Author Topic: Australian Investing Thread  (Read 479732 times)

kivex

  • 5 O'Clock Shadow
  • *
  • Posts: 9
Re: Australian Investing Thread
« Reply #2800 on: February 23, 2017, 01:50:17 AM »
My wife and I recently opened an account (joint names) with the Vanguard wholesale funds. Our tax brackets are 32.5c for my wife and 45c (47?) for me.

Tax wise, would it make much of a difference to create a family trust and transfer our Vanguard fund to the trust? We have two children (7/10) so would that mean the trust could pay them up to a tax free threshold?
« Last Edit: February 23, 2017, 01:51:55 AM by kivex »

Rob_S

  • 5 O'Clock Shadow
  • *
  • Posts: 95
  • Location: Melbourne, Australia
Re: Australian Investing Thread
« Reply #2801 on: February 23, 2017, 02:03:16 AM »
My wife and I recently opened an account (joint names) with the Vanguard wholesale funds. Our tax brackets are 32.5c for my wife and 45c (47?) for me.

Tax wise, would it make much of a difference to create a family trust and transfer our Vanguard fund to the trust? We have two children (7/10) so would that mean the trust could pay them up to a tax free threshold?

Not worth it on the family trust unless one of you plans to give up working or dramatically scale back and end up in lower marginal tax bracket. Might be worth it if one of you works in a field where you are likely to be sued from an asset protection point of view.

I might be wrong but I am fairly sure you could only stream about $600 from the trust to your kids tax free. The ATO take a very dim view of investents for kids and tax the hell out of them. So again not really worth streaming income from a family trust to kids unless they are much older - 16 or more likely 18 when they are taxed as adults and get that tax free threshold.

marty998

  • Magnum Stache
  • ******
  • Posts: 4177
  • Location: Sydney, Oz
Re: Australian Investing Thread
« Reply #2802 on: February 23, 2017, 02:35:35 AM »
My wife and I recently opened an account (joint names) with the Vanguard wholesale funds. Our tax brackets are 32.5c for my wife and 45c (47?) for me.

Tax wise, would it make much of a difference to create a family trust and transfer our Vanguard fund to the trust? We have two children (7/10) so would that mean the trust could pay them up to a tax free threshold?

49...

45% marginal tax rate + 2% medicare + 2% debt levy (+ Medicare surcharge if applicable)

bigchrisb

  • Pencil Stache
  • ****
  • Posts: 839
Re: Australian Investing Thread
« Reply #2803 on: February 23, 2017, 02:48:41 PM »
My wife and I recently opened an account (joint names) with the Vanguard wholesale funds. Our tax brackets are 32.5c for my wife and 45c (47?) for me.

Tax wise, would it make much of a difference to create a family trust and transfer our Vanguard fund to the trust? We have two children (7/10) so would that mean the trust could pay them up to a tax free threshold?

Do you need the income from investment now?  If not, I'd invest through a trust, stream what you can to the kids (not much at their ages but will increase as they get older / support them through uni), and stream the balance to a company beneficiary.  Better to be compounding at 27.5% than 49% / 34.5%, and have the flexibility to change how you distribute income later without CGT.

This is the approach I've taken, and its been beneficial for me.  I'd say the main criteria are:
- Having a reasonable nut to invest, so there are some tax savings to offset the running costs.  Maybe $250k was the break-even point for me.
- Being on a high personal tax rate
- Not needing the money now, and having a reasonable duration to gain from the tax spread
- A bonus if you expect to have differing income patterns.  For example, last few years I was the high income earner compared to my wife.  We are heading overseas for her work soon, and this will invert.  With a trust, we can choose the lower tax beneficiary.  With investing in individual names, changing it would be a CGT event.

Eucalyptus

  • Stubble
  • **
  • Posts: 140
  • Location: South Australia
Re: Australian Investing Thread
« Reply #2804 on: February 23, 2017, 09:33:23 PM »
My wife and I recently opened an account (joint names) with the Vanguard wholesale funds. Our tax brackets are 32.5c for my wife and 45c (47?) for me.

Tax wise, would it make much of a difference to create a family trust and transfer our Vanguard fund to the trust? We have two children (7/10) so would that mean the trust could pay them up to a tax free threshold?

49...

45% marginal tax rate + 2% medicare + 2% debt levy (+ Medicare surcharge if applicable)

Hey Marty. I've never thought about the medicare additions, etc. (Have thought about my HECS-HELP debt repayments).

