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Ask Paul: I’m 26, should I buy another investment property?

ask pual clitheroe should i buy another investment property

Q. I’m 26 years old with a great job. I have two properties (an apartment and a house) and $15,000 in exchange-traded funds (ETFs). I recently received an inheritance of $300,000, part of which I used to buy the house.

I have $50,000 in a growth superannuation account making great returns.

I’ve estimated repayments should I buy a third property and if interest rates rise another 4%, and I can meet repayments of principal and interest on the three properties within my current salary.

Should I purchase another investment property, keep the funds in my offset account and wait, or add to my share portfolio?

I would like to have children in the next several years but it’s not on the immediate horizon. – Emma

A. Emma, call me old-fashioned but diversification is one of the fundamental laws when it comes to our money.

Despite the current really solid downturn in property values, with a strong economy and a growing population it is hard not to predict that over the long term property will do well.

But there are few guarantees in life, so if I was in your shoes I’d spread my risk by adding to my ETFs.

In particular I’d make sure I had exposure to international shares.

Our economy is heavily resource-based and very small in global terms.

Adding to super via salary sacrifice is always a great idea but at 26 it does lock away your money for many decades, so I suggest that your employer’s contributions are enough here.

Written by Paul Clitheroe

Paul Clitheroe

Paul Clitheroe AM is a respected financial adviser and Money’s chairman and chief commentator. He is chair of the Australian Government Financial Literacy Board, and author of several personal finance books. Ask Paul your money question.

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  1. Thanks Paul for the direction given but wonder if that suits my situation. I am 48 stayed home mum looking after 7 kids and my husband is the only income earner of around 60k. Also I want to ask if we can change banks to better rates as I noticed our unit is on principle & Interest (very high interest 5.06%)
    instead of Interest only mortgage.The other property is 4.56%(fixed) but coming up due soon then go to P & I mortgage. Our PPR is less than 5k to pay it off with the interest rate of 4.21%.
    Looking forward to your advice

    Regards

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