Good financial habits are the basis to creating wealth. Building financial freedom is not something you learn overnight, it takes time and a foundation of solid habits that you perform day in and day out.

There is no such thing as ‘getting rich quick.’ Yes, you can win lotto, but most people blow their winnings because they don’t have the knowledge behind them on how to properly manage their newfound wealth.

When you’re trying to build up good financial habits, keeping it simple is the way to go. You want to set yourself up with the best possible chance for success by starting with habits that you can actually achieve and most importantly, maintain. This in turn builds your self-confidence and increases your motivation towards the journey of financial abundance.

HOW TO CREATE NEW HABITS?

By definition, a habit is an acquired behaviour that is regularly followed until it becomes almost second-nature. It’s a bit like driving a car, when you first learn, it’s a process that requires hours of practice. However once you’ve mastered the skill, you’ll find yourself arriving at home without remembering much of the drive, and that’s because you were on auto-pilot.

The key skills you’ll need to develop to form and keep your new habits are willpower and discipline. When a particular action becomes a habit, a neural pathway is formed to reinforce this behaviour. When you nurture those actions that lead to wealth creation, they’ll soon become second nature, leading you to automatically (habitually) do those things that can help you achieve financial success.

Now we’re all creatures of habit, just take a look at your daily routine – you probably brush your teeth, have your morning coffee and take the same route to work every day. So why is it so hard to form new healthy habits?

It can take anywhere from 18 to 254 days for a person to form a new habit and an average of 66 days for a new behaviour to become automatic. There is no one-size-fits-all approach when it comes to creating new habits. It generally requires trial and error until you find what works for you.

As previously mentioned, keeping it simple will give you the strongest possibility of maintaining your new habits. The reason why most people give up so easily is because they skip a day or two and think there is no point in continuing.

If you forget now and again this does not impact your ability to form a new habit – what is important is that you stick with it and remain disciplined.

Start small

Most people struggle to create good habits because they make bold goals that are unsustainable. If you’ve never been to the gym and you expect yourself to go five times a week without fail, then you’re in for a shock.

For example, if you’re wanting to save for a house deposit then begin with putting away a small percentage of your income, and once you become familiar with that you can re-evaluate your budget to identify where you can cut back spending in order to save more. The satisfaction you’ll get from actually saving what you say you will is unmatched.

Do it every day

Like real estate is a long-term investment, so is creating new habits. As mentioned, on average it takes 66 days for an action to become habitual. Building good financial habits isn’t as glamorous as most people think, it requires small steps each and everyday that over time will build up to a massive shift.

Make it easy

It’s all about working smarter, not harder! You are more likely to form a new habit if you clear the obstacles that might stand in your way. Humans are especially sensitive to small friction in our environment, so by reducing any distractions you’ll be more likely to form a new habit.

For example, if you’re wanting to learn more about wealth creation through property investment, then perhaps an e-newsletter about real estate might be the solution for you. Positive real estate has a weekly email that’ll give you the education you need to build your property portfolio.

Reward yourself

In our fast-paced world, most people jump onto the next thing without properly acknowledging and celebrating their wins. Rewards are an important part of habit formation.

Rewards teach us which actions are worth remembering in the future. Your brain is a reward detector. As you go about your life, your nervous system is continuously monitoring which actions satisfy your desires and deliver pleasure. Feelings of pleasure and disappointment are part of the feedback mechanism that helps your brain distinguish useful actions from useless ones. Rewards close the feedback loop and complete the habit cycle.

GOOD FINANCIAL HABITS EXAMPLES

Building a financial plan is a great place to start when it comes to beginning your journey of creating good financial habits. It can help you with everyday money decisions, and provide you with guidance when you get to the stage of deciding what types of vehicles you’re going to invest in to create wealth.

Your plan should include the following attributes:

• Specific goals that define what you want to achieve and which are aligned with your values and your personal situation.
• Clear, actionable steps that lead you towards your goals.

Identifying why you want to create good financial habits

As with anything in life, in order for it to stick you need to have a really strong reason why. You should have solid reasons that will encourage you to keep going when things get tough. Understanding your why will also help guide you in certain areas down the track.

For example, if you choose to invest in real estate to build your wealth, you will likely have to make decisions about buying, selling or renovating. Having clarity around why you are aiming for financial success will aid you in this decision making.

Most people want to create wealth so that they can retire and live life on their terms. With the cost of living rapidly rising, retiring stress free is becoming out of reach for many Australians. This is because most go about their lives thinking their Super and pension payments will be enough for them to thrive in their golden years.

Unfortunately, the harsh reality is that is simply not going to be enough. The Australian pension payment is $36,000 per couple or $24,000 if you’re single. Wanting more than to merely survive in retirement is a pretty solid reason why.

Set specific and actionable goals

This was vaguely mentioned above but it’s worth reiterating as it’s a deal breaker when it comes to achieving the outcomes you desire.

Once you are clear on your “why” you’ll be able to design goals that are specific and actionable. Creating goals that are relevant to financial success and not impossible to achieve are much more powerful than wishy-washy goals such as “pay off debt soon” or “make more money”.

As with anything in life, there is risk, especially when it comes to investments. If your chosen wealth creation vehicle is real estate, then in order to better inform what kind of specific and actionable goals you should be setting it helps to understand your risk profile.

When we talk about risk in real estate, we’re essentially gauging how willing you are to expose yourself to loss and how you adapt when things go wrong.

Create a liveable budget

Forming a budget is a good financial habit to make because you should always know how much money is coming in and going out of your accounts each month. Without knowing this vital financial information, you may be spending more than you make – leading to a life of debt and poor credit.

A simple way to gain a clear view of your financial situation is to track your spending for at least two weeks – if you can do one to three months, even better. It can be as simple as writing it down on a piece of paper.

Once you know where your money is going, you’ll be able to spot patterns. Where are you wasting money? What areas can you cut back on to increase your savings? This will help you to create an action plan that you can live by each day.

Pay off debt

Debt is not always a bad thing, especially when you are leveraging it to invest in yourself or your financial future (student loan or recycling equity). However, over the course of your life, you might be amazed by how easy it is to get into debt, and how difficult it can be to reduce it.

Bad debt refers to borrowing money in order to fund your lifestyle, usually on items that have no value or that will depreciate over time. Think credit cards, car loans, hire purchases and laybys.

Making a plan to pay off all of your bad debt is a good financial habit that will (hopefully) encourage you to avoid accumulating debt in the future.

When making a plan to pay off debt, consider the below:

• List how much you owe and the type of debt (credit card, Afterpay etc).
• Prioritise your debts from highest to lowest by interest rate. Pay off debts with higher interest and fees first.
• Make a repayment plan.
• Work out if you can afford (based on your budget) to pay more than the minimum repayments.

Find a way to create passive income

You have probably guessed by now that property investment is our go-to when it comes to building wealth. Through capital growth and rental yields, real estate can offer the ability to increase your net worth and also provide you with a stable passive income.

Passive income is essentially money you make residually through endeavours with minimal routine upkeep. Basically, the idea is for your money to work for you, not you working for money.

Real estate can generate income through rental yield. When building an investment portfolio you want to be looking for positive cash flow properties. This is where your rental income and tax deductions cover the majority of your running costs, and then some to generate a profit.

Historically house prices have increased over the years in Australia. We have seen a 23.7% increase in residential property prices in the last 12 months, one of the strongest annual growth records. To take advantage of these capital gains, you have to be committed to property investment for the long-haul. Most real estate investors adopt a buy-and-hold strategy so they can be a part of the gains of a normal real estate cycle.

HOW TO REINFORCE YOUR GOOD FINANCIAL HABITS

You are the average of the five closest people you spend time with. This is something you want to be aware of when you’re embarking on this journey of creating good financial habits.

For example, if you’re wanting to retire by 40-years-old with an extensive property portfolio then you’re going to need to start connecting with like-minded people who want to do the same (or have already done it).

When you first start planning for your financial future, it can be very overwhelming. The best thing you can do is get support. If you’re thinking that real estate could be the wealth creation vehicle for you then come along to one of our FREE property investing masterclasses.

This jam-packed two hour event will give you all the information you need to start out in property investment, and you will be able to ask questions to our expert team.

Register now for the free property investor webinar

When it comes to property investing as the saying goes, if you don’t have a plan, then you could be planning to fail! While there are many factors we can’t control in the market, there are certain facets we can manage to give us the best possible chance of success. In this article we will help you understand the 7 plans every property investor must know.

Starting out in property investment can be overwhelming, and most Australians don’t even embark on the journey because they simply think it is out of reach. Even the most successful property investors will tell you that they are not experts in all things accounting, tax minimisation and property management. The key to building a thriving property portfolio is to plan and do it well. With that being said, here are the 7 plans every property investor must know to go the distance and win at real estate.

THE THREE PHASES OF PROPERTY INVESTMENT 

First though, here’s a broad overview of what a standard investor journey throughout the years looks like.

There are three phases when it comes to building a property portfolio that every investor must navigate. Real estate is a long-term investment strategy and the course of these phases usually spans a 15-20 year period.

Acquisition phase

The acquisition phase is when an investor should be in growth mode. It is generally the stage between three to seven investment properties. Your main goal will be to acquire as many properties as possible in a safe and sensible manner.

During the acquisition stage, you want to be focusing on high growth properties in a variety of locations in order to make the most out of your equity gains. To do this, you will need to understand what drives the market.

Consolidation phase

When you get to the stage where the banks won’t lend you anymore money, you’ll need to begin refining your investment portfolio. In order to secure more lending you will need to reduce your debt and simultaneously increase your income. To move into a positive cash flow phase, you will need to lower the loan-to-value (LVR) ratio of your portfolio. What this means is that you’ll need to reduce the amount of debt you have. You can do this through selling non-performing properties, renovating to add value or reducing the rate at which you purchase properties.

Lifestyle phase

This is the point in your journey where you can truly start benefiting from all your hard work as an investor. Your property portfolio will be at a point where it is generating enough income for you to retire (whatever that looks like for you).

Once you get to the stage where you’re living off the income produced from your assets, you might like to consider a more conversative approach to investing, in order to protect your assets.

THE 7 PLANS EVERY PROPERTY INVESTOR MUST KNOW 

These are the 7 plans every property investor must know if they want to create legacy wealth through real estate. If you’re asking yourself how do I make a property investment plan? You’ve come to the right place.

Acquisition plan

Having a plan that outlines how you are going to grow your property portfolio will be integral to your success. When creating your acquisition plan, the key thing to remember is that you want to grow as fast as possible. Some investors believe that when the market is flat they should stop and wait for another boom. This couldn’t be more wrong. Property is a long-term investment so it doesn’t really matter when you buy in the market cycle, just as long as you get in it.

