Tax, tax, tax – most of us shudder at the sound of it, despite it being an inevitable part of life. However, there are ways to reduce how much tax you actually pay in order to keep more cash in your pocket – the golden word – property investment. 

You see, owning real estate in Australia can be very tax effective. 

Before we go too far, I want to make it clear I’m not promoting negative gearing as an investment principle by itself. Any potential tax deductions are simply a bonus of owning property. Without the assurance of significant capital growth, buying a piece of real estate to deliberately lose money simply to get tax deductions, is not clever. 

OPTIMISE YOUR TAX DEDUCTIONS

I see deductions as a fringe benefit, not a fundamental principle. For providing property to the rental market, the Australian Taxation Office gives property investors a tax deduction. 

Real estate is a fantastic wealth-creation vehicle because there are two portions to it – the land and the building. While one goes up in value, the other goes down. 

So, when the building goes down in value and creates a paper loss, not only does it take no money out of anybody’s bank account, but the owner gets to claim that loss as a deduction. It means investors don’t have to lose money or have a negative cash-flow to get massive tax deductions. 

MAKING SENSE OF TAX

So, let me talk about tax first and put it in a way that will make more sense. 

You go to work a certain number of days a week for a certain number of hours, exchanging your time for money. It’s a system that’s been around for eons and is the quickest way to make money although you shouldn’t get stuck in that process if you want to build wealth. 

PROFITS ARE BETTER THAN WAGES

Of course, I don’t encourage anyone to quit their job until they actually are wealthy. It is hard to become a property investor with no income because nobody will lend you money. 

The trouble with the system is that when you break it down into its separate days, you’ll discover that every hour of work on both Monday and Tuesday – and, for some people, Wednesday as well – have benefited nobody but the tax man. 

You don’t get a cent of it. 

REDUCE THE AMOUNT OF TAX YOU PAY!

So, here’s the thing you need to know. If you have an income, PAYG, or are in business, the law states that as an investor you have the right to claim losses as tax deductions and reduce your tax legally when you invest in property. 

If the average Australian bought between three and five properties – the newer the better and the higher cash-flow the better – they could legally claim back 78 per cent of their tax for providing rental housing to the market. 

To put it more simply, the average Australian could actually claim back the money they earn on Monday, Tuesday and Wednesday. Even more simply: they can stop working for free! 

MANAGE YOUR TAX SMARTLY

The tax system was created by wealthy people to be manipulated by rich people. However, the rules apply to everyone. 

There is indeed cash-flow to be gained from the tax system. The current system is a daily mugging for those who look at it as controversial and dismiss it. 

The masses are ignorant to the benefits of such cash-flow advantages of property. Unsubscribe to this school of thought or you will suffer tax prejudice forever. 

DEVELOP YOUR TAX REDUCTION PLAN 

As you’re now aware, there are many ways that owning an investment property can minimise the amount of tax you are liable to pay. 

For a kick-ass investment plan that includes the right buying techniques, tax reduction and everything in between, join us for a free property investing seminar.

Our team runs these free real estate workshops to help investors build a well-rounded portfolio. Learn the secret language of property investment that will generate passive income for years to come. 

REGISTER FOR THE FREE PROPERTY INVESTOR WEBINAR

By Sam Saggers

Shocking Factors That Could Affect Your Investment Wealth

Predicting what could affect our investment wealth, and where the smart buying opportunities exist, is getting more complicated.

A 2020 news article suggested that Australian home owners could face millions of dollars in losses if their homes are affected by sea damage or coastal erosion due to the fact that most major insurance companies will not insure properties against environmental damage.

Considering that all major Australian cities are coastal, and most of the richest neighbourhoods are beachside, the growing threat of severe weather incidents due to global warming throws a serious spanner in the works when considering where to buy and invest.

If you’re a climate change sceptic, we’re not here to judge. But that position isn’t going to help you if the institutions you rely on to protect your assets won’t have a bar of your $3 million beachfront house.

While you can’t single-handedly stop climate change, you can gain a greater understanding of the other factors at play in what can affect your property investment wealth in both positive and negative ways.

