Common Obstacles to Wealth
Obstacle 1: Inflation
Whenever you save money, even if you earn interest, it’s actual spending value decreases over time and you don’t end up with any more than when you started, in fact it’s usually less.
This begs the question – what’s your super really worth? How far will it go when you retire?
Obstacle 2: Dead Money – Tax
How Much Tax Will You Pay In Your Remaining Work Life?
|Current Threshold||10 Years||20 years||30 years||40 years||50 years|
sourced from www.taxcalc.com.au
Obstacle 3: Dead Money – Interest
How Much Interest Will You Pay On Your Loan?
On a traditional mortgage, the amount of interest you end up paying is more than double the amount borrowed – and usually takes 30 years to repay.
That’s a big chunk out of your equity…
Obstacle 4: Deposit
OK so let’s say you know all this and want to buy an investment property but getting the deposit is an issue? Read on for some solutions below.
Overcoming the Common Obstacles
Overcoming Obstacle 1 – Inflation
Putting your money into something that increases in value is a way to stay ahead of inflation.
There are various ways to do this, and you can discuss it with our financial planners free of fees. Property is one of the favourite ways because it is a very passive type of income, plus it’s an actual roof over your head for generations.
Overcoming Obstacle 2 – Tax
Would you agree that taking advantage of tax rebates rather than let them go to waste makes better financial sense?
There are varied tax rebates available when purchasing new property for investment, in fact they can go towards paying up to 20% of the entire property. Normally this tax is money going nowhere but the Australian government has created this incentive to be invested towards your retirement.
Overcoming Obstacle 3 – Interest
Restructure Your Loan To Save Time And Money
Most people are aware that getting a lower interest rate will help, but a lower interest rate isn’t enough compared to getting a different type of loan or restructuring into a new type of loan.
Free Financial Planners will refer a licenced Credit Representative to see which product, if any, would best suit your needs.
Overcoming Obstacle 4: Deposit
If you want to buy property but don’t have enough savings for a deposit there are other sources that won’t leave you out of pocket.
- If you are already paying off a mortgage or own your own home, then your equity can be used as a deposit.
- If you are renting, you may be able to use your Super.
- If you can’t afford property in either case but interested in making your money go further in other ways, there may still be some hope.
Talk to one of our financial planners to discuss which option is right for you.
Funding Your Retirement With Property
The average increase to house prices in Australia has been 7.25% per year.
(figures rounded down for illustration purposes)
Pay For It Without Your Own Money?
You don’t need to be out-of-pocket to buy an investment property – in fact they may be able to pay for themselves or pay you a passive income depending on the property you buy and your financial situation.
This is a common scenario:
- Use current equity or super for the deposit
- Your tenants pay around 70% through rent
- The tax man pays around 10-20% through tax reductions
- Your savings on interest or loan restructuring could pay the remaining 10%
Even If You Have Pay A Little?
You could still have a house and land in the end for a fraction of the normal price compared to paying for it entirely yourself and not utilising any investment strategy.
To put it another way, lets say the best scenario you could get for your situation is paying $30/week towards the investment property. Compare that with putting $30/week into a savings account for 25 years, and for arguments sake we’ll use a hypothetical return of 5%/pa for both investment property and term deposit interest.
If you put away $30/week every week for 25 years into a hypothetical fixed 5%/pa savings account, you would have $70,574 ($36,000 invested + $34,574 interest) – or roughly 2x the amount you contributed.
If you purchased a $350,000 property, to which you had to contribute $30/week for the repayments and it didn’t increase in value at the end of 25 years, you would still have an asset that you could sell for $350,000. Minus your contribution plus fees and taxes etc upon sale should leave you with around 8x the amount you contributed. However assuming 5% increase per year in this example compared with the term deposit, its sale value is now $1,185,224 – around 30x the amount you contributed.
Why Investment Property Is Australia’s Most Popular Investment
- Secure and reliable
- Easy to understand and manage
- Very tax effective
- Usually paid for by someone else
- Can provide inflation-proof income for life
Steps To Successful Property Investment
Properties are researched by a group of experts to be a successful investment based on:
- Price to value
- Potential growth location
- Rental income / yield
- Insurance for loss of rental income or damage by tenants
- Property management
- Maximum re-sale value
Making sure the above boxes are ticked can be a lengthy and risky process.
A clearer path, free of fees
Why risk 100’s of hours of time and vast sums of money when you can get experts to help without charging you?
Some financial planners can also help you protect your assets through setting up a trust, create better performing self-managed super fund, restructure loans or determine if other investment strategies would best suit you. They are bound by law to only present a solution or property if it is in your best interests.
and receive advice and pitfalls on all wealth creation opportunities that interest you.
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