If You Have $110,000 Where Should You Invest It?
The Bank, shares, New Zealand property or an Australian investment property?
In this short video, I explain the options and show you the results. You can either watch the video or read the script below.
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Should you invest $110,000 in the bank?
Purchase a New Zealand investment property?
Purchase an Australian investment property?
Watch video below to find out what is the best investment option.
I’m going to share with you what would happen at the end of 10 years if you put the same amount of money, which is $110,000 into the bank, buy shares, or purchase a New Zealand property, or purchase an Australian investment property.
Make sure you read to the end as I have a free gift for you.
Hi, my name is Mark Scarrott, I’m the CEO of Key to Australia.
We help New Zealander’s and Australian’s purchase investment property in Australia to help them increase their wealth and reach their retirement dreams and goals.
So let’s get into it.
Should you invest $110,000 in the bank, buy shares, or purchase an investment property.
Put $110,000 into the bank
The first scenario, what would happen if you put the $110,000 in the bank. If you were to invest, or maybe you already have $110,000 in the bank, the current rate of interest is around 2.8%, and that’s taking an average over all the banks. Let’s say the interest rates stay the same for the next 10 years.
That first year of interest is $3,080 and then it’s compounded thereafter, after ten years, the profit is $34,985. That’s a 31.8% return on your investment.
The second scenario is buying shares, to keep the example uniform, we’re gonna assume 6% growth for shares and property.
If we were to invest that $110,000 into shares, a growth rate of 6% per annum for 10 years, your profit is $86,993.
That’s a 79% return on your investment.
Buy a New Zealand Investment Property
Now let’s take our third scenario. Use our $110,000 to purchase an investment property in New Zealand, this is where we’re talking about leverage. This is where you use a small deposit and borrow the balance to own real estate.
So by buying a New Zealand investment property, with the New Zealand current lending requirements, you have to have a 30% deposit.
This limits you to purchasing a property for just $360,000 and where do you think you could purchase a four-bedroom, stand-alone house for $360,000 in New Zealand?
Definitely not in a growth area. If you were to look on Trade Me, you can only buy a second-hand property, definitely not new, in places like Gore, Greymouth and Timaru.
For the purpose of this example though, we will add a growth rate of the same 6% every year for the next 10 years. This will take your $360,000 property to $644,705 That’s a profit of $284,705. 258.8% return on your New Zealand property investment.
Buy an Australian Investment Property
Now, let’s look at the same property scenario if you were to buy a property in Australia.
You’re only required to provide a 20% deposit for an Australian investment property which means with your $110,000 you can purchase a $500,000 property and that includes the stamp duty and the exchange rate.
But this property won’t be an existing property, but a brand new, 4-bedroom, 2-bathroom, double-garage house on a 400 square meter site. These are all in growth areas with populations over 600,000 people.
We will still use the same growth rate of 6% per year for the next 10 years.
This will take your $500,000 property to $895,424. Less the capital gains tax which we pay here in Australia of $34,500 which will give you a profit of 360,924.
That’s a 328% return on your Australian investment property.
So, as you can see, if you have $110,000 sitting in the bank, under your mattress, or buried out the back of the yard, the best return on your investment right now, is purchasing an Australian investment property.
Let’s go through those scenarios one more time
The return on your $110,000 investment, the bank will give you a 31.8% return over the ten years.
Shares are 79% return.
New Zealand property, 258.8% return.
Australian investment property, 328% return which is the best investment option if you have $110,000 to invest.
So the best option in the investment market is purchasing an Australian investment property.
If you would like to know more about purchasing an Australian investment property in Australia, contact us via our website.