Property Versus Shares


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It's the showdown between property and shares, so which is better… property or shares?

It's a debate that has many investors divided.

So we decided to find out if there was a winner by talking to those who've put their money where their mouths are.

Dean Baxter and his wife Barbara wanted to capitalize on their savings and thought shares were the way to go....

"When we retired a couple of years ago we needed an income and that income needed to come from property or shares… With property you are not getting a return unless it's a growth return and you need a large outlay to purchase a property to rent to start off with but with shares you can put in $1000 to start off with," says Dean.

The key according to Dean is to invest in companies that are paying high dividends.

"As long as I can get enough out of what we get from our dividends then I don't need to worry about the growth and if I have another financial collapse it's not going to worry me as much because the companies will still pay the dividends," says Dean.

After three years he's calculated his annual earnings to be between $65 and $80 thousand dollars.

"Right now with the money I've invested in shares if I invested that in property the returns I'd get out of that for rent and others I would not get the weekly return," says Dean.

But if you ask mum Prue Muirhead… She'd strongly disagree.

"You can borrow more money to buy property you can borrow up to 95 % and earn capital growth and make money on the banks money and second of all is to manufacture growth we add value to the property," says Prue.

Prue and her husband Andy only started investing in property six years ago.

"My husband and I had an entertainment company and realised we had no superannuation, nothing for the future, that's the only reason we got into property," says Prue.

Now they have a portfolio boasting 17 estates...

"The properties are paying for us to live rather than us having to pay for the properties and you can do it, a lot of people say it's impossible, it’s absolutely not impossible, we're a great example of that, we retired five years ago," says Prue.

And they've only invested 22 thousand dollars of their own money. The rest they've been able to borrow from the bank using equity on their home. But the key, Prue says, is to buy properties that are positively geared... That is they earn enough to cover the loan.

“Whyalla, I bought in December, I bought for $100 thousand dollars and it rents for $200 a week, it's positively geared, we did send somebody in to paint, carpets, so it did cost us about $2000, but the property is worth about $125 thousand, so suddenly we have about $23 thousand dollars in our pocket and it took one week," says Prue.

Let's bring in property guru... Peter Koulizos and shares expert Zac Zacharia.

"It all comes down to a number of different factors, risk vs return, how much money you have to get in, how much are you looking to borrow," says Peter.

They've written a book... Property vs Shares... That explains the disadvantages and advantages of both and what to consider before making any decisions.

"You’d first start by looking at how much you've got to invest your investment time frame, the volatility of returns, how much risk you are willing to tolerate,” says Zac.

If you don't have a lot to invest, they suggest shares are the way to go.

"The biggest advantage is that you can get started with a small amount of money, that's really the small advantage when young investors are wanting to get started, they can start with as little at $500," says Zac.

But as little as 10 grand could get you into the property market.

"Probably the biggest advantage property has over shares is the leverage, that is the ability to borrow using the property as an asset," says Peter.

There's also much less risk in property.

"Property has got less volatility because, people don't revalue their homes every second of every day, shares do… The single biggest risk is the fact that you might make an investment in a share that goes belly up. Which was the case during the GFC," says Zac.

However it's easier to get your hands on cash from shares.

"The big disadvantages of property you can't cut a bit off and sell it off tomorrow. One of the great advantages of shares is you can cut some off and have cash within a matter of days," says Peter.

Well it seems there is no clear winner...

“The reality is you need to have some of both, but it doesn't need to be 50 percent property, 50 percent shares," says Peter.

It depends on your own circumstances and it's important to seek advice from professionals.

You can purchase “Property VS Shares” by Peter Koulizos and Zac Zacharia, it's available from Dymocks, Angus and Robertson, most other bookstores, Big W and also online., RRP $19.95.