Shares or Property!

[DebtEquity]

Hi any suggestions about what if you can't afford to purchase another property but could shares, what would you purchase?

I am thinking of purchasing another IP but maybe not enough cashflow to hold it or equity. but maybe able to purchase shares.

Any suggestions?

 

[Andrew_A]

Hi any suggestions about what if you can't afford to purchase another property but could shares, what would you purchase?

I am thinking of purchasing another IP but maybe not enough cashflow to hold it or equity. but maybe able to purchase shares.

Any suggestions?

Do what will bring your closer to your goals.

 

[WBG Redcliffe]

DebtEquity

It doesn’t matter what you buy so long as you buy ensuring you profit up front. This lowers your risk and provides equity to borrow against. (Read Reno Kings for property or Buffett for shares.) Value investing can be found in any market if you know what you are looking for and you spend the time on the research. The more you read the easier it is to find the profit up front.

 

[normailson]

It's not about which asset class is better but what you can DO with one asset class over the other. The Shares Vs. Property debate has raged over time and it's an argument that is impossible to win for either side.

All debate aside, the reason many property investors go for residential property is the higher LVR attainable and therefore the greater opportunity to generate real wealth. More exposure = greater returns.

If you set up an offset account then you can effectively improve your cashflow by parking any extra money you have until you are ready to buy, or, until a time when the cashflow has improved (more rent over the initial purchase price). You offset 100% at the interest rate charged so you don't get charged interest. However, you may want all the rates expense for tax purposes.

In a less volatile sharemarket, I have parked my extra into well-capitalised shares and hang on until I'm ready to go again.

 

[BV]

Hi any suggestions about what if you can't afford to purchase another property but could shares, what would you purchase?

I am thinking of purchasing another IP but maybe not enough cashflow to hold it or equity. but maybe able to purchase shares.

Any suggestions?

Decisions decisions
I'd go for property because of the higher gearing but I am biased.
If you believe the sharemarkets have bottomed and short term you can make some money perhaps you can use shares as a way to increase your deposit for an IP. Good luck

 

[hobo-jo]

All debate aside, the reason many property investors go for residential property is the higher LVR attainable and therefore the greater opportunity to generate real wealth. More exposure = greater returns.

As with any investment highly geared the larger exposure could also mean larger losses in the case someone was forced to sell at a bad time.

I certainly wouldn't be buying RE at the moment if things were going to be 'tight', unless you have a large buffer.

 

[jingo]

Hi any suggestions about what if you can't afford to purchase another property but could shares, what would you purchase?

I am thinking of purchasing another IP but maybe not enough cashflow to hold it or equity. but maybe able to purchase shares.

Any suggestions?

I think the two asset classes compliment each other. I use my shares to help offset my holding costs. I want to grow my share portfolio and will do so by drawing equity out of the IP's.

Personally I would buy shares with a high yield. But be careful - make sure the company you are investing in is well managed, has high earnings and low debt!


Regards Jason.

 

[dajackal]

I think the two asset classes compliment each other. I use my shares to help offset my holding costs. I want to grow my share portfolio and will do so by drawing equity out of the IP's.

hi jason, does this mean you are paying interest at the prevailing rate e.g. 9%? does the dividend income from shares put you infront from cashflow perspective?

 

[normailson]

As with any investment highly geared the larger exposure could also mean larger losses in the case someone was forced to sell at a bad time.

I certainly wouldn't be buying RE at the moment if things were going to be 'tight', unless you have a large buffer.

When isn't it "tight" these days. This is where our risk-reward barometer differs. I laugh at the doom and gloom espoused by some top 500 and higher people here.

If I went into RE with the notion that I will lose if I am forced to sell, I would never have started. Lets face it: if you think short term sale in RE, you WILL lose. No doubt about it.

While everyone is thinking this way, I'll buy another - especially because everyone is thinking this way. When everyones risk-reward barometers are synchronised, it will be too late!

Back on the subject, my shares kept stopping out. With 8.5% on offer or the opportunity to offset, that is definitely the way to go for me.

 

[joeExpat]

Any suggestions?

Leave it in cash (/offset) for the rest of the year, then revisit the question.

 

[kissfan]

Hi any suggestions about what if you can't afford to purchase another property but could shares, what would you purchase?

Hi DE.

Sounds to me you've answered your own question with your opening statement.

Regards
Marty

 

[wylie]

Hi DE.

Sounds to me you've answered your own question with your opening statement.

Regards
Marty

I read it as "what ACTUAL shares should I buy", rather than just whether or not to buy shares.

