Where would you invest $500k?
November 12th, 2014 • One comment
You’ve just left your brokers office, pre-approval in hand after being told you have $500,000 to spend on an investment property. Your heart is racing, blood pumping and you feel good enough to do a Toyota jump moment on the sidewalk – but what now? Where are you going to invest the money, how do you decide what to buy?
When clients come to me with this situation I want to know their overall situation to see where the $500k would be of most benefit to their goals and current portfolio.
To get to this point you would certainly want to make the most of what you have so it’s more important than ever to protect yourself from loss and maximise your equity or savings.
Here are my top tips to be comfortable investing half a million dollars.
1) Set Investment Objectives
Most investors spend their time focusing on their financial situation but don’t have specific financial goals. Whatever your goals are, setting investment objectives will highlight the appropriate strategies and actions to take to help you reach them. They key is these objectives should be measurable, achievable and able to be communicated toy our financial advisors, and should be reviewed at least once a year, of if your financial situation changes.
2) Risk Tolerance
Consider investments that align with your personal risk appetite & their direct ability to reach your investment goals. Every investment has some risk so it is important to weigh up the pro’s and con’s of the investment and then put a suitable strategy in place.
There are things you can do to manage the risks associated with investments such as
- Making sure your investment strategy meets your objectives and financial situation
- Understanding and researching the nature of the investment you are considering
- Being realistic with time-frames for a particular investment strategy and outcomes
- Regularly reviewing your investment
3) Consulting Finance and Wealth Professionals
When considering any investment it makes sense to use a professional in that industry. Same goes for Property Management. You wouldn’t ask a friend or perform a root canal on yourself would you? No! You would research and find the best dentist for the job! Why should investment and property decisions be any different?
Maximise the use of professionals and experts to make the right decisions, avoid costly mistakes by leveraging their knowledge and your time.
4) Minimise Tax with the Right Structures
Through our clients I am continually reminded of the importance of having the correct ownership structures and the right advice on investment loans. It is important to understand how you can achieve the maximum tax benefits from an investment purchase.
The goal is to have a structure that is appropriate for you and your investment objectives that minimises risk, maximises flexibility for your future investment goals as well as providing tax effectiveness.
Determining the suitability of a structure should be discussed with an experienced advisor.
5) Selecting the Most Appropriate Investments
With $500k to invest there are so many options around the country at your disposal, so choosing the right one can be more than confusing. The following questions can assist you in choosing the most appropriate investment:
- Are you looking long term, short term, or both?
- Are you wanting safe returns (generally a lower rate of return) or investments with more risk (potentially higher rate of return)?
- What types of investments are you genuinely interested in/familiar with?
- Do you like hands on investments or passive investment income?
- What rate of return would you expect?
- Which type of investment will get you to your financial goals sooner?
There are no guarantees in any type of investing, but chosen correctly your $500K investment could potentially grow into millions over time. The key to success remains in doing your research and ensuring the properties you invest are worthy candidates to add to your portfolio.
Can you please give me your thoughts about the current Hedland market? I have a property in South Hedland that has been vacant since May and doesn’t look like it will be leased anytime soon. I can hardly get anyone in your office to answer me about anything. I’ve asked how many inspections there have been of our property, but no one answers. Where have all the tenants gone? What percentage of the workforce have left town for there to be no tenants?
I would really appreciate hearing back from you.