With new investors, common flawed thinking is to find a market that suits your budget. If your budget doesn’t quite reach the average house price in sought-after areas, then you may start looking as far out of the city as possible in a location with very little prospect for growth.

However, if you want to build lasting wealth then you must focus on high growth properties and in order to do this, you need to understand what drives the market:

• Infrastructure – spending on infrastructure points to a growing economic base
• Yield variation – signals growth
• Supply and demand – indicates need in the marketplace
• Population – fuels growth in an area
• Economics – reveals clues to an area’s capacity for growth
• Demographics – influences growth – as incomes grow, so do property values

Each of these factors will help you identify where you should be investing. As mentioned, you need your money in strong future-proofed economies. For example, in larger cities, you are more likely to achieve consistent capital growth. This is because property prices in cities tend to recover more quickly from economic downturns. Cities also have diversified economies which means there is always going to be jobs which bring people to the area. This will keep demand for housing resilient, making it easier for you to find a tenant.

Once you’ve found a location, the next step is to find a good property. Any successful property investor will tell you that money is made at the time of purchase. This is why you’ll have to learn the art of negotiation.

Of course the market generally dictates what kind of discount you may be able to secure, if the market cycle is at the bottom then you’ve got a great chance of getting a discount – more so than when it’s strong. Here are some proven tips and strategies designed to help you tilt the odds in your favour:

• Speak with authority: those that are well informed make better decisions. This is especially true when it comes to making an offer on a property. By doing proper due diligence, you’ll have more confidence and this will be reflected in the negotiations.

• Listen closely: It’s helpful to understand human nature when negotiating, so it’s worth the effort to learn how to identify both verbal and nonverbal cues that may reveal hidden information.

• Silence is your friend: During negotiations, moments of silence can be unnerving to some individuals. Use this to your advantage. For example, if you’ve received an offer that doesn’t meet your expectations, pause before responding, you might be surprised at what happens next!

Lending plan

In order to conduct business safely during the acquisition stage of your property investing journey, you need to create a lending plan. This plan will detail how you are going to get the funds to finance your purchases.

When it comes to securing lending, a common mistake that many new investors make is that they limit their buying options by only looking at lenders that offer cheap interest rates. What these investors fail to understand is the value in building a portfolio of good properties in growing locations right now.

For example, you could approach a major lender (big banks) and get approved for a $600k loan with a 3.5% interest rate. Depending on the area, lets just say you’re able to purchase 45 minutes out from the city in a small suburb with no prospect for growth. In comparison, if your lending plan allows you to consider second-tier lenders that may offer you $750k at a 5% interest rate you’ll be in a much better position to purchase in a growing economy (closer to the city). Whilst your finance costs more, you will likely make more money through capital growth down the track.

For most investors, their lending plans will have a provision for securing finance from second-tier lenders, because even if the major banks have a cheaper interest rate, their terms are often restrictive. A second-tier lender is a non-bank entity, making them exempt from some of the more rigorous APRA requirements. This doesn’t mean they’re free to do as they please, you can have peace of mind knowing that they are regulated by the Australian Securities and Investments Commission (ASIC). The goal of the ASIC is to protect investors like yourself while enforcing Australian finance law.

Having access to funding is super important when it comes to property investing, and having the cheapest interest rate should be the last thing you consider.

Tax management plan

Owning real estate can actually be incredibly tax effective. When it comes to property investing there are a lot of things that you can’t control such as the market, interest rates, and yields. However one thing you can control is your tax – through managing it.

There are four main taxes that property investors pay:

• PAYG
• Land tax
• Stamp duty
• Capital gains tax

And if a company owns your property portfolio then you will also need to be across goods and services tax (GST) and company taxes.

For many investors, tax breaks make it affordable to own an investment property in the first place. So when it comes to managing your taxes you need to ensure you’re across it. This does not mean you need to understand tax law in depth, but having a basic understanding will help you (and your accountant) in the long run.

A smart investor will have provision in their tax management plan for how they can use tax to pay for their properties. Let’s say you purchase a property for $500k, the rental return is $500 per week and the property expenses are $601 a week. So your property is making a loss, and the great benefit of being a property investor is that you can claim tax back and get depreciation. So on this brand new $500k property you can claim back $152 per week. With a PAYG withholding variation, you can receive the $152 tax break each time you’re paid.

Property management plan

Every investor knows that real estate is a long term game. In order to keep your properties in tip-top condition over this time, you need to invest in an amazing property management company right from the start – at the beginning of the acquisition phase.

Your property manager will spend more time at your property (your biggest asset) than you and therefore you want to ensure you have the right team on your side looking after your properties.

Let’s say you get dumped with an inexperienced property investor, they do an average job of looking after your property, it gets ruined by your tenants and you become fed up. Your property management company refers you to a real estate agent who convinces you to sell, and then you’re out of the game. This is the potential cost of not investing in a good company.

Debt reduction plan

As mentioned above, you move into the consolidation phase once you’ve exhausted your ability to recycle equity. As a quick reminder, equity is the difference between the market value of a property and the mortgage against it. A common strategy in an investor’s lending plan is to borrow against the available equity in a property.

Capital growth in the form of equity is useless, unless you can access it. In order to access it you need to lower your loan-to-value ratio by reducing your debt, or increasing your income (rental yields).

It is completely normal to get to a point in your investment journey where you need to take a break for a year or two whilst sorting out your finances. What you can do during this period is put every single dollar you have into your offset account. An offset account is an account linked to your mortgage that operates like a transaction or savings account. It offsets the balance in that account against the balance of your home loan, so you’ll only be charged interest on the difference.

Financial plan

Your financial plan should be operating in the background throughout each of the phases of your investment journey. Creating a financial plan will set you up to ensure you’re building wealth for the right reasons.

Your financial plan should include the following attributes:

• Specific goals that define what you want to achieve and which are aligned with your values and your personal situation.
• Clear, actionable steps that lead you towards your goals.

Your financial plan will also identify how you are aiming to fund your retirement outside of real estate, such as through your Superannuation or shares.

Wealth acceleration plan

The wealth acceleration plan takes place in the lifestyle phase. The lifestyle phase of an investment property career is the place the property investor is striving towards. You’ve built your portfolio to a point where it is generating enough income for you to retire (in whatever way that is to you).

With capital growth in the market over 15-20 years your portfolio will (hopefully) be worth a lot more than the initial cash you invested. A wealth acceleration plan will map out how you are going to put this equity to work. When you get to this stage it can be easy to fixate on the cost right now, this is where many investors go wrong. In order to quantum leap your wealth to new heights you need to understand the long-term value of your investment.

BUILDING YOUR 7 PLANS WITH THE RIGHT TEAM

A list of 7 plans every property investor must know is all well and good but we all know how hard it can be to stay on top of all the aspects of property investing, particularly in those early stages.

In order to successfully apply these 7 plans across these three stages, it pays to enlist some help. That’s where the TRC-Gorod team comes in. Our team has over 18 years experience in property investment coaching.

Come along to one of our free property investing masterclasses. This two-hour event will give you the opportunity to ask questions to our experts, connect with key people in the industry and develop the support team you need to succeed in real estate.

Register now for the free property investor webinar.

When it comes to real estate, there is a lot to learn about property investment and one of the first things you’ll need to determine is what property type/ or types will be best for your portfolio. When you strive to learn everything you can about investing in property, you increase your chances of creating generational wealth!

The best type of property to invest in is dependent on a number of factors about the investor and their real estate strategy.

Different property types will deliver different results and what may work for some investors, will be completely off the mark for others.

To ensure you’re across the best type of property investment for you and that you’re ready to invest, here are some things to consider:

YOU’RE PERSONAL RISK PROFILE

When it comes to property investment, the amount of risk you’re comfortable with is a crucial factor. Essentially, it will come down to how willing you are to expose yourself to loss, and how you will adapt when things go wrong. Additionally, there are always ways to manage risk in real estate.

There are a few different risk profiles that investors generally identify with:

• Conservative

Investors with conservative risk profiles have a low appetite for risk and as such are more likely to take a conservative approach and invest in low-risk options that are more protected from financial loss.

• Balanced

Investors with balanced risk profiles have a more moderate appetite for risk and are likely to invest in real estate that will steadily appreciate over a long time. They may also adopt a balanced strategy where they own multiple properties that balance each other out.

• Aggressive

These investors have a high appetite for risk and are generally focused on achieving maximum returns from their investment. They are typically interested in growing a profit at a faster rate, focusing on high growth and value add strategies.

Generally, there are three main ways that investors may handle risks, based on their own risk profile. This includes risk avoidance (completely avoiding a clear risk and therefore eliminating it), risk control (controlling a risk by having the proper precautions in place from the start) and risk transfer (transferring potential risks, usually with the use of contracts or insurance).

YOUR FINANCIAL CAPACITY 

Your financial capacity refers to your ability to build wealth and create success through investment decisions by using your own resources (education and savings). It can depend on a range of factors, including your ability to save, your own research on investing, your financial and personal goals and how you plan to achieve them.

There are three key wealth creation principles that will help you understand if property investment is a good fit for you:

1. Understand your money ‘buckets’

Money buckets are how you grow your wealth. Most people only have one bucket where they’ll put all their wages and nothing else. But, investors know that this isn’t enough to create financial freedom or success.

Therefore, it’s smart to have other buckets being filled at the same time. These come in the form of other assets or strategies that work alongside our wages to help build that wealth, whether that’s shares, side hustles, or real estate.

1. Know your budget

Calculating how much is coming in and out of your bank account(s) every week, month or year is important when defining your financial capacity. Doing this will help you see how much you need to save, how much you can spend and how much you’ll have left over when it comes to building your investing strategy.

It will also help you narrow down your options for an investment property and may even show you what you’ll need to retire comfortably (or lavishly).

1. Learn what grows your wealth vehicle

Property investment is great for creating wealth. Real estate has always had incredibly reliable returns, and being a physical asset, it will always be around in society.

But what drives the growth in real estate? There are six common market drivers that help push up values:

• Population growth
• Infrastructure growth
• Supply vs demand
• Economics
• Demographics
• Yield

Each of these will influence property growth. For example, if you can find population growth in an area where infrastructure is improving and expanding, where you know that people are going to want to live, then that’s a good place to invest.

YOUR LOCATION STRATEGY

The significance of location is simple – you can do what you want with your real estate, but you can never change the area it’s in.

Knowing what drives growth in property investment (like the factors mentioned above), and what will therefore influence your wealth, must be taken into account when defining your location strategy.

