What to do with $30K

[younguns]

Afternoon all,

We are not currently able to borrow any more money until at least October due to my husband being newly self emlployed.

We are not wanting to sit on our laurels for the next 5 months and are looking for some out of the box suggestions to generate some funds.

We have approximately $30K to play with.

We are looking to get into development and have been considering sourcing a good block without DA, getting an option to purchase the property, organising DA and then onselling for a profit or eventually developing it once we can source investors or organise vendor finance.

We have never done anything like this before and would appreciate some ideas on how to generate some cashflow over the next few months.

Cheers
Younguns

 

[Simon]

$30K isn't much.

What about doubling it via a margin loan and looking for a funds manager that suits your style?

You can keep adding to it as you go - every $1000 doubled up into the fund.

Just an idea to toss around - not investment advice

 

[younguns]

$30K isn't much.

What about doubling it via a margin loan and looking for a funds manager that suits your style?

You can keep adding to it as you go - every $1000 doubled up into the fund.

Just an idea to toss around - not investment advice

Interesting. I haven't heard of margn loan before. Can you elaborate Simon?

 

[Simon]

Is like a mortgage but you use the shares as security.

I use Leveraged Equities but lots of banks offer a margin facility. www.leveraged.com.au might give you some information but look around at others.

You can usually borrow up to 70% against quality stocks/funds but I think 50% gives you room to move.

Like a mortgage the value of the security determines what you can borrow.

Unlike a mortgage the shares/funds are valued daily. So if a security drops below a specified amount you will be called on to put in more money or more security. This is why I would suggest a lower LVR for someone just learning.

At the least I have given you something to think about. There is no right or wrong. We are all at different experience levels aqnd have different risk profiles.

When I was a young dude starting out (80's) I realised that I could repay a loan much easier than saving. ie if I decided to save $10 000 to buy some shares then I kept finding better things to spend my money on. But I went to my credit union and borrowed $10 000 and bought the shares. I paid it back quickly and claimed the interest. I listened to all my peers telling me I was a fool to borrow to buy shares.

But I never did understand why they thought borrowing $10 000 to buy a Commodore was better sense than buying Woolworths shares. Be interesting to do the sums today on what my purchase would be worth compared to theirs.

Cheers,

 

[Blacky]

Interesting. I haven't heard of margn loan before. Can you elaborate Simon?

If you havent heard of it before - its probably not something which I would personally use. Learn more about shares and trading first.

You say that you cant afford to borrow any more money (I am guessing due to lack of servicability?). Therefore, personally - I wouldnt recomend a development. $30k will barely see you covering purchasing costs!
Developments will take you longer and use more cash than you ever thought possible.

Personally I would say put the cash into an offset account, or repay any non deductable debt. This is a risk free option guaranteed to save you 7% every month.
Use the saving to increase repayments and reduce debt further.

Good luck

 

[younguns]

Thanks Blaky. Serviceability is not the problem. Hubby has recently gone self employed and the banks want at least 12 months BAS statements etc before they let us access any of our equity or borrow additional funds.

We are keeping the cash in our PPOR home loan offset account for now and meeting with Emma on Thursday

Thanks again for the referral and advice.

younguns

 

[Simon]

If you havent heard of it before - its probably not something which I would personally use. Learn more about shares and trading first.

I would stay away from trading and think long term holding even with a margin loan to be safer.

Personally I would say put the cash into an offset account, or repay any non deductable debt. This is a risk free option guaranteed to save you 7% every month.
Use the saving to increase repayments and reduce debt further.

Good luck

Offset account is the best place for it while you work out if and what you might choose to invest in.

 

[Simon]

Thanks Blaky. Serviceability is not the problem. Hubby has recently gone self employed and the banks want at least 12 months BAS statements etc before they let us access any of our equity or borrow additional funds.

We are keeping the cash in our PPOR home loan offset account for now and meeting with Emma on Thursday

Thanks again for the referral and advice.

younguns

Who is Emma?

 

[Blacky]

Hey Young Guns - I didnt realise it was you, I just read the post not the 'postor'
I will be more carefull in future

We are keeping the cash in our PPOR home loan offset account for now and meeting with Emma on Thursday

Good spot for it for the time being I think!

Thanks again for the referral and advice.

younguns

Always remember I dont give advice - just ideas

Please say hi to Emma for me from Kazakhstan!

Who is Emma?

Emma is my buyers agent & project manager and all round guru on what I should do next.