Once you
(1) have sufficient buffers in place, (2) are on track to reduce debt by a
sufficient level by the time you retire, and (3) if your cash flow is not
sensitive to interest rates, then it’s likely that investing in growth assets
(investments) is more important than making additional loan repayments.
Often, we
meet people that have few investment assets, other than superannuation, that
have (for example) spent the past 5 years repaying their $350,000 home loan to
zero.
We think
this is a waste – a missed opportunity.
In many
cases, it is likely that they would have easily repaid their home loan by the
time they retired, as their debt was relatively immaterial.
As such,
they would have been much better off beginning investing 5 years ago (e.g., the
international share index has returned 11.5% p.a. over the past 5 years) and
taking longer to repay their home loan.
We discussed
why investing is likely to generate more wealth than repaying your home loan.
In short,
this is because it is likely that the after-tax percentage return from
investing in shares or property will be more than the home loan interest rate,
on average, over the long run.
RealRenta has all the tools that a property manager has but for
less than ¼ the cost of a property manager.
Join now and the cost is less than a cup of coffee a week to manage your
rental property.
RealRenta also has a free vision, so why not check it out.
Jason Gwerder
Friday, 27 October 2023
