Property vs Shares: Why Both Matter (and When)

When it comes to building long-term wealth in Australia, “property or shares” is the wrong question. For most investors, it’s property and shares—in the right sequence, with the right risk controls, and for the right reasons.

This guide distils a Property Nerds conversation with Simran from Abundant Advisory, covering how high-income professionals (especially in tech with RSUs), families, and SMSF trustees can combine both asset classes to grow—and protect—wealth.

Big idea: Concentration builds wealth; diversification keeps it.

Property vs Shares at a Glance

Property (residential or commercial):

• Strengths: Leverage (5–6x exposure on a 20% deposit), potential for capital growth, inflation hedge, control over value-add.
• Watch-outs: Low liquidity, chunky costs, potential cash-flow gaps, concentration risk if overexposed to one market.

Shares/ETFs:

• Strengths: Liquidity—you can sell in parcels (you can’t sell a bathroom to pay a plumbing bill), lower entry costs, easy diversification across sectors and geographies, dividend income.
• Watch-outs: Higher day-to-day volatility, behavioural pitfalls (panic selling), less control.

Bottom line: Use property to accelerate growth via leverage; use shares to keep a liquid, diversified buffer and smooth your path to income.

A Holistic Planning Lens

Simran’s team works largely with high-income accumulators (ages ~40–60) and a growing cohort of tech professionals. Their philosophy:

• There’s no single “right” asset; the right mix depends on time horizon, cash flow, tax, and risk capacity.
• The goal isn’t to win a debate; it’s to sequence decisions so you retain the wealth you build.

“We might get a great outcome fast with one asset—but the way you retain wealth is diversifying.”

Tech Professionals: RSUs, Vesting & Tax

If you’re in big tech, a large chunk of your compensation may be equity (RSUs/ESPP). That creates both opportunities and tax surprises.

What to know:

• Vesting events can trigger taxable income—many first come to a planner after a surprise tax bill.
• Concentration risk: Your salary and a big slice of your net worth can be tied to the same company. Diversify proceeds deliberately.
• Practical playbook:
  1. Map vesting schedule and expected tax.
  2. Pre-fund tax and buffers (don’t sleepwalk into ATO debt).
  3. Set sell-down rules to manage concentration risk.
  4. Allocate proceeds: part to liquid portfolio (ETFs), part to property deposits if strategy supports it.

Leverage: Accelerator with a Seatbelt

Leverage is a powerful tool—used well.

• Property: Common and accessible; a $100k deposit can control a $500–600k asset. Compounding works on the larger base.
• Shares: Margin loans exist, but Simran rarely uses them. More common is equity gearing via debt recycling (see below) rather than margin facilities.

Golden rules:

• Match leverage to stable income and buffer planning.
• Stress-test for vacancies, rate rises, and repairs.
• Maintain liquid reserves so you’re never a forced seller.

Good Debt vs Bad Debt (Simple & Practical)

• Good Debt: Tax-deductible, used to acquire growth assets (investment property, diversified share portfolio).
• Bad Debt: Non-deductible and/or funds consumption (credit cards, personal loans, owner-occupied mortgage).

Your mission: Reduce bad debt over time while strategically using good debt to build assets.

Debt Recycling 101 (for Homeowners)

If you own a home with equity and want to build a share portfolio before you’re ready for an investment property:

1. Create a separate loan split secured against home equity.
2. Invest that split into a diversified ETF/managed fund (investment purpose = interest potentially deductible; confirm with your tax adviser).
3. Direct surplus cash to pay down the non-deductible home loan, not the investment split.
4. Rinse and repeat—gradually convert bad debt to good debt while building a liquid portfolio.

This can be a sensible stepping stone toward your first or next property.

The Risk of Being Too Property-Heavy

Property can snowball wealth quickly, but over-concentration creates fragility:

• Liquidity risk: Can’t sell a bathroom to fund a repair. Shares can be sold in hours; property takes time.
• Retirement income risk (SMSF especially): If the fund is property-heavy, it may not meet required income draws; you could be forced to sell at the wrong time.
• Idiosyncratic risk: One market, one asset, one tenant—diversify to steady the ship.

SMSFs & Property: Who Should Not Do It

SMSF property can work—but not for everyone.

Red flags Simran sees often:

• Low balances & low contributions (e.g., ~$100k combined trying to buy a unit via LRBA).
• Too close to retirement with high leverage. The maths rarely stacks unless you’ve got ~15+ years to benefit from compounding and deleveraging.
• Thin buffers: Higher costs, higher rates for LRBA, and vacancies can quickly strain the fund.

If considering SMSF property:

• Assess time horizon, contribution rates, true all-in costs, and income needs in retirement.
• Ensure you won’t be a forced seller to meet pension payments.

Protection First: Insurance & Buffers

Two moments spur people to act: having kids and seeing a loved one face a health event. A robust plan includes:

• Emergency fund (offset or high-interest savings).
• Income protection, life, TPD, and trauma as appropriate.
• Ownership & beneficiary structure aligned to your strategy (personal, trust, SMSF).

“As long as we reduce risks—buffers, insurance, diversification—you can take smart leverage and let time do the heavy lifting.”

A Balanced, Actionable Framework

If you’re early/mid career with strong income:

1. Build 3–6 months’ expenses buffer.
2. Kill bad debt quickly.
3. Use debt recycling to start a diversified share/ETF core.
4. Deploy property leverage for growth—borderless, data-driven selection.
5. Systematically de-risk: sell-down RSU concentration, maintain buffers, insure.

If you’re within 10 years of retirement:

1. Prioritise liquidity and income reliability.
2. Avoid large new property leverage unless the cash-flow maths is compelling.
3. Tilt to diversified equities and debt paydown.
4. Align to retirement drawdown needs (and SMSF rules if applicable).

Common Mistakes to Avoid

• Treating it as property vs shares rather than sequencing both.
• Ignoring RSU tax and concentration risk.
• Buying SMSF property with low balance/low contributions.
• Skipping buffers and insurance while using leverage.
• Becoming a forced seller by underestimating liquidity needs.

Work With a Team That Plans Holistically

At InvestorKit, we’re property specialists who thrive working with holistic planners like Abundant Advisory. You get data-driven acquisitions plus a broader plan for liquidity, tax, and protection—so your portfolio isn’t just growing, it’s resilient.

Ready to map your path?👉 Book a free discovery call to see how a high-growth, low-guesswork portfolio comes together.

FAQs

Is property or shares better for beginners? Neither, universally. Start with a buffer, clear bad debt, then choose based on your cash flow, time horizon, and borrowing capacity. Many begin with a liquid ETF core and step into property when ready to leverage.

What if most of my compensation is RSUs? Plan sell-downs, pre-fund tax, and diversify. Consider channelling a portion into ETFs (liquidity) and saving towards property deposits as part of a broader plan.

How big should my emergency fund be if I invest in property? Commonly 3–6 months’ expenses, plus a property buffer for repairs/vacancies (e.g., several months’ repayments and typical capex for that asset).

Is debt recycling risky? It’s leverage—so yes, it needs buffers, stable income, and discipline. Done right, it converts bad debt to good debt while building a liquid portfolio. Get tax and credit advice.

Who shouldn’t buy property in an SMSF? Those with low balances/low contributions or short time horizons. If high leverage and required pension payments could force a sale, rethink it.