# House vs Stocks advice appreciated



## Ants (17 May 2006)

HI There. I will cut to the chase because typing is not a strong point.
I have 3 properties 2 of of which are tied to one I own/owned?
The equity in these have grown considerably. I must say that they are all only units and I come from Perth so market values are probably lower than where you guys come from. 
They are collectively about 650 in value with about  230 owing. 
So with that said. 
I must say that I am renting (a ****box) and have them all tennented So the whole project is nearlly 90% neutrally geared (approx)
My situation which I am having a hard time figuring out is whether to buy another place at which I am looking around 400000 in total.
By selling off a unit @200000
loaning 200000 repayments 7.7% lo doc approx 15000 a year
*Then the CGT on the sale * 
There may be some savings from renting a room (not that keen but could be done)
or
Keep renting cost  approx $8000-9000 per yr
and borrow to get into stocks/funds or whatever else

So *Pros* of *house * are I could live in a decent place small cap gains

*Cons* expensive repayments with little growth over coming years Most gains have been made in Perth Market and I am really buying @top of the market.
No reall tax advantage that I see because I will be going back to school to study so no reall income (unless any of my speccies come thru  )
And the Pros and cons of fund s and stocks are....?? Please fill me in

I know this is an incomplete explanation of my situation . Ive done my best and quickest. So thanks for any advice 
Ants.


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## Prospector (17 May 2006)

You will get some who say Only Property - some who will say Only shares, and others like me who do both!

Pros and Cons (for me) of shares are:

I can invest in shares with small amounts of money
I can get access to my cash in 3 days if I need to
I have been lucky and seen immediate returns in shares
I can control losses by quick sales
Shares dont need maintenance (the hot water service never breaks down!)

Cons
You can lose money as a result of situations out of your control
You need to know what you are doing - have a plan etc etc
Documentation is required

CGT will be the same regardless of which investment you choose.

I'm sure there are others!   I have investments in both property and shares, they serve different purposes so maybe check out your circumstances with a good advisor!


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## dennisll (17 May 2006)

Hi Ants,

From the information you have provided, it looks to me like you have a better understanding of the property market, especially since you already have 3 units.  Thus to me it makes more sense if you continue to invest in your area of expertise.  Granted that the Perth market is possibly at the high end of the investment cycle, you are still in a better position to gauge the future profitability of any investment you make there as against stocks.  Have you considered investing interstate?

If however you were looking at learning about how the stockmarket works and would like to invest in it as you would in property, then I would suggest you take baby steps and not commit a huge amount quickly.  As we have seen in the last few days, the stockmarket can be very unforgiving especially to the uninitiated.  Take your time and learn through experience.  With time, you will be at a level where you are comfortable to allocate the same size of capital as you have done in your property investments.

Lastly, if you are moving to a situation where you will have no income, it might be prudent to investigate safer alternatives to both the property and share market as you might be dipping into your capital while you are studying.  The last thing you'd want to happen is to need to access your capital in the middle of a bear market, either in shares or property.

Please note, this is general advice based on the limited information provided.  It would be best to consult a financial planner for advice more specific to your situation.

Regards,

Dennis


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## tech/a (17 May 2006)

> CGT will be the same regardless of which investment you choose.




Urrr ----*Perhaps not*
.
Well first thing I would do *is move into one of your units* for at least 12 mths.

Youll save the best part of your rent and most importantly you'll avoid the CGT if when you sell it its been your *principal place of residence * for atleast a year,There is a limit on this so get pro advice.
This in itself could be a 50% saving!!!

If you wish to try out shares get a line of credit and use *Some* of it to feel the water.
Again get advice on a decient portfolio.

In 12 or so months you'll be in a much better position to do what you want.
Maximise profit my friend it comes but once!


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## Smurf1976 (17 May 2006)

Prospector said:
			
		

> Cons
> You can lose money as a result of situations out of your control
> You need to know what you are doing - have a plan etc etc
> Documentation is required



All of those points apply to practically investment if you want to make a profit and keep it when the boom ends.

Anyone could have made a profit during the house price boom earlier this decade and now the stocks boom. Just buy any house or practically any stock and watch it's value go up. Easy... 

But when the boom ends many will lose those profits. Indeed that has already happened to those who bought into the Sydney house price boom at the top. With leverage, they would now be sitting on massive losses. Likewise those who bought into dot.com stocks in early 2000 etc.

So I contend that any investment can lose, at least in real terms (even cash can lose in real terms) if the timing is wrong.


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## bullmarket (17 May 2006)

Hi Ants

interesting situation you have there.....unfortunately I doubt you will get much more than general advice in a forum like this but at least that would be a good start.

