Sell House? and Invest Money in What?

AsSeenOnTv on 12/11/2021 - 18:16
Last edited 13/11/2021 - 19:35

We have purchased a new house and are wondering whether to sell our current house around April or May next year or keep it and rent it out.

And if we sell it do we just pay down the home loan or keep the $500k of the bank's money at around 2.5% interest and invest it in something else?

Rental returns are generally about 5% of property value per year, and house is a fairly old so will require a reasonable amount of maintenance as a rental.

So I was hoping to see what people though:
a) the property market was going to do in the next few years.
b) what a good, relatively conservative investment was that returns more than 2.5%

Thanks in advance.

EDIT: thanks for all the comments, not sure I'll pursue the dildo business but the other comments were useful.

Financial

Comments

  • deme on 12/11/2021 - 18:25
    +4

    Paging rektrading@ to tell you to put it in cryptocurrencies.

    a) the property market was going to do in the next few years.

    No one has a clue.

    b) what a good, relatively conservative investment was that returns more than 2.5%

    https://www2.asx.com.au/markets/etp/vas

    • AsSeenOnTv on 12/11/2021 - 19:11

      Thanks. That is pretty much my current thinking, or maybe corporate bonds because my wife is a very cautious investor.

    • sangohan on 13/11/2021 - 01:03

      shares can't really be called conservative. They are risky assets.

      • deme on 13/11/2021 - 09:40

        Please, I selected an ASX300 index ETF.

        To assess the risk you'll need a time domain, the longer it is the less risk there is.

        • sangohan on 13/11/2021 - 12:41
          +1

          the longer it is the less risk there is.

          that's an incorrect statement of risk. The longer the time frame, the more you can withstand high volatility, but it doesn't mean the risk decreased.

      • tims on 12/12/2021 - 12:27

        Shares are generally a great investment if you look over the long term. Choose a good company and plan to keep the shares for at least 10 years

  • screensaver on 12/11/2021 - 18:41
    +1

    there is no bank interest at 2.5%.
    I am with Australian Unity Diversified Property Fund, invested just under 80000 11 months ago. now worth 93000. However they are now planning to combine with their other asx listed property fund and convert to shares. I am not sure but we may be getting a 9% bonus, need to confirm. They do have another property income fund. You will need to check unit prices and distributions
    https://www.australianunity.com.au/wealth/investment-options…

    • MS Paint on 12/11/2021 - 18:53
      +4

      invested just under 80000 11 months ago. now worth 93000.

      I propose that Pam should become the formal financial advisor for ozbargain.

      • screensaver on 12/11/2021 - 19:58

        just sharing information that I have experienced

      • rektrading on 12/11/2021 - 20:13
        +1

        Pam is pamping her bags ozb. Is it ok I pamp my bags too?

        • screensaver on 13/11/2021 - 01:18
          +1

          what do you mean by that rubbishy sounding comment. OP asked a question, and I answered.

    • AsSeenOnTv on 12/11/2021 - 19:12
      +1

      Banks are charging 2.5% home loan rates so I need to do better than that otherwise I would just pay down the loan.

    • Yummy on 12/11/2021 - 21:09

      Hello screensaver!

    • AsSeenOnTv on 13/11/2021 - 13:37

      Thanks just having a look at the performance of the fund. Long term it is returning around 9% but has done 20%+ this year which is similar to the housing market and I am concerned there may be a subsequent period of low returns or even worse a correction. Still looks good though as the value is probably less volatile than shares and you can divest any time.

      • screensaver on 13/11/2021 - 13:46

        the distribution is the same each quarter, unless there is a special distribution of more (we got one when they sold a building) .

  • MS Paint on 12/11/2021 - 18:47

    keep it and rent it out.

    Will it be setup financially to be tax effective?

    • AsSeenOnTv on 12/11/2021 - 19:09

      It can't be setup to be very tax efficient unfortunately. We bought it 10 years ago for a fair bit less and we had mostly paid it off so we cannot claim much if any interest costs.

