8 DecDon’t fear fear

I thought I would share some insight with you about my personal life that may help you in business, in investing or just in life in general. As I was touring the internet for random video’s, yes as I do, I stumbled across Anthony Robins the motivator and life coach. He was discussing failure and how failure holds people back. With the countless people I meet in my business, the fear of failure too holds them back from making those big jump decisions, such as changing jobs, moving states, buying an investment, investing money or starting a business. But as Anthony stated if you learn from failure, it’s an experience, don’t forget that.

In my business I have made failures, I over invested and was sucked into advertising systems numerous times, one was over spending in the Yellow Pages, another was with a TV ad. In those two examples, it wasn’t the sales persons fault, it really wasn’t any one’s fault, the delivery didn’t meet the outcome, it can happen. My biggest failure however was opening a retail store, actually three of them with my wife. The principal of the store was fine, but during that time the GFC struck and the locations of the shops didn’t help our business model. What happened was we bled money, we had pride we fought it out, until it got to a point where we decided we have tried but now it’s time to stop.

We lost over $100,000 in our money giving it a shot, does this make us a failure? My answer is No. Did it stop us reinvesting into our other business? Of course not! We learnt from it, we learnt to process decisions more effectively, create stronger strategies, and most importantly the lessons we learnt we have been able to guide 100’s of our financial clients. We have been able to help people avoid making the mistakes that we made, so not only have we learnt, but others are also and luckily enough we can save people money. So even though at the time we lost money, we have probably saved more than that through future decisions and clients decisions.

So as we head into the Christmas and new year period, a time when people start thinking about life and what to do with it, I implore you all to not fear failure. Have a positive visualisation of what you want to do and when you are ready, do it. Don’t be afraid to seek advice from the right person, too many people are conservative and will attempt to hold you back, because their fear that you will succeed and therefore they will fall further behind, don’t lets those type of peoples negativity stop you. Surround yourself with likeminded people, positive people, a group that will encourage you to develop and shoot for the stars.

If you have had similar experiences or would like to ask any questions I would enjoy hearing them

2 DecOptimising Your Retirement is Best Not Left to the Last Minute

A very powerful way to increase your retirement funds is a Transition to Retirement (TtR) strategy. A Transition to Retirement strategy can boost your funds for retirement without reducing your after tax income while at the same time minimizing the amount of tax you pay. A TtR  can also be great when you want to start cutting back on the hours you work while maintaining the same level of take home pay.

It works like this; By accessing a small portion of your super, your taxable employment income whether that be as an employee or self-employed, is exchanged for a tax effective income from your superannuation fund as a transition to retirement pension.

Simply put, by making extra contributions to your super through salary sacrifice, (or a personal tax deductible contributions if you’re self-employed) you reduce the amount of taxed paid from your marginal tax rate to the super contribution tax rate of 15%.

Effectively increasing your retirement funds without effecting the amount you receive in your hand at the end of the week.

This strategy is suitable for individuals who have reached their preservation age, (determined on your date of birth)  if you’re working as an employee or are self-employed, and have accumulated funds inside a superannuation fund.

For individuals born before 1 July 1960 your preservation age is 55, for those born after 1 July 1964 and onwards your preservation age is 60, and for those born in between 1 July 1960 and 1 July 1964 your preservation age is subject to your date of birth in between these dates.

If you have reached preservation age and are under age 60, the portion of your wage which is salary sacrificed is replaced by funds from transition to retirement pension (or super funds), tax free, or at a 15% tax off-set on any taxable portion. If you are 60 or above, the amount you receive from your transition to retirement pension is all tax free and all earning within the pension are tax free too, were if the funds were inside the superannuation environment those earning would attract 15% tax.

For a more in depth look into how a transition to retirement (TtR) strategy could work for you, contact Luke Howe on 08 8263 4009 or email your questions to luke@nieuvision.com.au

2 DecThe Great Australian Housing Bubble where is it?

When I talk to many potential or current property investors we often discuss the impending housing bubble Australia is about to have. Some time ago in 2009 I had a discussion with a client about an impending housing bubble and I also recall all the way back in 2004 my old neighbour Peter saying stay away from property, there will be a housing bubble.

I’m still waiting for that housing bubble. Like a boxer waiting for his foe, signalling with my palm, come at me bro :), ok maybe not.

The point I am getting at however is that people use these bad news stories to deter them from their goal, a goal which is to improve themselves and better their future. Have you ever wanted to do something but been told don’t do it, that is stupid and therefore stopped?
Well these bad news stories are just scare tactics certain media and ‘experts’ are creating for you. If you let it, these scare tactics could stop you from achieving your goal of financial independence.

I understand the common argument; it happened in the U.S.A so it can happen here in Australia. I also understand the fact the cost per house has risen from 4 times annual income to almost 10 times, but if it’s that fragile why hasn’t it happened already?

It hasn’t happened already because we have different income streams generating housing demands, there are also other sources of revenue to maintain property prices such as access to self managed superannuation buying property and overseas investors. More families are also looking at buying as a unit, coupled with a very strong and regulated financial sector.

When you couple the above with our increasing population growth driven by births and immigration, this will continue to place upward pressure on prices.

So what happened to my neighbour Peter who was trying to time the market waiting for the housing bubble in 2004? The house purchased in 2004 in an Adelaide suburb for $240,000, is now worth $420,000. He has missed out on nearly $200,000 in capital growth and his purchase price to enter the market is now more expensive.

