Barefoot Investor: ‘Bad rating is holding me back’ and more money questions answered

AN executive chef earning a very good income on a superyacht might be all at sea over a bad credit rating. The Barefoot Investor has some advice.

Ah, this is the life — back on your feet, cooking up a storm in Monte Carlo.

AN executive chef earning a very good income on a superyacht might be all at sea over a bad credit rating. The Barefoot Investor has some advice.

 

CHRIS ASKS: I’m an Aussie working abroad — I’m the executive chef on a superyacht. I earn euros and the money is tax free! My mantra is to make “smart decisions for the future”, so I am investing in shares and cash. Unfortunately I had a restaurant for several years and now have a bad credit rating. I’m now kicking goals, making plans the for the future but I feel the credit rating is holding me back from moving forward into the property market. I’m not sure how to proceed best from here.

BAREFOOT REPLIES:

You sound like you’re living most people’s dream. Just remember to enjoy it. Now, as far as your bad credit rating is concerned, I’d like you to quantify it. How bad is it? Have you checked? Veda.com.au will give you a free report once each year. If there’s anything on there that doesn’t check out, challenge it. If I were in your shoes, I’d be saving as much as you can into shares. Of course there’s nothing stopping you from getting into the property market. Try looking at listed real estate investment trusts. Chances are you’ll get a better (and safer) return from them than in a residential building. Plus, you won’t have to get into debt.

TOO GOOD TO BE TRUE

WILL ASKS: I am an avid reader of the Barefoot Investor. I have recently come across a company that claims they can help me pay off my principal place of residence in record time (through negative gearing, deferred investment mortgages and claiming a monthly tax return instead of waiting for the end of the year, showing a loss). Have you heard of anything like this?

BAREFOOT REPLIES: Sure, I’ve heard of it. Let me explain the pitch: you buy an investment property with an interest-only loan. You let the debt build up, and use the rent to pay down your home mortgage. Then you write to the tax office and tell them you’re losing money (it’s called a PAYG variation), so your boss doesn’t take as much tax out of your pay. Then your investment properties go up in value and you live happily ever after. The end. There are only three problems with this strategy: First, someone will invariably be trying to flog you an investment property (and trouser a commission), or flog you a lot of debt (and trouser a commission), or in most cases both. Second, every single company I’ve seen that offer these deals are not people I’d trust to mow my lawn. And I’m not even that fond of my lawn. Hell, my dog defecates all over it. But I still wouldn’t trust them to cut it. Third, I’ve never seen this work in real life. It only seems to work in the marketing brochures. That may have something to do with the fact that you’re aim is to get out of debt, and these morons’ solution is to get you into a lot more debt.

LEAVES NASTY TASTE

JENNY ASKS: Freehill Mining Limited is undertaking a fundraising to complete acquisition of the Yerbas Buenas mine, a magnetite sands mining operation in Chile. Our son has handed over $5000 to this fundraising venture. What are your thoughts on this company. He processed the payment on July 29 — could he get his money back? Help, help, help.....

BAREFOOT REPLIES: Understand that this is the investment equivalent of drinking from the drip tray at the pub. Well, lickety, lick. Let’s take a gulp. Freehill Mining lodged a prospectus with ASIC in December 2015 to raise $3.5 million, by way of a backdoor listing (taking over a worthless company). ASIC had some concerns with the prospectus in January, and said “more information please”. It appears (but isn’t clear) that the company didn’t raise the minimum subscription within three months, and was delisted by the ASX in March. Now, the company is planning a front-door listing. However the prospectus available from the website is the old one from December last year. Presumably, there’s a new one somewhere, but I haven’t been able to track it down. Either way it won’t change my recommendation: why drink from the investment drip tray, when you can quaff as much Grange (AFIC, Argo Investments, the S&P 500 index) as you want? Yes, he could get his money back if the listing doesn’t proceed. Either way I’d be asking the company secretary for a refund. It could work.

 

WE’RE RUNNING FREE

GREG AND TINA ASK: We have been doing our best to “go Barefoot”. My husband and I (aged 58 and 47, with kids aged 7 and 5) have downsized our home, from a $750k mortgage to a $420k one — and loving it! We also sold our investment property and pocketed $80k after CGT. Now we have a big decision to make: my hubby will inherit $250k soon and he wants to buy shares (to add to his $200k in super). But I’m thinking we put it on the mortgage. What do you think?

BAREFOOT REPLIES: You should focus on three things: having your Mojo funded, being debt free when you retire, and maxing out your pre-tax super contributions. So if I were in your shoes, I’d save about $10,000 in a high-interest online savings account (Mojo). Then I’d take the $240,000 and pay it straight off the mortgage. Then I’d increase his pre-tax super contributions to the maximum $25,000 each year. You’re doing well. Keep going!

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The Barefoot Investor holds an Australian Financial Services Licence (302081). This is general advice only. It should not replace individual, independent, personal financial advice

Originally published as Barefoot Investor: ‘Bad rating is holding me back’ and more money questions answered