What should we do with $1M

[Ajax]

This is being quite irresponsible given the original posters need for this money...however for the sake of discussion as to how to get a grossed up dividend yield of over 12.5% p.a. read on.

I'd buy Telstra shares. TLS closed today at $3.18.

At AGM yesterday director stated intention to pay 28c/p.a. fully franked dividend (that's 40c/share with franking credits) for 2011/2012 and 2012/2013. That's a grossed up yield of over 12.5% p.a. for next 2 years.

Also talk at AGM of a possible share buyback to be announced early next year. Analysts are suggesting TLS will buy back up to 4% of its own stock. Buybacks are usually good for a company's shareprice.

If I was really brave I'd do it on margin loan through Macquarie at 90% lvr... and gear the return/risk up by a factor of 10. You only live once. Note this may not be good for the father's blood pressure.

 

[jaycee]

Any interest on income earnt is fully taxable. Any rental income is also taxable but can be offset by claiming deducations against it such as loan interest and outgoings (PM fees, maintenance, depreciation etc). Disclaimer: I have an interest in the block of flats pictured on page 4 of this thread.

Even if you get 48.5% back out of the expenses like PM & maintenance, you still paid the other 51.5% from the return... and they are still expenses that the term deposit doesn't have in the first place..

You forgot to mention depreciation though, you don't fork out $ for this out of your weekly rent to pay "depreciation", but you can claim a set amount each year as an expense. Can't do this with a term deposit.

Plus, you probably hope that one day the property will become worth more money, but the balance of the term deposit won't change.

 

[shuggy]

Plus, you probably hope that one day the property will become worth more money, but the balance of the term deposit won't change.

Yes all valid points jaycee but the last one requires a crystal ball, depends on timeframe and whether you want to punt on cap gains or prefer cashflow.. however it's likely the property will be worth more in real dollars than a term deposit that's been eroded by inflation.