Your own security comes first

Mary wants to help the kids but ...

QMyhusband and I own our three-bedroom unit in Bondi and my husband wants to buy a unit/villa worth about $400,000 to $500,000 in a beachside area somewhere up or down the NSW coast and pay it all off himself without it being tenanted. He is 56 and will have 12 years to pay it off.

I think it is better to buy an investment unit in Sydney and have someone else pay it off. I would look at prices of $750,000 to $850,000. Would we be better off paying into super instead or is there another option? We have two children in their 20s and they will never be able to buy around the eastern suburbs for themselves. Is there some way we might be able to help?

From an investment perspective, Mary, you are quite right. Buy in a good location in the rapidly growing city of Sydney, rent it and, as you say, someone else will pay for it. But I think your husband is thinking lifestyle, not investment, so I’ll have to leave that debate to you both to sort out!

The reality is that property in high-demand locations with a growing population, access to jobs, education and great facilities, as is the case in the eastern suburbs, is going to be hard to beat as an investment but not as much fun.

At 56, super is hard to beat. You could both put in up to $20,000 a year at only a 15% rate of tax, unless you earn over $250,000, when it becomes 30%. That is a really powerful wealth-creation strategy. You get 85¢ in every dollar you put in.

Then we turn to the kids. It is always great to help them but you have to put your financial security first. So my advice is to agree on your plans to be financially independent, and then think about the kids.