If one does something like Salary Sacrafice into super, thus reducing taxable income, does that also reduce the income on which the 2% medicare charge is calculated?

potm

  • Bristles
  • ***
  • Posts: 470
Re: Australian Investing Thread
« Reply #2805 on: February 23, 2017, 09:41:23 PM »
Yes, salary sacrificing to super will reduce the medicare levy as well.
It won't reduce your hec repayments though.

marty998

  • Magnum Stache
  • ******
  • Posts: 4177
  • Location: Sydney, Oz
Re: Australian Investing Thread
« Reply #2806 on: February 24, 2017, 03:47:03 AM »
Yes, salary sacrificing to super will reduce the medicare levy as well.
It won't reduce your hec repayments though.

Correct... there's a few things that are added back to your income for the purpose of calculating HECS and entitlements to other social security measures such as FTB. Net investment losses (negative gearing) being a prime example.


Notch

  • 5 O'Clock Shadow
  • *
  • Posts: 30
  • Location: Gladstone, QLD, Australia
Re: Australian Investing Thread
« Reply #2807 on: February 24, 2017, 01:52:38 PM »
The other option to keep things simple and minimise tax is to keep your high-yielding Australian shares in your super accounts, and keep the relatively low-yielding international stocks in your names.

kivex

  • 5 O'Clock Shadow
  • *
  • Posts: 9
Re: Australian Investing Thread
« Reply #2808 on: February 24, 2017, 04:26:50 PM »
My wife and I recently opened an account (joint names) with the Vanguard wholesale funds. Our tax brackets are 32.5c for my wife and 45c (47?) for me.

Tax wise, would it make much of a difference to create a family trust and transfer our Vanguard fund to the trust? We have two children (7/10) so would that mean the trust could pay them up to a tax free threshold?

Do you need the income from investment now?  If not, I'd invest through a trust, stream what you can to the kids (not much at their ages but will increase as they get older / support them through uni), and stream the balance to a company beneficiary.  Better to be compounding at 27.5% than 49% / 34.5%, and have the flexibility to change how you distribute income later without CGT.

This is the approach I've taken, and its been beneficial for me.  I'd say the main criteria are:
- Having a reasonable nut to invest, so there are some tax savings to offset the running costs.  Maybe $250k was the break-even point for me.
- Being on a high personal tax rate
- Not needing the money now, and having a reasonable duration to gain from the tax spread
- A bonus if you expect to have differing income patterns.  For example, last few years I was the high income earner compared to my wife.  We are heading overseas for her work soon, and this will invert.  With a trust, we can choose the lower tax beneficiary.  With investing in individual names, changing it would be a CGT event.

Thanks Chris, lots of great info for consideration.

One question regarding the company beneficiary - how do you get the $$ out of the company later?

marty998

  • Magnum Stache
  • ******
  • Posts: 4177
  • Location: Sydney, Oz
Re: Australian Investing Thread
« Reply #2809 on: February 24, 2017, 06:15:44 PM »
Easy - pay a dividend, transfer cash form company to shareholders (you).

marty998

  • Magnum Stache
  • ******
  • Posts: 4177
  • Location: Sydney, Oz
Re: Australian Investing Thread
« Reply #2810 on: February 24, 2017, 11:00:51 PM »
I've been sitting on the sidelines for over a year watching the performance of listed investment company QVE (price $1.32) and been a little surprised to see the share price now go a long way ahead of NTA ($1.17 at the end of Jan).

As well, some of their larger holdings - BOQ, TOX and ANN are down quite a bit this month too so I would not expect Feb's NTA to be too good either.

There's one company in their list of investments that I missed out on (Pact Group Holdings Ltd). Debating a year ago whether to buy some of it at ~$4.50. It nearly hit $7 earlier this month :O

Anyway, I can't see that the premium to NTA is justified, given the 1yr underperformance of around 5%.

FFA

  • Bristles
  • ***
  • Posts: 472
    • Financially Free Australia
Re: Australian Investing Thread
« Reply #2811 on: February 26, 2017, 09:47:23 PM »
I bought some QVE a while ago when it was nearly 5% discount to NTA. I sold out of it in the range 5-10% NTA premium, I don't think it's justified either......

FFA

  • Bristles
  • ***
  • Posts: 472
    • Financially Free Australia
Re: Australian Investing Thread
« Reply #2812 on: February 26, 2017, 09:49:48 PM »
The other option to keep things simple and minimise tax is to keep your high-yielding Australian shares in your super accounts, and keep the relatively low-yielding international stocks in your names.

I'm moving in this direction now (post FIRE)..... of course the trade off for most FIRE focused people is the need to have passive income outside Super to pull the trigger, and that usually means people go the other way and hold the high yield Aus shares ex Super. It is worse for tax but might make your FIRE date much earlier than if you hold mainly international shares ex Super.... Life is full of trade-offs!

potm

  • Bristles
  • ***
  • Posts: 470
Re: Australian Investing Thread
« Reply #2813 on: February 27, 2017, 12:00:01 AM »
The other option to keep things simple and minimise tax is to keep your high-yielding Australian shares in your super accounts, and keep the relatively low-yielding international stocks in your names.

