Ask Paul: I own my apartment but is a house a better investment?


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Q. I'm 42, single, earning about $125,000 gross.

I've paid off my mortgage but am feeling a little nervous as I was told apartments like mine in the Perth CBD are really investment products with high rental yields rather than a good asset for owner-occupiers and was advised get a proper house that would appreciate in the long term.

I have about $100,000 sitting in a term deposit and about $200,000 in superannuation.

ask paul partner is older age difference top up super apartment

I've never really thought about joining a different super fund since I've always belonged to a constitutionally protected fund. I salary sacrifice $700 a fortnight into super.

I'm a reasonably good saver, live well within my means and have no outstanding debts.

I know nothing about finance and find the idea of share investment absolutely daunting.

I would really appreciate your advice on where to invest my savings. Should I put them towards a house, or perhaps start learning about shares, or something else altogether?

A. I had to laugh at the "buy a proper house" comment. But there is quite a bit of sense in it for your next property, Brooke.

As our cities grow, more of us will live in well-located CBD towers, so I have no concerns about your apartment over the coming decades.

Knowledge is always a powerful thing so I would encourage you to do one of the free ASX online share courses.

This may make you more comfortable with shares but I am not concerned if you prefer to stay with property as you are building up super, which will be predominantly invested in shares anyway.

If you do decide to buy another property, it would make a lot of sense to buy it as an investment.

As your mortgage is paid off, renting your current apartment while living in another property with a mortgage is not ideal.

The income you would get from the apartment would be taxable and the interest you pay on your new home would not be deductible. I'd suggest a chat with your accountant about this.

Don't be too nervous. You have done well with your money. You own an apartment, are in a good super fund (and topping it up) plus you have good savings. So I would spend a little time learning about shares while you consider buying another property.

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Paul Clitheroe AM is founder and editorial adviser of Money magazine. He is one of Australia's leading financial voices, responsible for bringing financial insight to Australians through personal finance books, the Money TV show, and this publication, which he established in 1999. Paul is the chair of the Australian Government Financial Literacy Board and is chairman of InvestSMART Financial Services. He is the chair of Financial Literacy at Macquarie University where he is also a Professor with the School of Business and Economics. Click here to ask Paul your money question. Unfortunately Paul cannot respond to questions posted in the comments section. Please view our disclaimer here.

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