Is there an option to reach your retirement target or more?The good news is it’s not too late to create wealth for you and your family if you create it the right way. This means creating a property portfolio that can deliver income in excess of what you may need for a comfortable lifestyle. And a portfolio that remains with you right through retirement increasing in value AND rental income and one that is still there for your kids when your gone. Most people actually leave planning for their retirement far too late and many come into my office on the wrong side of 50 only just starting to think seriously about it asking; “How am I going to do this?”. With most, thankfully, I find it isn’t too late. No matter when you start, you’re going to be better off than if you don’t start at all.
The 7 Things (About Money) I wish I’d learned at school…That would have made me a millionaire by the age of 25!
- Where to go for advice Most people go to a bank for advice on the right bank accounts and loans to have. A bit of a laugh really when you consider their profit margins. It’s like asking the mouse where to put the cheese! I wish I had been taught to ask someone who has money the best way of handling it.
- Credit cards are like fast cars A fast car driven recklessly is dangerous, but treated correctly it isn’t. Credit cards are the same. Most of us just use them to help the banks, but you can turn the tables and use the banks money for free and use your money to reduce your interest. This secret could have saved me thousands!
- More organised = more money!! It is a fact that if you get organised with your money, you have more of it. Bills get paid on time, you don’t waste precious money on fines, fees and overdue payments, and you make your money work for you instead of against you. A cash management program accelerates your debt reduction and wealth creation.
- You can make compound interest work for you or against you Saving to buy something instead of borrowing can halve the price you pay for most items. This sounds boring to us in this ‘have it now’ world, however, compound interest working for you instead of for the loan company saves you thousands. I wish someone had told me that ‘interest free’ isn’t free at all. The interest has been tacked onto the price – ask for the ‘cash’ price and see.
- Debt consolidation can be your best friend or your worst enemy Consolidating credit card and consumer debt onto your home loan can reduce your repayments each month and lower the amount of interest you pay. I wish I had been told to use this extra money to then reduce the home loan much faster, and not fall into the same trap again and again – burning up precious equity that could have been used for investing.
- The power of separating your life from investments There are 1.7 million people in Australia who invest in property, less than 2 per cent get to five properties or more. Why? They don’t keep their personal and investment money separate. I wish I had learned the key to successful investing and stress-free living was to keep these sides quite separate from each other.
- Don’t assume a home loan is a long term debt I wish I had been taught that a home loan doesn’t have to be a stone around my neck for 25 years, or best case, if I paid weekly or fortnightly, 17 years. What most people don’t know is that handled correctly, a mortgage should be paid off in five to seven years just by doing your banking differently.
So how can you create wealth through property?When you start investing and you buy a safe, conservative property, it usually starts off negatively geared. This just means it costs more than it earns. A common mistake people make is to think they need more rental income to help with the holding costs so they buy a positively geared property. Unfortunately, when you choose properties based on high income, they are usually also high in risk and high incomes usually don’t last. High rents are usually based on supply and demand, which can change, just look at the mining industry. This means there can be a lot of volatility. Buying properties in conservative areas with the normal growth patterns means less volatility. The value of the property goes up and so does the rent and eventually over time the property turns from negatively to positively geared. That’s where your income comes from in retirement. Remember debt is money. As well as money devaluing over time, debt devalues over time as well, which is really important. Once the rent is higher than the costs it can start reducing the debt, as the debt reduces you have more income, which means you have more income to live on in retirement.
The 4 Rules of creating wealth through property
Rule #1 SEPARATE YOUR LIFE FROM YOUR INVESTMENTSThe most important part of successfully investing in property is the organisation of your money. By getting control of your income and personal mortgage, getting debt reduction and money control happening, you can confidently launch into property investment. We teach our clients to separate their personal side from the investment side and build a property investment portfolio. Many investors fail from the financial pressure when the rental property expenses and income flow in and out of their personal accounts. By managing their investments and not having the holding costs affect their personal income, our clients increase their wealth, without decreasing their lifestyle.
Rule #2 BUY NEW NOT OLDThere is quite a difference to wealth creation by buying new properties instead of old. Over the years, the drain on cash flow from constant maintenance and repairs of old properties can really hold back your ability to buy more investment properties. However by buying new property, the benefits are not only increased cash flow but also being able to attract better tenants. And importantly, the bonus of receiving tax deductions from depreciation. With all of these financial benefits, you are able to go from negatively geared to positively geared much faster, thus enabling you the freedom to grow more quickly.