A lot of quality real estate gets overlooked because investors have preconceived ideas about certain locations, but remember it’s not about buying property for yourself to live in, rather property that’s going to attract the right tenants.

In summary, look for a location where you are going to get a good rental income, and ideally in a capital growth area.

WHAT TYPE OF PROPERTY IS BEST FOR AN INVESTMENT?

Established houses

Investing in houses offers the prospect of capital growth to increase your wealth, rather than through rental returns. Choosing an established house as your property investment will allow you a less stressful process, in comparison to building a house. You may also be able to rent out an established house immediately, allowing you to earn a rental return from day one, which is desirable for a lot of investors.

Investing in established houses – benefits vs. disadvantages

Benefits

Investing in houses offers the opportunity to increase your capital growth through strategic improvements, such as through subdivisions or renovations (renovations on an investment property are tax deductible too!)

Disadvantages 

Typically, a large share of a house’s value is tied up in the land. This means that often, the rental yield won’t reflect that value. Maintenance costs can also be high in houses because you’re responsible for the entire structure and landscape.

As low-maintenance properties can sometimes be difficult to obtain, investing in existing properties can mean repairs and maintenance which, although tax deductible, can be expensive.

What type of investor should buy an established house?

Purchased at the right time of the market cycle and in the right location, investing in established houses is a good strategy for people in the early and middle stages of their investing journeys.

If you buy when the market cycle is at its lowest, then hold, you’ll gain the most benefit. As rents grow, and as your debt is reduced, your investment will soon begin to pay for itself. Until such time, you’ll gain tax benefits either through a cash neutral or tax negative position.

Apartments 

As investment properties, apartments can sometimes be more affordable and better value than houses. They can produce higher rental yields than houses and this is always good news if you are on a tight budget when buying.

While investing in houses offers great capital growth, apartments in good locations can provide the capital you’ll need to build up your investment property portfolio when you’re just getting started.

Investing in apartments – benefits vs. disadvantages

Benefits

As stated above, investing in apartments can produce higher rental yields than investing in established houses. They may also have lower council rates, maintenance requirements and are very desirable to younger tenants looking for certain lifestyles and living locations.

If you are striving to be cash-flow positive in your investments, apartments may be one of the best types of property investments for you.

Disadvantages 

There is no perfect investment for any one person, and apartments are no exception to the rule. The building’s value may rise in the future, but the land value won’t necessarily follow. The building and all of the improvements that go with it is where the value lies.

You will also have to pay body corporate fees and strata levies.These costs are non-negotiable and go towards maintaining any common areas. You will also be limited on the amount and type of renovations you can do to this type of property due to strata laws.

Additionally, if you buy in the wrong location where the market is oversupplied with apartments you’ll also experience both limited capital growth and rental yields, so it’s important to choose apartments based on demand, desirability and supply.

What type of investor should buy an apartment?

Investors who are further along in their property investing journey and those nearing retirement would do well to buy apartments as they can be a good income source and are fairly low-maintenance.

Villas and townhouses

For those that are stuck between wanting to invest in a house and an apartment, a villa or townhouse can be a good ‘in-between’ option.

They are usually desired by those wanting the space and privacy of a house but lacking the budget for one. Villas and townhouses are generally quite spacious and are statistically cheaper than houses.

If purchased in a highly desirable location, this type of property can deliver both capital growth and a relatively high yield.

Investing in villas/townhouses – benefits vs. disadvantages

Benefits

Townhouses usually offer more space and privacy than apartments, usually with at least two storeys and sometimes a small, fenced in front or backyard. This means they can be very desirable and in high demand for many different types of people (couples, small families, people with pets looking to downsize, etc.)

Townhouses can deliver capital growth that rivals houses and rental yields similar to apartments. They also offer the potential to renovate, provided the by-laws allow it, which can increase both your property’s value and your rents.

Disadvantages 

Like apartments, villas/townhouses can require extra costs like body corporate and strata fees. On top of this, while you own the dwelling, you still share the land with the other owners.

Additionally, over time, a property can become outdated. If the by-laws are too restrictive this can impact an investor’s ability to update a property either through renovation or even as far as demolition. Also, a group of villas or townhouses might face competition from similar properties, offering investment property owners little opportunity to make their property stand out amongst the crowd.

What type of investor should buy a villa/townhouse?

This property style offers individuals who are in the beginning stages of growing their investment property portfolios a lower price point than houses. Also, the capital growth prospects provide access to leverage that can help them continue to grow their wealth.

In investing, “leveraging” simply means borrowing money to finance another investment that will allow you to increase the return on investment. For example, when your investment property value increases and delivers you more equity, you can leverage this equity to purchase another property, and therefore build your investment portfolio.

Although investors can be reluctant to borrow money, as they see it as a big risk, leveraging often allows you to purchase more property than you could otherwise afford.

WHAT IS THE BEST TYPE OF PROPERTY TO INVEST IN?

As you can see, the best type of property investment depends on the investor, what stage of life they’re in and what they value. Don’t forget that the best type of property for an investment will change from investor to investor.

Whether a great investment is good value will also boil down to its location, amenities, size, and the current condition of the property. Your strategy, portfolio goals, and financial circumstances will also play a part in the success of your investment property, so it pays to understand your personal situation and the property itself.

Remember that the right property type for you depends upon a number of factors; your financial situation, how long you’ve been a property investor, the state of your current investment property portfolio, when you expect to retire, your capacity for risk and much more.

If you’ve been searching the markets but still aren’t sure where or what to buy, it’s best to consult with a professional property advisor. Our team at TRC-Gorod have almost 20 years’ worth of experience and knowledge. If you’re ready to connect with property experts that can guide you along your investing journey, then check out our free property investor webinar for all the help you need to find the best type of property investment for you!

Register now for the free property investor webinar.

Real estate has the potential to become your main vehicle for creating wealth, but only if you take the time to learn some crucial property investment basics to set you up for success as an investor.

All too often, wanna-be investors try to jump into the game without fully understanding what they’re getting themselves into. Before you even put in your first offer, you need to determine what your “dream” financial goal is, and then from there you can develop a custom-built plan that not only suits your current lifestyle but also challenges you to make decisions for your desired future.

These are the four property investment basics that every investor needs to know before buying an investment property.

1. BRAINSTORM YOUR FINANCIAL FUTURE

In order to set yourself up for success, you need to consider what you desire from property investing. This is the first step in property investment basics, so be bold and dream big – your future is in your hands!

Having a clear understanding of the end-goal will greatly assist you when it comes to planning how to get there. Perhaps you’re wanting to work less hours, travel more or retire at 40? Sit down, grab a pen and paper and start mapping out your dream life.

Setting up your plan of attack

Now that you have a clear understanding of what you want, it’s time to establish a timeframe for achieving your goals. The key to building a sustainable plan is to break it down into micro-steps that you can work towards each week.

1. Establish a six month, one year and five year time frame.
2. Under each time frame, create a list of the five most important steps that you need to do to get closer to your target.
3. Schedule a time, either quarterly or bi-annual to review your goals.

By reviewing your goals regularly, it will give you the opportunity to adjust your plans as your personal situation changes.

2. GET YOUR FINANCES SORTED

The foundation of your property portfolio is finances. So the next step in property investment basics is getting a handle on your money.

Pay off consumer debt

Before you even think about purchasing a home, you want to eradicate all of your consumer debt. Having consumer debt is a massive financial liability that will make it incredibly difficult to secure lending from the banks.

The less consumer debt you have, the better your ability to both purchase and service your investment properties.

Create and stick to a budget

Be honest with yourself. If you’re not disciplined with your finances, your success will be limited at best.

A budget can be done on a rough piece of paper, or if you’re after something a bit more sophisticated, then there are a multitude of budget templates online to help you track your income and expenses. Once you know where your money is going, you’ll be able to spot patterns.

The essence of budgeting is to track what’s coming in and what’s going out. Your financial situation cannot be improved if you don’t know what’s happening in your bank accounts.

Being able to create and stick to a budget is a vital skill that will assist you greatly as you expand your property portfolio and accumulate wealth so the earlier you can get a grasp on it, the better.

3. LEARNING THE KEY CONCEPTS

When you’re first starting out in property investing, it can often feel like there are a million things you need to know before you can even purchase your first home. For many people, this can be a put off and is usually when they tend to throw in the towel. However, if you put some time aside to become informed, the rewards for your efforts will pay off – literally!

While there are several key concepts that you should have a basic understanding of, you certainly do not need to become an expert in everything real estate to build a successful property portfolio.

Here’s a few simple things to be across.

Drivers of the real estate market

In order to secure a great property to add to your portfolio, you need to understand the drivers that influence the market. For example, knowing that investment in infrastructure generally leads to increased population will help you identify the areas that are on a growth curve. The main market factors to be aware of are:

• Infrastructure – spending on infrastructure points to a growing economic base
• Yield variation – signals growth
• Supply and demand – indicates need in the marketplace
• Population – fuels growth in an area
• Economics – reveals clues to an area’s capacity for growth
• Demographics – influences growth – as incomes grow, so do property values

Positive versus negatively geared property

A property is negatively geared when the expenses of owning the property – including maintenance costs, depreciation and borrowing costs – exceeds the rental income, resulting in a loss.

Negative gearing deductions are most beneficial to people in high income brackets where they are in the top marginal tax rate. This is because the ‘loss’ is able to be offset against other income (e.g. salary or business income) therefore reducing the tax obligations of the owner.

Including depreciation within property expenses can increase the loss on paper without incurring a cash loss. Therefore, increasing the expenses and amount of tax deductions available.

This strategy works very well for high income individuals as the more money which is borrowed the more interest is charged which can then be deducted 100% from the owner’s taxable income.

If you’re planning to adopt a negatively geared property strategy, then you must have a good understanding of the potential costs. While negative gearing allows investors to recoup some of the costs via tax savings, it still results in losing money and therefore cash is needed to help service the property. The long-term strategy behind negative gearing is the hope that the losses will eventually be compensated in the form of capital gains in the future.

A property which is geared positively means that the income derived from owning the property exceeds the financial and maintenance costs incurred. Positive gearing is generally seen as lower risk than negative gearing because it provides more consistent income. The surplus income can cushion investors from interest rate hikes or unexpected property (or life) costs.

With a positively geared investment, investors are not able to reduce their income or get tax benefits. The ‘profit’ made on the rental income will be taxed at the appropriate rate. However, what positive gearing does provide is additional income which can be used to pay down the mortgage quicker, or used to invest elsewhere.

Both negative and positive gearing have their place in a property investor’s portfolio which is why it is important to have a clear understanding of both to determine how they may fit into your real estate strategy.

