Ask Paul: I sold my property to upgrade, now I'm priced out of the market

Dear Paul,

I am an investing newbie in my 50s. I inherited a property, which I sold in order to be ready to buy/upgrade where I live, but then COVID lockdowns struck and there was little on the market and nothing of interest.

I have now been losing out with very little interest on my principal in the bank while house prices have soared. 

My bank is trying to get me to invest in bonds issued by companies such as Qantas. It says I can get a 2.4% return and can sell in 48 hours if I need the funds to purchase a property.

How true is this and how safe is it? How would I find the best way to get into them, through the bank or otherwise?

It also brings up the issue of what do people do with large sums when they sell their property, before purchasing a new one?

I believe I just had very bad luck with timing in selling the property and wanting to upgrade. I would appreciate any information you can share. - Anna

Damn! Hindsight is the only really useful form of investment certainty, Anna, and here the property cycle has clearly not been in your favour.

I have just finished a phone conversation with a friend as they lamented on missed opportunities. I was in stitches of laughter, of course - investing with hindsight we would all be billionaires.

I can't comment on the specifics of what your bank is telling you, but when I hear projected returns of 2.4%, my heart rate stays pretty level.

That is a pretty realistic return with short notice on your money, but the ultimate security in this case is Qantas succeeding as a business and, of course, the fine print regarding the conditions of security and redemption of your bond.

If, as I suspect, it is a large amount of money, I'd seek professional advice from a fee-charging adviser.

Maybe a starting point is a bit of diversification. Surely your bank has low-cost, more broadly based funds holding many different bonds, reducing your risk?

But you know what? 2.4% is not going to make much difference to your money over even a full year.

Unless you invest for years, in which case you should get professional advice about longer term investments.

I wonder if you should not just go out and find that property. Sure, sooner or later we will get a price downturn, but who knows when? Our population is growing.

Well-located, in-demand properties will move up and down in price. But with population growth, it seems to me that doing your research and buying what you can afford, even in a boom market, will look pretty clever in a decade or so.

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