HAVING seen prices collapse in Ireland, Bernie Walsh is still coming to terms with property values here.
"The market looks surreal," says Bernie, who's renting a unit in Sydney's Coogee but is no stranger to real estate.
After starting a publishing company in Ireland in 1990, she got the bug from the success of her flagship property management magazine, reinvesting the profits into successfully developing 18 properties, both residential and commercial
"I've learned how to build a house from the ground up. I bought properties and did the designs, and fit outs," Bernie, 52, says.
She bought the materials and was her own project manager.
Bernie sees business opportunities in real estate, which is "very light on customer service and, generally, as a result suffers from a poor public image".
She will team up with a real estate company or hang out her shingle as either a property consultant or project manager.
Her first question is whether to buy a home for herself, renovate it and sell it later, and what the tax implications would be, or go on renting and put everything into developing her business or investing. She also wants to know when she should bring over her savings of $500,000, hesitating because the dollar is so strong.
If she were to invest it all, should she buy property or shares? If shares, which ones?
BFG Financial Services
As a general rule, diversification reduces risk. Like property, shares should be purchased as a long-term investment - at least five years. Given your marginal tax rate is 31.5 per cent, shares with a fully franked high-dividend yield will give improved cashflow with no or minimal tax payable.
If you buy a property with the intention of renovating and selling it at a profit, and go about it in a business-like way, you may be deemed to be carrying out a profit-making activity and then the net profit or loss will be included in your income-tax return.
Alternatively, if the renovations are undertaken on your own home you may be eligible for the main residence exemption, which would mean no capital gains tax on sale.
Once you have full residency and you buy a house or unit you'll get a $7000 first-home owner's grant. You'll also get a stamp duty saving if you buy land and build a house but I don't recommend this as I'd like to see you use your expertise in adding value to an existing property. You're obviously good at it.
But getting a PAYG job for the time being will help build a credit record.
When bringing in the money from Ireland you shouldn't play the market. Just get it into a bank where you can build up a relationship and form a good credit history. Term deposits up to $250,000 are government guaranteed as well. You'll pay a fee going from the Irish to Australian bank and may not get the best rate, but at least you know your money is secure.
Developers don't have a good reputation in Australia, even though you'd be adding value. For the next year or two the aim should be to build a financial track record with an Australian bank.
On buying shares, I think you should stick to your knitting. You know property and understand it. Do what you can to add value.
Paul Moran Financial Planning
Your property development business did well in a time of unprecedented growth in property prices in Ireland (and Australia too) and so I would be cautious if you are expecting to repeat the exercise here. Not that it is impossible to make money from property development - just that prices here are starting at very high levels.
As you have expertise in property, consider using your skills to get the home you want at the lowest cost so you can get rid of the mortgage over the next 10 years. This will naturally limit how much you borrow against your deposit and therefore set your property budget.
Given the precarious nature of your work, for the next few years while you get established, you should not be taking too much risk with your savings. A focus on low-risk bonds, perhaps a few blue chip shares and term deposits might be the best option. When your income is more established, you might look at share investing in a bigger way.
Get free financial advice by participating in Money Makeover. Your photo and financial details will be published. Email to email@example.com and put Makeover in the subject line.
Name Bernie Walsh
Location Coogee, NSW
Salary Nil, net investment income
Property Four properties in Ireland
Investments (managed funds or shares) BP, Banco Santander shares
Cash in the bank $500,000 in euros in an Irish bank
THE AVERAGE WEEK
After-tax income (weekly)
Rental income $500 net
Living expenses $250
Insurance policies Nil