[et_pb_section admin_label=”Section_2_Text Left:” fullwidth=”off” specialty=”off” transparent_background=”off” background_color=”#f7f7f7″ allow_player_pause=”off” inner_shadow=”off” parallax=”off” parallax_method=”off” padding_mobile=”off” make_fullwidth=”off” use_custom_width=”off” width_unit=”on” make_equal=”off” use_custom_gutter=”off”][et_pb_row admin_label=”Row” make_fullwidth=”off” use_custom_width=”on” width_unit=”on” use_custom_gutter=”off” padding_mobile=”on” allow_player_pause=”off” parallax=”off” parallax_method=”off” make_equal=”off” parallax_1=”off” parallax_method_1=”off” parallax_2=”off” parallax_method_2=”off” column_padding_mobile=”off” custom_width_px=”768px” custom_padding_last_edited=”on|phone” background_color=”#ffffff” custom_padding=”60px|60px|60px|60px” custom_padding_phone=”40px|20px|40px|20px”][et_pb_column type=”4_4″][et_pb_post_title admin_label=”Financial Success Formula: Master Property Investing Basics To Create Wealth – Part Two ” title=”on” meta=”on” author=”on” date=”on” categories=”off” comments=”off” featured_image=”on” featured_placement=”below” parallax_effect=”on” parallax_method=”on” text_orientation=”left” text_color=”dark” text_background=”off” text_bg_color=”rgba(255,255,255,0.9)” module_bg_color=”rgba(255,255,255,0)” use_border_color=”off” border_color=”#ffffff” border_style=”solid” disabled_on=”off|off|off” disabled=”off” custom_margin=”||40px|” title_font_size=”36px” title_font_size_phone=”28px” title_font_size_last_edited=”on|phone” title_text_color=”#00afff” meta_text_color=”#95989a”] [\/et_pb_post_title][et_pb_text admin_label=”Text_B:” background_layout=”light” text_orientation=”left” use_border_color=”off” border_color=”#ffffff” border_style=”solid”]<\/p>\n
The foundation of your property investing business is finances. Without capital your dreams of financial freedom will remain unrealised, so it\u2019s vital that you get a handle on your money.<\/span><\/p>\n [\/et_pb_text][et_pb_text admin_label=”Text_H3: ” background_layout=”light” text_orientation=”left” use_border_color=”off” border_color=”#ffffff” border_style=”solid” header_font=”Open Sans||||” saved_tabs=”all”]<\/p>\n [\/et_pb_text][et_pb_text admin_label=”Text_B:” background_layout=”light” text_orientation=”left” use_border_color=”off” border_color=”#ffffff” border_style=”solid”]<\/p>\n As a property investor, you\u2019ll quickly realise the less consumer debt you have, the better your ability to both purchase and service your investment properties.<\/span><\/p>\n Be honest with yourself. If you\u2019re not disciplined with your finances your success will be limited at best. Keep close tabs on your ingoing and outgoing expenses, always seeking better ways to manage your money.<\/span><\/p>\n You don\u2019t want to experience any surprises when visiting your mortgage broker or loan officer. Know what your credit report says and keep a watch on it, checking it on a regular basis. If you find erroneous information, have it removed promptly.<\/span><\/p>\n To address negative information which may be accurate you can contact the reporting companies directly or engage the services of a reputable credit repair company. There are legal ways to have negative information either removed or the effects mitigated.<\/span><\/p>\n [\/et_pb_text][et_pb_image admin_label=”Image_384px” src=”https:\/\/www.trc-gorod.ru\/wp-content\/uploads\/2017\/01\/shutterstock_565079941.jpg” show_in_lightbox=”off” url_new_window=”off” use_overlay=”off” animation=”left” sticky=”off” align=”left” force_fullwidth=”off” always_center_on_mobile=”on” use_border_color=”off” border_color=”#ffffff” border_style=”solid” custom_css_main_element=”max-width: 384px;” alt=”Get your financials in order”] [\/et_pb_image][et_pb_text admin_label=”Text_H3: ” background_layout=”light” text_orientation=”left” use_border_color=”off” border_color=”#ffffff” border_style=”solid” header_font=”Open Sans||||” saved_tabs=”all”]<\/p>\n [\/et_pb_text][et_pb_text admin_label=”Text_B:” background_layout=”light” text_orientation=”left” use_border_color=”off” border_color=”#ffffff” border_style=”solid”]<\/p>\n A key part of every budget should include funds set aside for legitimate expenses in connection with your investment property(ies). \u00a0These monies are not to be used for the purchase of a luxury vehicle or extravagant holiday. <\/span><\/p>\n Rather, the funds should sit in an offset account, earning compound interest until such a time as they\u2019re needed for legitimate expenses in connection to your investment property(ies).<\/span><\/p>\n An offset account is simply a savings account which is linked to your loan account. Let\u2019s assume you have a mortgage for $100,000 which is linked to an offset account with a balance of $10,000. <\/span><\/p>\n 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. <\/span><\/p>\n Do you see how quickly this can work in your favour? As your savings are reducing your loan, those repayments you make are more effectively reducing both the principal and interest on your mortgage.