INDUSTRY

Areas that are rich in industry is one good indicator that capital growth will happen. This is especially important to investigate if you’re looking at regional towns. While you may get more for your money than in a major city, will the area continue to thrive and survive? Does it have more than one industry that will attract jobs and people? While some regional towns are more like ghost towns now, others, such as Mudgee in NSW, are thriving. The tourism, mining, agriculture and wine industries that exist there are sustaining the region and allowing it to grow. Do your due diligence and make sure you know the region you’re buying into has a future.

INFRASTRUCTURE 

Infrastructure investment and development is another key influence in property investment wealth. If billions of dollars are being poured into local schools, transport and hospitals, the region will be supported by employment opportunities. The more people who come to work, the more homes will be in demand, and so the rent rates rise. 

LIVE, WORK, PLAY

One of the effects of COVID-19 has been an acceleration in the pre-existing shift of more people wanting to live, work and play within a 20-minute radius. Suburbs adjacent to CBD’s, with easy access to exciting social activities and green space, offer the renter or buyer much more than just a dwelling.  

The Third Space – the area close to your home that gives you a lifestyle you crave – is a significant factor on what will continue to grow investment wealth. Check out the walk score of a neighbourhood, investigate the health and well-being benefits of the community and find out if people are starting to see the area as a “place economy”. If people want to be seen and live there, property prices and rent rates will rise.

INSTITUTIONAL DUE DILLIGENCE 

Lastly and most importantly, make sure you fully understand your level of coverage and vulnerability risk.  

The institutions that support us as property investors by underwriting and protecting our assets are a vital part of our ongoing success and wealth creation. We need them on our side. 

Minimise your risks by doing your due diligence and making sure you can get the right protection for a property before you purchase it. 

SAFETY FIRST

Setting your property portfolio up for success from the get-go is a crucial factor of safe investing. With so much money on the line you need to ensure you have the knowledge and a strong strategy in place that supports your long term financial goals. 

To learn more about how you can do this, join our free property investing seminar and make sure you have the key fundamentals in place to achieve prosperity and wealth. Afterall, no one becomes an investor to stay stagnant or lose money. 

Limited spots are available. Book here now. 

Deciding on the right loan structure as a property investor, is a little bit like choosing the right outfit on a first date. It depends on what stage of life you’re at!

If you’re new to the game, something a little daring might work best. Later on, you might want to play it safe.

It’s the same for property investment and the stage you’re at reflecting how risky or safe your loan structure needs to be.

Here we weigh up the pros and cons of principle and interest loans vs interest only loans for property investors.

UNDERSTANDING DIFFERENT TYPES OF DEBT

Any type of loan is a type of debt. Debt can make people nervous. If you want to be successful as a property investor it’s important you know the difference between good or rich debt, and bad or poor debt.  

Poor or bad debt, is just that – BAD! 

Bad debt is borrowing money from a lender to buy something that immediately loses value and has no prospect of earning you an income. 

Bad debt is spent on things like new cars, jet skis, motorbikes, furniture. Expensive to buy, these items lose value as soon as you make the purchase. They never resell for more, or even the same, as what you paid, and it’s impossible to generate an income you can live on from them.

Rich debt is using other people’s money (usually the bank’s) to buy an asset. An asset puts money in your pocket. An investment property puts money in your pocket via rent. As an asset, an investment property has an added bonus in that it also benefits you with some tax effectiveness and efficiency that can also put money in your pocket. A jet ski doesn’t do that!

As a property investor you need to get comfortable with debt. There is nothing wrong with debt as long as it’s rich debt and not poor debt. You just need to know the difference.

WHEN INTEREST-ONLY LOANS ARE THE RIGHT CHOICE

During the acquisition phase of your property investor journey, your primary aim is to purchase the right properties, not to pay down your debt. Embracing debt can take a while to get used to, but you need to think about the long game and what you’re trying to achieve, i.e. many properties, all creating wealth.

If you can get an interest-only loan in your acquisition phase, this is 100% what you should do. Why?

Because interest-only loans give you flexibility with cash and that flexibility allow you to move on to the next property faster. Having access to spare cash is vital in your acquisition phase, which can last for years. If you’re paying every last cent you have to pay down your principle, where is the next deposit amount going to come from when you want to buy a second, third or fourth investment property?

