
Based on the Central Coast, about an hour North of Sydney. Would prefer something in the area - possibly Newcastle.
Should I be looking to find a buyer’s agent? What are the traps and pitfalls? What’s the deal with GST and Commercial Property? Should I be looking at retail, warehouse, industrial, office, etc?
Many thanks for your time
Nic
Pay a financial advisor and ask them about yield. It would be interesting to see how much their advice is worth.
When you have $1.7m cash paying $1k for good financial advice is just bloody logical. Isn't it? Maybe not.
Nice sibling flex by the way. Why aren't you getting a share?
To be fair the financial advice/wealth management industry haven't had a good reputation recently (or ever really IMO).
I know several respectable financial advisors, who are good people and unhappy with the type who rorted their incomes off trailing commissions.
Their advice is very mainstream, however. Leverage into real estate to bring down your tax bill and aim capital growth. Buy income insurance because your biggest asset is your earning potential.
EFTs are a quick and easy way to build a diverse portfolio.As has been pointed out to me on this forum, there are advisors who can be worth a lot, like preparing to move into aged care.
And I am sure there are advisors who can recommend secure, moderate yield investments.I’d be surprised if the answer here didn’t involve putting a bunch in super over the next few years, paying off any debts, making sure she has a good place to live and understanding any dreams she may have.
Absolutely consult a financial planner!
Industry super funds have reasonably priced financial planners who charge a fixed-fee and won't take a commission. They'll probably be biased about super, but otherwise I've found them to be really good.
There are some good guides on CHOICE. Look for someone who can attest to being "independent", since that term is highly regulated.
@kranix: No financial planner in Australia can receive a commission on a investment. I am also not sure why you would see a person who is tied to a product provider. It would usually be considered more prudent to see someone not tied to a product manufacturer.
@Ashbargin: Financial planning is a lucrative market. With most planners, the more you invest, the more they make off you. How that's structured (commission or not) is less important.
The Industry Funds planners (they're a separate entity: they technically don't work for the fund), from what I've experienced, have very reasonable flat-rate fees. Yes, they may have a biased with superannuation, but that's a far sight better than most of the alternatives.
Or, as I mentioned earlier, look for an "independent" planner. They can be more transparent and probably give a flat fee. They'll probably cost more up-front since their business model isn't subsidised from elsewhere.
Leverage into real estate to bring down your tax bill and aim capital growth.
In 2021? Yikes!
They'll probably cost more up-front since their business model isn't subsidised from elsewhere.
Except that salary/life insurance plan they refer to their insurance mate.
EFTs are a quick and easy way to build a diverse portfolio.
which EFT should I buy? Mastercard or VISA?
When you have $1.7m cash paying $1k for good financial advice is just bloody logical. Isn't it?
LOL this is OzBargain. You just want to save money, never mind the financial impact it is going to have. 50% off something you don't need is better than making 10% off that capital.
More likely $5-10k..
Transfer it to my account, I'll give you 15% yield if you want.
My investment plan is rock solid, going to by a heap of A200 "AMG"s and sit on them for a few years as they inevitably appreciate in value.
You can only get an A200 AMG line (with fancy seats and trim etc), or you can get the A45 AMG (with the beefy engine)
You must be new here…
Oh no I know about the high yield investment alright. I just think we have to put that investment to good use. Faster cars make it easier to get to financial management meetings with colleagues
@pegaxs: The first comment in the A200 is a reference to the high yield investment thread :)
Amazing they got so many serious answers after the not-so-humble brag.
Thus the " "
Also can't forget that the AMGs make journeys faster as time is money. Maybe he wasn't talking shit after all…
@burgermaniac: nah tesla in that case. faster and no need to fuel at petrol station, that's an extra 10min every week.
VE-VF SS Commodores are the current hot commodity. Don't miss the boat!
What did you get and what you are doing with it? Can Sister not leverage your approach?
Vanguard ETF's
Not enough information. Why did you specify 5%? What is yours/her risk profile? How old are you and how long term do you want this investment to be?
At the very least I would recommend diversifying.
Or you can just bugger all that advice and either put it all on black or all on DHHF.
5% is $85,000 1Y and enough to live a modest lifestyle.
$85k spending a year is modest? Is this OzBargain or Whirlpool??!
It hasn't been taxed yet though.
$85k is the average (mean) full time salary. It's about how much a school teacher makes. We don't know if she has a family to support, a mortgage to pay, where she lives, etc. While it should be enough for a comfortable lifestyle for a single person, it's not going to be a lavish lifestyle if she's supporting a family in Sydney.
