YOUR GAME PLAN

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Investing in property, like all other investment needs a plan!  The problem in the industry is that it is not governed under financial advice. That’s why there are so many so called “Property Sprukers”.

So at the wHeregroup, our team all hold the following qualifications:

  • Real Estate Agents
  • Diploma in Financial Planning
  • Accredited Mortgage Brokers
  • We are all active property investors
  • This way we can really put together a long term plan for your financial future.

With this in mind there are multiple strategies that can form the basis of your financial and property investing plan, and unlike other property firms we are happy to share these with you because the better you understand them the more comfortable you will be investing.

Depending at what stage of investing you are at and your age, here are a few strategies we like to use to help clients create wealth through property:

Rent & Invest

Buy and Sell

Self Managed Superannuation Funds (SMSF)

Transition to Retirement (TTR)

First Home or First Investment Property


Choosing the Game Plan that is right for you will generally come down to one real end goal to investing in property:

• Owning your home outright
• Have a passive income to retire with

The only difference is which home and how much passive income?  That’s where the plan and the strategy come into play!

Rent and Invest
This is the strategy Todd Hunter and his girlfriend used to invest in property and create wealth outside.

Todd and girlfriend wanted to live in an area that afforded them the lifestyle they loved but the downside was the cost of property in that area.  So by renting a property for around a third of what the mortgage would have been, they used the money that would otherwise have paid off a mortgage, to invest in property and managed to create wealth outside having a home of their own.

Like all strategies, there are pros and cons;

Pros –

  • Great lifestyle, happy life;
  • You can live where you want to live, perhaps in an area that otherwise you may not have been able to afford;
  • If interest rates are over 6.5%, generally the rent will be far lower than the equivalent mortgage repayments;
  • Rent is the same as mortgage interest; it either goes to the vendor or the bank in interest, its only principle payments that benefit you and reduce the loan amount;
  • If you do some work from home and have a home office set up, then part of your rent and utilities can become tax deductable – check with your accountant on this;

Cons-

  • Renting can be a frustrating and hard option, especially if you live in an area of high demand.
  • You may have to move if the owner decides to sell or move back in
  • Increase in rents
  • Difficult to find a rental property in a tight market

But – please keep in mind that just because you currently rent, doesn’t mean you can’t invest in property!  In fact renting can be an excellent strategy to owning your own home in the future, I mean really owning it… with no mortgage!

For example, if you were to use a typical:

• Unit worth $400,000
• House worth $600,000

The rent on these properties currently would be around:

• $320 per week for the unit
• $450 per week for the house

Yet the mortgages on these properties with a 5% deposit (most people only put a 5% deposit down these days) would be:

• $535 per week for the unit paying principle and interest repayments and
• $792 per week for the house

There is a saving of between $215 and $342 per week. This extra cash flow can be used to fund investment properties or repay your loans quicker.

So by using the “rent and invest strategy” to create an investment property portfolio that you later sell – you are creating wealth and you could then buy your home with a larger deposit or with cash entirely.

Renting Tip: If your employer requires you to do some work from home and you have a room set up as an office, then you are allowed to claim some of the rent you pay against your income tax… check with your accountant on the parameters of this allowance.

Buy and Sell

Many clients of the wHeregroup have used this strategy.

This means that you buy investments then sell them to make a capital gain and pay your home mortgage off sooner.

The biggest battle with this strategy is the mental battle in overcoming paying Capital Gains Tax and Stamp Duty. However, let’s remember, if you are paying tax, it’s because you ARE making money.

Imagine the interest payable on a mortgage of $350,000 over 30 years, compared to the capital gains tax payable, simple math’s will give you an idea, it’s a big difference!

Remember, this Game Plan example is a means to pay your mortgage off sooner, and once paid off, we’ll work with you to establish a Game Plan for the next phase of your life.

SMSF (Self Managed Super Funds)


Due to the changes in Superannuation and Taxation laws, the SMSF Game Plan can be a feasible strategy of purchasing investments when planning for a passive income and retirement.

We recommend that if you still have a mortgage on your own home, its best that we get the buy and sell strategy underway, as this should increase your cash flow thus allow for maximum benefit in the SMSF.
When purchasing property in your SMSF, if a capital gain is made after a period of time and age of trustee, than you may be exempt from Capital Gains Tax.

Buying in your SMSF doesn't just limit your options available, we have on many occasions worked with a Buy and Sell Game Plan and a SMSF strategy at the same time.



Transition to Retirement

Well, we’ve worked hard for 45 years, why shouldn’t we retire, sit back and relax? The amazing statistic is that a large percentage of Australians retire on an income which is below poverty level!

We estimate that you will need 60-70% of your post retirement income when you retire.

The above examples should give you a brief idea of where to start, if you are not anywhere close to these figures, what are you going to do?

That’s where the team @ wHeregroup comes into play. We can set up a “Game Plan” whereby you invest in property for long term gains.

To Buy a First Home or First Investment?

Increasingly each year, housing affordability becomes harder and harder especially for first home owners or low income earners.

The question we really need to ask ourselves is:

Why are we buying our first home?

• Mum and Dad pushed us
• Peer pressure, as your mates buy
• To create wealth
• For housing security
• It's the great Aussie dream
• To get the First Home Owners Grant and Stamp Duty Exemption

All of the above are valid reasons but creating wealth is the back bone to all of them.

So if that’s the case then let’s decide whether buying a home or simply investing in property is the best method to creating wealth.

At the wHeregroup we like to explore both options for clients to help them make the most informed choice with such a large decision.

Remember, the area in which you choose to buy in may be decreasing in value, however, investing could allow you to buy in areas where your money will appreciate. This can also allow you to invest your money elsewhere, then sell when the market is becoming ripe and buy in your chosen home location when the market is low.

Please note: that under current legislation, if you were to invest in property and later buy a home, you are still entitled to receive the First Home Owners Grant but not the stamp duty exemption.

But if you were to invest wisely, the capital growth would far out way the savings in stamp duty exemption.

Goal Setting

The first rule of thumb before you make the decision to invest is to think about why you want to do this.

Goal Setting is something that should be an ever changing activity, but at different stages in your life.
A simple exercise to do, so you don’t start writing a wish list of goals that will never eventuate is the break them down into your most important 9 goals.

  • 3 Short Term - next 12 months
  • 3 Medium Term - 1 - 3 years
  • 3 Long Term - 3 - 10 years

Planning a Budget

The first place to start is with how much you earn.

We keep it pretty simple, so everyone can achieve the desired result.

We have some helpful tips to keep you in line with your budget;

1. Never spend more than you earn on a weekly basis.
2. If you absolutely have to have a credit card, then pay it off at the end of each month. There is no point in saving money, and earning interest that will be taxed if you are paying upwards of 15% on your credit card balance.
3. If you budget to pay $15 per week over a year on council rates, set up a Bpay automatic transfer every week
4. Again, with all your other regular bills like, electricity, gas, phone, internet etc, what you budget to expect to pay, set up a automatic payment, this way at the end of the month, all your bills should be paid, and you won’t have the opportunity to spend the money.

See the table below which gives you a starting point to work from.

http://www.understandingmoney.gov.au/Content/Consumer/Tools/Planner/default.aspx

Like to know more?

Contact us to arrange an obligation free consultation.