If your comfort-zone demands some visible debt reduction – or at least the potential of it – instead of a principle and interest loan, opt for an offset account. 

The advantage of an off-set account is that you can put any extra money into that offset and make extra payments if and when you want, but you retain access to that cash. 

If you opt for a principle and interest loan and you suddenly need money, you have to apply to the bank to redraw that money – and there’s no guarantee they’ll say yes. An off-set account gives you the comfort of seeing some “savings” without losing control of the money.

WHEN A PRINCIPLE AND INTEREST LOAN MAKE SENSE

When you move from your acquisition phase, into your holding phase, and finally into your consolidation phase of property investment, it might be time to change your loan structure.

Unless you have a significant income, it’s hard to pay off debt while borrowing money to buy three or five investment properties. But once you’re happy with your portfolio, a principle and interest loan can help you start to pay down your debt, while still reaping the rewards from your investment incomes.

No matter what style of loan you choose, the most important thing is that you are able to service that loan while achieving your goals. 

LOAN STRATEGY IS FUNDAMENTAL 

Having a long-term plan around your loan strategy will be important to your overall success as an investor. 

Let the experts at TRC-Gorod teach you about how to calculate your loan repayments while you’re still investing at one of our free property investing seminars. 

Sign up for one of our information and education events, where you’ll be equipped with the tools, resources and support to thrive, and not fall behind on your path to financial freedom – whatever that may look like for you. 

Book your spot now and find out what you need to know about the current market landscape and how you can make it work for the ultimate wealth creation opportunities. 

Book here

If you want to know when to sell an investment property, or even if selling an investment property is a good idea, all you have to do is read the rules.

RULE #1 LET YOUR PROPERTY DO ITS JOB

Property investment is not the same as property developing or buying, fixing up and flipping properties. They’re different wealth propositions, so you need to be clear about what being a property investor actually is. Without that knowledge you might be expecting the wrong outcome from your investment properties and be selling when you should be holding.

Investment properties are a way to create passive income, i.e. money in your pocket that you haven’t worked for. The way investment properties create income is through rent incomes and regular increases in rental rates. 

Another way investment properties create wealth for investors is to increase in capital growth. While we may not be able to live off that growth, we can use it by extracting equity out of properties and using that cash to buy another property, thus creating another rental income.

Investment properties also provide investors with various tax deductions, which again while we may not live off, we can reap the benefits of those savings.

In short, if your property isn’t holding you back, if it’s generating passive income and has given you back any deposit amount you paid in at purchase, it’s doing its job. The property is providing you with passive income and asking very little, or anything at all, from you. So hold onto it and leave it alone.

RULE #2 QUIT THE COMPARISON CONCEPT

If you’re a few years into your property investment journey you may have a number of properties. Hopefully you’ve followed some of the other rules of real estate investment and you have properties in various locations, some houses, some apartments. Each property will be working in its own specific way. Perhaps some of the properties have multiple tenants and create more than one income stream. Perhaps some are in place economies and are attracting renters who are willing to pay top dollar just to reside in that post code. 

The rule here is not to compare apples and oranges. A property that is split in two and gives you two incomes, may not be increasing its capital growth as fast as say an apartment in a place economy. But remember rule number one – you need to let each property do its job. Your duplex is creating more than one income stream – huge tick for your cash flow. If it keeps doing that, and you’re able to regularly increase the rental rates, why does it need to double in capital growth as fast as another property? Remember capital growth is a vanity metric. It might be nice to say your property has doubled in value, but you’re not living off that growth, so quit comparing and appreciate what’s working.

RULE #3 THINK BEFORE YOU SELL

Ask yourself why you want to sell. If it’s because you aren’t seeing the capital growth you’d like? Refer to rule two.

If however, you aren’t seeing the rents you want, and are having to top up the mortgage out of your own pocket, you still need to stop and think before you decide to sell.

Ask yourself what is stopping rent increases. Is it something that can be fixed? Would a new kitchen and bathroom, air-con or granny flat in the garden, be the golden ticket to higher rent rates? Ask yourself if you can improve the property’s ability to attract higher rents and weigh the costs of those improvements against the next 15-20 years of rental income.