<\/span><\/p>\n There are two different types of offset accounts; partial and 100% offset. Obviously, as they have grown in popularity, more people opt for the 100% offset account type.<\/span><\/p>\n Money migration simply means that as investors, we\u2019re looking all across the country for markets which are doing well and then putting our money where it has the greatest chances of growing. This involves all aspects of investing; strategies, timing the markets, setting up our structures and of course trading when necessary to achieve our goals.<\/span><\/p>\n [\/et_pb_text][et_pb_image admin_label=”Image_384px” src=”https:\/\/www.trc-gorod.ru\/wp-content\/uploads\/2017\/01\/shutterstock_564838018.jpg” show_in_lightbox=”off” url_new_window=”off” use_overlay=”off” animation=”left” sticky=”off” align=”left” force_fullwidth=”off” always_center_on_mobile=”on” use_border_color=”off” border_color=”#ffffff” border_style=”solid” custom_css_main_element=”max-width: 384px;” alt=”finances”] [\/et_pb_image][et_pb_text admin_label=”Text_B:” background_layout=”light” text_orientation=”left” use_border_color=”off” border_color=”#ffffff” border_style=”solid”]<\/p>\n A property is negatively geared when the expenses of ownership – including finance and maintenance costs – exceeds the rental income, resulting in a loss.<\/p>\n Negative gearing deductions are most beneficial to people in high income brackets where they are in the top marginal tax rate.<\/p>\n Losses are then offset against other income (e.g. salary or business income) reducing the tax obligations of the owner. 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\u2019s taxable income.<\/p>\n A property which is geared positively means that the income derived from owning the property exceeds the financial and maintenance costs incurred. Monies received are then added onto the owner\u2019s income and taxed at the appropriate rate.<\/p>\n Both negative and positive gearing have their place in a property investor\u2019s portfolio.<\/p>\n \u201cPositively geared\u201d property means it creates more income than expenses BEFORE tax, whereas positive cash flow property ONLY creates more income than expenses AFTER tax deductions and refunds are calculated.<\/p>\n Put simply, no. The option you choose depends on your particular financial situation and the goals you\u2019ve set for yourself.<\/p>\n Typically, positively geared property is best unless you\u2019re able to find property in a high growth area using a positive cash flow strategy. Generally, properties which are either new or newly renovated (high depreciation) hold the greatest potential to be positive cash flowed, because you can claim a greater \u201con paper\u201d loss, thereby recovering more via tax refund.<\/p>\n 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.<\/p>\n It\u2019s your choice to either 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. \u201cPositively geared\u201d property means it creates more income than expenses BEFORE tax, whereas positive cash flow property ONLY creates more income than expenses AFTER tax deductions and refunds are calculated.<\/p>\nGet your financials in order<\/i><\/b><\/h3>\n
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Pay off consumer debt<\/span><\/h4>\n<\/li>\n<\/ul>\n
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Create and stick to a budget<\/span><\/h4>\n<\/li>\n<\/ul>\n
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Obtain a copy of your credit file and have erroneous information removed and\/or changed<\/span><\/h4>\n<\/li>\n<\/ul>\n
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Take care of any negative information<\/span><\/h4>\n<\/li>\n<\/ul>\n
Grasp key concepts<\/i><\/b><\/h3>\n
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What are buffers and why do I need them?<\/span><\/h4>\n<\/li>\n<\/ul>\n
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What is an offset account and why should I use one?<\/span><\/h4>\n<\/li>\n<\/ul>\n
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What is money migration?<\/span><\/h4>\n<\/li>\n<\/ul>\n
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Which is better – positive or negative gearing? Does it matter?<\/h4>\n<\/li>\n<\/ul>\n
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Is a positive cash flow property the same as positively geared property?<\/h4>\n<\/li>\n<\/ul>\n
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Is one better than the other?<\/h4>\n<\/li>\n<\/ul>\n
\nClick here for the final installment of our series of the basics of property investing.<\/p>\n