Using real estate to create financial security for the future is a popular option for many Australians, however it can be tricky to know how many investment properties you need to retire to get the outcome you desire.

When it comes to planning for retirement, you need to ask yourself, what kind of lifestyle do you want? For most people it’s to enjoy their golden years without having to worry about money or penny pinching from week to week.

Investing in property is a great way to set yourself up to thrive in retirement because it has the potential to not only increase your net worth but also provide you with a stable income. Many investors ask the question of how many investment properties you need to retire?

The short answer is that there is no magic formula – everyone’s retirement goals are different, not all investment properties perform similarly, and predicting the future is impossible.

However, with help, you can develop a plan for building a portfolio that will satisfy your retirement lifestyle needs. The key is to be able to see past your first one or two properties as you’re going to need a much larger portfolio than that to gain financial freedom.

WHY INVESTORS FUND THEIR RETIREMENT WITH REAL ESTATE

There are a multitude of ways to fund your retirement, and the most common among Australians seems to be relying on superannuation and pension payments. Unfortunately the harsh reality is that depending solely on these will likely force you to live very frugally, especially with living costs rapidly rising. Today the pension sits at about $36,000 per annum, per couple. It doesn’t sound like a lot right?!

Real estate is a long-term investment and therefore time is on your side. The earlier you embark on your investing journey, the greater success you’ll likely achieve. Real estate is a key investment vehicle for many Australians when it comes to planning for retirement and that is because it is stable and will always be around in society.

Positive Cash Flow

Rental property has the potential to generate income if done right, and this is one of the main reasons why people use property investing to retire. The cash flow from a property refers to the pre-tax income earned and is calculated using the below formula:

weekly rent × number of weeks rented in the year = annual rent

– all expenses (excluding interest)

÷ purchase price × 100 (to get a percentage)

This is also known as rental yield. A good figure to aim for is between 4-6%, the idea is for the yield to mirror the interest rate as closely as possible. Ideally, your rental income and tax deductions should be covering the majority of your running costs, and then some to generate a profit.

However there may be times when your cash flow is lower than forecasted, or even negative. Any business is unpredictable, especially the landlord business, you may have to pay for unexpected repairs, or your property may take longer to find a quality tenant.

Any good property investor understands the importance of safety buffers, which refers to money set aside in your budget for any unforeseen expenses. 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).

Capital Growth

Home prices in Australia have historically increased over time. According to the latest report by the Australian Bureau of Statistics, the total value of the nation’s 10.8 million homes grew by $2 trillion to a record $9.9 trillion in 2021. What this means is that we have seen a 23.7% increase in residential property prices in the last 12 months, one of the strongest annual growth records.

Of course, nothing increases linearly, and real estate is no exception. However, as mentioned property is a long-term investment, which is why most real estate investors adopt a buy-and-hold strategy so they can make the strong gains that come with a normal real estate cycle.

Recycling Equity

The quickest way to build a large property portfolio is by recycling equity. Equity is the difference between the market value of your property and the amount still owing on your mortgage. This strategy allows you to purchase a property with someone else’s money.

Basically, the bank will allow you (pending conditions) to borrow against the available equity in a property. It can be scary to think about increasing your home loan, however you need to flip your mindset to see the benefit of expanding your asset portfolio using very little of your own cash.

Tax Benefits

Offsetting income with depreciation is perhaps one of the biggest tax advantages of property. 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.

Along your investing journey you may have a property in which the expenses exceed the rental income. This is known as a negatively geared property and is most beneficial for high income earners because the ‘loss’ can be offset against other income.

KNOWING YOUR NUMBER

Before you start building your property investment strategy, you need to get really clear on what kind of retirement lifestyle you want to live. This will help inform how many investment properties you need to retire.

It’s a morbid question, but it will underpin your future decision making, how much money do you need to die? Understanding how much income you want each year in retirement is a thought that many of us don’t think about until it’s too late. Whether you’re after a comfortable or lavish lifestyle, you need to do the maths. 

1. Determine your desired retirement annual income
2. Assume a gross rental yield (between 3-6%)
3. Divide income by rental yield

This will give you the amount of money you should have invested in property. It’s then up to you to use this figure and work out how many properties you should own which will be dependent on how much retirement income you desire.

THE THREE PHASES OF AN INVESTORS JOURNEY

There are three phases to building a property portfolio before an investor is ready to reap the rewards of their hard-earned labour.

Acquisition of Investment Properties

The period of acquisition refers to the initial stages of an investor’s wealth building cycle. Your main goal will be to acquire as many properties as possible to help build your asset portfolio quickly, and to generate as much rental income as you can to increase cash flow.

In this stage of an investor’s journey, interest-only loans can become an important part of the toolkit because they allow you to only repay the interest charges on your loan for a specified period (3-5 years). Interest only loans allow investors to tap into a market that they wouldn’t otherwise be able to afford. However, they can also be risky, especially when the principal payments kick in. Any good investor will prepare for this and ensure they have a buffer set aside.