I'm moving in this direction now (post FIRE)..... of course the trade off for most FIRE focused people is the need to have passive income outside Super to pull the trigger, and that usually means people go the other way and hold the high yield Aus shares ex Super. It is worse for tax but might make your FIRE date much earlier than if you hold mainly international shares ex Super.... Life is full of trade-offs!

In theory it shouldn't make a difference whether stocks pay a dividend or not.
Our American friends would all require to sell down their stocks unless they have a very low withdrawal rate.
It's a lot easier to live off the dividends though.

Itchyfeet

  • Stubble
  • **
  • Posts: 147
Re: Australian Investing Thread
« Reply #2814 on: February 28, 2017, 08:41:57 PM »
So, Sydney residential real estate posted another 2.6% gain in Feb.

I am feeling a sense of altitude sickness at these dizzy heights.

I have been heavily leveraged on Sydney real estate for a long time. The market growth over the past 15-20 years had been a key driver of my current net worth. I am now feeling it is time to take profits and bale.

How are others feeling?

Mind you, in practice, I can't really sell without incurring a huge tax bill which could be avoided if I wait a 2 more years (expat ATM, will use 6 year rule to avoid cap gains tax). So, for me I will almost certainly continue this crazy ride with my fingers crossed.

Just for the sake of discussion, if I sold now from abroad I would incur cap gains tax of around $150,000 on a sale price of around $2.1-$2.2 million.

misterhorsey

  • Bristles
  • ***
  • Posts: 259
Re: Australian Investing Thread
« Reply #2815 on: February 28, 2017, 09:49:27 PM »
Mind you, in practice, I can't really sell without incurring a huge tax bill which could be avoided if I wait a 2 more years (expat ATM, will use 6 year rule to avoid cap gains tax). So, for me I will almost certainly continue this crazy ride with my fingers crossed.

Hey Itchyfeet. Perhaps i'm missing something, but how does waiting a further 2 years allow you to avoid CGT?

My understanding of the 6 year rule is that it's a maximum period you are allowed to treat a property as your main (CGT free) residence, despite not living in it.

https://www.ato.gov.au/General/Capital-gains-tax/In-detail/Real-estate/Treating-a-dwelling-as-your-main-residence-after-you-move-out/
« Last Edit: February 28, 2017, 09:54:41 PM by misterhorsey »

Itchyfeet

  • Stubble
  • **
  • Posts: 147
Re: Australian Investing Thread
« Reply #2816 on: February 28, 2017, 11:26:58 PM »
We will move back to Australia in 2 years time and will move back into the house for maybe a year before selling it. We will have been out of the house for about 5 years.

Itchyfeet

  • Stubble
  • **
  • Posts: 147
Re: Australian Investing Thread
« Reply #2817 on: February 28, 2017, 11:45:14 PM »
Looks like maybe I am misunderstanding the law. Maybe there is no need to move back in to treat it as a PPOR. I just need to sell it before the 6 years is up. Is that right?
« Last Edit: March 01, 2017, 08:20:44 AM by Itchyfeet »

deborah

  • Magnum Stache
  • ******
  • Posts: 4681
Re: Australian Investing Thread
« Reply #2818 on: March 01, 2017, 12:06:51 AM »
I think so

marty998

  • Magnum Stache
  • ******
  • Posts: 4177
  • Location: Sydney, Oz
Re: Australian Investing Thread
« Reply #2819 on: March 01, 2017, 12:29:45 AM »
Err you may need specific tax advice. If you've rented this thing out for the last few years it'll make the CGT calc very complex.

You could also be in a position to add to the cost base a lot of otherwise non-deductible costs.

potm

  • Bristles
  • ***
  • Posts: 470
Re: Australian Investing Thread
« Reply #2820 on: March 01, 2017, 02:22:07 AM »
If it was your PPOR before and you haven't claimed any other place as your PPOR then you have up to 6 years after you move out to sell it CGT free. No need to move back in.

misterhorsey

  • Bristles
  • ***
  • Posts: 259
Re: Australian Investing Thread
« Reply #2821 on: March 01, 2017, 04:27:31 AM »
^^^Yep, no need to move back in.

As the link says, you must have acquired it as a PPOR and then rented it out.  The underlying policy intent is so as not to disadvantage people who buy a PPOR, qualify for CGT exemption, but then have to relocate for work.

I've used the exemption myself (sold a former PPOR, which was rented out, within 6 years of renting it out). It's the weirdest thing.  If you qualify for the exemption, then there is no CGT event as such that is triggered. Therefore you don't actually tell the ATO anything.  The wonders of self assessment.