      • Pandaroo on 12/11/2021 - 23:00
        -1

        Look into debt recycling, you will be able to make it tax efficient.

        • AsSeenOnTv on 13/11/2021 - 13:51

          That's effectively what I am considering: take out the equity of our primary residence and invest it to get a return and deduct the interest cost. Unfortunately I can't claim the interest against rental income as it was nearly paid off.

          • Pandaroo on 13/11/2021 - 14:06

            @AsSeenOnTv: Yeah you can't just withdraw the equity. Refinance the IP, split the loan and invest the split portion into an income producing asset eg shares/another IP and you'll be able to claim the interest payments.
            See a decent mortgage broker and they can sort it out easily.

  • rektrading on 12/11/2021 - 19:10

    a) the property market was going to do in the next few years.

    Would you believe me if I told you that your house could be 2x in the next 5Y? Would you keep it or sell it?

    • AsSeenOnTv on 12/11/2021 - 19:16

      I would definitely keep it for 100% over five years. I am watching the market very closely ATM. October to October it grew 29% and Oct it grew 1.9% so it looks to be slowing but still at 23% per annum rate so as long as it stays this hot I will sit on it, but be ready to sell.

  • [Deactivated] on 12/11/2021 - 19:13
    +3

    Never sell unless you have to. Save some money and renovate, neg gear the money spent.

    I'm not a financial advisor but hey you asked on ozbargain

  • Seraphin7 on 12/11/2021 - 19:16
    +2

    a) the property market was going to do in the next few years.

    Go up, down, sideways, round-and-round in circles. Maybe all of the above, maybe some, maybe one, maybe none.

    b) what a good, relatively conservative investment was that returns more than 2.5%

    Well maintained and low maintenance residential property held through the market cycle.

  • Godric on 12/11/2021 - 19:16
    +1

    ETH

    • AsSeenOnTv on 13/11/2021 - 14:57

      I am struggling to understand crypto. I don't really see much actual use for it as a currency and so can't see much underpinning it as an investment, but then again you could argue the same for gold.

  • Kangal on 12/11/2021 - 19:21
    +2

    There's always money in Hummus

    • bloom on 12/11/2021 - 19:36

      I put all my savings on tzatziki… definitely should of gone with hummus

  • pharkurnell on 12/11/2021 - 19:26
    +1

    Chuck it into Helium.

    • Kangal on 12/11/2021 - 19:51
      +6

      That market is pretty inflated as it is.

      • Pascal on 12/11/2021 - 23:24
        +2

        Sky high, indeed

    • parsimonious one on 20/11/2021 - 15:59

      Pfft… lightweight

  • netjock on 12/11/2021 - 21:10
    +2

    Unless it is a money pit think carefully before you sell. Because after agent fees and all the transaction fees I'd suspect you won't be able to get back into the market given how expensive stamp duty is.

    I am not a property sales person. You can still get the PPOR exemption up to 6 years so unless it is a money pit have at your options then hit the sell button.

    • AsSeenOnTv on 13/11/2021 - 08:48

      Yes agree. The main reasons we would sell is if the market has flattened out and going to stay flat for 5+ years which is kind of what I am expecting (and think we need because prices are rediculous).
      We definitely want to avoid selling to then just buy a similar property again.

  • johndowy on 12/11/2021 - 23:46

    $500k? I have calculated the tax and all associated fees in the sale?

    • AsSeenOnTv on 13/11/2021 - 08:40

      We currently have two properties in the same loan (new and old). The part if the loan secured against this property is about $265k and this property will sell around $1m.
      So $1m less:
      $20k agent fee
      $3k styling
      $3k marketing
      $2k solicitor
      $265k loan
      Leaves around $700k. We want to have some available for redraw in case we need it so there should be easily $500k. This is all the bank's money but I figure if the loan rate is around 2.5% I should be able to invest it and make an extra margin.