Positive cash flow versus positively geared property

A “positively geared” property creates more income than expenses before tax, which means your rental return and tax breaks cover your outgoings, leaving your wage or income unaffected. Whereas positive cash flow property only creates more income than expenses after tax deductions and refunds are calculated, making it a self-funding investment.

Investors that follow a positive cash flow strategy understand that living off passive income is the key to an early retirement. That isn’t to say that positive cash flow is better than a positively geared property – it all comes down to your specific financial situation.

For example, if you’re looking to purchase in a high growth area then perhaps a positive cash flow strategy will be right for you. Generally speaking, new or newly renovated (high depreciation) homes hold the greatest potential to be positive cash flow because you can claim a larger “on paper” loss.

On the other hand, properties which are older and less expensive have the potential to offer a strong rental return, creating a positively geared property.

Your strategy will come down to whether you want to lose money and recover it through taxes or earn money before taxes and offset the income received through tax deductions, essentially paying little to no tax.

The importance of safety buffers

Regardless of what strategy works for you, the concept of safety buffers is a key underlying factor to all successful real estate strategies. Every investor’s budget should include money set aside for any unforeseen expenses that may arise. This is not extra money to go on holiday or buy a new car, it should be reserved for legitimate expenses connected with your investment property(ies).

Having your safety buffer sit in an offset account gives you the ability to earn compound interest until such a time where this money may be needed.

An offset account is simply a savings account which is linked to your loan account. Let’s assume you have a mortgage of $100,000 which is linked to an offset account with a balance of $10,000.

In this scenario, you would only accrue interest on $90,000 rather than the entire $100,000. You will still pay back the principal of $100,000, however the interest will only be calculated on the $90,000. Therefore, your mortgage repayments will be more effective at reducing both the principal and interest on your loan.

4. GET HELP FROM EXPERTS

Now that you have a basic understanding of the key concepts of property investing, it is time to put them into action. Remember that knowledge is only potential power. You can research for months, but if you take no action, you’ll still be back at square one.

Beginner investors often experience information fatigue, they know what to do but don’t know where to start. This is why it is crucial to develop your six-star team that will help you climb the ladder of success. Let’s explore this further:

Find a good mentor

The best way to learn is from someone who is doing what you want to achieve. When learning something new, mentoring can help ease the learning curve because in addition to “textbook” knowledge, a student under the tutelage of an experienced property mentor can take advantage of the many years experience of their mentor without having to go through the experiences themselves.

Establish relationships with industry experts

Some of the most successful people in the world will tell you it’s ‘who you know’ not ‘what you know’ and this couldn’t be more true for the real estate industry.

Find networking events that give you the opportunity to mix with industry experts. Our free real estate investing seminar is a high-value two-hour event that will connect you with the people you need to know to build your team.

Having the right team is vital for your success, by surrounding yourself with knowledgeable property professionals, you will be putting yourself in a position to soak up all that they know. It’s all about working smarter, not harder.

PROPERTY INVESTMENT BASICS NEXT STEPS!

Now that you have a good understanding of the four top property investment basics, it is important to remember that everyone’s journey is unique and there is generally no one size fits all approach to real estate investing.

As long as you are aware of all strategies, and you work with a team to determine which is the best fit for you and your long-term goals then you’ll be on your way to creating generational wealth through property investment.

The best thing you can do is get support, so come along to one of our FREE property investing masterclasses. Our coaches and mentors have real life experience as investors and can give you the tools, resources and knowledge to help you build your property portfolio.

Register now for the free property investor webinar

It’s the Australian dream – the clock ticks 65 (or earlier) and off you sail into the sunset of retirement to live out the rest of your years stress-free. Sadly, for some, this will remain nothing more than a dream with the drastic cost of living rising and no plan to cover the shortfall – that is, unless you take onboard these retirement planning tips which could change the way you prepare for the future. Our property investment groups is a great place to keep informed about the ever changing landscape of real estate investing.

The truth is, unless you can live off $500 a week then you’ll need to start planning ahead now. That’s because a mere few hundred dollars is all you’ll get if you have $523,000 in your super by age 65 (estimating that you’ll live to 85).

This is the approximate amount that Australian Super Funds of Australia (ASFA) says you’ll need to live a comfortable retirement, based on the assumption that you’ll also receive the pension which is $36,000 per couple or $24,000 if you’re single. It doesn’t sound like a lot does it?!

Assuming you want more than to just scrape by after all those hard years of work, then these retirement planning tips are what you need to be across in order to retire stress free.

TIP 1 – CRITICALLY EVALUATE YOUR SITUATION 

What is your financial situation right now? Before we look at where you’re headed, we first need to understand where you are today. Do you live paycheck to paycheck? How much do you have in your super? What about your emergency fund? These are all extremely important questions that most Australians overlook when wading through life.

The thing about financial security is that when you have it, everything else in your life changes for the better. That’s why the sooner you start creating wealth, the safer you’ll feel and the more you can live the way you want without having overarching guilt or feeling stuck in your current position.

There are three basic principles when it comes to creating wealth. So, put aside one hour, grab a pen and paper and let’s get a better understanding of your current financial situation.

Principle 1: Money buckets

Money is an energy exchange, the better you understand it, the more you’ll attract. As we grow up, money is often a taboo subject, and because it’s not talked about, we enter adulthood knowing nothing about money.

So here’s your first lesson; money buckets. They’re basically how you grow and accumulate wealth. Most Australians only have one thing in their bucket e.g. their wages. We know this isn’t going to create wealth for a stress free retirement.

You need to diversify and put your eggs into other buckets. These come in the form of other assets or strategies that work alongside your wages to help build that wealth, whether that’s shares, side hustles, or our favourite – real estate.

Principle 2: Knowing your number

This is asking the hard question, how much money do you need to die? Most people pluck a number out of thin air with no strategy behind it. Actually no, most people never even answer this question!

To create an informed investment strategy that will allow you to retire stress free, you need to work out what you need every month to live the life you want. Whether you’re after a comfortable or lavish lifestyle, you need to do the maths. If you don’t know how, this method will take you through the process. 

Principle 3: Learning what grows your wealth vehicle

Let’s be clear, property doesn’t need to be your vehicle of choice for creating wealth for a stress free retirement. But, if you want an investment strategy that’s safe, steady and guaranteed to look after you in the future, then you need to consider it as an option.

This is because real estate has always had incredibly reliable returns, and being a physical asset, it will always be around in society. The key to creating passive income from property long-term is understanding what drives growth.

There are six market drivers that grow real estate value:

• Population growth
• Infrastructure growth
• Supply vs demand
• Economics
• Demographics
• Yield

This is explored further in tip number five!

TIP 2 – SET SPECIFIC AND ACTIONABLE GOALS 

Once you are across the money principals above, the next step on the retirement planning tips list is to set some goals! Take note of the words ‘specific’ and ‘actionable’ – we’re building an informed strategy here. There is no substance to saying “I want to have five investment properties in 10 years” with no action steps to go along with it.

With any investment comes risk, and when we talk about risk in real estate, we’re essentially gauging how willing you are to expose yourself to loss and how you adapt when things go wrong.

As property investors, risk is all part of the buying game, so understanding your risk profile is crucial to your overall success. Once you know where you sit on the risk scale, this will help better inform what kind of specific and actionable goals you should be setting for your retirement plan.

TIP 3 – SET AND FOLLOW A LIVEABLE BUDGET

Once you’ve got your goals set in stone, you need to create an action plan that you can live by each day. A budget need not be complicated, the simpler it is, the easier it will be for you to follow. A good way to start is to track every dollar you spend for at least two weeks – if you can do one to three months, even better.

You can do this on a rough piece of paper, or if you’re the king or queen of organisation then you’ll find joy in knowing there are heaps of budget templates out there to set you up. Once you know where your money is going, you’ll be able to spot patterns. Where are you wasting money? What areas can you cut back on to increase your expendable income?

Make budgeting fun! Yes, it’s important to plan for your retirement but do it in a way where you can still indulge in those things that mean most to you. The key to budgeting is identifying and cutting back on your frivolous spending that doesn’t help your financial situation at all.

TIP 4 – PAY OFF DEBT

To ensure a stress free retirement you need to eliminate all of your debt – both the good and the bad – before you put in your notice.

For example, if you have a home mortgage and/or consumer debts (aka bad debt), focus your efforts on paying these obligations off as a first priority.

Bad debt is one of the top factors that holds back real estate investors. A lot of people are living on borrowed money without creating a financial outcome from what they are borrowing.

Potentially one of the most important retirement planning tips is to eliminate bad debt. It is the cleanest way to fix your credit profile and surge ahead as a property investor. Rip up the credit card and get rid of the car loans and those pesky Afterpays.

This will free up the funds you need to supplement your super, add to your emergency cash and perhaps buy your first (or next) investment property.

TIP 5 – COMMIT TO BUYING INVESTMENT PROPERTY(IES)

As previously alluded to, property investment is the go-to investment vehicle for creating wealth when it comes to retirement planning because as we say, real estate is a marathon not a sprint. When it comes to retirement, you want a vehicle that delivers consistent results over the long term.

Residential real estate has provided quality returns over the past 20 years, matching Australian Shares and outpacing inflation. In fact, a report from the ASX and Russell Investments released in June 2018 examined the returns of long term investments.

It found from the 20 years to December 2017, residential investment property saw better gross returns than the share market.

Investing in property for the first time can be exciting and thrilling. It can also be very, VERY confusing, and not to mention scary. This is your future, there’s a lot of money at stake and understandably, you don’t want to stuff it up.

As a beginner to property investing there are some important things to remember and steps to take if we want to get off to the best start.

TIP 6 – LEARN TO IDENTIFY THE BEST MARKETS

If this is all new to you then exercise some patience and do some really great, diligent research. The right property for you to buy may not be in your street or even in your state.

Take some time to research real estate markets around the country. Remember the six market drivers we discussed in tip one that grow real estate value? Those are called macro drivers and they will help you determine what city or state to buy in. For example, cities with infrastructure developments will likely attract people to the area and lead to population growth.

Then there are also micro drivers, which tend to be seen more likely in suburbs or towns.

The micro drivers are:

• The owners established benchmark
• The new established benchmark
• Socio-economic
• Symbolic landmarks
• The ripple effect

For example, when looking at suburbs or towns, you want to be looking for the “worst” house on the best street, (owners established benchmark) this allows for an opportunity to add value to reach the market-rate of nearby properties.

Another great way to see if a micro market will grow is to determine average income versus average house price, in other words, if wages are high and house prices affordable, the property market can rise in value.

