Update on investments (Japan real estate, shares and investment bonds)

Financial independence australia

Hi Everyone,

Instead of doing an article the way I do these days – telling a bit of a story – I have decided to keep on giving “real life scenarios” on things I’m working on and their results. After discussing on forums, I have discovered that my investment path is quite unusual, most probably because of my European background. While most Australians focus on Australian property and shares (Australian again – franking benefits), I’m a big believer that a successful investor needs to spread investments not only on asset classes but also geographically, and this means overseas.

Because I believe in Do It Your Own – the most effective way to learn! – I also want to invest directly in overseas markets, whether this is shares or real estate. I haven’t done an article yet on what are my goals and where I’m tracking as I’m somewhat shy on spreading my finances in front of the “world of the internet”. But here what I have decided to do:

Japan real estate update:

It took me a while but I have now signed the documents with the local agency that I’m going to be dealing with. I had to witness a limited power of attorney and contract of services with a solicitor – Paid $75. A JP wouldn’t do it (tried 3 times!).
TIP: A notary was suggested. They usually charge around $110 to $150 per document. The solicitor was able to do the same for $75. Nice way to say $40 bucks!

I will send all these documents to Japan now for the agency to sign.
Next is an upfront payable service fee to have them engage and start selecting properties. Fairly common and again somewhat inexpensive compared to a similar service here: A buyer’s agent will charge around $15k AUD with $2k upfront in Australia..

I’m also lucky as I have a Japanese colleague who has nicely accepted to run past the deals to see if he can detect something irregular. He has mates and family across the country if needed.

I have discussed with 4 different reference customers, from Australia and from I’m originally from: France. I wanted to check that I wasn’t part of a giant scam and checked their Linkedin profiles, etc… Picked up some great advice along the way on exchange rate issues and the minimum amount of money that I should leave in Japan at any time.

Once the agency is engaged, I have to transfer money. And this is where the exchange rate potential issue kicks in. The returns and entry points as discussed in my previous article are a lot more attractive (7 – 8% with entry points of around $40 to $50k AUD) in Japan than in Australia. But this money invested has to be “luxury” and what I mean by luxury is money that is not needed in urgency to pay bills. So far, the agency uses OZForex which seems ok to do transfers, but they charge $90 per transaction from Japan to Australia (their local bank) so the amount has to be quite substantial to make it worth the effort, when transferring money back home.

I don’t plan to bet on exchange rate, just to keep an eye on it not to get screwed!

Direct US share via Interactive broker first buy!

It tool me while but here it is, I have done my first share purchase! Code is VOO directly bought in USD, in the US, via Interactive Brokers. I’m actually quite proud as I had no idea what was the share market and how to invest in it few months back.

It seems VERY important for tax purposes to keep track on the purchase so I have started an excel file that I keep in Google Drive for simplicity, security and easy access across devices. I have noted: The date purchased, number of shares, what price I bought them for and what shares they were.

I will do a complete article on how I from no knowledge to doing my first investment directly via an online broker. IB charges $6 per trade which is ridiculously cheap compared to all others, including CMC market that I have also opened an account with. That’s also the only online broker that gives me complete direct access to all share markets around the world. I also hope that they will put back their multi currency accounts back to have instant access to Forex at unbeatable prices:
I could then use Interactive Brokers as a bank for my travels back to France, and deposits from my real estate in Japan directly without the burden of using an agency to collect the rent! Fingers crossed.

A last word on trading. I never understood why people go crazy about shares. I know understand. I own real estate also and the main difference between the two is that you see shares go drop and climb within minutes. Because I’m trading in the US and didn’t want to wake up at 3am when the markets open there, my first buy was unsuccessful:
– I tried to buy just below $201 per share which was the lowest price the previous day
– the next day, it was already at $202 and by the time I placed my order and checked it has been processed, it went up!

Saying all this, the S&P500 is trading at all time high and I have left a lot of cash on my offset account so far. As I said previously, it’s not if it will crash, It’s when.

Investment bond:

With Superannuation (salary sacrifice), here is probably the second most tax effective way to invest these days in Australia.

Mr Barefootinvestor gives some great advice, I’m going to follow up on his ideas! I had a close look and it is all starting fine:
– An investment that pays off with deferred tax arrangements. Which means that if you are above 30% tax bracket, you have tax advantages within the bon
– No capital gains tax nor revenue taxes after 10 years
– I had even found a company that would offer Vanguard index shares: Austocklife

The fees are not good (almost 1% per annum), but the benefits out weight the cost.

I’m looking at opening an account for my wife and I. But also for our kids as this is a nice way to have them started in 10 years time financially. It seems that you have the possibility to change names of ownership quite easily, which, frankly, would help a lot! I would then open an account and then transfer the benefits if we’re well off financially to our kids. If we’re in need in 10 years, we have a great investment completely tax free. If we run in trouble before, we still have our investments in shares and real estate we can turn back to.

More on this soon.

In the mean time, see y’all!!

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