Itchyfeet

  • Stubble
  • **
  • Posts: 147
Re: Australian Investing Thread
« Reply #2822 on: March 01, 2017, 08:19:22 AM »
Thanks everyone for your great advice.

Yes it was our PPOR for 5 years before we moved OS. We have not claimed any other PPOR whilst overseas.

It has been rented out for 3 years thus far.

So now I have a real question on my hands, and not a hypothetical one.

Is it now time for me to take my profits and exit the Sydney property market? Hmmm..... amd then where (and what) to invest in instead? .....

Definitely makes FIRE a lot more real when you are really making a conscious decision that you don't intend returning to working in Sydney again ever... (yes we could rent but selling up is a clear action of intent).
« Last Edit: March 01, 2017, 08:22:54 AM by Itchyfeet »

steveo

  • Handlebar Stache
  • *****
  • Posts: 1347
Re: Australian Investing Thread
« Reply #2823 on: March 01, 2017, 12:42:08 PM »
Itchyfeet - for years I've been saying the property market is in a bubble. It keeps going up. I think it's impossible to pick markets especially a sticky one like property.

If it makes sense to sell then sell. The thing with property in Sydney is that the yield is so low that cashing in is going to be a good option when you want to start withdrawing some of that money.

marty998

  • Magnum Stache
  • ******
  • Posts: 4177
  • Location: Sydney, Oz
Re: Australian Investing Thread
« Reply #2824 on: March 01, 2017, 01:27:03 PM »
We are definitely in bubble territory after the latest figures were released. It's all getting a bit ridiculous. (ARS and Waltworks are is going to come here and tell me I told you so).

Group of us at work are all in agreement that this town is fracked when it comes to first home buyers - they just can't get a foot in anywhere. Even 60km away from the CBD in the far north west properties are pushing $1m. We all work in Financial Services, one of the highest paid industries in the land, and the ones without a house can't buy one.

Cycles come and go, this feels like 2002 all over again. Remember from 2003-2009 Sydney house prices went nowhere and in many places declined.

I'm still inclined not to sell, as long long term (20+ years) prices will still go up in line with fundamentals (wages, CPI, population, whatever). After that we may have some demographic issues if the immigrant tap is turned off. Japan situation is an event that could easily happen. Who knows really, can't predict the future.

Could always sell and reinvest in Perth or Darwin, prices came off 5% over there, after falling last year as well.

deborah

  • Magnum Stache
  • ******
  • Posts: 4681
Re: Australian Investing Thread
« Reply #2825 on: March 01, 2017, 02:05:41 PM »
Itchyfeet, I'd look at the returns you could be getting on the money, and see which way to go - actually, surely you could FIRE TOMORROW if you sold the house, and bought a PPOR where you want to live in retirement. If you don't want to live in Sydney, a similar house (if you wanted one) anywhere else, would surely cost less than half that, and the rest would be stash.

misterhorsey

  • Bristles
  • ***
  • Posts: 259
Re: Australian Investing Thread
« Reply #2826 on: March 01, 2017, 02:25:43 PM »
It's a shame you can't hedge your bets on property by hiving off a bedroom or two, and selling them, while keeping the lounge and kitchen and back yard.

I think property valuations in Syd/Melb seem pretty stretched at the moment. Certainly by comparison with international benchmarks, as well as regional Austrlaia. Although unlike tulipmania and the dot com craziness, your classic textbook bubbles, there are certain types of properties (inner city detached houses) that they are simply not creating anymore - so in some sense high valuations are justified due to demand and very limited supply.

If you sell, will you be buying another property eventually?  Somewhere else in Australia? Is the the CGT exemption for your PPOR something that you will want to take advantage of again?

Maybe do a pros and cons analysis of better places to put your capital? For example, taking diversified index funds as a possibility, see if it brings about a better outcome for your circumstances. By 'better' I mean potentially better performing, more liquid/flexible, more tax effective or any combination of the three.

Zooming out again, I think if you bought property before this latest upswing in prices, and you're happy to quit while you're ahead and cash in your chips, and then say park it in an index fund which on average would delivered average annualised returns of 7%, and that sets you up, then why not?  Or split the proceeds and buy a smaller cheaper house somewhere and part the rest in an index and live off that?  You've got options.

Itchyfeet

  • Stubble
  • **
  • Posts: 147
Re: Australian Investing Thread
« Reply #2827 on: March 01, 2017, 07:20:44 PM »
Thanks everyone for your input.

My thoughts:

1. Marty, I certainly won't be buying in Perth. Perth prices were very inflated due to the once only impact of the mining boom. Prices are now correcting. Perth have a supply issue too - as in too much supply. Finally, like everywhere in Australia the property prices will suffer badly if interest rates rise even 1%. I don't see any value in aperth property.

