Why You Need To Invest In Your Future Today
Investing is an effective way to put your money to work and potentially build wealth and a secure future for you and your family. Smart investing may allow your money to outpace inflation and increase in value. The greater growth potential of property investing is primarily due to the power of compounding capital growth and the low risk-high return tradeoff.
Why Invest Your Money...
Investing your money can allow you to grow it. Most investments offer returns on your money over a long period of time. This return allows your money to build, creating wealth over time and often compounding.
While you are working you should be saving money for retirement. Investing in property NOW will allow you to build equity and therefore income and then, at retirement age, you can live off funds earned from these investments via rent or selling the asset for a profit.
Property Investment tends to offer the opportunity to earn higher rates of return than savings accounts; therefore, if you want the chance to earn a higher return on your money, you will need to explore investing your money in property.
As a property investor, you may be able to reduce your taxable income by using tax deductions then using those rebates/deductions to pay down debt or invest elsewhere while your asset continues to grow in value.
Moving From Saver To Investor
Most Australians are brought up understanding that each week they need to put a small amount of money aside as savings to slowly grow their wealth. The problem is when most people go through a period of unemployment or illness, or even expansion of the family, those long term savings are spent.
While it is true we do need to save, the greatest step we can make is move from being a saver to an investor. Making money is slow and tedious when we do it week by week.
The ultimate goal is to use the savings to make money then use that money to create growth and more money.
Personality Types
The world is a wonderful place full of different races and religions and even languages, however success is often a mindset and most successful investors have a very broad outlook on life.
Depending on the personality of the client, we often create strategies that match the clients mental comfort zone. For example, one of our clients has a lot of cash but since she retired she is dipping into her savings. She stresses about money every day so we knew we had to address her thought patterns first. We worked out how much she spends each week and then looked at investing her excess cash into a short term investment property (unit) that allowed her grow her wealth while retired.
We set her up with an offset account so she could see her cash whenever she wanted to and we got her to draw down money each month to live on while her remaining money reduced her debt by utilising her offset mortgage account.
A lot of potential investors suffer from anxiety and buyer’s remorse but we know that if you are well educated and knowledgeable about what type of property suits your needs, buying an investment property is actually a fun and exciting process.
We spend a lot of time with our potential buyers and are very hands on throughout the entire process and often ‘steer the ship’ so to speak to make it a smooth and fun experience that you will want to do over and over again throughout your life.
Understanding Human Nature
Human nature is a funny thing, while we are all different funnily enough we can broadly brushstroke some traits with all of us.
The most dangerous trait in real estate is greed. Greed kills deals, misses profits and creates risk and danger for potential buyers.
We always advocate creation of a portfolio or cash machine as we like to call it however a portfolio to us is 3 or 4 properties that are cycled every 5 years creating lifelong wealth. It is not owning 75 properties, it is not stress and it is not hanging onto to properties too long until they require costly repair or refurbishment and it is not kicking out tenants over a $5 rental increase and leaving it empty for 3 months while a new tenant is sourced at the slightly higher price.
While Gordon Gecko said ‘Greed is good” in Wall Street, in property, success and greed do not go hand in hand. Often we have advised clients to sell a property that they loved because it is close enough to the financial ceiling and clients want to hang on to ‘ring its neck’ so to speak and in the end accepted a lot lower offer or had to pay for repairs to get the value of the property simply because they were greedy.
We often advise to sell a property even if there is still some potential growth because we know that is a way safer and more profitable option that missing the boat all together.
Retirement And The Australian Pension
One major worry for all Australians these days is retirement and to most that means the pension. After we pay our taxes and top up our super there really is bugger all left and it is really a matter of fending for yourself these days with regards to funding your retirement.
Investing in property is actually the perfect vehicle to protect your retirement but it can’t be left too late in life to start. The banks look at age before lending and the optimum time to start to set up your retirement is NOW.
A good strategy is to use a current property as equity, borrow against that property to purchase and investment property while you are working then use the rebated tax deductions to pay down the debt so by the time retirement comes around there is huge equity in the property from capital growth and due to the debt reduction the incoming rental return is not only high but increasing each year and becomes cash flow positive accessible income for lifestyle and living.
The perfect model is to purchase multiple investment properties over a 20 year window allowing for equity creation, debt reduction and rental yield increases so that 1 property can be sold every 5 years of your retirement to make sure your cash flow always outweigh your spending and this model makes retirement fun and exciting prospect. The best part is the tenant, and the government, have actually paid all the costs and created your wealth, you haven’t had to work extra hours in your already busy life to fund your retirement.