Ask the ex­perts

A move to a re­gional town pro­vides the op­por­tu­nity for a fresh fi­nan­cial start

Money Magazine Australia - - CON­TENTS - SU­SAN HELY

NAME: Glenn Groves

STA­TUS: Re­cently moved to, and bought a house in, a re­gional town in Vic­to­ria.

QUES­TIONS: How do I build a group of peo­ple around me with an in­ter­est in money and in­vest­ing? How should I re­duce my mort­gage debt and build up my re­tire­ment sav­ings in the next 20 years? Do I have the right in­sur­ance for my needs?

AN­SWERS: Get your in­vest­ment prop­erty ren­o­vated and rented and use the in­come to pay down your debt. Salary sac­ri­fice ex­tra to build up your super. Change your salary con­tin­u­ance and TPD in­sur­ance to poli­cies with more suit­able op­tions.

Tim­ing your en­try into the prop­erty mar­ket can be tricky. If you wait for it to go down but it keeps go­ing up you can be locked out be­cause it is too ex­pen­sive.

Glenn has given up on buy­ing in Mel­bourne, where the av­er­age house price is $740,000 and it takes 9½ years of me­dian house­hold in­come to pay it off. Glenn ran his own busi­ness for 16 years and much of what he earned went into that, so he has few sav­ings. Now he is on a mis­sion to build his hous­ing as­sets and wealth.

He bought a di­lap­i­dated house, which he is ren­o­vat­ing, on a large block three hours out of Mel­bourne in the pretty town of Hor­sham. He would like to even­tu­ally de­velop a num­ber of units on the site to build eq­uity and in­come for re­tire­ment. Then he bought a two-bed­room house in Bal­larat Glenn in­tends to re­tire in the Bal­larat house.

All up he has paid $300,000 for the two prop­er­ties and has in­ter­est-only loans with only 10% de­posit. Two-thirds of the mort­gage on the Bal­larat home is at a fixed in­ter­est rate for the next three years while one third is vari­able. What is the best strat­egy for in­ter­est rates?

He re­cently moved into his Bal­larat home and com­mutes 100 kilo­me­tres one way to Mel­bourne. For the amount he paid for his pre­vi­ous Mel­bourne rent, he can fund his Bal­larat mort­gage, pay rates and util­i­ties plus cover his travel costs. He is ren­o­vat­ing the other home and plans to rent it out for more than the mort­gage re­pay­ments. He has a bud­get of $25,000 for the ren­o­va­tion.

One chal­lenge with mov­ing to a new area is find­ing a com­mu­nity to con­nect with. What steps should Glenn take? A few years ago he vis­ited a fi­nan­cial plan­ner about his in­sur­ance needs but was scep­ti­cal about their ad­vice and fees. He wants to meet peo­ple who are in­ter­ested in in­vest­ing. “I would like to build a so­cial cir­cle of peo­ple who are great with money,” he says.

His su­per­an­nu­a­tion bal­ance also needs a boost af­ter years of be­ing self-em­ployed. How does he jug­gle his mort­gages and super? He has in­sur­ance through his super fund, Host­plus, but won­ders if it is ap­pro­pri­ate for him. Does he need death and TPD if he doesn’t have any de­pen­dents? Does he have the right in­come pro­tec­tion in­sur­ance (90-day wait) to cover his bills if some­thing hap­pens to him?

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