SHARES HAVE DRAWBACKS WHEN SAVING FOR A HOME

OUR daughter held an account with the disbanded government First Home Savers scheme, and with our help had saved quite a good sum. What would be the best option for a similar account to save towards a deposit, as she has been advised by her bank that the best it can offer is an online savings account. It will be around five years before she

is in a position to buy a property. Would a term deposit be an alternative, or should she look outside banks and consider a good share portfolio?

The reality is that online savings accounts are the only practical alternative. If she invests in shares, she could suffer a capital loss if the market falls, or be liable for capital gains tax if it rises. MY husband has just accepted a voluntary payout of $115,000 and we are unsure of the best way to move forward. We have a mortgage on our house of $158,000 and also have two rental properties, which are both positively geared. My salary is $98,000. Our plan is to pay $75,000 off our mortgage and use the remaining money to renovate one of our rentals. Alternatively would it be better for us to put the money into buying another property, although we are worried this may put a strain on our finances given we will only have one steady income?

You should try to maximise your deductible debt and minimise your non-deductible debt – therefore any spare funds should be directed to pay down the non-deductible housing loan. Also consider borrowing for the renovations on the investment property as the interest on this loan will be tax deductible. I note the investment properties are positively geared, which means they are costing you nothing to keep. If you feel they have good potential for capital gain, an option may be to consider keeping them because they will not be a drain on your cash flow, even if you are living on one income. You already have three properties so it may be worthwhile talking to an adviser about borrowing to invest in shares. MY daughter intends to continue her education in a capital city in the next three years. With this in mind, my husband and I are thinking of buying either a house or apartment there now. Can you

give us some guidance as what we should be doing or who we should contact?

My view is that an investment decision must be as devoid of emotion as possible. To buy a property just because your daughter is studying there means you are closing your mind to all other investment options. These could include buying in other areas and/or buying other asset classes such as shares. If you do decide to buy a property, keep in mind the secret of doing well is to buy in a prime location from a vendor who needs an urgent sale.