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  1. #466
    Gnawing on Bones Beagle's Avatar
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    Quote Originally Posted by voltage View Post
    Beagle, you have lots of common sense and would appreciate to hear more. Partnering, is this joint ownership? or do you help repaying loans?
    Thanks. I use the word partnering with your kids in the loosest possible way as this can take many forms. A partnership where ownership is joint, or co-ownership in a company or family trust are the main ownership vehicles. Unless you are super comfortable financially I think any investment in a house through a co-ownership arrangement should place the sole emphasis on the occupant being able to service the bank mortgage. If they can't fund it themselves at the current interest rate then you probably should look at buying something more affordable unless the parent(s) are well prepared to meet the ongoing burden of chipping in for mortgage payments and (seeing as they can't afford the mortgage) this leaves them also exposed to meeting the ongoing burden of other running costs including maintenance, insurance and rates. Parents should think very, very long and hard before putting their head in an ongoing perpetual liability situation for their kids in my opinion as this can lead to nasty surprises down the track. For example what happens if there's some deep cycle maintenance required such as a full repaint inside and out..who pays for that ? What about if there's some moisture ingress issues ?...do parents want the long term exposure of the risk involved and are they financial comfortable enough to afford this as well as look after their own financial needs comfortably ?

    Another possibility is where parents partner with their kids by helping them save for their deposit and then the parents contribution is then treated as a loan either with or without interest and is repaid over time. I think this is the most common sort of help as most parents are not super wealthy and while they can help with the deposit they probably need that money paid back over a period of time for their retirement needs. I recommend loans be formally documented as kids relationships with their partners often end badly and parents need to protect their financial interests as well as the interests of their own child.

    Yet another possibility is this partnering is simply a process whereby wealthy parents partner with their kids to help them save the deposit, usually 1:1 contribution but sometimes 2:1 or even 3:1..but as mentioned above its very important that the kids do put in some of it and then the parents gift the money they've contributed either all at once or over a period of time with conditions, (such as the kids keeping the bank's mortgage payments up to date, rates, repairs and insurance current)...this sort of thing might be appropriate where parents want to help their kids heaps but feel they need to keep "trainer wheels on the bike" for a while so to speak.

    I don't think any one solution is the perfect generic fit for all. For example one might have very serious concerns, (I think many parents have some concerns lol) about their kids choice of partner, so ownership in a family trust with your own child as the primary beneficiary might give some much needed peace of mind if one feels their kids relationship with their partner is rocky or likely to end badly. What percentage of marriages (or unions if you want to call them that) fail these days...50% ?
    Maybe people should plan for the risks associated with that ?

    Hope that gives you some food for thought....but I will add one final note of caution. I have seen quite a few families of modest means go way out on a limb for one or more of their children and it can go very very wrong with very sad consequences. Business entrusted to one's child to run, run into the ground and worthless at the loss of hundreds of thousands of dollars of much needed capital, one example and rental properties so badly damaged by methamphetamine use and consequent other wild party damage the repairs nearly bankrupted one of my clients and nearly ruined their marriage, (both kids involved with both properties were step children of one and natural child of the other client which caused massive friction in and of itself). When things go wrong they usually go very very wrong so whatever help you are prepared to give your child to get into a house I think one is best to seriously consider the chance you'll never see that money again and limit one's help to what you're prepared to gift or lose. The other thing from a relationship perspective is if you really go out on a limb for your child and they let you down so badly it seriously affects your ability to have a comfortable retirement then its harder to have a good relationship with them going forward. Best to take a carefully measured approach making sure you look after yourself and your partner properly as your first priority...along the lines of the advice below, in my opinion.

    An old retiring accountant once gave me this very sage advice when I was a very young starry eyed bean-counter "Love many, trust few and always paddle your own canoe"
    Last edited by Beagle; 01-01-2019 at 01:39 PM.
    No butts, hold no mutts, (unless they're the furry variety).

  2. #467
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    Having recently been reviewing my retirement investment strategy and found this thread. I have a debt free house and $500k.

    Im considering a rental property purchase with the $500k but would be interested to hear what others think about REIT's as an alternative investment. Have not been following them lately so not sure about how they will perform looking forward.

  3. #468
    Gnawing on Bones Beagle's Avatar
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    No butts, hold no mutts, (unless they're the furry variety).

  4. #469
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    Quote Originally Posted by ynot View Post
    Having recently been reviewing my retirement investment strategy and found this thread. I have a debt free house and $500k.