TIP 7 – BUILD A PROPERTY PORTFOLIO 

Now you know the benefits of property and what it takes to retire stress free by calculating your magic number based on your retirement living goals – great! But how do you go about building a property portfolio that reflects that?

Two things – you need the right team and the right strategy.

TIP 8 – ENROL A TEAM OF EXPERTS

The key to seeking advice is to get it from someone that is doing what you want to do. As much as you love your friends and family, unless they’re very savvy property experts who have spent years staying up to date with market behaviours and patterns then, it is likely that

their concerns and strategies will not make sense from an investor’s perspective today. Their advice may actually be the opposite of what an educated, experienced property investor would suggest.

In order to successfully use property as a wealth creation vehicle you need to assemble a six-star team to manage your portfolio. This team is comprised of:

• A property strategist expert (the captain of your team – a coach, mentor, investor and advisor who understands your big picture strategy)
• A finance expert
• An acquisitions expert
• A property management expert
• An accounting expert
• A financial planning expert

Most people end up as the statistic of 99% of investors who fail in property because they don’t ask experts for help. Our team of expert coaches and mentors can help you on your way to becoming one of the one per cent. The one percent of Aussies who are successful property investors.

SET UP YOUR RETIREMENT PLAN TODAY

Before you even buy your first investment property, you should have a plan in place that includes these retirement planning tips. You know, as the saying goes, if you fail to plan you’re planning to fail.

If you’re ready to get started in your real estate journey so that you can retire stress free, then sign up for our next free property investing masterclass. These high value events are packed full of information about where the markets sit right now, how to invest both wisely and smartly, and it’ll connect you with the TRC-Gorod team who have been dominating the property investing industry for over 20 years.

Saving for a house deposit to get onto the property investment ladder is tough. Especially with the cost of living drastically going up. After bills, rent/mortgage, groceries, petrol, insurance… there isn’t a whole lot left for saving. But that doesn’t mean it’s impossible! By adopting these 10 ways to save for a house deposit you’ll be ten steps closer to building out your portfolio and creating future wealth.

Typically, you’ll need at least a 20% deposit (an 80% loan-to-value ratio – LVR), for an investor home loan if you want to avoid paying lenders mortgage insurance (LMI). Some banks will allow you to put down a deposit smaller than 20% to buy an investment property, but you’ll need to pay LMI which adds an additional cost to your loan.

As a rule of thumb, aiming for a bigger deposit is better because it shows the lender that you’re a good saver and are able to manage your finances. There are a few banks that will allow a 5% deposit but that is usually the lowest amount they will entertain. A 5% deposit on a $500,000 loan equates to $25,000, which is far less than many prospective investors imagine their deposits will need to be.

BIGGER DEPOSIT VS SMALLER DEPOSIT 

There are also other costs you need to consider when purchasing your first investment property. These can include:

• leasing fees
• property management fees
• repairs and maintenance to ensure minimum rental standards
• body corporate fees
• tax
• loan, interest, and bank fees.

If you’re not prepared, you can easily get caught out by the costs involved in running an investment property. Where possible, a larger deposit is always preferred so that a partial amount can act as a safety buffer if needed for any hidden costs.

And now, here are the 10 ways to save for a house deposit.

1 – PAY OFF YOUR DEBT 

It sounds simple enough, but you’d be surprised at the number of people drowning in crippling amounts of debt. There are two types of debt, good debt and bad debt. 

What is good debt?

Good debt is money you borrow that is used to purchase something that will either grow in value or bring in an income. Such as your mortgage or a student loan. Your investment property will increase in value over time and provide you with rent. A student loan gives you opportunities in your career and increases your earning potential.

Paying off good debt should still be considered when saving for a house deposit, however your main priority needs to be bad debt.

What is bad debt?

Bad debt is anything that is used to fund your lifestyle, debt that is spent on things that have no value, or that go down in value over time. Things like credit cards, car loans and holiday loans won’t leave you any better off in the long run.

With social media running rampant through society, it is common these days for you to feel like you “need” to purchase the latest and greatest in order to keep up with the trends. The “buy now, pay later” phenomenon has developed rapidly in Australia with Afterpay now being a billion dollar company. In April 2021 they notched up their 10th millionth customer. Isn’t that just terrifying?!

Services like Afterpay have made it incredibly easy for customers to access something they need or want immediately. If repayments are made on time, often little to no interest is paid. However, if repayments are not made in the agreed time period the late fees or interest can incur.

Why should you pay off your debt quickly?

People often think they’re better off paying the minimum on their loans so that they can save money for a deposit, however this is actually very counterintuitive.

The average Aussie owes $3841 on their credit card according to Canstar. If you are only making the minimum payment, almost all goes to pay the interest incurred and only a tiny fraction goes to pay the purchases you charged (the proportion depends on your credit card rules).

This means that a credit card balance of $3841 would take you almost 30 years to pay off with minimum repayments. The frightening thing is, the interest you would pay would be almost $9000!

However, in this scenario if you paid $189 per month your debt would be paid off in only two years and you’d shave off over $8000 of interest charges.

Bottom line, you can’t save for a house deposit while you have bad debt. In fact, your ability to service an investment property with loads of unsecured debt is impaired as well.

2 – GET A BUDGET

You’ve probably heard this a thousand times. It is a common misconception that budgeting is reserved for the poor. However, this couldn’t be further from the truth. The richest of the rich generally all follow a strategised budget. How do you think they became rich in the first place?

You guessed it, let’s get into budgeting!

A budget is the single most effective tool for saving money. You can use an excel spreadsheet which will cost you nothing – or you can invest in accounting or budgeting software.

The essence of budgeting is to track what’s coming in and what’s going out. Your financial situation cannot be improved if you don’t know what’s happening in your bank accounts.

If you want to go all in, try and live off of 50% of your income for one month. If you can do this, you will end up in a place where you can budget for anything. You will learn to survive only with what you have, it is in our human nature to make do and this will set you up for a future of wealth.

A more conservative budgeting tip is to follow the 50/30/20 rule which is the idea that 50% of your income goes towards your needs, (mortgage, bills) 30% of your income goes towards entertainment and 20% needs to be invested into income producing assets.

While a budget is important to have while saving for a house deposit, it will become vital once you own that investment property.

3 – SAVE CONSISTENTLY 

Once all your debt is eliminated then you can begin saving. The best and easiest way to save is by adopting the “Pay yourself first” method.

Pay yourself first method

Paying yourself first means that instead of paying all your bills and saving whatever is left, the very first thing you do when your wages come in is to send a percentage of your income to your savings and investments before covering things like food, petrol, insurance etc.

It’s useful because you’re saving some of your money for your future self before it leaks somewhere you hadn’t meant it to. To make this method fool-proof it is suggested that you set up automatic withdrawals – you know…”out of sight, out of mind”, right?

 4 – ADOPT A GOAL-ORIENTED MINDSET

If you’ve never set any goals before, then it is likely you bounce through life like a pinball doing what others want instead of accomplishing what is important to you. So the magic question is – what do you want?

It is very common in Australia to reach adulthood and never be asked this question. Society is designed to trick you into thinking you know what you want but most people never stop and reflect to determine their vision and mission for life.

One fundamental attribute you’ll find among the wealthy is goal setting. They know exactly what they want and they create a plan to achieve it – a plan that they relentlessly follow until it’s completed.

Here are five powerful ways to become more goal-oriented:

1. Start with the end in mind and work backwards
2. Get specific and then break down into sub-goals
3. Get clear on your values
4. Make time for inspiration
5. Form goals around your strengths

5 – PRACTICE FINANCIAL DISCIPLINE

A basic definition of ‘discipline’ is to exhibit self-control and avoid impulsivities. So to apply this to your financial situation would be to control your money and avoid impulsive spending. Financial discipline is one of those things that is a lot easier said than done.

In a world full of marketing noise, where every brand is trying to sell you something it can be difficult not to splurge. If you want to save for a house deposit fast, then a great way to “turn off the noise” is to cancel all email subscriptions where their only purpose is to take your money.

If you do come across something you fancy, then institute a mandatory three-day waiting period for every buying decision, large or small. If you still want it three days later, go ahead and buy it. Chances are, though, that you won’t remember why the item appealed to you—or even what it was you thought you wanted.

Having financial discipline will serve you now while you’re trying to save for a house deposit and it will be absolutely indispensable when you start expanding your property portfolio.

6 – SELL OR REORGANISE 

It’s time to cut ties. Needs and wants are two very different things that social media, large corporations and trends like to blur together. If you’re wanting to save for a house deposit fast then there are some big steps you can take to bank some extra cash without doing a bucket load of overtime.

• Sell off assets (sell that second car, boat, etc.)
• Live on one salary and save the other
• Move your savings to a high interest account (if it’s not cost prohibitive)
• Start your own side hustle
• Sell off your clutter on and offline
• Move your high interest debt to a zero interest credit card and pay it off BEFORE the introductory period expires.
• Change over to a “cash and carry” mentality. Keep your credit cards at home.

7 – SLASH YOUR BILLS 

Reduce your outgoings and you’ll instantly save money. Start with the non-essentials such as subscriptions – Netflix, Disney +, Amazon Prime, Spotify etc. You do not need them all!

It is important for quality of life to still enjoy entertainment but if you want to save for a house deposit fast then you need to get creative. There are a tonne of leisure activities that are free – hikes, the beach, a walk or a bike.

Once you have eliminated those bills that you don’t need, try to find ways to reduce your essential bills. Insurance, phone and internet providers love customer loyalty and I am sure they would hate to lose you, so ring them up and see if they can do a deal for one of their longest standing customers. You never know unless you ask!

8 – GET HELP

Find one or more individuals who would be willing to buy the investment property through a joint venture. Granted you’ll split ownership, but part of something is always worth more than all of nothing!

Friends and family – even colleagues – are the obvious people you might go to if you want to form a joint venture and invest in real estate, which can come with difficulties. There are three simple rules when investing with people you know to ensure your financial (and physical!) survival. These are:

Have clear goals

Make sure everyone wants the same thing. Competing strategies will only end in disappointment and confusion, so before you decide to enter a joint venture, ensure all parties are on the same page.

Have clean documentation

Once you have agreed on a strategy, write it down, have all parties sign on and file it somewhere safe. Same goes for all of your agreements as to how much money is being invested, who owns what, who’s liable for what and what to do if something unexpected should happen. While written proof doesn’t always solve an issue, having a signed agreement never hurts.

Know your role

Be clear about what yours and everyone else’s role is and respect that position. Everyone must have an understanding of what each role entails and ensure you have the time and money to take your role on without undue stress or anxiety.

9 – CLAIM YOUR INHERITANCE EARLY

It’s not uncommon for parents to help their kids get into a property – even if it’s an investment property.