2. I would be ok with the idea that holding on long term should see the peaks and troughs average out to provide a more normal growth linked to inflation, population, productivity, wages etc. However, I honestly believe that we are at the very peak of a cycle/ bubble with minimal upward potential. It might be more than 10 years before there is any further growth. Surely my funds will be better placed elsewhere.

3. Deborah, I don't own 100% of the property. I have a mortgage so am leveraged, which is making me even more anxious as I am even more exposed to any downward price movement (of course I also benefited from the growth as well). I have a FIRE number that I will achieve in 2019, assuming no further growth in the value of my Sydney property. But, yes we do have a lot of equity tied up and it's part of what we will be living off post FIRE.

So, my DW and I discussed...... she has an emotional attachment to the house and would like to live there again, in the heart of Sydney, for a few more years after we return to Australia before we head somewhere cheaper. The discussion is not over. I hope we are not missing a big opportunity.

Freshwater

  • Pencil Stache
  • ****
  • Posts: 543
  • Age: 42
  • Location: Sydney, Australia
Re: Australian Investing Thread
« Reply #2828 on: March 01, 2017, 07:50:41 PM »
Itchyfeet, my opinion is that property in the blue chip and inner areas of Sydney is going to give you similar returns to the markets when you combine rental returns with capital growth over the long term. If you were in a bit of an outlying area of Sydney or had apartments in a location when lots were being built then it's different. But like someone above said, the cash flow/ rental returns are appalling, so when it actually comes to retirement and you need income not capital growth it makes sense to sell up then and put it in an index fund. That's what we've decided to do with our apartment investment.

We get less than 3% on the current estimated value of the apartment from the rent after usual expenses but not including refurbs. But it's been fine having the money there rather than in a fund as the capital value has increased 7% a year over the 8 years we've had it (although not evenly of course!). It was somewhere we bought to live but then kept when we moved on, so we know it's a desirable location and we hoped it would be a pretty good bet as an investment e.g. no new apartment blocks could go up nearby under current zoning. I'm imagining your home is somewhere desirable too?

We are just starting the process of putting it up for sale so we can retire. The actual timing comes down to personal reasons, the fact that the current value is more than we'd ever ever pay for an apartment and I've got the jitters, and because we know if we keep it another year or so we'll be up for those carpets & blinds plus many other things.

So short version - if you want more investment income or need some capital - sell; if you don't, I would personally hang on to the investment if it's in a 'good' area.

deborah

  • Magnum Stache
  • ******
  • Posts: 4681
Re: Australian Investing Thread
« Reply #2829 on: March 01, 2017, 07:58:15 PM »
Try looking at allhomes.com.au with your wife for various places, and see what you can get in the type of property you might prefer. It has places all over Australia, and might give you both ideas, and perhaps have her feeling that other houses/places would also be great.

Itchyfeet

  • Stubble
  • **
  • Posts: 147
Re: Australian Investing Thread
« Reply #2830 on: March 01, 2017, 08:29:15 PM »
Thanks Deborah

Actually, over the past few years we have been thinking of where we might live in FIRE. About 3-4 years ago we bought an investment property in Brisbane (pure investment, not future home) just to take a stake in the market as we thought Brisbane might be somewhere we might like to live and property was about 1/3 of the price of where we were living in Sydney. It's now 1/4 the price due to the explosion of Sydney prices.

We have also been considering living outside a capital city om the coast in NSW or QLD, but DW says she wants to keep working part time, and there would be more opportunities in a city. Also, cities offer a lot in terms of entertainment, airports etc which we would value. I don't think we are quite ready to any new property purchase right now. But for sure, we are both 100% sold on the fact that our long term future will not be in Sydney.

It doesn't make any economic sense to live in a $2m house, except when you are working in the Sydney CBD and getting paid Sydney wages and can really make the most of the great lifestyle that living only 10 mins from the city gives you. Once time is plentiful and Commuting is not a concern, living close to the CBD has less value. (When we bought our house it wasn't a $2m house. I would never spend that much on a home, especially after my MMM indoctrination).


Itchyfeet

  • Stubble
  • **
  • Posts: 147
Re: Australian Investing Thread
« Reply #2831 on: March 01, 2017, 08:51:20 PM »
Itchyfeet, my opinion is that property in the blue chip and inner areas of Sydney is going to give you similar returns to the markets when you combine rental returns with capital growth over the long term. If you were in a bit of an outlying area of Sydney or had apartments in a location when lots were being built then it's different. But like someone above said, the cash flow/ rental returns are appalling, so when it actually comes to retirement and you need income not capital growth it makes sense to sell up then and put it in an index fund. That's what we've decided to do with our apartment investment.