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 factors influence the market.

There are both macro and micro factors that drive the real estate market.

Macro drivers of growth:

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

For example, you want to have your eye on locations where there are infrastructure developments because this attracts people to a location (population growth). In or near cities are often high growth markets because there are always job opportunities (economics) which again, brings people to the area. These people will become your tenants.

Micro drivers of growth:

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

The above drivers will help you narrow down what micro markets to buy in (suburbs or towns). For long-term growth, symbolic attributes are a unique aspect that can enhance the performance of an area. The owner’s established benchmark is when an investor looks for the ‘worst house on the best street.’ Finding a property that is a blank canvas, situated close to properties higher in value will give you a good chance of increasing the value of your investment through renovation.

Consolidation of Property Portfolio

Once you’ve exhausted all of the equity the banks will allow you to lend against, the next phase is to consolidate your investment portfolio. You’ll need to refine your investments to maximise rental yield, therefore increasing your cash flow. Most investor’s will cycle through the acquisition and consolidation phases numerous times until they are ready to transition to the lifestyle phase of their investing career.

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 in several ways:

• Sell one or more non-performing properties: as you move closer to retirement, it is wise to let go of properties that are making a loss, otherwise you’ll have to sacrifice some of your retirement income to maintain the investment.

• Add value to your properties through development or renovation: increasing the market value of your property will therefore increase the value of the investment against the mortgage.

• Stop buying properties (or reduce the rate at which you’re buying them): when you’re in the growth stage, it can get quite exciting expanding your portfolio quickly, but more properties doesn’t necessarily mean more income. As you get closer to retirement it is best to become very selective with the properties you acquire.

Once you’ve reduced your debt to a lower LVR – maybe somewhere like 50% or so – you’ll be able to enjoy the benefits of leverage while owning property that is positively geared. 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.

Retirement Lifestyle

You’ve finally made it! The lifestyle or legacy 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).

Maybe you’ll work fewer hours in order to do something you enjoy more, such as travelling, gardening or golf. Regardless of what retirement means to you, the main idea is that you no longer need to work in order to fund your lifestyle, because your investment properties now provide that income for you.

Once they reach retirement, most investors adopt a more conversative approach to investing, in order to protect their assets that they have so tirelessly grown over the years. During this stage, there is less focus on building your portfolio and more emphasis on enjoying passive income.

THERE IS NO MAGIC NUMBER TO HOW MANY INVESTMENT PROPERTIES YOU NEED TO RETIRE 

Everyone wants to have passive income in their retirement, but not many actually reach the stage where they can successfully make the switch. The first step is deciding what kind of retirement lifestyle you want, and then working out how much money you’ll need to fulfil that.

If you’ve decided that property investment is your chosen vehicle for creating wealth, then your next step is to get help. Instead of asking, how many properties do I need to retire, you want to focus on the combined value of your portfolio and the returns it provides.

Find someone that has done what you want to do and follow their example. That’s where the TRC-Gorod team comes in. Learning from someone who has done what you want to achieve is the quickest and easiest way to learn.

Come along to one of our free property investment seminars. Our coaches and mentors have real life experience as property investors and can give you the tools, resources and knowledge to help you build your wealth portfolio for retirement.

Register now for the free property investor webinar
See our property investment strategy guide
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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.

Ever thought you’d picked an absolute winner of a property only for the bank to come back with a list of valuation risk factors? 

It’s more common than you think, particularly in a rising market where values fluctuate so much that our ideas of what a property is worth actually start to disconnect from what a valuer sees. 

Now, there are a lot of considerations a lender will make when determining whether to give you a loan or not. Obviously, your personal finances like your income and outstanding debts matters greatly, but banks are also heavily concerned about risk – and valuation risk factors can really change how they choose to finance you. 

Remember though, while valuations can be a challenge, they aren’t the final word on what happens with real estate. As a property investor, it’s your job to determine if and how that property can grow in value.

Don’t start missing out on great real estate because the bank has deemed there to be valuation risk factors. You need to be in the market to benefit from it.

WHAT IS A VALUATION?

In the real estate industry there’s this little phrase – There is God, and then there are valuers. As a property investor you need to understand why valuation risk factors matter in your ability to borrow.

Essentially, a real estate valuation is an unbiased report that details what a property would be worth in the market. 

The person conducting the report – the valuer – is usually outsourced by banks and lenders to independent companies so that it remains impartial. 

A valuer cares only for history. Their role is to look back and determine what was happening in previous markets. Think of them as living three to six months in the past at all times. By nature, they are very conservative when it comes to risk. 

