Your own se­cu­rity comes first

Mary wants to help the kids but ...

Money Magazine Australia - - ASK PAUL -

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.

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