.....

So short version - if you want more investment income or need some capital - sell; if you don't, I would personally hang on to the investment if it's in a 'good' area.

Our place is in a highly desirable location. It certainly has the benefit of being in a place where far more people would want to live than could ever realistically afford. How many houses allow you to watch the fireworks on the Sydney Harbour bridge from your bedroom window, and commute to your CBD office in around 10 minutes from your front door?

That said, I still think that returns for the next year will be negligible. A rent return of less than 3% including refurbs, and at best CPI capital growth, is hardly exciting. Especially when I think even growth at CPI is optimistic. I say this with your reasoning "I would never pay that much!". Maybe I am starting to think more mustachinan than the average home buyer. I don't know.

bigchrisb

  • Pencil Stache
  • ****
  • Posts: 839
Re: Australian Investing Thread
« Reply #2832 on: March 02, 2017, 02:53:39 PM »
Even the OECD is getting in on Australia's housing bubble, with the front page headline on the AFR being "OECD rings alarm on housing rout". 

http://www.afr.com/news/economy/oecd-rings-alarm-on-housing-rout-20170302-guowau (apologies for posting links from a subscription webpage).

Ozstache

  • Pencil Stache
  • ****
  • Posts: 730
  • Age: 49
  • Location: Oztralia
Re: Australian Investing Thread
« Reply #2833 on: March 02, 2017, 04:07:33 PM »
http://www.afr.com/news/economy/oecd-rings-alarm-on-housing-rout-20170302-guowau (apologies for posting links from a subscription webpage).

Ever since I started using a VPN, the AFR website seems to consider me a subscriber even though I am not, so I can see articles like this. For those that can't here's another link to a similar story: http://www.canberratimes.com.au/business/the-economy/oecd-warns-of-rout-in-house-prices-if-investors-head-for-the-doors-20170302-gup0yw.html

I watch Austraila's continued love affair with property with great bemusement. Yields are absolute rubbish now in Sydney, so people had better hope that capital gains continue at their historic rate to make up for it, even though CGT discourages any profit taking. With already eye-wateringly high prices, an economy that blows with resource prices driven by others, and interest rates nudging slowly higher in defiance of the official cash rate, what could possibly go wrong?

bigchrisb

  • Pencil Stache
  • ****
  • Posts: 839
Re: Australian Investing Thread
« Reply #2834 on: March 04, 2017, 04:07:08 AM »
For another bit of "evidence" about bubbles, went to an auction down the street for a place somewhat comparable (but probably marginally higher price point) than the place I bought 2.5 years ago.  It sold for 75% more than I paid for mine a couple of years ago.  Totally ridiculous!

Itchyfeet

  • Stubble
  • **
  • Posts: 147
Re: Australian Investing Thread
« Reply #2835 on: March 04, 2017, 05:55:01 AM »
For another bit of "evidence" about bubbles, went to an auction down the street for a place somewhat comparable (but probably marginally higher price point) than the place I bought 2.5 years ago.  It sold for 75% more than I paid for mine a couple of years ago.  Totally ridiculous!

But what to do about it?

The most logical answer is to sell. Unfortunately, it seems DW and I have decided to do the illogical and sit on the over priced asset.

I am personally really uncomfortable with this, as a 20% drop in the next few years would mean I have to work probably 2 more years..... of course we could sell the house now, amd invest in stocks which could also drop by 20% tomorrow..... lol... amd quicker than the housing market would most likely drop.

with this line of thinking I am bound to be a victim of OMY syndrome.

Itchyfeet

  • Stubble
  • **
  • Posts: 147
Re: Australian Investing Thread
« Reply #2836 on: March 04, 2017, 09:37:16 AM »
Well the median auction sale price in Sydney today was 20% less than last weekend. Maybe last week was just an abnormality.

Clearance rate dropped below 80% too, so it seems that at least some buyers went to auctions today with some common sense.

marty998

  • Magnum Stache
  • ******
  • Posts: 4177
  • Location: Sydney, Oz
Re: Australian Investing Thread
« Reply #2837 on: March 04, 2017, 03:02:41 PM »
Well the median auction sale price in Sydney today was 20% less than last weekend. Maybe last week was just an abnormality.

Clearance rate dropped below 80% too, so it seems that at least some buyers went to auctions today with some common sense.

I think the week before was an over the top median.

Also the rain would have dampened spirits a bit :)

Freshwater

  • Pencil Stache
  • ****
  • Posts: 543
  • Age: 42
  • Location: Sydney, Australia
Re: Australian Investing Thread
« Reply #2838 on: March 04, 2017, 05:48:07 PM »
I have asked for an appraisal for our IP and should have an initial number Monday. A similar place a couple of streets away sold pre-auction on Friday for huge $$$, so if I can get a 'disappointed buyer' to snap ours up then I'll have a lump sum to put in a fund. DH won't sell unless we get the same price as that apartment, so it's not definite at all, but crossing fingers.