The most important thing you need to remember about a valuation is that it is tied only to lending, so as property investors, we are likely to need them in order to obtain finance. The final number given by the valuer advises the bank or lender how much they could allow you to borrow.

Of course, this doesn’t mean that the final sale price will align. The market is influenced by so many other factors and there is no way to know how much a vendor or seller could get for the property. However, they are the most accurate way to determine what a piece of real estate is worth. 

For a more in-depth look at how you can value real estate yourself, this is an awesome podcast to check out: how to value real estate.

THE 8 VALUATION RISK FACTORS LENDERS LOOK AT

Lenders rate each factor on a scale from one to five. They then make their finance decision based on both your personal situation and the property valuation risk rating you get.

1. Location

Is the property in a highly desired location? Is it close or far away from amenities?

Naturally the closer a property is to key amenities such as employment hubs, transportation and quality education, the better the rating that suburb will receive. 

Choosing a fantastic location is crucial for property investing success. Working with a property coach or strategist will help you narrow down the best areas to buy in that work for your budget.

2. Environmental

Properties in areas prone to natural disasters such as flooding and bush-fire zones will always rate as a higher risk. 

It’s also generally harder to get comprehensive insurance in these suburbs which is something to factor in beforehand.

3. Improvements

Newer properties typically rate better than older or more established ones, however if a property shows signs of good maintenance over the years, and improvements have been finished to a good standard, it can still attain a good rating.

4. Land size

Certain land-ownership issues such as zoning, title, and access can impact the marketability of a property.

Lenders want to be assured that each of these factors are satisfactory and that no outstanding problems will arise that could impact your investment.

5. Volatility

A lender wants to know if that market is more subject to volatility. For instance, an inner city unit might be deemed more of a high risk property if there is a lot of oversupply in the market.

6. Expected future value

Lenders tend to ask valuers about what’s going on in the market and where it appears to be headed.

Basically, they want to know if they can expect a reduction in value in the next two to three years based on all these other valuation risk factors.

7. Local economic conditions

Single-market economies where there are very few employers and/or where the employers are in a high turnover industry (e.g. mining or tourism) will rate as more of a risk than places like major cities where there are a number of employers in a diverse range of industries.

8. Market sector

Finally, lenders want to know where that property lies in terms of saleability and whether they will be able to recoup their costs should the need to sell arise. 

HOW TO AVOID BUYING A HIGH RISK PROPERTY

Each of these valuation risk factors determine the position and quality of your property in the eyes of the lender or bank. 

A property valuation risk rating of four or five is considered to be relatively poor security for banks, which means there is a chance the bank will limit lending or not even lend at all.

Of course, we don’t want that! So how do you avoid buying a property lenders would consider high risk? 

Well, the most obvious one is buying in a good location. 

There are so many things to consider when it comes to location which is why you should never a) choose location based on preconceived ideas, and b) pick a location without doing a tonne of due diligence first. 

Here some quick tips when picking a location:

• Avoid buying on main roads – the noise and traffic will boost your risk rating
• Similarly, avoid properties that back onto train lines or are right next to an airport
• Buy near good amenities like transport, schools and cafes
• Avoid locations that already have an oversupply of real estate
• Don’t buy into suburbs with high vacancy rates

The other factor you want to consider is whether or not it appeals to the majority demographic in that area. 

Above all, you want to make sure you’re buying into an owner-occupier suburb – not an investor suburb. If the percentage of homeowners is higher, it’s likely to be a safer investment.

That’s because owner-occupiers like to think long term, so they won’t get up and leave their home in a crisis.

MAKE SURE TO DO YOUR COMPARISONS

A good place to start when you’re considering a purchase is to look at what you’re comparing it to. You can do that in three ways:

Compare the place

We often see the comparison of property when it comes to regional versus city. 

City real estate is naturally more expensive to buy and smaller in land size, while regional real estate is cheaper to purchase with a lot more space inside and out. 

However, you need to compare what both places can do for you. City apartments for example attract higher rental yields and higher occupancy rates, making them a big win for increasing cash flow and creating quick income. 

Regional properties often fetch lower yields and are at this moment going through longer vacancy periods thanks to coronavirus pushing people to live in places where they work. 

Compare the infrastructure

Real estate needs some fundamental factors that will not only increase its capital value but also attract good rental rates. One of those things is infrastructure.

Good infrastructure opportunities like new roads, public transport and power facilities don’t just make an area more attractive to live in, but it also creates jobs – which means more income in the area.

While the property you’re looking at might seem like a steal, if it isn’t supported by good local infrastructure, the area won’t develop and grow and over time people won’t want to live there. 

Compare the place economy

A place economy is an area that is attracting wealthy people – not only to live there but to socialise and be seen there. 

Bondi is a classic example of this. Bondi itself has become a brand that the whole of Australia knows about. People want to travel there, live there and spend their time there. 

