Ask Paul: Should we sell our shares to buy an investment property?
Q. My husband is 36 and I'm 29. Excluding super, he earns $135,000 and I earn $95,000 but I am on maternity leave with our eight-month-old son.
We have a $740,000 house with a $200,000 mortgage at a favourable rate from family. We have $245,000 in super and $370,000 in Australian and international shares/managed funds. We have $30,000 in cash, and salary sacrifice into super to the cap (only recently started this).
We are unsure about the best way to set ourselves up for the future but are considering an investment property in Newcastle (where we live).
We don't have a deposit and don't know if it's best to sell shares to get the cash or wait until we accumulate enough from earnings.
I'm a chartered accountant and am considering taking further time off to be with our son but don't know if it's financially responsible. - Nikki
A. You know, Nikki, it looks to me like you are being really financially responsible. You are just 29, your husband is 36 and you are already in a great position.
Believe me, barely any people your age salary sacrifice into super to the maximum and have some $1.2 million in equity, so there's no need to beat yourself up about extended time with your son. Of course it is a family decision, but I know what I'd suggest: grab that invaluable time with your son while you can.
Newcastle is a terrific city and a great location. It will certainly grow, so I have no problem with you buying an investment property there.
With your existing assets, borrowing is not going to be much of an issue but, again, this is very much a decision for you and your husband and it links very much to the price you would pay for an investment property.
There are a couple of ways to boost your deposit. You could take a break from maximum contributions to super.
Or, as a chartered accountant, you could look at your current super and consider moving it to a DIY fund and using this to buy the investment property. If this is not your area of expertise, I'd chat to someone about this option.
Of course, you could sell some shares to get to, say, a 20% deposit or just relax and keep up your savings until you build a deposit. This, I think, calls for you and your husband to find a nice bottle of red and have a planning evening or two but I don't think it calls for any stress.
Seriously, you are in a wonderful financial position already.
You really can afford to put your family first; your money is doing just fine as you are now. Sure, in time a good investment property is a great idea but don't be in too much of a hurry. Life goes by too quickly.
I'm off to the 30th birthday for my oldest child, also a son. I am so glad Vicki and I spend a lot of time with him and our two daughters. If we didn't I have no doubt we would have more money but, really, so what!