      • screensaver on 13/11/2021 - 11:33
        +1

        you get 5% p.a, in The Property Income Fund, paid quarterly. On 500k thats about 25k a year. They own their own properties,Also the unit value gives capital growth

        • screensaver on 13/11/2021 - 11:55

          There next investment is in disability housing, backed by NDIS funding

        • rektrading on 13/11/2021 - 12:09

          $500,000 is a lot of capital for a 1.2% 1Y return.

          • AsSeenOnTv on 13/11/2021 - 12:47

            @rektrading: If it is a totally safe 1.2% I would definitely be interested as it is the bank's money so it's all gain for us.

            • screensaver on 13/11/2021 - 13:10

              @AsSeenOnTv: i invested because it was not a mortgage fund, they had their own diversified properyt for security, and their was capital growth as well as an income. If I hadnt, and just gone with bank interest. I would have had to dip into my capital and would likely have a lot less now.

          • screensaver on 13/11/2021 - 12:59
            +1

            @rektrading: its 1.2% per quarter, not per year

            • rektrading on 13/11/2021 - 13:36

              @screensaver: Did you factor in a 3.8% 1Y inflation rate in your 5% 1Y return?

              • screensaver on 13/11/2021 - 13:37

                @rektrading: I made a lot more than 5 per cent. I had capital growth too. I made 13000 on 80000 in 11 months. My sister fund sold a building and gave us a special distribution. I believe theirs did too, I think I saw it somewhere

              • AsSeenOnTv on 13/11/2021 - 13:44

                @rektrading: Inflation is one of the reasons I would like to have the bank's money invested. Even if it just tracks inflation at 3.8% but I am still only paying 2.5% then I am still up 1.3%, less tax so ~0.9% after tax on $500k that is still $5k.

  • MrThing on 12/11/2021 - 23:53
    -1

    Rental dildo shop

    • CMH on 13/11/2021 - 00:15

      I want some of that action.

    • parsimonious one on 20/11/2021 - 16:01

      Tough market, too much stiff competition

  • El cheepo on 13/11/2021 - 01:28

    Stonks

  • Team Ozgiftcards on 13/11/2021 - 07:21
    +1

    Can you do anything with your old house?
    Is there demand for your old house?
    Reno / subdivide / build / partner with a developer.
    You’ve got 6 months to sell a principle place of residence and pay no cgt.
    See a town planner and accountant.

    • md333 on 13/11/2021 - 12:42
      +1

      You can sell later and still don't pay CGT on the time it was PPOR, only on gains since you moved out. Worth getting a valuation done now, in my opinion, though noone ever asked to see the one I had done (probably only an issue if audited).

      • AsSeenOnTv on 13/11/2021 - 12:45

        The usual approach is to divide the gain evenly over the total period which actually works out much better as most of the gain has been in the last two years and it has been our poor for 10 yrs.

        • md333 on 13/11/2021 - 12:54
          +1

          If you know the value you have options though.
          A lot of areas are at all time highs now, so quite plausible you might sell in 5 years for the same value as now, which would mean no capital gains tax based on valuations, or quite a bit based on averaging.
          You can always ignore the valuation and using averaging if it works out better at the time.
          The last place we sold in Perth 7 years ago is in a suburb that hasn't increased in value since, and there was a 300% gain in the previous 10 years while it was our PPOR. (not really a fair comparison as that was the individual property gain, not the suburb median).

    • AsSeenOnTv on 13/11/2021 - 12:43

      The house is not too bad and is 90% renovated so there is good demand. It's not zoned for subdivision and it's not worth knockdown rebuild at this stage.

      I'm not too worried about cgt at this point as even if we have to pay tax on some of it it has been our primary residence for 10 yrs so the amount of cgt would be very small.

      The street has been upgraded with two new houses and others being renovated so it is at least as good as the broader market.

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