So if the option is to buy a huge $1 million house in the countryside where no one lives and it’s an hours drive for a decent cup of coffee, compared to a two-bedroom apartment in Bondi for the same price, wouldn’t you go for the one where you’re likely to get better and more consistent returns? 

THERE’S NO RISK TO VALUATIONS IF YOU CHOOSE THE BEST REAL ESTATE

Valuations and valuation risk factors shouldn’t be a factor of concern if you’re smart about where and what you buy in the real estate market. 

Once you get the hang of property investing you’ll instinctively understand which properties will return lower risk ratings and which ones are more likely to get knocked back by lenders. 

As we know the best way to learn is by connecting with the experts who know this stuff inside and out. Meet the best in the business at our next free property investing masterclass. Our real estate coaches have over 20 years experience helping investors make smart, informed decisions, helping them create million dollar portfolios to get them on the path to financial freedom.

Register now to join the next seminar near you.

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

There are many ways you can win big by investing in real estate. Equally, if you lose sight of the basics, you’ll end up losing something much worse – money!

No one sets out on their property journey to go backwards financially, so take note of these three common mistakes that investors often make, because if you don’t, it may cost you in the long run. 

THEY DON’T UTILISE CAPITAL GROWTH

Our nation’s capitals are going gangbusters when it comes to property prices.

In July 2021 all capital cities reported an increase in house prices, with six – Sydney, Melbourne, Brisbane, Adelaide, Canberra and Hobart – racking up record highs for the third quarter in a row.

Not only is this great news for property investors, but for those ready to get into the market it offers a sense of security that house prices are continuing to go in the right direction as a current trend.

No one is going to argue that rising house prices are great for property investors, especially when it comes to the properties we own.

But, there’s a trap with capital growth that even smart investors can fall into.

First of all, capital growth, at least when you’re in the acquisition and consolidation phase of your investment journey, is a vanity project unless you take action and access that money.

Buying a property for $500,000 and seeing its value rise by $50,000 or even $100,000, feels great. You can sleep well at night knowing you made a smart investment.

But, unless you refinance your loans and grab that equity out of the property, what use is it to you? 

Here, by not using your dormant equity, you’re putting yourself in a position that limits your earning potential which will ultimately lose you money in the long-run. 

THEY SELL TOO SOON

The quickest way a property investor can lose money is to sell an investment before it’s had the time to work for you.

Working for you isn’t only increasing in value. More importantly, property works for you by creating a second income stream in the shape of tax breaks and rent.

If we take our eye off the long-term plan, capital growth can beguile investors into thinking their property has reached its peak and it’s time to sell.

THEY LISTEN TO THE WRONG PEOPLE

While very few people would chime in on the topic of how best to perform root canal surgery, or try to predict the weather forecast, almost everyone you know will have an opinion about property.

“You should buy, you should sell, you should do what my Uncle Fred did…”

Despite having no experience or expertise, most people think their opinion will be invaluable to you on your investment journey.

(Spoiler alert: It won’t!)

While smart investors might find it easy to ignore their nosey neighbour’s “good” advice, there are some people it’s harder to dismiss. Beware of well-meaning professionals who aren’t experts in property investing. 

These people are often the ones you least expect, such as accountants and real estate agents. 

For example, with accountants you pay them good money to help you make money. They know all about numbers and were probably really good at math in school. Surely, they know what they’re talking about when they’re telling you to sell your property that just got a bump in capital growth? 

No, they don’t! Ask your accountant how many investment properties they own and how much passive income they’re generating via their long-term investment strategy before taking any advice that will likely be a small, short-term win, over a big, long-term gain.

Then there’s real estate agents. Ok, they’re just doing their job, but don’t lose sight of what that job is. Real estate agents are not paid to care about how much money you make over the life of your investment journey. In fact, they aren’t paid very much at all, unless they sell properties. They want their commission TODAY and so the quicker you sell, the richer they’ll be. Taking investment advice from a real estate agent is an oxymoron – it just doesn’t add up.

POSITION YOURSELF AS A WINNER, NOT A LOSER

Through listening to the wrong people and selling too fast, property investors deny their properties the chance to fulfill their potential, and they lose substantial amounts, not only in rental income and tax breaks, but in capital growth.

If your investment strategy is laid out over 10, 15 or 20 years, that’s what you need to stick to. Getting distracted by capital growth or bad advice will only lead to regret and financial loss in years to come. 

Talk to property investing experts, like the coaches and mentors at TRC-Gorod who have years of experience and knowledge when it comes to the benefits of investing long-term. 

Learn more about how you can take advantage of the current property market at one of our free property investor seminars. You’ll be led by a team of professionals who have demonstrated experience working across all types of markets so you can optimise your ability to grow a budding portfolio, create passive income and get set for the future – whatever that may look like for you. 

Spaces are limited. 

Register now for the free property investor webinar