Debt Equity, are you asking for recommendations of what shares you should buy?

 

[kissfan]

I read it as "what ACTUAL shares should I buy", rather than just whether or not to buy shares.

Debt Equity, are you asking for recommendations of what shares you should buy?

Yep, could be the case Wylie.

Just re-reading my reply made me think it may have been taken as a wisecrack which was not the intention.

DE, if you are asking whether to buy shares or property, I would say don't overcommit yourself, which is what it sounds like you may do if you purchase another IP (only going by your comments).

If you are asking what shares should you look at, someone more qualified will give you a response.

Either way, do your due diligence, crunch the numbers and even then speak to your MB and accountant if still unsure.

Regards
Marty

 

[murtagh]

Hi any suggestions about what if you can't afford to purchase another property but could shares, what would you purchase?

I don't have any advice for you really, but I have investigated the current options for my own circumstances and I've found that the biggest return for the least risk, at the moment, is my offset account on my PPOR.

Last time I did the numbers I needed at least 13% return (it will be higher now, with interest rates so high) on investment to "beat" my offset account. With leverage both shares and property can do this, if you choose right.

I don't know enough about shares to pick winners - I can buy and hold with the best of them, but am wary about the next six months, so have decided that leveraging into a market where I don't understand what is coming in the short term .. is too risky for me.

Same with property. I don't know what is happening in the next six months (not that one ever does). Will prices (in my neck of the woods) rise dramatically? I doubt it, but I don't know for sure. So for the moment I am watching and waiting on the property front too.

But I've taken this forced "wait" period to draw down what I can from where I can, and pop it into my PPOR offset .. so I'm "earning" a nice return, and have my funds available while I figure out what comes next.

 

[alexlee]

Though remember your 'return' would include capital gains. So while a share yielding 7% gross may look lower than your 13% or whatever offset 'gross' return, if the share goes up 7% as well........
Alex

 

[murtagh]

Though remember your 'return' would include capital gains. So while a share yielding 7% gross may look lower than your 13% or whatever offset 'gross' return, if the share goes up 7% as well........
Alex

Absolutely - if you can tell me how to pick those shares that are going to do 7% CG this year and return a 7% yield, I'm all for learning. But for the moment I don't have those skills (and I can't judge the market at the moment) so I am going to just sit out for a few months and consolidate.

 

[alexlee]

Absolutely - if you can tell me how to pick those shares that are going to do 7% CG this year and return a 7% yield, I'm all for learning. But for the moment I don't have those skills (and I can't judge the market at the moment) so I am going to just sit out for a few months and consolidate.

Not saying they'll go up 7% a year over the long term (though I'm fairly confident), but a lot of the banks, insurance companies, etc are yielding 7% gross (when you include franking credits). Westfield probably yields around that too? I'm not saying these are my suggestions, but at the moment there are some 'blue chip' shares that at yielding >7% gross. I have no idea whether they'll do 7% CG this year (for all I know they'll crash). But my CBA shares, for example, have yielded nicely and even after this recent splatfest I'm still ahead.

Especially if you're young, you don't have to time the market that well. Buy, DRP and dollar cost average.
Alex

 

[murtagh]

Especially if you're young, you don't have to time the market that well. Buy, DRP and dollar cost average.
Alex

I agree - over the longer term compounding and use of leverage will outperform letting money sit in an offset account. But when you look at an offset account as guaranteed returns in a shaky market .. it makes sense to me, for now.

 

[jingo]

hi jason, does this mean you are paying interest at the prevailing rate e.g. 9%? does the dividend income from shares put you infront from cashflow perspective?

Hi dajackal,

I am not currently paying interest at 9% on funds I have used for shares. I haven't bought shares for a while now, and when I did the rates were much lower. (They are fixed rates at around 7.5% or so).

I have funds ready to buy more shares, but am waiting for rates to subside. I am also watching yields carefully. Still lots and lots of research to do. KeithJ is a great person to ask regarding shares. He has lots of information and suggestions. I am still learning! (Although I do have a modest portfolio that is currently helping to offset my -ve gearing).

Regards Jason.

 

[chara]

Talking about shares that I know nothing, can anybody tell me where to start? any books or web site recommended? I want to learn.
One more thing, since most of the people in here are investors, I believe some also invested in gold or silver. Can any of you also tell me where to start learning about investing in gold as well? any books or web site?
I just want to learn and watch then decided later where to go with extra money that is not enough be invested in IP
Thanks.

Chara