@macrocephalic: 85k is closer to what a graduate teacher would be on, depending on what state you are in. Teachers with several years experience can be up around 115k in NSW, thats without any additional duties or management which of course gets even higher pay.
@J6: Pretty much the max level as a teacher in QLD is 104k. Head of departments and deputies etc make more.
Is sister single?
Asking the real question I see
Single and 80.
Isn't that even better?
Works for me. Where do I send my proposal of marriage?
become a financial planner.
Convert to bitcoin
If it goes to $1M USD/Bitcoin by 2030 like they are predicting then that $1.7M would be worth $53.7 million dollars if it's also staked in Celsius at 3.6% APY.
Or a stablecoin such as USDC 8.88% per year (but not USDT) again though Celcius if you don't want the volatility of a non-stablecoin crypto such as BTC
She can buy 21.25 $80k high yield investment vehicles with $1,700,000
Good bot.
Too many variables. Age, lifestyle, current housing situation, employment status, family situation and so on.
This certainly wont be a welcome answer here but I'm going for it nonetheless!
Buy a house? or 2?
Just going of my area, Western Sydney, which is probably one the worst areas in the country for yield, should be able to get two 3-bed houses or 3 2-bed apt that will make around $450 p/w rent min each.
That's about 20k p/a each after management fees and the like so about 40k/60k for each option respectively. And yes while that's below 5% cashflow p/a specified the properties will continue to appreciate at a rate that will exceed the overall 5% per annum you (your sis) require.
Going off better cities/areas for yield (i.e Canberra) you could be making more like $600-$800 for a similar house and $500-600 for each apt. Leaving you with $66k-$78k est. per year, which is bang on the 5% specified.
Going off the stock market though most major (blue-chip) companies are avg. at around 3-4% div yield so you wouldn't be making the required amounts there either.
With the properties mentioned, you could then branch out when you're more confident and get another loan to purchase another property showing the equity & income coming from these 2/3 and be able to make the repayments with funds to spare.
Hopefully this way you can build multi-generational wealth and also have a fully paid off roof over your head if that's something not readily available now/in the future.
Rent would over the long-term continue to rise giving you an increasing yield over time, and on top of that you'd rake in hefty Capital Gains too.You're right it won't be a welcome answer. Mainly because it's way off the mark.
A $1.7m house in Sydney will get $700 a week on average. You're certainly not going to get 2 anywhere but the darkest corner of Sydney for that much. That's gross of 2%. Net of expenses with a loan anyway you will be losing money. Without one you'd be lucky to pull 1%. That's how most people do property "investment" in Sydney.
Apartments will have better yields but again you'd be lucky to get a positive net in Sydney or Melbourne.
If you want high yields in property you need to take risks so slum-lording in small towns would get you 5% but then you have the risk of properties being empty, tenants not paying etc.
As someone else said commercial would probably be better but spreading the risk is key as they can be vacant for years. The current commercial market has the reverse problem of housing in that we have had a rent bubble in recent years. When leases expire and businesses go bust after Covid a lot of the ridiculous rents being charged on commercial property will correct.
Way off the mark? Clearly you didn't read my answer.
I specified Western Sydney, and I recently bought a 3-bedder for well under 850 and am getting the aforementioned rent I specified, and can corroborate that with many similar experiences across my wider family/friends circle. My parents/family & friends have a large number of investment properties, and pre-COVID, only one instance of abusive/non-paying tenants ever came up and if you have decent landlord insurance you'll be fine on that front too.
You sound like a pretentious eastern suburbs elitist, if you're going to call a thriving, safe and well-educated part of Sydney the "darkest corner". Yes, a lot of us are immigrants, or of that background, but we're hard-working and contribute to Sydney's thriving & diverse landscape and don't detract from it.
Thank you for generally referring to a large area of our city as a slum-lording town, clearly you're one of the affluent Sydney-siders who dares not venture out past Olympic Park in fear of getting stabbed.
Yes there are areas that are quite backwards and detached from society, but that's apparent across the city and not isolated to the west (looking at you Redfern).
TBH these are areas and people that should be supported and integrated further to provide better outcomes for all, rather than being isolated.Using a general metric for a Western Sydney property (if you buy well) you can get a 3 bed for <850k, get rent of $450-$500 and have expenses (maintenance & management) take up about 15% of income (personal experience). You can expect about $20k per annum cashflow from a $800kish property or a net yield of 2.5% (Gross of about 3-3.5%). Build a granny flat on the property (about 100-150k), and you can increase each of those another 2%.