Buy well, never sell, is a motto successful property investors live by. The costs and tax involved in buying and selling properties can be significant, so selling too fast will eat into any wealth from capital growth you may have seen. 

LEARN THE RULES THEN PLAY THE GAME!

Let the experts at TRC-Gorod teach you about the buying and holding technique of property investment at one of our free property investing seminars. 

Sign up for one of our information and education events, where you’ll be equipped with the tools, resources and support to thrive, and not fall behind on your path to financial freedom – whatever that may look like for you. 

Book your spot now and find out what you need to know about the current market landscape and how you can make it work for the ultimate wealth creation opportunities. 

Book here.

Most of us were raised with the idea that debt is bad. Debt drags you down. Rich people are never in debt.

While that may have been true for our great grandparents, it’s no longer the case. Debt is one of the keys that can unlock future wealth as a property investor. The more good debt you have, the more income you can create. 

But, before you go out and put yourself $1 million in the hole, let’s talk about the right kinds of debt. The debt that’s going to lead to success, not ruin. This is called…

…DEBT LENDING

With real estate you can use your assets to create wealth. In simple terms, you can pull money out of one property in order to buy another. Equally borrowing money from a bank or other financial lender and using that cash to buy a property that is going to give you an income and increase in value over time, is a smart way to use debt to create wealth.

With record-low interest rates up for grabs, now is a great time to borrow money. Cash is cheap, which means borrowing and investing is more accessible to more people. The opportunity to create wealth as investors is in great shape.

But, even with low interest-rates, the banks aren’t just throwing cash around and there are steps you need to take to ensure you can borrow at your maximum amount and then leverage that cash to start building a portfolio.

STEP 1: CLEAN UP YOUR FINANCES

For at least three months before you want to borrow money that you can then use as a deposit, get your finances in shape. That means:

• getting rid of direct debits i.e. any ongoing drain on your finances and;
• cutting out any unnecessary spending

Your ability to borrow, and how much, will depend on how clean your accounts and budget look. Come up with a strategy to reduce your outgoings and get your accounts looking healthy.

STEP 2: THINK ABOUT HOW TO LEVERAGE YOUR LOAN

The point of borrowing for property investment is not about reducing your loan amount as quickly as possible. Let go of the idea that your debt is hurting you, when it’s actually your best friend. 

Consider this. You have $100,000. Do you spend it all on one deposit, or take that cash and split it into two deposit amounts, and buy two properties? Can you leverage your debt to work harder for you and start to create cash flow faster?

If you can divide your deposit into smaller amounts and purchase more properties, your debt will start to create cash flow that much quicker.

STEP 3: GET THE RIGHT LOAN – AND DO YOUR NUMBERS

The difference between an interest-only loan and a principal interest loan is important when we’re trying to make debt work for us, not against us.

The key here is to read the terms, especially when it comes to interest-only loans. While they can be the smartest way to leverage your deposit to it’s maximum, you need to be aware of how your finances will need to adjust when the fixed term comes to an end. 

Part of making debt your friend, not your enemy, is by respecting it and getting to grips with the terms and conditions attached. A smart property investor knows the cost of their interest and how that might affect their debt moving forward. In short – read the small print and pay attention. It’ll pay off. 

DEAREST DEBT…

By now you’re probably aware that good debt can serve as a faithful friend on your journey to create real and lasting wealth. 

The real key though, is ensuring you’re maximising your debt potential with a strong property investment plan that will set you up for long term financial success. To do this there are a lot of moving parts which is why we’re currently running a free property investment seminar. 

Sign up to this extremely valuable event and learn the most crucial elements you need to be across to make sure your debt is working for you not against you. 

This is a great opportunity to be equipped with the tools, resources and support to thrive, and not fall behind on your path to financial freedom – whatever that may look like for you. 

Limited spaces are available. Book here now. 

These 4 tips will help you pay off your mortgage early without straining yourself. 

Paying off your mortgage faster will save you money and take away the financial load sitting on your shoulders. Here are some ways to get rid of your mortgage debt faster.

Switch to Fortnightly Repayments

Like most people, you are probably paying monthly. 

Each year has 26 fortnights. If you cut your monthly payment in half and pay every two weeks, each year you’ll be making the equivalent to 13 months worth of payments. 