The way I would tackle trying to decide what is the best option going forward is to set up a spreadsheet to model the expected income and returns *(after tax)* for the various scenarios you are considering.  You might have to get some professional advice on the tax treatment for each scenario but imo if you have  'realistic' numbers and a model to predict likely returns then at least you will be making an informed decision when choosing which path to take.

Good luck 

bullmarket


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## Prospector (17 May 2006)

.
Well first thing I would do *is move into one of your units* for at least 12 mths.

Youll save the best part of your rent and most importantly you'll avoid the CGT if when you sell it its been your *principal place of residence * for atleast a year,There is a limit on this so get pro advice.


My understanding is that you still pay CGT on the proportion of time that it wasnt your place of residence!


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## Prospector (17 May 2006)

Smurf1976 said:
			
		

> All of those points apply to practically investment if you want to make a profit and keep it when the boom ends.
> 
> So I contend that any investment can lose, at least in real terms (even cash can lose in real terms) if the timing is wrong.





I was thinking more along the lines of HIH and the like!


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## tech/a (17 May 2006)

> There is a limit on this so get pro advice.




Hence the comment.
If he had it for a year or 3 even could be worth considering.
given the gains


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## bullmarket (17 May 2006)

Your understanding is correct prospector 



			
				Prospector said:
			
		

> .
> Well first thing I would do *is move into one of your units* for at least 12 mths.
> 
> Youll save the best part of your rent and most importantly you'll avoid the CGT if when you sell it its been your *principal place of residence * for atleast a year,There is a limit on this so get pro advice.
> ...




cheers

bullmarket


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## Ants (17 May 2006)

YOU all rock! Thanks very much for yor insights. I will be taking these ideas and applying them to my decision making. Taking time out to answer is a gracious gesture. So I thank you all again, even you bullmarket : 
You have all been a great help in my foray into the stock market and I have found an interesting and hopefully rewarding way to invest.
Ants. 
ps I'll let you know my decision and reasons when they are made.


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## bullmarket (17 May 2006)

no problem Ants


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## grumpee boi (17 May 2006)

This is only my opinion (take it with a grain salt as you appear to have done well by yourself).  I would be inclined to look at diversifying your portfolio as you will be getting severely overweight property if you purchase another one.  There would be some people that would suggest that you cannot be overweight if you are experiencing gains but there are people on this board old enough (I am not one) to have been through 2 RE and sharemarket cycles.  The problem with being overweight in one is that it is great while it lasts but then there is the downtime.  Think of it like two sine curves cancelling each other out and making for a much smoother and tolerable ride.

I don't know how old you are but if under 50 then there is a strategy known as debt recycling.  You basically convert your non-deductible home debt into deductible investment debt - which you appear to have done with the investments.  Generally it is done with shares and establishing a portfolio.  Say you are comfortable with an LVR of about 67%, then you could borrow back up to around 430k or a portfolio of $200k.  This would probably be way too much if you don't have much sharemarket experience and I would not recommend it.  As techA suggested maybe you could just increase your loans with a line of credit and start off with a small 50k portfolio and see how you go.  

Having said that, the sharemarket looks like it is overvalued at the moment but depending on how old you are any retracements will offer a good buying opportunity for the long term.  After all, the sharemarket is bascially a general barometer of the capitalist system and things look good over the longer term with China really embracing the way that we do things here in the west (economically at least).  

I have a friend that I have just helped get into some passively managed investments with the express knowledge that the market is likely to go down over the next 12 months believe it or not.  Rather than invest 10k and then 1k monthly we decided on 5k and 700 monthly.  He is only 31 so it is a perfect introduction for him to the sharemarket and to see just how he reacts to drawdowns over a sustained period.  When I questioned him on what he thought his risk personality was he thought he was gung-ho aggressive but it turned out he is much more conservative than he thought.  Hopefully he will get to experience a drawdown over the next 12 months as I have prepared him for one and then we can ramp up his wealth accumulation.

I think it is important for you (and all investors) to experience the downtimes early on so that you can really determine what you are comfortable with and what you simply cannot tolerate.  Then readjust your strategy accordingly moving forward.

Who knows, you may even find that shares make you sick and it's property for you.

Adam


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## 3 veiws of a secret (17 May 2006)

Tilt panel factory should be considered in the equation!!! when you look at the domestic housing property market for rent your always scratching a living ,with tilt panels ,easy up keep,but consider the fact appreciation is not as great     :beat: 
Again why buy in Australia ,have you thought of Europe? Also have not read this thread through ..............time out!


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## 3 veiws of a secret (17 May 2006)

Ants -I don't think my  last remarks matter to you -just generalising I guess!


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## RichKid (17 May 2006)

This is a related thread, remember that similar threads to the current thread appear at the bottom of each page, that's where I found this one, it might help plug some gaps or add new perspectives: https://www.aussiestockforums.com/forums/showthread.php?t=782


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