Shipping containers could be a sinking investment

INVESTING in shipping containers through an offshore company may not be seaworthy and could leave you open to losing your money, warns Scott Pape.

Shore crane lifts container during cargo operation in port

INVESTING in shipping containers through an offshore company may not be seaworthy and could leave you open to losing your money.

MEL ASKS: I recently heard about investing in shipping containers through a company based in Hong Kong called Pacific Tycoon. They lease the containers owned by individuals and rent them to the shipping industry. The individual is paid a monthly rent equal to 12 per cent of the purchase price of the container. I would need to take out a loan to purchase the containers so I was just wondering if you think it would be a wise investment?

BAREFOOT REPLIES:

I GOOGLED “Pacific Tycoon”, and the second listing was the WA Government’s ScamWatch website. You should check it out — they use very amusing puns for government bureaucrats: “Investing in a sea container may not be a watertight investment.” Gold! To which I’ll add, “it sounds like a load of ship to me”! The ScamWatch site sums up the investment opportunity by saying: “Be aware that if an investment scheme turns out to be a web-based fraud by overseas criminals, authorities in Australia may not have the resources or appropriate international powers and law enforcement connections to find those responsible or trace your money.”

A GUT FEELING

ANDY ASKS: I’m a successful professional who achieves big goals: I have multiple degrees and a great job — and I recently lost 12kg. Yet I have a $280k mortgage, a $36k credit card debt, and no savings. I have made small dents into my debt, only to blow it again. I am now focusing on my finances and using what I have learned from my other achievements. I have read your articles and tried (unsuccessfully) to follow the advice. Can you help me get myself out of this hole?

 

BAREFOOT REPLIES:

IF you’ve been able to keep off the kilos, it’s because you changed both your behaviour and your beliefs. It’s exactly the same process when it comes to winning with money. No book or super strict diet is going to work long term. Seriously, the only enjoyable way I know to win with money is to convince yourself of the truth: there’s nothing broken about you that requires you to have a “debt card”. They’re a marketing con-job, designed to trap you into paying high rate interest for your entire life. They are not convenient, and they are not for emergencies. They are robbing you of your self-respect and your freedom. Having savings, on the other hand, gives you choices. It rebuilds your self-respect, because no matter what happens to you financially (within reason) you’re in control. Now, here’s the cool thing I’ve found from years of helping thousands of people: the moment you understand this in your gut, you’re already free. A massive burden of indecision is lifted off your shoulders. You know you’ve done the right thing. Better yet, you don’t even have to wait until you’ve paid off the last card. Just cut them up, and fist pump the air. You’re mentally free, now it’s just a matter of time. Here’s the rub. Getting to that point can take an hour, or a lifetime. Over to you.

GET YOUR SHARE

CHRISTINE ASKS:

My mum died in 2006 and left her property to myself and my two sisters. It is a three-acre block in a coastal area. At the time we got it valued and a real estate agent stating it would “eventually” be worth $3 million. The house has sat idle for many years, and recent real estate valuations have it valued at $1.2-$1.4 million. Now it’s 10 years later, and I want to sell up, but my sisters do not want to sell as they are still waiting on the “cash cow”. It is stalemate, what can I do?

 

BAREFOOT REPLIES:

I’d talk to your sisters about buying you out by having them take out a mortgage over the property for whatever an independent valuer reports, and what you all decide is fair and reasonable. Your share is potentially worth $400,000, less any taxes that are payable. Hang on, will there be taxes? Maybe. It’s important to understand death doesn’t trigger a capital gains tax (CGT) event, it merely transfers it to the beneficiaries. So the answer depends on when your mum acquired the property. If it was before the 19th of September 1985, it will be CGT-free, and you may even get to share in a handy capital loss if it’s gone down in value since the date of her death. If she bought it after the 20th of September 1985, you’ll have to determine what her cost base was (get your accountant to do it), and work out if there is tax to pay. Either way it sounds like getting your share of the estate, and doing something productive with the money, sounds like a smart strategy.

HONOUR YOUR MUM

DENISE ASKS: I’m 48 and a stay-at-home mum of three children. Until recently I was also carer of my mum, but sadly she didn’t survive heart surgery. She kindly left her house to me. Due to grief I am unsure what is the best way to honour her, as she was a single mum and a victim of domestic violence. Our home loan is $405k on our home which is worth $800k. Mum’s home is worth $700k, and has a reverse mortgage of $126k. My husband is 50 and earns $105k. Do we sell Mum’s home or keep it as a rental?

 

BAREFOOT REPLIES: If I were in your shoes, I’d sell your mum’s home, pay down the reverse mortgage. After accounting for selling costs, you should come out with roughly $560,000 (and, importantly, you won’t pay Capital Gains Tax if you sell your mum’s home within two years of inheriting it). I’d save three months of living expenses (which will be dramatically lower when you don’t have a mortgage). With the balance, I’d do two things: make an undeducted contribution to an ultra-low cost super fund, and a donation to a domestic violence shelter in your mother’s name.

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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 Shipping containers could be a sinking investment