    Im considering a rental property purchase with the $500k but would be interested to hear what others think about REIT's as an alternative investment. Have not been following them lately so not sure about how they will perform looking forward.
    I imagine with 500k you will need to eat into the capital, as well as using the return. If that is the case -go for the LPTs. You can always flog off a few if you need 10 or 20k, or add to if you have a year with low expenses.
    Besides that it's a damn sight easier dealing with a share of a trust, than a tenant. Especially with the ones which are PIES e.g. ARG, PFI. GMT, PCT. Not even any paper work, with no tax to worry about. Augusta is not a PIE, and Stride. comes with stapled shares in a management company Stride is a PIE, but the stapled shares in SIML are not.

  5. #470
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    Quote Originally Posted by fungus pudding View Post
    I imagine with 500k you will need to eat into the capital, as well as using the return. If that is the case -go for the LPTs. You can always flog off a few if you need 10 or 20k, or add to if you have a year with low expenses.
    Besides that it's a damn sight easier dealing with a share of a trust, than a tenant. Especially with the ones which are PIES e.g. ARG, PFI. GMT, PCT. Not even any paper work, with no tax to worry about. Augusta is not a PIE, and Stride. comes with stapled shares in a management company Stride is a PIE, but the stapled shares in SIML are not.
    The million dollar question, or .5m in my case, is how do I choose this portfolio and secondly how do I manage it. I am not averse to researching the subject but I am afraid of getting it wrong.

  6. #471
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    Quote Originally Posted by ynot View Post
    The million dollar question, or .5m in my case, is how do I choose this portfolio and secondly how do I manage it. I am not averse to researching the subject but I am afraid of getting it wrong.
    How much do you have in KiwiSaver (and in any other pension schemes) and in what type of KiwiSaver fund? What type of debt-free house do you have. If it is a big house in an expensive location, then that gives you the ability to trade down to a cheaper property and gives you an extra cushion of financial security that could be drawn upon in retirement. Also depending on the KiwiSaver balance you may be able to make a more risky property or Real estate related stock exchange investment with your $500k

    Both house prices and stock exchange prices have had good increases in prices and may well be entering a consolidation phase now. Is your 500k currently in a big Aussie bank?

  7. #472
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    Bad time to buy a rental property IMO. Current government is anti landlord and pro tenant. However, they haven't twigged yet that adding extra costs and compliance on landlords might lead to some exiting the market including not buying / building new. Which is good news for remaining landlords as they hike rents (ECON101).

    Silver lining, but not for tenants.

  8. #473
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    Quote Originally Posted by ynot View Post
    Having recently been reviewing my retirement investment strategy and found this thread. I have a debt free house and $500k.

    Im considering a rental property purchase with the $500k but would be interested to hear what others think about REIT's as an alternative investment. Have not been following them lately so not sure about how they will perform looking forward.
    I personal would avoid Residential property at this stage ..year to two ago I would have said look to the likes of invercargill-dunedin etc but now both have gone up pushing av. yeilds(for properties with Cap growth potential in good areas) to much lower levels and with all the costs one has renting properties and damage one always gets..

    Personal if I had a spare 500k I'd be buying another Commercial property ... much less hassle if you buy the right property
    a couple I would be looking closer at ..down my neck of the woods

    https://www.realestate.co.nz/3461424
    10% yield .long term fixed term lease.. does need some earthquake strengthening but I understand Oamaru has very low earthquake risk so local council would give you a longer term to bring upto min standards which going from the picture look like the front facade has already been upgraded ?? ...

    https://www.realestate.co.nz/3407006
    Well built good location 8% yeild
    People don't have ideas, ideas have people

  9. #474
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    Quote Originally Posted by Bjauck View Post
    How much do you have in KiwiSaver (and in any other pension schemes) and in what type of KiwiSaver fund? What type of debt-free house do you have. If it is a big house in an expensive location, then that gives you the ability to trade down to a cheaper property and gives you an extra cushion of financial security that could be drawn upon in retirement. Also depending on the KiwiSaver balance you may be able to make a more risky property or Real estate related stock exchange investment with your $500k

    Both house prices and stock exchange prices have had good increases in prices and may well be entering a consolidation phase now. Is your 500k currently in a big Aussie bank?
    I have already traded down the expensve house. New house cost 500k and now have 500k in the bank. (nz$)
    Nothing else of any major value. All cashed up including kiwisaver.

  10. #475
    Gnawing on Bones Beagle's Avatar
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    Quote Originally Posted by ynot View Post
    I have already traded down the expensve house. New house cost 500k and now have 500k in the bank. (nz$)
    Nothing else of any major value. All cashed up including kiwisaver.
    Would you like me to start a new thread for you in the main NZX section so people can opine on this. Perhaps a heading like this.
    I have exactly $500K to invest in my retirement years. What portfolio investment stratagy would you recommend to maximise my long term wellbeing ?
    It might help people to refine their recommended strategy for you if you stated your approximate age and if its just you or you and your partner and I assume you're getting National Superannuation ?
    Is it a major goal to leave as much as possible to your kids (if any) when you pass on or are they ratbags like mine are and don't deserve anything ?