If they’re willing, your parents can gift you some of your deposit, however remember that lenders want to see that you can save money so part of the deposit needs to come from your savings which have accumulated over a period of time – typically at least three months.

10 – NURTURE A LOVE OF LEARNING 

No matter how long you invest there will always be something new to learn. Adopt an attitude of openness to learning new things and you will be amazed at what will happen.

However, don’t listen to just anyone. Find people who have achieved the success you are seeking and ask them how they made it. You are the average of your five closest peers so start surrounding yourself with people that are already property investing.

People love to share what they know, so take advantage of it and ask questions!

THE RIGHT TEAM KNOWS HOW TO SAVE FOR A HOUSE DEPOSIT 

A list of 10 ways to save for a house deposit is all well and good but we all know how hard it can be to stay motivated and disciplined.

The best way to stay committed is by having the right team to work with you. If you’re seeking a team of experts to help you get on the property ladder fast, then check out our free real estate investing seminars

Come along for this high value two-hour event, ask our property investment experts questions and get to know key people in the industry that can help you streamline your investing strategy and get into the property market quicker.

So, you want to find out how to educate yourself on property investment? Well, you have come to the right place. There are millions of free resources out there that claim to “help you get rich quick,” this is not one of them. In this blog you’ll find out exactly how to learn property investment, as well as the best ways to actually get started.

Real estate is a fantastic wealth creation vehicle if you’re wanting to create lasting long-term wealth. To become a part of the 1% that succeed in this industry you have to exhibit patience and persistence. If it was easy, everyone would be doing it.

With a commitment to learn property investment and all its ins and outs you’ll be able to grow a booming property portfolio, enjoy passive income streams and eventually create financial security for retirement.

Here’s a list of how you can get started:

GO TO OPEN HOMES

Creating wealth through property investment is 100% a numbers game. We all know this in theory but it rarely gets put into practice when people start investing in property.

Here’s a challenge – go to an open home and see how many people will be buying real estate based on an emotional decision. You’ll hear weird comments like, “It’s got a lovely kitchen,” or, “This master will get great afternoon sun”.

These comments are purely emotional and often people end up over spending due to buying with their heart not their head!

You need to ensure you’re making decisions based on the numbers, and the economic returns of the property. Once you’ve eavesdropped on the conversations of emotional buyers, you’ll have a better understanding of how NOT to approach real estate.

UNDERSTAND HOW THE NUMBERS WORK

Buying real estate based on the numbers, or a strategy, is a far better way of looking at the market. There are four strategies behind buying a winning property.

It takes endurance and commitment to create a deal that “stacks up”. Most real estate is sold to illiterate buyers who are impatient and consider themselves too time-poor to show persistence and conduct proper due diligence. These four simple strategies are a great place to start learning about property investment.

1: Return on deposit 

Cash on cash is a term all investors should acquaint themselves with when they analyse a deal. The return on deposit percentage gives you the most accurate indicator of how fast you can do this. Here, your goal is to ensure your capital is in and out of the market within two years at the latest.

For example, if you were to put $30,000 in the market, accumulate the asset and achieve growth over 12 months to gain a further $30,000, this is considered to be a 100 percent cash on cash return.

2: Property finance 

Understanding what the typical finance requirements are in an area is critical. Mortgage insurers and banks have classifications for various areas in the property market regarding how risky they believe it to be. If a particular market is very flat or does not look desirable the bank may ask you to put more skin in the game to protect themselves.

Properties can often look wonderful until you consider how much capital is required as a deposit. You need to run feasibility on lending when you are buying.

3: Market value 

To determine the sale-price range of properties in a particular area, it’s best to organise them by price.

This will identify the lowest priced property compared to others in the suburb which establishes a guide for how much discount to seek or when to walk away. If a property is priced well below others in the area, asking for a discount is not necessary. The best thing to do is snap it up! Money will be made “on the way in” due to good research and knowledge of the market.

4: The returns 

Running the numbers before purchasing a property is of huge importance. A property could look great on the surface, but until you measure the rental return, the outgoings and associated costs, you won’t know how much the true cost is per week.

As a rule of thumb, no more than 30% of the property income should be lost to expenses and rent should be no lower than four percent return.

LISTEN TO PODCASTS 

Podcasts aren’t only good entertainment, but also great education. They are a fantastic way to integrate productivity into mindless tasks such as cleaning or exercising.

Nowadays podcasts are very accessible. They are a way for the common person to communicate their expertise to the masses without the use of mainstream media. What this means for you is that you have access to experts from millions of industries, usually for free.

There are thousands of podcasts that will help you to educate yourself on property investment. Ideally, as an investor in Australia you want to seek Aussie-based shows. Here are two of our faves:

The Wealth Faculty Podcast 

TRC-Gorod Founder and Chief Education Officer, Jason Whitton hosts a ground-breaking and inspiring podcast series about the true meaning of wealth. Jason interviews world-renowned leaders who have achieved extraordinary levels of abundance. Some of whom are the very experts and advisors that have impacted and contributed to Jason’s success as a property investor and coach.

The Urban Property Investor Podcast

Sam Saggers – TRC-Gorod CEO, hosts the UPI podcast where he brings together the latest news, strategies and ideas to help grow your personal wealth from investing in real estate. With a major premise to help you join the 1% of people who achieve financial independence, Sam advocates ways to replace your income, invest in property and retire rich using trends that form part of the urban landscape. The podcast uncovers the answers to the critical “what” “why” “where” and “how” of investment using behavioural economic insights into how everyone can prosper in the cities of tomorrow as investors of today.

READ BOOKS 

It can be tough cutting through the clutter to find the property investment strategies and tips that are right for you. Books are a great source of education when it comes to learning more about property investment. The problem is, some books are good, some are outdated and many give advice that doesn’t work for real estate investors in Australia.

Well you’re in luck because Sam has authored three books on property investment that will get you set up for investing in the real estate industry in Australia.

Property success in 7 lessons – the safe way to fast track big $

This is the book for first-time investors. The most important first step for novice investors is to change your mindset, so in Property Success in 7 Lessons Sam begins by dispelling some of the property myths that often hold people back. He then focuses on the basics, such as setting challenging yet realistic goals, saving more and spending less, and understanding the market.

Developing the right mindset is only the first step; to fast track your wealth, you also need a plan and the right tools, which is why part II of this book is about putting everything into practice.

The future of property investing in Australia

A timely read, first published in 2017, this book sets out to explore the rapidly changing Australian property market and explains how property investors can capitalise on emerging trends. Whether you’re just starting out or buying your fiftieth property, this book will change the way you look at real estate. With a sensible and easy-to-follow approach, Sam gives you a proven path for your property investment journey. This is your ultimate guide to cracking the code for what type of property makes a great investment and what properties you should avoid. There are no excuses with this one, because it’s FREE.

The money magnets of property investing

The latest addition to Sam’s writing repertoire; in this book he advocates ways to replace your income, invest in real estate and retire rich. This book is about investing beyond 2020 and tackles ways to bulletproof your investment plan.

TAKE ACTION 

It is very common for investors starting out to experience ‘analysis paralysis’ which is when you over analyse and overthink all the information you’ve consumed to the point where you cannot take action. Listening to podcasts and reading books is all well and good but the best teacher is experience.

Once you’ve got a basic understanding on property investment it’s time to bite the bullet and get into the market. Learning through your own personal journey will be the quickest and easiest way for you to understand what works for you.

This is because everyone’s journey is different and therefore your strategy needs to be customised to suit your needs. Here are four powerful lessons to help you take action today:

1. Stop waiting until the time is right

If you are waiting for the ‘right’ time you will be waiting forever. There will always be something that is not right or could be better. The best thing you can do is take action now and make adjustments as you move along.

2. Stop, get up, and do it

Turn yourself into a doer. A doer is someone who has an idea and moves forward with it immediately. When you pause and wait, you lose the will to move forward and allow doubt to creep into your mind.

3. Take continuous action

Once you get started, continue to take continuous action. It is often mistaken that motivation is a prerequisite for action taking, however motivation actually comes from taking action. The more you do it, the more your confidence will build to keep going.

4. Focus on the present

There is an old Chinese Proverb that says, “The best time to plant a tree was 20 years ago. The second best time is now.” Yes, if we had planted those seeds 20 years ago we would have a lush and vibrant forest to provide us with shade. But if we do not plant that tree now, 20 years in the future we will still be standing in the sun. Focus on what you can do in the present.

ASK THE EXPERTS AND ATTEND INVESTMENT WORKSHOPS 

Good property investors are nimble and adapt fast. They stay informed and enrol a team of experts to help them excel. The TRC-Gorod 6 star team is who you need to create wealth through real estate. The 6 star team includes;

1. Mentor, coach, investor or advisor
2. Lending specialist
3. Property deals team
4. Property management
5. Accountant
6. Financial planner

You’re the average of your five closest peers so it’s about time you start mixing and mingling with the elite of the real estate industry if you want to learn about property investment. The 6 star team at TRC-Gorod are real world investors and qualified experts who stay up to date with the news and market changes, and implement real-life strategies for long term investment and financial sustainability.

With all the support you need to retire rich under one roof, a great place to start educating yourself is with our free masterclass. This is a high value two hour event that will show you how to reach the next level in any type of market conditions.

KNOWING WHERE TO LEARN PROPERTY INVESTMENT IS THE FIRST STEP 

Now that you have a wealth of resources at your fingertips it’s time to start learning about property investment. But remember, knowledge is only potential power. It’s now up to you to take all these learnings and put them into practice.

Starting your real estate journey can be overwhelming and stressful and the key factor that successful investors do is they get support and they stay relevant. Without a good team behind you to guide the way, it can be incredibly overwhelming to own property!

If you resonate with that at all, come along to one of our FREE property investing masterclasses. Our coaches and mentors have real life experience as investors and give you the tools, resources and knowledge to help move you through each phase of the investing cycle.

Register now for the free property investor webinar

Real estate is the perfect asset structure for wealth building, but it has to be done right – and that means having solid money management skills to back you as you make these major financial decisions. 

Some of these skills may seem obvious – like having a budget – but you’d be surprised how many young investors didn’t get to build this foundation of knowledge through their school or home life. 

You see the idea of having wealth is still very much stigmatised in Australian society, especially in the middle class. And yet who can truly say that life wouldn’t be easier if you knew you and your family were set up nicely to live the lifestyle you truly desire?

HOW TO BUILD YOUR WEALTH

Outside of having terrific money management skills, there are three basic principles to building wealth: Understanding money buckets, learning what grows your wealth vehicle, and knowing your number.

Understanding money buckets 

Money buckets are basically the means of how you grow and accumulate wealth. 

