Shares versus property is a question I am often asked about. And the answer is (like always): it depends.
Shares and property play important roles in building wealth, but they serve different purposes depending on your stage of life, cash-flow needs and goals.
Property often feels more tangible and it’s usually easier to borrow for a $800,000 house than to build up the same amount in shares. But it also comes with maintenance, overheads and lumpy cash flow.
One client’s investment property earned $45,000 per year in rent, but once expenses and repairs were deducted, the actual return was closer to $20,000, which equalled about a 2.5 per cent return. In retirement, that lack of consistent income can become a real issue.
Shares/exchange traded funds/managed funds, on the other hand, offer liquidity and flexibility. You can buy and sell quickly which you can’t do with property. Shares can also provide dividends, which become valuable as you transition into retirement.
Another often overlooked factor is ownership structure. Getting this right can have significant tax consequences when you sell and improve outcomes down the track.
Ultimately, it is not about which is better, but what is right for you.
Getting the strategy and structure right early is crucial, so always seek financial advice.
Because as I always say: Hope is not a strategy.
Mandy Newman, director, AJN Financial, 15/13 Poinciana Avenue, Tewantin, 5430 6631, ajnfinancial.com.au
This column is part of our Business 2 Business (B2B) series featuring industry leaders sharing their expertise. For more great articles, SUBSCRIBE to our FREE news feed, direct to your inbox daily. All you need to do is enter your email below.