This could save you thousands and reduce your mortgage fast. 

Consider An Offset Account

An offset account is like a regular bank savings/transactional account. The difference is that it is linked to your mortgage. The balance held in the offset account reduces the amount you owe on your mortgage. This results in a reduction of the interest you pay and will help pay off your mortgage faster. 

Reduce Your Interest Rate

To do this, the first step is to compare your current home loan to see if there are cheaper options in the market. This comparison must be a ‘like-for-like’ comparison. So you must compare a loan with the same features as your existing mortgage. 

Then once you find a few competitors with better rates, contact your existing lender. See if you can negotiate with them. You’ll be surprised, they want to KEEP you as a customer. 

If your lender won’t negotiate with you, then it is worth considering switching loans. Speak to a qualified mortgage broker and they will be able to provide you with an appropriate recommendation. 

Reducing your interest rate comes with obvious benefits. Your repayments reduce and therefore you pay off your home loan sooner. 

Increase Your Repayments

Now you have reduced your interest rate, it is a good idea to keep the same repayments that you were paying before the rate reduction. This way you will pay off the mortgage faster. This can save you thousands in interest and reduce your loan term. 

This works also If you are on a variable interest and interest rates drop. If your rate drops, keep the same repayments you were making. 

Applying these 4 simple tips, you will be on your way to repaying your home loan faster. This will save you money in the long run.

If you’re after more tips related to Property Investment, you should join us at our next Property Investor Night and meet with our wonderful Coaches. You’ll be able to ask them any question you want and it’s a free event!

Book your seat here.  

Is it spending time with your family? Working? Travelling?

Whatever you love to do, one thing is certain…if you’re chained down to your job you’re going to be forced to make sacrifices.

Some of which you probably don’t want to make.

So how can you achieve success on your own terms?

By gaining financial independence.

Financial independence is the key to unlocking your options and a proven way to create financial independence is through investing in houses.

But if it were easy, everyone would be doing it, right?

Well a lot of us are.

As of 2011, the data show that 7.9% of Aussies own one investment property.

While that’s fantastic, you won’t achieve financial freedom by buying only one investment property.

The numbers of course can vary, but generally speaking you need five or more properties to gain financial freedom and enjoy what most would call success.

The truth is, despite the fact that so many Australians are investing in houses, only a small number of them own multiple properties; only .9%, according to RP Data and the Census.

Get started

Define what you want

You need to know exactly what you want. Only then will you have the information you need to create your goals and establish a plan to reach them.

Create S.M.A.R.T. goals

A popular method of goal setting is to use a strategy known as S.M.A.R.T. (Smart, Measurable, Attainable, Realistic and Time-based).

Each of your goals should abide by this criteria.

Specific: Clearly defined. When you look at the goal it should indicate exactly what your next step should be.

Measurable: You should have some way of knowing how long it will take you to complete the goal. You should know exactly when you’ve reached your goal.

Attainable: You should have all of the resources you need to reach your goal.

Realistic: Your goal should fit within your abilities, resources, knowledge and time-frame.

Time-based: You should assign enough time to reach the goal, taking into account every possible hindrance. Don’t set the goal out so far ahead that it encourages procrastination. Bottom line, your goal should offer just a bit of a challenge, but remain very doable.

Educate yourself

Anything worth doing is worth doing well, so invest time and resources to learn as much as you can about investing in houses.

Seek out quality advice and education based on the presenter’s experience and the results they’ve achieved for others.

Be careful, however not to get stuck in “analysis paralysis”. You have to actually buy property to make a go of it.

Get help

Once you’ve defined what it means to you, and crafted goals that align with your definition of success, you can get to work investing in houses.

Sometimes, however, it helps to get someone else on board with our investing efforts. We can get so tied up in our own situation that we often miss things that are blocking our success.

If your portfolio is going nowhere or you’re not sure how to get started investing in houses, find a mentor who can help you move forward.

It’s your life.

You can choose to maintain the “status quo” or you can shake things up and make the choice to build the life you want and deserve through investing in houses.

If you want more tips about your Property Investment strategy, book a FREE consultation with one of our expert Investment Coaches to discuss your situation and investing goals.