We have a retail Vanguard account with approx $10k across Aus and international index funds that we opened a while ago but never really added to. Pretty sure the fees are high - 0.75%. We could put the apartment sale proceeds into a wholesale index fund with 0.15% fees, but when I had a look on Vanguard it said min investment $500k. I would struggle to get DH to put $500k in one go into one non-bricks and mortar investment (I'm scared too) but something like $100k a month until retirement day (soon) across two or three funds could be achievable. I think that directs us towards ETFs?

I'm starting from scratch learning about these, I hadn't heard of them before this forum (!) so I'll go back up this thread and read earlier discussions, but at the moment I'm hearing in my head the advice "don't invest in something that you don't understand." I will educate myself as much as possible, but at the moment ETFs are feeling a lot more black box than an index fund and I'm not feeling all that comfortable :(


Luckyvik

  • Stubble
  • **
  • Posts: 103
  • Age: 47
Re: Australian Investing Thread
« Reply #2839 on: March 04, 2017, 06:40:55 PM »
I looked at the auction results in Domain and although the clearance rate is 80% the places passed in are mostly in outer Sydney, inner Sydney is not showing any signs of slowing at auction. I'm (together with DH) looking at 'upgrading' from a 1bd apartment to a 2bed terrace in the inner west but also not sure if this is the best use of our money.


Sent from my iPhone using Tapatalk

potm

  • Bristles
  • ***
  • Posts: 470
Re: Australian Investing Thread
« Reply #2840 on: March 04, 2017, 07:18:48 PM »
I have asked for an appraisal for our IP and should have an initial number Monday. A similar place a couple of streets away sold pre-auction on Friday for huge $$$, so if I can get a 'disappointed buyer' to snap ours up then I'll have a lump sum to put in a fund. DH won't sell unless we get the same price as that apartment, so it's not definite at all, but crossing fingers.

We have a retail Vanguard account with approx $10k across Aus and international index funds that we opened a while ago but never really added to. Pretty sure the fees are high - 0.75%. We could put the apartment sale proceeds into a wholesale index fund with 0.15% fees, but when I had a look on Vanguard it said min investment $500k. I would struggle to get DH to put $500k in one go into one non-bricks and mortar investment (I'm scared too) but something like $100k a month until retirement day (soon) across two or three funds could be achievable. I think that directs us towards ETFs?

I'm starting from scratch learning about these, I hadn't heard of them before this forum (!) so I'll go back up this thread and read earlier discussions, but at the moment I'm hearing in my head the advice "don't invest in something that you don't understand." I will educate myself as much as possible, but at the moment ETFs are feeling a lot more black box than an index fund and I'm not feeling all that comfortable :(

Give Vanguard a call, they will accept 100k min into the wholesale funds. At least they did in the past even though the website has always shown 500k.

steveo

  • Handlebar Stache
  • *****
  • Posts: 1347
Re: Australian Investing Thread
« Reply #2841 on: March 04, 2017, 07:27:35 PM »
My brother is trying to sell his house in an expensive area but I think got basically no offers for his place. I don't really like his house but maybe there is some semblance of normalcy coming into the market.

Freshwater

  • Pencil Stache
  • ****
  • Posts: 543
  • Age: 42
  • Location: Sydney, Australia
Re: Australian Investing Thread
« Reply #2842 on: March 04, 2017, 08:57:06 PM »
I have asked for an appraisal for our IP and should have an initial number Monday. A similar place a couple of streets away sold pre-auction on Friday for huge $$$, so if I can get a 'disappointed buyer' to snap ours up then I'll have a lump sum to put in a fund. DH won't sell unless we get the same price as that apartment, so it's not definite at all, but crossing fingers.

We have a retail Vanguard account with approx $10k across Aus and international index funds that we opened a while ago but never really added to. Pretty sure the fees are high - 0.75%. We could put the apartment sale proceeds into a wholesale index fund with 0.15% fees, but when I had a look on Vanguard it said min investment $500k. I would struggle to get DH to put $500k in one go into one non-bricks and mortar investment (I'm scared too) but something like $100k a month until retirement day (soon) across two or three funds could be achievable. I think that directs us towards ETFs?

I'm starting from scratch learning about these, I hadn't heard of them before this forum (!) so I'll go back up this thread and read earlier discussions, but at the moment I'm hearing in my head the advice "don't invest in something that you don't understand." I will educate myself as much as possible, but at the moment ETFs are feeling a lot more black box than an index fund and I'm not feeling all that comfortable :(

Give Vanguard a call, they will accept 100k min into the wholesale funds. At least they did in the past even though the website has always shown 500k.