So YES its under the metric specified but also comes with handy benefits such as:
- having an asset that's expected to continue increasing in value
- have increasing yields as rents continue to rise whilst your initial capital investment is near constant
(parents place in the area is about 4% yield for a property valued at about $850k that was bought only about 5 years ago)
- having yields that by and large will remain extremely consistent, frequent and not subject to board decisions
- having a secure asset that you can use for other ventures in life that a bank will easily accept as a form of securityGoing off the place I bought less than 6 months ago. I could build a granny flat within the $850k constraint and therefore get a rental income of about $850p/w. Leaving 15% for maintenance and management fees, I'd be getting 4.4% p.a yield which is bloody close to what the OP expects. Do this twice and you can use the full budget specified and diversify across 2 areas where growth is likely.
I never mentioned Commercial property either, but agree with the sentiment. However that person cleared described the sector that he works with in Commercial Property and his justification for investing in it sounds perfectly valid.
I expected my response to be frowned upon as it would be contributing to the reduced housing supply for O/O and first home buyers who really do have a tough time getting their first steps in (I'm one of them). Nonetheless they're a solid investment tool and unless something changes there, it'll likely always be a target for cashed up investors.
The median house price in Sydney is now $1.4 million dollars. You absolutely will struggle to find a house for "well under $850k" in all but a few postcodes. I don't need to be a "pretentious eastern suburbs elitist" to see that, I can just do a search on Domain and come to that conclusion.
Sorry I didn't read the rest of your reply because when you start off attacking someone for facts it's hard to take the rest of what you say seriously.
@kbbargains: come on mate, you clearly fired the first shot and I sincerely read your whole response before replying (seems you've failed to do that twice now).
What your saying is not wrong, but you're going on tangent to what I've said.Yes the median SYDNEY price is $1.4million, but that's heavily skewed to the multi-million dollar properties that are located everywhere to the east of Strathfield (Strathfield/Lidcombe is commonly regarded as the border between Western Sydney and the Inner West). There's about 44% of Sydney's population who lives to the west of that line and the median there is just hitting $1m now, but again is largely skewed by properties bordering the Inner West and large quarter acre+ blocks out in the far west.
Standard 500-600sqm blocks with an average decent condition 3-4 bed house on it are still at the 800-900 mark, and are ideal buys without any major structural/geographical issues. There's a reason why this area is growing in value so quick and that's because investors and FH buyers see the strategic value in the area with major infrastructure investment alongside strong yields (compared to the rest of Sydney).
A quick domain search would reveal just that, and hopefully you'll come the conclusion that its not just a couple of postcodes but rather a large swathe of Sydney suburbs if you know what you're looking for.
@harthagan: Yeah you're right, meant to say and report the average but I guess most understood what I meant.
For those who didn't, I meant that prices in Sydney largely take the shape of a negatively skewed bell-curve (esp past $1m)
This however doesn't mean that there isn't a significant number of places in Sydney where houses can be bought under $1m
For reference: Negatively Skewed Bell Curve@JDMcarfan: Median and average are different year 10 class maths should of taught anyone that.
I agree with @jdmcarfan you can find properties under the 1 mill mark Blacktown etc 450 square meters plus to build granny flats. 800 bux a week in rent two properties should be enough for a 10-15 years.
I bought a 3 bedroom townhouse for $390k in Perth, it brings in $430pw so pretty decent return.
Different story out east though I think.
wow where is this exactly? and when did you purchase it?
@selphie: Was about five years back, but there are loads of three bedroom places for sale under $400k, even now. 10km from city center too.
I dunno, I feel like property is definitely the way to go but it requires a lot of start up capital. As an example, a recent sale of a house in Haberfield went for $7M dollars, this was bought for $1.3M in 2008. So even if you get a measly 2% rental return ($500/week rent), that would be an income of $438k/year + $26k/year in rent = $464,000/year or an average return of 35.7%/annum for 13 years straight.
As long as the population keeps going up and the land goes down, house prices will keep going up. For those that can't borrow $1M+ from the bank, we've got to rely on crypto trading to one day get us there :P
Alot of people think you can just buy a house and rent it out. Buying a house in an elite area there are renters but they are not going to pay the big bucks like 1k a week in rent.
Plus not to mention high turn over of tenancy damage to property marking on the wall I like one life long tennant at a discounted price to market value affordable set and forget
Sorry for her/the loss…
As for her gain…"has no idea what to do"… How old is she?
Happy to help her spend it 'wisely'. :)
clearly OP is sad and grieving
must get the ozb post in though to see what he can do with the money
100%…the PC portion of my brain says, I still need to extend condolences.
