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A host of Property analysts including Peter Koulizos offer differing advice to a couple who are about to retire and looking for the best place for their savings. Money Magazine September Edition.
Peter Koulizos states:
Comparing shares with the property market, the yields on the sharemarket are higher than they are if you buy property. However, if you look at the risk-adjusted returns, property wins hands down. Considering you are looking to invest for retirement, you should be aiming to minimise your risk.
With property prices on the way down, this is an excellent time to pick up a bargain. Undervalued properties abound, but you need to ensure that the property you buy has the potential for capital growth. There is not much point in buying a cheap property if it is always going to remain cheap.
So far as utilising funds is concerned, I’d suggest you leave your cash in the bank and borrow as much as possible. I imagine that you are on the highest tax bracket and would benefit from negative gearing. However, negative gearing works only if the property increases in value at a greater rate than the losses you make on an annual basis. There is no point in having a negative cash flow of, say, $15,000 a year if the property is not increasing in value by at least this amount on an annual basis.
Happy House Hunting!
Written by Peter Koulizos, university lecturer, author and buyers advocate.