The issue we have in Australia is that a lot of people only have one money bucket, and in there they only put one thing – their wages.

Now we know that wages alone can’t create great wealth. Even if you earn a huge salary, it’s pretty rare that someone has ever ‘saved themselves wealthy’. That’s why we need to have other buckets filled with strategies or assets that accumulate wealth too. 

This could include:

Superannuation: Money we set aside that accumulates money with very little effort from us. The more contributions we make, the more money we make.

Tax: Most Australians pay too much tax and don’t apply for the deductions they’re eligible for. Good money management skills will ensure you get the most out of tax to top up your bucket.

Side hustles: Creating a second income, or side-hustle, is another potential income that will help you accumulate extra wealth. 

Shares: With good financial advice you can buy shares and get a nice dividend at the end of the year. 

BUT what will be your biggest bucket of all? Cmon, it’s real estate!

Learning what grows your wealth vehicle 

Let’s be clear, the vehicle you use to create wealth doesn’t have to be property. It could be shares, businesses – whatever you feel you have the money management skills to do well at.

If you’re here it’s likely you’re either already in the property game or looking to invest, in which case you need to understand what drives it to grow. Once you know that, you will know where and when to invest.

With property, there are six market drivers that grow its value:

• Population growth
• Infrastructure growth
• Supply vs demand
• Economics
• Demographics
• Yield

Basically if you can see population growth in an area where infrastructure is improving and expanding, where you know that people are going to want to live, then that’s a good place to invest.

Get to know what influences and grows your wealth vehicle. By doing this you will make investment decisions based on education and knowledge, not emotions and impulses.

Knowing your number

While most Aussies agree they want to retire comfortably, very few actually work out how much money they’ll need each month to reach that. 

The biggest mistake you can make is believing your super and pension will be enough to live the lifestyle you want. The pension number for a couple today is $36,000 per annum, while the average super balance at retirement is $128,000 if you’re male and $73,000 if you’re female. 

It doesn’t even take an expert to tell us that no-one is living the high life off those numbers.

Nail down how much income you need every month to live the life you want. Once you find that figure you can then start working towards achieving it.

Of course, in order to get there, you’re also going to need the best money management skills to keep you on the right path. 

10 WEALTH MANAGEMENT SKILLS YOU MUST HAVE

1. Say goodbye to instant gratification

Building more wealth is a long term game. Whether you’re buying an investment property or investing in shares it takes real time to grow assets.

A typical real estate cycle lasts anywhere from 10 to 15 years, and yet 99% of people fail in real estate in the first six years – less than a full market cycle! Why?

Well one of the reasons is they expect instant capital growth and strong rental returns, and when they don’t get that gratification they simply give up.

2. Know the difference between a need and want

Do you really need to buy a brand new $50,000 car – or do you want it? 

If you want to know how to build your wealth you should start with a little self reflection. The lifestyle you’re working towards through property investing is within reach as long as you’re not trying to live it too early on an income that can’t afford it. 

Don’t rob your own future by buying everything you want now. Focus on your wealth building plan and honing those money management skills.

3. Learn to automate your savings and investing

Having the right structure for your finances is crucial. One thing that can help keep you on top of your savings and investing is having automated systems in place so you don’t have to worry about moving your money around manually every week, fortnight or month. 

Money sitting in the bank these days is wasted. When putting together your finance plan ensure you’re directing the savings portion of your income in areas where that money will work harder for you like your buffer or offset account.

4. Understand the cost of debt and ownership

When it comes to real estate you have to consider more than just whether or not you can afford a monthly payment. Good money management skills means ensuring you figure out the entire cost of ownership before making a decision.

For instance, if you’re buying an investment property that is geared negatively, are the tax savings you’ll receive more beneficial to your financial situation and your goals than a neutral or positively geared property?

Remember there are a lot of costs you might not have thought about with property ownership such as legal fees, council rates and insurance. Here is a comprehensive guide on the financial commitments to investing in real estate.

5. Set goals

Every decision you make in your property investing journey will fall in line with your strategy. And your strategy? Well that’s based on your goals. So if you haven’t clarified what you want yet, how will you know when you’ve achieved it?

One popular goal setting strategy we use with our clients is the S.M.A.R.T. method, which is designed to help them narrow down what they want and what it will take to achieve their desires.

For example: “I will buy a second investment property by December 31, 2022, and I will negotiate the purchase price to be at least 10% below the fair market value.”

6. Learn to live within your means

One of the best and oldest money management skills is knowing how to budget. In fact, it’s not just knowing how to budget, but having the willpower to stick to it.

When creating a spending plan don’t set yourself up for failure. Consider your financial capacity, what your other life commitments are, and what you still want to enjoy on a regular basis. 

However, don’t forget the basic key of budgeting is to spend less than you earn, so if you need to cut out unnecessary spending in order to build your wealth – do it. 

Here’s another great blog on the five budgeting mistakes you might be making.

7. Be willing to make short-term sacrifices

Often life is about trade-offs. You have to be willing to give up something you want now – like that annual holiday overseas – for something better in the future.

An easy principle to work off? If you want an easy life later, work hard in the beginning. If you want a hard life later, take it easy in the beginning.

8. Seek out the experts

Even with the best money management skills you can’t build wealth alone. A lot of the time you’ll need the help of experts who can guide you through certain decisions and processes. 

In fact, you’ll need help from at least six experts – your six star team – if you want to make it through this long real estate investing journey. Learn more about that here!

Don’t forget, there’s no shame in asking for help when you need it.

9. Remove the bias

Don’t make assumptions about real estate before you look into it further.

Should you buy the new investment property or the older one? Well, ask a seasoned property investor and they’ll tell you that it depends on a lot of factors – your financial situation, your goals, the suburb’s postcode…

There are a lot of things to consider when managing your money and building your wealth and each of them will impact the success of your investing. Just don’t let bias around certain properties or locations push you to make poor money decisions.

10. Take advantage of opportunities

PAYG variations, negative gearing, renting out your principal residence – there are a number of tools and strategies you can use to grow your wealth.

Once you get your money management skills down pat, you’ll open yourself up to a lot more opportunities to get you one step closer to your ultimate goal. 

HONING YOUR MONEY MANAGEMENT SKILLS IS JUST THE FIRST STEP

Now that you know the money management skills you need to succeed as a property investor the real education can begin! 

Having the know-how around finances is just one piece of a much bigger puzzle. Building wealth through real estate takes a lot of planning and a core understanding of how markets work. Without a good team behind you to guide the way, it can be incredibly overwhelming to own property!

If you resonate with that at all, come along to one of our FREE property investing masterclasses. Our coaches and mentors have real life experience as investors and give you the tools, resources and knowledge to help move you through each phase of the investing cycle. 

Register now to join the next masterclass near you.

Tax isn’t often one of those conversations that give investors the warm fuzzies, especially when we’re talking about the 10 property investment tax mistakes to avoid!

But it’s important that property investors reframe their thoughts around tax. Owning real estate can actually be incredibly tax effective – in fact some might say tax is a secret weapon for property investing. 

You see, as investors there are a lot of things we can’t fully control – the market, interest rates, and yields to name a few. But one thing we can control? What we claim on our taxes. 

HOW TO CLAIM INVESTMENT PROPERTY LOSSES ON TAXES

The ATO provides a tonne of information about the rental expenses you can claim and how. 

Of course, if you really want to make sure you’re putting in place systems that shield you from the tax mistakes to avoid, then there are two major things you need – a depreciation schedule, and a complete record of your expenses.

Both documents will not only maximise your return at tax time but also make the entire process as efficient as possible.

Depreciation schedule 

A depreciation schedule is the holy grail when it comes to tracking your deductions. It’s basically a document that lists out item-by-item every single thing in your property. 

If you’re in an apartment or townhouse complex too, this can also include common areas that you have a share in like a BBQ area or a pool.

Take note though, this is not just something that your accountant can whip up or take a guess at. You need a professional business to organise a proper document for you. Don’t skimp on this because a) every cent counts, and b) the service is tax deductible anyway!

Records of every expense

One of the biggest tax mistakes to avoid is not having all of your paperwork together for the expenses you’ve incurred for the year. Every. Single. Expense. 

The one investors miss out on the most is when they haven’t structured their loans properly and therefore don’t have the correct splits, redraws, information and accounts for money that they’ve been using out of their offset when it comes to expenses paid. 

If you’ve used money out of your redraw facility to cover any property costs then you have to be able to show a receipt for it. The aim is to be able to claim that cash back again as soon as the financial year is over.

THE 10 PROPERTY INVESTMENT TAX MISTAKES TO AVOID

It’s unfortunate that so many property investors either leave thousands of dollars on the table that could have been used to grow their portfolios, or they make wrongful claims from a misunderstanding of tax deductions. 

It’s no secret tax is tricky to navigate. So even though the Australian Taxation Office (ATO) has their own list of tax mistakes investors often make, we’ve compiled the most common ones that you need to know about.

1. You’re not claiming enough

You’d be surprised at just what the ATO allows you to claim.

Installed new smoke alarms or security systems lately? What about garbage bins?

Fixtures and fittings valued at less than $300 can be claimed within the first financial year. Others may be claimed over a number of years.

Just to give you an idea…

Under the plant and equipment depreciation category, there are more than 6,000 different 

depreciable assets recognised by the ATO, including items like carpet, blinds, air conditioners, hot water systems, and ceiling fans. Each plant and equipment asset is assigned an individual effective life and depreciation rate.

2. You think your property is too old

Just because you have an older investment property it doesn’t necessarily mean there’s no depreciation in it left to claim.

Yes, your investment property must have been built after 1987 to claim capital credits for structural elements (e.g. ceilings, floors, walls, etc.), but it’s still possible to claim deductions for renovations completed after 1987, even if they were done by a prior owner.

If you’ve added new plant and equipment assets like stoves and carpets, then these are deductible and should definitely be claimed.

3. You miss deductions after renovations

Any items that have been scrapped after renovating, as well as the items that are replaced, can be deducted.

For example, if you discard tile and replace it with new tile or hardwood, the value of both the new and the old can be deducted.

4. You think that once a return is lodged it’s done

For property investors there’s a lot to consider when compiling your tax information so it doesn’t hurt to have another look once you’ve filed.

If you do look back and realise you forgot to claim something, don’t automatically think it’s too late to correct the mistake. The ATO allows you two years to submit an amendment on your tax return which starts from the day after your notice of assessment is sent to you, so this is definitely one of the easier tax mistakes to avoid.

5. You’re claiming the purchase cost of the land in a construction investment

Improvements to the land, including structural improvements are deductible but not the cost of the land purchase itself.