    You might as well tap into the collective wisdom on here.
    Last edited by Beagle; 09-01-2019 at 01:02 PM.
    No butts, hold no mutts, (unless they're the furry variety).

  11. #476
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    Thanks, New thread, yes. Major goal would be "lower risk, " somthing left for my kids maybe but i want steady return for myself to supplement my nz super.

  12. #477
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    Quote Originally Posted by JBmurc View Post
    I personal would avoid Residential property at this stage ..year to two ago I would have said look to the likes of invercargill-dunedin etc but now both have gone up pushing av. yeilds(for properties with Cap growth potential in good areas) to much lower levels and with all the costs one has renting properties and damage one always gets..

    Personal if I had a spare 500k I'd be buying another Commercial property ... much less hassle if you buy the right property
    a couple I would be looking closer at ..down my neck of the woods

    https://www.realestate.co.nz/3461424
    10% yield .long term fixed term lease.. does need some earthquake strengthening but I understand Oamaru has very low earthquake risk so local council would give you a longer term to bring upto min standards which going from the picture look like the front facade has already been upgraded ?? ...

    https://www.realestate.co.nz/3407006
    Well built good location 8% yeild
    I couldn't agree more about commercial/industrial as opposed to residential. Some of the syndicates available are well worth considering. e.g. this Wellington one is being syndicated in $200,000 lots with projected return of over 10%. (Disc - I have gone into this one, but possibly some titles still available) Main tenants look good.

    (Spark, BNZ and AMP.)

    https://www.stuff.co.nz/business/pro...ding-ever-sold
    Last edited by fungus pudding; 09-01-2019 at 01:12 PM.

  13. #478
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    Thanks, New thread, yes. Major goal would be "lower risk, " somthing left for my kids maybe but i want steady return for myself to supplement my nz super.
    Yes just the wife and i. Im 65 she 63.

  14. #479
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    Quote Originally Posted by ynot View Post
    The million dollar question, or .5m in my case, is how do I choose this portfolio and secondly how do I manage it. I am not averse to researching the subject but I am afraid of getting it wrong.
    Sorry can't help you as I know nothing but nice to know there are others like me who are unsure where to invest. Would be interested to hear back what you decide.
    I think 2018 was a good year for cash compared to other investments.
    https://www.cnbc.com/2018/12/20/the-...d-in-2018.html
    No yield but if asset prices are falling then it works out OK. You are however taking a chance that central banks will eventually make your money worthless with low interest rates and money printing. Have read a lot about "time in the markets, not timing the markets" blah blah but think I am smarter than the experts who dedicate their lives to investing so continue to unsuccessfully try and time the markets.

    Not a recommendation but I am waiting another year (or two) to see if I can time the next major downturn and buy investments at half price. Janet Yellen has stated that we shouldn't expect another downturn in our lifetimes which may be right. I am not a phd and she is way smarter than me, yet I will wait a bit longer as December 2018 maybe gave us a glimpse into the future, at least up until Jay Powell confirmed investors can rely on the Fed Put.
    Last edited by Aaron; 09-01-2019 at 01:59 PM.

  15. #480
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    Quote Originally Posted by Aaron View Post
    ...
    I think 2018 was a good year for cash compared to other investments.
    https://www.cnbc.com/2018/12/20/the-...d-in-2018.html
    No yield but if asset prices are falling then it works out OK. You are however taking a chance that central banks will eventually make your money worthless with low interest rates and money printing. Have read a lot about "time in the markets, not timing the markets" blah blah but think I am smarter than the experts who dedicate their lives to investing so continue to unsuccessfully try and time the markets...
    In 2018 these were the following approximate after 33% tax returns (included both taxed income and untaxed unrealised capital gains during the year) for various asset classes:

    NZ Cash (in a big bank): <1%
    NZ 12-month Term Deposit +2.3%
    NZ bonds mixed portfolio +2.5%
    NZ shares +5.2%

    With inflation running at about 1.9% only NZ shares would have provided a reasonable amount of return plus capital CPI purchasing power preservation. Bonds and 12 month td would have given you an after inflation and after tax return of approx 0.50%.

    So, whilst maintaining capital purchasing power, to currently provide an independent after tax retirement income of $30,000 from rolling over term deposits with varying lengths would require $5,000,000 of capital. (3.7% is the current rate for a BNZ 5-year TD)

    If you are prepared to have your capital value eroded by inflation, $30,000 after tax income from term deposits would require $1,300,000 in capital. But that income would be static (and dependant on changes in interest rates) so inflation could erode what it could buy each year.

    Disc: Assuming un-changed tax system. All figures are Very approximate. DYOR.
    Last edited by Bjauck; 19-01-2019 at 09:24 AM.

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