Ok, great, will try that.

Just spoke to DH and he's keen to split the pot between 2 x peer-to-peer (we have a Ratesetter account so need to research another), a Vanguard index fund, another index fund (TBC following research, have no idea yet) and a new (est. 2014) sustainable managed fund he's been following with interest. The bulk would be in Vanguard so wholesale might still be possible. We'll still have rental income from our PPOR, our Super of course and a year's expenses in a term deposit so I think we will be pretty well diversified should any economic shit hit the fan!

Are there any FIRE Australian's reading this thread who might share their allocation? Especially if they pulled the plug many years from being able to tap super?

deborah

  • Magnum Stache
  • ******
  • Posts: 4681
Re: Australian Investing Thread
« Reply #2843 on: March 04, 2017, 09:10:54 PM »
Not sure that any FIRE Aussies meet the criteria.

Freshwater

  • Pencil Stache
  • ****
  • Posts: 543
  • Age: 42
  • Location: Sydney, Australia
Re: Australian Investing Thread
« Reply #2844 on: March 04, 2017, 10:15:12 PM »
Not sure that any FIRE Aussies meet the criteria.

Do you think there aren't any Aussies that are FIRE before, say, 50, or just on this thread? I'll make another thread to find out! I think Mrs Rich Life is RE. Plus isn't there a young guy going extreme? Hmm.

marty998

  • Magnum Stache
  • ******
  • Posts: 4177
  • Location: Sydney, Oz
Re: Australian Investing Thread
« Reply #2845 on: March 04, 2017, 10:51:51 PM »
Not sure that any FIRE Aussies meet the criteria.

Do you think there aren't any Aussies that are FIRE before, say, 50, or just on this thread? I'll make another thread to find out! I think Mrs Rich Life is RE. Plus isn't there a young guy going extreme? Hmm.

BigChrisB is the only one I'm aware of.

I don't think Jupiter is still around. Something about his situation didn't add up to me anyway...

My brother is trying to sell his house in an expensive area but I think got basically no offers for his place. I don't really like his house but maybe there is some semblance of normalcy coming into the market.

Thread on PropertyChat forum discussing this very point. Lots of auctions on Saturday passed in with no bids but were not reported by the agents. It looks really bad for an agent when this happens, and also is damaging to the eventual price that a property might sell for.

Have to keep up those clearance rates to show there is still puff in the market but honestly I agree, people have finally run out of money.

Freshwater

  • Pencil Stache
  • ****
  • Posts: 543
  • Age: 42
  • Location: Sydney, Australia
Re: Australian Investing Thread
« Reply #2846 on: March 04, 2017, 10:59:20 PM »
I might check out that Property Chat forum. For my sake, I hope there is a bit of puff left so I can cash in on the IP, but for the wider population, I do hope the craziness is over. And we would be just fine without the sale!

I started this thread:

http://forum.mrmoneymustache.com/post-fire/looking-for-aussie-fire-ees/

deborah

  • Magnum Stache
  • ******
  • Posts: 4681
Re: Australian Investing Thread
« Reply #2847 on: March 04, 2017, 11:13:38 PM »
Criteria include not being able to tap into super. BigChrisB is not FIRE yet. The others I can think of were able to tap into super equivalents of various types. There is only one I can think of who may fit the criteria. I retired several years before I received super, but used my savings until then, so I probably don't count either.

Itchyfeet

  • Stubble
  • **
  • Posts: 147
Re: Australian Investing Thread
« Reply #2848 on: March 05, 2017, 01:43:54 AM »
We will FIRE in 2019, so not there quite yet, but close.

I will be 47 and DW 41

We will have quite a lot outside super. Probably more than normal due to being able to accumulate funds tax free outside super - PPOR in Sydney + savings on tax free income earned in Middle East.

At FIRE our NW will be split something like:

Super Accum 17% (accessible from 60)
Super Def Benefit pension 8% (accessible from 55)
Investment Property (Bris) 0-20%
Stocks (primarily indexed funds) 30-50%
PPOR 25%

We haven't decided what to do with our Brisbane investment property yet. Might keep it leveraged. Not sure.

DW wants to work part time Post Fire. This might give us an opportunity to put some more in super, depending on what she earns. At a minimum there will be the SGL.

I don't plan on working. We shall see.

FFA

  • Bristles
  • ***
  • Posts: 472
    • Financially Free Australia
Re: Australian Investing Thread
« Reply #2849 on: March 05, 2017, 02:52:06 AM »
We were FI early/mid 30's, FIRE 37... But it never really went to "plan" I was immediately part-time consulting, which has now morphed into part-time work.... AA is on the inactive blog somewhere!