Plan to down­size and re­tire at 60

Hav­ing done well with prop­erty, Ro­han has a ...

Money Magazine Australia - - ASK PAUL -

QI cur­rently have an in­vest­ment prop­erty in Chel­tenham, Mel­bourne, which was pur­chased for $210,000 and is now worth around $1 mil­lion, with a loan of $500,000. In nearby Black Rock I have my own home which still has a sub­stan­tial loan against it (around 40% LVR) and also an SMSF hold­ing an­other town­house which has around $450,000 eq­uity.

I am 49 and look­ing at a 10-year re­tire­ment plan. I am want­ing some ad­vice as to whether I sit and hold all prop­er­ties un­til re­tire­ment or sell my Chel­tenham house, take a CGT hit now and de­posit the eq­uity I come out with into my SMSF to buy an­other prop­erty that will be CGT free at 60 years of age?

At 60 my plan is to down­size our home and pur­chase a smaller house in Mel­bourne and also look at pur­chas­ing a prop­erty on the Sun­shine Coast to es­cape the Mel­bourne win­ters.

Ro­han, I know what you mean about es­cap­ing the win­ter. As I write this, I am on a flight from a very warm and sunny Mag­netic Is­land to a chilly Syd­ney. Wow, your Chel­tenham in­vest­ment prop­erty has been a cracker. I am not too sure why it was bought for $210,000 and has a loan of $500,000. Did you do a ren­o­va­tion? The town­house in your SMSF has also done very well.

While I re­ally think you need an hour or two with an ad­viser to get the qual­ity of an­swer you need to make de­ci­sions,

I can say that I am not keen on you sell­ing a prop­erty that has done so well. My view on in­vest­ments is pretty sim­ple. If a prop­erty has done well it is telling us it is in a good growth lo­ca­tion. I don’t see why that would change.

Again, as a gen­eral prin­ci­ple the idea of pay­ing tax now and re­duc­ing your as­set base, plus sig­nif­i­cant sale costs, is re­ally unattrac­tive. I get your point about then rein­vest­ing in your SMSF so fu­ture CGT past 60 is tax free but you would have to run the num­bers with an ex­pert.

But, re­gard­less, I would like you to use the next decade to build as­sets that are not prop­erty. As we are see­ing now, at times prop­erty will go back­wards. At re­tire­ment we all do need to hold a mix of as­set classes.

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