Ask Paul: Should I buy a regional investment property?

Dear Paul,

I am 60, living with my wife and two infant kids, currently not working.

I am mortgage-free and have super worth $400,000. I have $40,000 invested in the ASX and use Morningstar research.

I have $350,000 in savings - what should I invest in? Should I use the $300,000 equity in my home to buy an investment property in regional NSW, such as Batlow? - Mick

Well, Mick, I've got a great mate who lives in Tumbarumba , so I know the Snowy Valleys area but have never visited Batlow. Tumbarumba is going really well, but I'm going to leave the research on the Batlow property market to you.

Pretty obviously, projected population growth, availability of work and access to health services, schools and other important things for modern life, including decent coffee, will be the driver of population growth and hence property values.

It is great that you own a home, with a wife who is studying, two little kids and retirement looming. Home ownership is so valuable.

It seems to me that planning towards a pension in about seven years is important.

With your current assets, you are likely to get a small part-pension initially, but this could grow as you use assets to support your living costs. That, though, is a fair way off.

I agree with you that right now it is best to maximise your returns. Here we look at super, your shares and an investment property.

I would guess you are thinking about regional areas as you are more likely to get a positively geared property. But will you get the capital growth of big city property markets?

Frankly, this is more personal preference than investment logic.

If I was in your shoes, I'd top up my super as much as I could under the rules, select a growth-type option, which would be mainly shares and property, and sit back, relax and let super do the work for me.

With any surplus, I would build a low-cost portfolio of shares. An exchange traded fund is an easy way to do this.

Here you are lumped with my biases. I'm lazy and I find investment property hard work. But property may be 'your thing'.

With good research, you may be able to buy a good property in a regional growth area; possibly you could renovate to add value. Using your savings, debt and equity in your home, you may have the personal skills with property to drive better returns.

The great news is that with a home, good savings and a solid amount in super, you are in a good financial position.

Please be careful if you use your savings and home equity to buy an investment property. In the regions, returns will all hang on population growth.

Get that wrong and your property investment could also go badly wrong.

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