Property Investment

                                                  Firstly, let's get started on the 'correct' footing by asking yourself the following questions:

                                                  • Why invest?

                                                  • What’s my objective or motivation for investment?

                                                  • What investment vehicle best suits me?

                                                  • What am I prepared to do?


                                                  In simple we like to look at property investing as follows:

                                                  • Investment = Lower Risk (medium to long term)

                                                  • Speculation = Higher Risk (short term)


                                                  Know the difference; many people confuse the two and it generally ends 'in tears'.

                                                  It’s all about risk management, in fact many decisions in life are

                                                  You should be able to sleep at night with the knowledge you are actively investing in your future, with a good plan and not having over extended yourself.

                                                  Take a conservative approach, particularly on your first investment, and invest in yourself by learning about the process, so you are better equipped to develop your property portfolio.

                                                  Property is our investment vehicle of choice; mixing your investment vehicles is a personal choice, so just go with what you know and are comfortable with. Diversity, done correctly, does help spread the risk.

                                                  It’s very difficult to accumulate a level of wealth, required for a comfortable retirement, on normal income alone:

                                                  • What are you doing about your financial future?

                                                  • We are generally living longer now, so who will take care of us in our later years?

                                                  • Will the Government pension still be there and how much will it cover?

                                                  • What about your family?

                                                  • Do you know just how much income you will need to live comfortably in retirement?

                                                  The Association of Superannuation Funds of Australia details living costs for retirees. Their website outlines a guide to what you might need in retirement.

                                                  Example

                                                  General 'cash'

                                                  $1,000,000 cash in the bank today, at an interest rate of 3.0%, will give you an annual income of $30,000 to live off (less taxes and bank expenses).

                                                  Note: you are spending the entire yield from this cash asset every year, eliminating the major benefits of compound growth. Over time, inflation will eat away at your cash asset; over the next ten or so years there will still be the original amount of capital, $1,000,000, however its 'real' value could potentially be half of its original amount.

                                                  An asset that is growing in value, and producing an income, is a true asset.

                                                   

                                                  • Motivation

                                                  • Plan

                                                  • Action

                                                  • Result

                                                  We believe in property as a wise investment vehicle, that has been in existence for all humanity, after all you cannot live in a share certificate!

                                                  Our investment property stock is selected on various criteria (no particular order):

                                                  • Localised infrastructure

                                                  • Transport / accessibility

                                                  • Desirability / liveability

                                                  • Rental returns

                                                  • Quality of build

                                                  • Supplier strength / reliability

                                                  • Depreciation / tax benefits

                                                  • Employment reach

                                                  • Affordability

                                                   

                                                  Why do we prefer capital cities?

                                                  Capital cities offer many variables from social to economic however the same can’t be said for ‘mining’ or ‘country’ towns in general; these locations are generally too reliant on one or two main industries for employment/ economics, which mean your residential property investment is inextricably tied to these industries.

                                                  Whilst these locations may possibly do ok and can be a nice place to live, the lack of these variables increases your risk greatly; the downside to these locations can be severe.

                                                   

                                                  Rental Returns

                                                  As a guide, Investors look for a rental return of around 5%; this is calculated as your annual rental income, as a % of your purchase price.

                                                  Example:

                                                  • $400,000 property purchase

                                                  • 5% = $20,000 (per annum)

                                                  • $20,000 / 52 weeks = $385 rent per week (rounded up)

                                                   

                                                  Taxation

                                                  Taxation deductions are available to owners of a rental property(s).

                                                  Please seek professional advice from your Accountant in matters relating to ATO deductions:

                                                  ATO webinars for rental property Owners:

                                                   

                                                  Depreciation Report

                                                  This is obtained from a licensed Quantity Surveyor; there are many Quantity Surveyors on the market to choose from, here is an example below:

                                                  Disclaimer:

                                                  All information contained within this web site is general in nature only and does not intend or claim to provide personal or investment advice.

                                                  Responsibility remains with the Reader / Client to seek independent professional, legal and financial advice specific to your needs.