6. You’re claiming false costs

If you’re the kind of landlord who has the skills or know-how to DIY certain jobs, then it’s fair enough that you’ll probably undertake some of the maintenance or installation jobs yourself relating to your investment property.

While it’s beneficial that you can save a lot of money this way, the fact is that your time and effort are not allowable deductions because you didn’t actually incur a cost.

So, while the materials you purchased to complete the job are tax deductible, your physical labour is not.

7. You’re trying to claim personal interest

In terms of tax mistakes to avoid, this one’s a biggie. 

If you’ve taken out a home loan to buy both an investment property and a new car, you’re not allowed to claim a deduction for interest paid on the personal part of the loan i.e. the part that covers the car. 

This loan structure is actually a big red flag for the ATO when auditing, which is why we always suggest keeping your investment property loans separate from your personal ones.

8. You’re trying to claim extra travel expenses

While you might be able to claim travel costs while visiting your investment property, it’s not possible to claim that travel in connection with a personal vacation.

In other words, only the costs incurred that are directly related to visiting your investment property are deductible.

9. You’re doing the dodgy when allocating rental expenses

If you have a part-time rental (e.g. a holiday home that you also use yourself) you cannot 

claim deductions for the proportion of expenses that relate to your private use. You also can’t claim times if it was not genuinely available for rent, such as when used or reserved for friends or family.

If your holiday home is rented out to family, relatives or friends below market rates, your deductions for that period are limited to the amount of rent received.

10. You’re struggling with tax return preparation

Understanding tax structure can be complex. There are so many possible deductions (and a lot of tax mistakes to avoid) especially for property investors.

You shouldn’t miss out on potential gains that can be used elsewhere towards building your wealth just because you don’t have a mind full of knowledge on tax exemptions and the law. 

That’s why you need to work with a tax professional who is ideally a property investor themselves, and well-versed in the regulations surrounding real estate investments so that you can be sure you’re claiming everything you’re entitled to.

YOU’VE CLAIMED ALL YOUR TAX BACK…NOW WHAT?

Congratulations, you avoided those tax mistakes and now have some money back in your pocket to spend as you please!

Well, I wouldn’t take that a sign to pat yourself on the back for all your hard work and start buying things unnecessarily. In fact, if you’re a smart real estate investor, you’ll learn how to use that tax to actually pay for your properties. 

The other option is to use it to reduce the amount left on your loan – but I don’t just mean using it to make an extra payment. 

No, put it in your offset account and reduce your interest payable. Think about it, if you get $5,000 back every year in tax, after 10 years your offset account has built up to $50,000! 

Not only is that significantly less interest you’ve been paying, but when you’re ready you can then use that amount to either get more capital in the market or renovate one of your existing assets to create more value. 

THE RIGHT TEAM KNOWS THE TAX MISTAKES TO AVOID

A list of 10 property investment tax mistakes to avoid is all well and good but we all know how hard it can be to stay on top of all the facets of property investing, particularly in those early stages.

The best way to make tax time seamless is by having the right team to work with you. If you’re new to property investing and haven’t found that support system yet, the best place to start is at one of our free real estate investing seminars.

Come along for this high value two-hour event, ask questions to our experts and get to know key people in the industry that can help you streamline your investing strategy so that your money works better for you.

Register now to join the next seminar near you.

Have you decided to take the property investment journey but are feeling clueless as to how to actually board the train? We’re going to give you our top five tips for buying an investment property in 2022 to help point you in the right direction!

But first…

WHAT TO LOOK FOR WHEN BUYING AN INVESTMENT PROPERTY

We know there are a few different market drivers that impact investment properties, such as economics, supply and demand, and rental yields – but the one we want to focus on today that is particularly influential is infrastructure growth.

Investment in infrastructure stands out because it reveals where money is spent, where jobs are getting created and of course where property values will likely increase. 

If you’re trying to determine if the property you have your eye on will be a success, ask yourself these four questions:

1. What is the current investing climate?

What does the market look like? Are local investors buying in the area and how long is it taking for properties to sell?

2. Are incomes increasing?

Look for the percentages of individuals who are in high paying growth industries such as medical or tech – then look at property prices. 

Can their salaries support the rents as they are now? Could they afford them after any increases?

3. Could a ripple effect take place?

Are nearby suburbs undergoing change that is influencing – or soon will be influencing – the suburb you’re looking at?

4. What kind of demographic lives in the area?

Age, profession, marital status…all of these demographic factors play a part in what type of properties will do well in a certain area.

Once you know what the demographic is, you can figure out what it is they want such as good schools, or good public transport.

WHERE TO BUY PROPERTY IN AUSTRALIA

Right, so we’ve already alluded to the significance location has on your success when buying an investment property.

The importance of location is simple – you can do what you want with your real estate, but you can never change the area it’s in. That’s why we need to be smart about where we invest. Here are three things to consider when looking at markets and locations:

1. Go where the wealthy go

Have you heard of the Four X Growth plan? It’s an awesome strategy used by TRC-Gorod CEO Sam Saggers, where you aim to choose assets that will go through four types of growth – deal growth, location growth, market growth and behavioural growth. 

Location growth comes about through gentrification. Gentrification is the process of an area’s economics going up as more wealthier people move into the neighbourhood. This stimulates growth as they bring with them new money, subsequently attracting more housing, business and infrastructure. 

The idea behind it is that wealthy people live where they want to live and they’re willing to pay more for locations that provide proximity, mobility and liveability. So, if you follow the activity of well-off owner-occupiers, you’ll know which areas are valuable for buying an investment property.

Here’s a great explanation on all six stages of gentrification and how to spot the process happening early.

2. Look at how behaviours may change in the area

Locations that create positive or desirable behaviours are worth their weight in gold. 

Planned infrastructure or local projects will tell you exactly how that property may be used differently in the future, whether its new bike paths being put in that connect your real estate to the main shopping centre of that district, or an older apartment building getting a new accessible rooftop space.

Keeping up to date with town planning is a great way to know how councils plan to grow areas and foster certain behaviours. 

Also doing your research around a city’s economy and how they’re planning to attract a bigger population is key. Sam shares his thoughts on why Brisbane is one of the best places for buying an investment property right now.

3. Let go of preconceived ideas on location

Too often quality real estate gets overlooked because investors have preconceived notions about those locations. 

For instance, people might not bother to look in Sydney anymore because the values have grown tenfold in certain areas – but that doesn’t mean there aren’t any good properties left in Sydney that are within your price range and poised for gentrification. 

You also don’t want to get the idea in your head that you should only invest in locations near you or that you’re familiar with personally. That’s what your property strategist and coach is for! They’ll not only help narrow down your search to a handful of potential locations, they’ll also reach out to local agents in those areas to get a better feel of the rental returns and demographic. 

FIVE TIPS FOR BUYING AN INVESTMENT PROPERTY

1. Location is everything

Come on, if you’ve got this far you already know this! Even when there’s a lack of good supply, don’t let that push you to buying up in the wrong areas. 

A quality location should have strong rent-to-income ratios where typical tenants have the cash to also cover a rental increase. 

On top of everything we’ve already mentioned about location, look for neighbourhoods that have more of a live, work, play dynamic. These are areas where everything you need or want (entertainment, food precincts, culture, wellness and natural amenities) can be reached within 20 minutes of your property.

2. You need MULTIPLE strategies to succeed

Buying an investment property is a 15 to 20 year-long commitment, so it’s silly to think that you can make it through without having multiple strategies in place.

That’s right, multiple strategies. Seven in fact! You’re going to need:

• A finance strategy – how will you maximise your buying power and improve your serviceability as you go on?
• A growth strategy – the foundation of your property portfolio will likely rely on capital growth to keep acquiring assets
• A property management strategy – how will you manage and maintain your investments?
• A debt reduction strategy – once you’ve acquired as many properties as you set out for, how will you now start paying down those debts?
• A tax minimisation strategy – ensuring you’re paying the least amount of tax as possible on your assets
• A financial strategy – not to be confused with a finance strategy, how will your acquired wealth be managed through retirement?
• An acceleration strategy – how will you use any equity you haven’t tapped to accelerate your wealth?

Of course, it’s not expected that you’ll come up with these all on your own. Strategising is where you need your six star team to step in and help – starting with an awesome property coach or mentor.

3. Think about the quality of your tenant

Finding the best tenants has always been a concern when buying an investment property, even more so since the pandemic made it very clear just how many renters are one paycheck away from being broke. 

An ideal tenant should have enough cash to their name that they won’t need rent relief if a major interference happens. This isn’t to say they all need to be in jobs that pay over $80,000 a year, just that they have enough extra cash flow to take on increases with ease.

Considering the lack of wage growth across Australia, this means having your property manager do a little more due diligence to ensure the tenants they choose are reliable, skilled and working within in-demand industries.

4. Invest in the visual experience

There are too many people out there focusing only on analysing markets and crunching the numbers when it comes to buying an investment property.

But guess who doesn’t give two hoots about the data? Renters and home-buyers! What they do care about is the feel and the visual experience a home provides. 

There are three design traits that your property needs in order to appeal to the top tier demographics:

• Functional design: Think effortless floor plans that maximise space and emphasise the flow of liveability.
• Reflective design: The cosmetic side of real estate – think nice hardwood flooring, feature panelled cabinetry, exposed stone or brick, high end fittings and fixtures, and a spacious kitchen with a feature splashback. 
• Behavioural design: A feature that will change a behaviour in someone’s life – think an outdoor breakfast bar or a pool.

For a much better deep dive into each design aspect have a read of this blog: The psychology of what makes a home desirable.

5. Get rid of any bad debt first

Bad debt is not something you want to have hanging around your neck when it comes time to borrow money. 

If you currently have credit cards, personal loans, car loans, or any other kind of consumer debt to your name then you’re not helping your financial standing with lenders. 

Remember this includes your own home – your Personal Place of Residence – which offers no tax benefits unlike buying an investment property which we consider to be good debt. 

To improve your borrowing power, focus on paying down as much bad debt as you can so that you free up that cash flow for more properties. If it’s your own home standing in the way, then it may be worth considering moving out and renting somewhere cheaper for a while.

THE BEST ADVICE YOU’LL EVER GET…

It’s all well and good for us to share our tried and tested tips for buying an investment property, but without the right guidance to implement them you might find yourself just as stuck as you were before!

The truth is you won’t succeed as a property investor unless you have the right team around you. We run free real estate investing seminars designed to help you build strong foundations for your property portfolio – including how to choose the best people to help you. 

Learn where the best markets are to start your investing journey and begin creating the financially free life you’ve always dreamed of. 

Register now to join the next seminar near you.