Maybe we can find some discounted flowers to send her… sorry, I mean him!… Ok, maybe both - OzB 2 for the price of 2? lol…PC Principal is that you?
I can give you a little heads up. I am in a fund with a 5% yield, they own the type of properties mentioned above and gives capital gain too. The heads up is that one of our other funds wants to merge with us and will pay a 9% premium if it goes through, So thats a nice chunk of change. I am with Australian Unity Diversified Property Fund.
Australian Unity do run some good funds they are worth looking into.
Yes I just found out about the proposed merger and am looking forward to a bonus windfall.
Get some proper advice that takes into account age, current employment, current assets and liabilities, risk profile, etc.
Do you really need 5% income which may have some tax obligations or negligible income and growth?
If it was my 24yo daughter with a decent paying job I'd say max out super including any catch-up of concessional contributions. Buy a modest property somewhere. DCA $10k each per month into VESG for access to Apple, facebook, amazon, etc; IVV (S&P500) and VDHG (lots of things plus bonds).
put it on a multi
always back the greyhound that shits before being put in the starting box.
Choose a reliable ETF/s and throw in like 60%. Now ain't a bad time considering shit has dropped with all the drama. Maybe 30% in crypto if you feel like investing time to research it. Leaving 10% on the side as I'm assuming there may be a situation of luxury buys after getting the lump sum.
Without any context of the age/background/health/ or anything at all about the person.
- Pay off all debts; of the remaining,
- Set aside 1 year worth of living expenses in a high yield savings account, of the remaining,
- set up a will
- Set aside 5%-10% to "play money", of the remaining,
- invest in combination broad stocks/bond index funds - with more weight to bonds if more risk-averse or have a shorter life expectancy.
This
Completely agree. The only thing I'd add is to put the max into super every year if possible to offset tax.
Broad indexes return more than 5%pa on average, but there can certainly be lean years. Be sure to let the fund grow to allow for inflation.
Makes too much sense. Not sexy enough for some people.
Is your sister still single? 😁
Ok more context!
-single but not looking
-she wants 5% because this will pay off her rent for the year approx
-she has seen a financial advisor however is looking for as many opinions as possibleHer rent is 85k a year? :o
If her rent is 85k, she already knows exactly what to do with 1.7M.
If she's renting she should probably buy a cheap PPR…
PPOR is tax free capital gains. Could buy a home in a family friendly area close to schools and public transport, and live in it.
Compare to 5% profit on other investments, after tax it is closer to 3%, which should be achievable even in the slower property market that will be seen in the years ahead.
no age ? context ? existing financial status/security ?
if renting, others suggested buying a home, tho' some like rentvesting - I know one beach who bought a 'home' high on the FHOG, lived there 6 months to qualify, then moved out and rented it out to pay her mortgage and claim the mortgage interest as a tax deduction which you can't do for your home
others like ETFs which go up and down
near 60yo super can be low tax concessional contributions - I think you can put maybe $300K as an after-tax non-concessional contribution (using the 3 year bring-forward rule), then after 60 it becomes tax-free if you convert it to a pension
if young, they may want access to funds - tho' beware too liquid is too easy to splash and burn and then it's 'where did the money go … ?'
most financial advisors are constrained by law to recommend a will and income insurance, ya dee yar - and then suggest standard balanced investments
if she doesn't need the cash, higher returns come from higher risk
my IVV (ETF AU copy of the US IVV ETF based on the US S&P500 index) returned about 30%pa last year - next year could go down the toilet - but on average will probably return at least 5%pa
if she wants more cash out each year (higher dividends), that's higher tax, so think about her marginal tax rate
if $1.7M in IVV returned 5-30%pa that's like $85-510Kpa - the 45% marginal income tax rate kicks in at incomes over $180K so would she be happy paying $38-230Kpa income tax ?
I think my IVV was mostly capital growth (not taxable until sold) and something like 1-2% dividend (taxable) e.g. only $17-34Kpa cash payout - if she has a full-time job paying say $45Kpa and add $17-34Kpa cash payout to total $62-79Kpa income that keeps her in the 32.5% marginal income tax bracket so only an additional $6-11Kpa income tax…
so does she want more cash in hand then have to pay more tax - or need less cash so can pay less tax ?
I'd invest into a diversified index fund, like one of the Vanguard ones; VDHG or VDGR… both great long term growth options with very decent yield.
- 1
- 2
Ask a financial adviser. Good quality Commercial Property is always a great way to get yield. I work in the industry so happy to give your sister a recommendation if she likes