Money really does grow on trees Author: George Liondis Date: 24/06/2007 Publication: Sun Herald
If you have a taste for the unusual, George Liondis finds four very different places to put your money.
BORED with property? Fed up with playing the sharemarket? Does relaxed and comfortable no longer tickle your fancy? Well, have we got some crazy ideas for you.
TREE CHANGE
Forestry schemes have been popular with investors for some time, especially around the end of the financial year. That's because investments in forestry schemes attract a 100 per cent tax deduction.
The sector got a scare recently when the Federal Government removed the special tax status of similar schemes in other agricultural areas, such as grape and olive growing.
But so far forestry has been spared. In fact, the May federal budget contained an unexpected boost for forestry schemes by introducing the concept of secondary trading.
Under the old system, investors were locked in for the duration of a forestry scheme - typically a 10- to 25-year wait while trees were planted, grew to an adequate size, were harvested and then sold for timber or woodchip.
However, the new secondary trading rules, which start on July 1, mean investors can sell after four years.
Tim Lee, director of research at Australian Agribusiness Group, says investors poured $700million into forestry schemes last year.
Lee says these investors can expect a return of between 6 and 15 per cent compounded annually for the duration of a scheme, depending on the type of timber involved. But he warns drought, fire, pests, disease and poor management are all risks that can eat into returns.
He says the Government crackdown on other agricultural schemes has created uncertainty, but adds that the forestry sector appears safe.
"The risk is always there, but it's unlikely [forestry will lose special tax status]. The reason forestry was spared is that the Government is very supportive of the forestry industry because it takes the pressure off native forests."
PARK YOUR CASH
The problem with investing in property is that it's so expensive to get a foot in the door. And then you rent the place out to tenants, who go and break things.
But what about car parking spots? Believe it or not, there is a small but dedicated market for people who want to buy parking spots as investments, particularly in the overcrowded hearts of Sydney and Melbourne.
Francis Armstrong, founder of the website www.findacarpark.com, says parking spaces in the Sydney CBD typically change hands for between $60,000 and $70,000. Owners then rent them out for about $350 a month. It's a bit cheaper in Melbourne, where spaces typically sell for between $35,000 and $40,000 and are rented out for between $200 and $250 a month.
If that still sounds expensive, wait until you hear what parking costs in cities overseas. In London it's #451 ($1050) a month for a space in the West End, says Colliers International, while it's Y86,660 ($830) a month in Tokyo and $US575 ($680) in New York.
Armstrong says the appeal of car parks as an investment is simple: "They're clean, there's nothing to break or maintain and the entry cost is quite low. A lot of people don't even need to get finance for it."
THE GOLD STANDARD
If you want an investment that really impresses friends, there's nothing like a vault full of gold.
It's no joke: organisations such as the Perth Mint do a roaring trade in gold bullion. It will cost you about $770 an ounce at the moment, plus 1.5 per cent a year for the mint to store the gold bars, each of which will be inscribed with a serial number on your behalf.
If you'd prefer to avoid the 1.5 per cent charge, the mint will sell you unallocated gold. It's basically the same thing, except you don't get specific gold bars with your number on them - you are allotted a relevant portion of the mint's general gold reserves instead.
Perth Mint treasurer Nigel Moffatt says investors like to hold gold for safety.
"If you add gold to your portfolio it reduces the volatility," he says. At the moment, the gold price is on a steep upward trend. But Moffatt warns it is not unusual for gold to stay flat for decades. "You can hold gold for 10 years and it does nothing," he says.
But buying gold is all about security.
LIGHTS, CAMERA . . . ACTION?
If you're a wannabe thespian, or have always wanted to have your name in lights, then investing in film productions could be for you.
Bryce Menzies, a partner with law firm Marshalls & Dent, has been involved in the financing of 300 films. He says some have made investors very wealthy, but warns the success rate is poor.
"One in 10 does pretty well, one in 100 does spectacularly well," Menzies says. Because it's so hit and miss, Menzies says, most film investors have an attachment to the industry.
"It is those with an artistic bent or some involvement in the production who are attracted," he says.
Bryce says there are similarities between investing in films and the sharemarket.
"It is all about the people involved in the film," he says. "It is just like the sharemarket in that sense. So my advice is to always check out the people involved."
Up until now, investors in Australian films could claim a tax deduction under the 10BA rule. But that system is being phased out from July 1, although it will be available for two more years for films already in development.
In its place, the Government has introduced a rebate that will allow filmmakers to recoup 40 per cent of the costs of a production.
Shaun Berg, a partner with law firm Hunt & Hunt, says the new rules change the landscape for film investors.
"The Government is trying to change the focus from investing for tax purposes to making money from film," says Berg, who has acted on behalf of investors in Australian films such as Wolf Creek.
"They are really providing an incentive to make money out of film, so the rebate should be more attractive to investors in the long term."