Rule #3 INTEREST ONLY LOANInterest only loans always spark debate in both the home owner and property investment circles. We use interest only loans but pay extra, assisting in massive debt reduction against your home mortgage. Most clients reduce their debts in record amounts –more than $30-$40,000 in the first year. On the investment side there are big benefits. Interest is tax deductible, principal payments aren’t. It’s easier to manage the investment holding costs if you minimize the cost of payments during the ‘negatively geared’ period. As the property goes up in value, so does the rental income. The property should go from negatively geared to positively geared and then the extra rent reduces the investment debt. So it is all about the timing, and maximizing the tax. deductions.
Rule #4 NEVER SELLOver the past 100 years, Australian property has grown in value on average 10% pa. It’s not 10% every year, it works in cycles, usually 2 or 3 years of really good growth, 5 or 6 of flat and a couple of years of negative growth or retraction; meaning that a property can have flat or even negative growth over an 8 year period. The property growth cycle is often debated, but history shows this as fact. Though no one has a crystal ball for the future. There are many benefits of keeping property – you incur buying costs only once, and pay no commissions on selling or capital gains tax. But by selling, taking profit and buying again you maximise the costs and minimise the profits. These costs can equate to $50 or $60,000 even before capital gains tax. By not selling, this money can be utilized as equity to purchase more property, and your existing property continues to grow as well as the new one.
Pay off your home loan in five to seven yearsDon’t believe what your parents told you. One of our biggest mistakes is to believe your home loan is a long-term debt. Most of us saw our parents work hard all of their lives to pay off their mortgage, and then struggle to retire comfortably. It is nurture not nature that keeps most of us imprisoned on the debt mouse wheel. Our grandparents, God bless their little cotton socks, were taught by the banks how to do their banking. They passed this on to their children who passed it on to you. They had a lot to say about money… RECOGNISE THESE SAYINGS? “Money doesn’t grow on trees.” “A penny saved is a penny earned.” “If you count your pennies, the dollars will take care of themselves.” Most of us believe that we should work hard, save to buy our home, spend the rest of our lives working to pay it off, and hopefully, save a bit to retire on. It doesn’t have to be that hard. By treating your money right in the first place, learning the benefits of how loans should work, and setting up the correct finance platform for both fast debt reduction and smart wealth creation, most of us can pay off our homes in five to seven years instead of 25, and get 10 properties in 10 years without struggling with the holding costs. It’s just a matter of setting up your loans properly. Look at your current situation. Have you been paying your loan off for years and seem to be getting nowhere fast? Add up the amount you have paid into your loan to date. Most loans have only reduced by $5k or so in that time. Now we have an OMG moment! Where does all that money go? Time to do things a bit differently. Change the way you are doing your banking… if you follow the next 7 steps you will be well on your way to making a huge difference and will get out of debt fast.
7 Steps to Financial Control Step 1 Get the right loan Step 2 Set up your money plan (cash management) Step 3 Use a credit card Step 4 Bank your pay into your loan Step 5 Stay organised Step 6 Now start really getting ahead … investing Step 7 Keep personal and investment banking totally separate
Change your life in 35 minutes!IT’S ALL ABOUT THE NUMBERS Yes, I know it sounds impossible, but that is exactly what our clients tell us we can do. We look at things differently than you do and we can do that in one meeting. When you look at your finances you may get overwhelmed or fearful of what appears to be never ending debt and no way out of it. We, however, look for the opportunity to use your money differently and take away the financial pressure you feel and maintain, or even improve your lifestyle. THE SECRET IS TO DO YOUR BANKING DIFFERENTLY We specialise in teaching people just like you to do your banking differently, managing your money to reduce debt not your lifestyle and help you take back control of your life. Have you been paying your mortgage off for years and seem to be getting nowhere fast? Once you have the knowledge of how to beat the banks at their own game you will be surprised to watch the years fall off your mortgage. LEARN HOW YOU CAN REDUCE DEBT AND CREATE WEALTH THROUGH PROPERTY How would you feel if you were able to reduce your mortgage by $20,000 and purchase two investment properties within 6 months? Or have four investment properties in just 10 months? Well, we have clients who have done just that and are well on their way to creating the lifestyle they want in their retirement. Just by changing the way they look at their money. It doesn’t have to be hard – treat your money right in the first place, learn the benefits of how loans should work and set up the correct financial platform for both fast debt reduction and smart wealth creation. If you feel like you have lost control of your financial direction, are just treading water, or worse even, you are fearful of what your life looks like in retirement, then maybe it’s time to change what you’re doing. If you are serious about reducing debt, creating wealth and setting up your future for retirement, call us today. We guarantee it will change your life for the better. Chris
We have helped hundreds of clients just like these so book your FREE Wealth Coaching session to find out how we can help you too! CALL 5430 4777