If you have a goal, go for it, don’t wait for unknown’s, just do you research, if you buy in strong suburbs and in strong area’s with great house designs that are popular over the long term you will win, if not maybe it’s your bubble that your afraid will be burst not the property markets.

18 NovHoliday spending will it rear it’s head?

As we enter the holiday period it is easy to get all philosophical on life, but I will spare you those thoughts.

What I want to remind you all of is the imminent flood of stories and media articles about the personal debt blow out as consumers we will suffer. Every year the same stories get rehashed and the financial experts like myself come on and provide the predictable lecture. My first question to you is why do you do it? Secondly, what are the consequences?

Why do we do it? Well if you remember my previous blog, the lure of instant gratification, as consumers we have been trained to spend, especially at this time of the year. We have to battle smart marketing companies who know how to pull our emotional levers to get us to part ways with our hard earned cash, if we don’t have the cash they create ways for us to find it through personal debt. Which is great at the time, the kids get what they want, the family gets what they want, but does the boring old financial situation get what it wants? Not only this but we become lazy, we don’t bother trying to change. However if you don’t initiate change sometimes the consequences can be great such as whether you want to have flexibility, creativity and freedom in your life or if you are happy living day to day. Now for some you aren’t happy, but can’t see the light at the end of the tunnel. Do the hard yards, it may be a 5 year plan, but honestly at the end it will be worth it.

So after this Christmas I want you do a few things if you want to initiate change.

Step 1 work out how much you want for Christmas and birthdays in 2015 and include that as expenditure for 2015, include it in your budget, start putting that money away.

Step .2 create a budget by yourself, or with yourfamily. If you don’t know how to budget use someone that does.

Step 3 yes you now have more debt than 6 weeks ago but lets not give up, after your budget shows extra cash you can find, put it onto your credit card or personal loan, any extra payment will save you interest, that is dead money, start with the highest interest rate debt mechanism and work down.

By implementing these strategies you will have a better understanding where you are sitting financially and what you need to do to change. Worst case scenario, you won’t add to the debt in 2015 as you would have saved for those presents in advance. The consequences for not changing our ways is an inability to do what we want, perhaps that could be upgrading to a bigger house, or getting a new car, or having the freedom of living life how we want too, so act as efficiently as you can.

Have a great Christmas period, drive carefully and enjoy time with your family, friends and loved ones.

28 SepNegative gearing what is it?

Negative gearing is the ability to offset a losses on an investment against other income in your taxation return. Negative gearing isn’t restricted to just property but also other investments such as shares.

There is plenty of commentary that negative gearing causes issue’s to the housing market and should be revoked, but could the removal of negative gearing do more harm than good? Not many people remember but negative gearing was frozen back in the late 1987 when Paul Keating was Treasurer of Australia.

During this time it lasted 18 months before the Government realised it wasn’t a good idea. The freezing of negative gearing created a massive slow down in the property market, before people say yes, meaning house prices will drop, we have to think of the overall economy. A downturn in housing impacts many sectors and therefore your employment.

It also meant tenants suffered with landlords missing the tax benefits, rents increased. This caused housing affordability to increase for those mostly likely able to afford it.

When you hear the rumours of negative gearing being removed, let’s not forget it’s been tried before and failed, same as the rumours of removing the capital gain concessions. Also the Government can’t remove laws for investors already in the system so it will only be future investors that will suffer

22 SepThe importance of research for property investors

One of the biggest mistakes property investors make is believing that any property is a good investment opportunity. Many operate under the misconception that there will be little or no risk to their money if they invest it in bricks and mortar, but a successful investor will be the first to tell you that not just any pile of bricks will do. They’ll also tell you that you should never believe what the salesman tells you – and that’s because a sound strategy and doing your own thorough research are the keys to success when building wealth through property investment.

What should you research first?
The first thing you need as a property investor is a sound investment strategy based on your personal financial situation and your personal risk profile. To create this, you will need to research your financial position by consulting qualified professionals that you can rely on to provide you with an honest assessment and sound advice.

Engaging a team of experts at each stage of the investment journey will reduce your risk of making costly errors. When it comes to advice, it’s important to differentiate between free advice and sound, unbiased advice. Who you trust is important, so you should research every person you deal with very carefully.

As an industry accredited Mortgage Broking professional, you can rely on our advice to be sound and unbiased. We put your interests first and we will also refer you to other professionals we trust to help you along your investment journey.

You should also be wary of advice from people who are not educated about the market or don’t understand your financial position and objectives.  There’s always someone you know who has to put their .20c worth in, but you should take everything they say with a grain of salt.

Research your property markets
Once you’ve got your strategy, finances and a team of advisors sorted, the next step is to locate your first investment property. As mentioned earlier, not just any property will do. A common error is assuming that all property will enjoy capital growth – but property prices can go down as well as up, so you’ll want to research the property market you choose, before you take the next step of choosing an actual property to buy.

Smart investors know that Australia is not just one property market. For example, in this financial year, capital growth in median house prices in Sydney and Melbourne has far outstripped capital growth in all other capital cities. Remember, you don’t need to invest in property close to where you live – you can choose a property from anywhere in the country.

Research which areas have the most capital growth potential. For example,  find areas where population growth and demand for housing looks set to outstrip housing supply during your planned investment period, as this will help to ensure prices go up and not down.

Research which property to buy
No two suburbs or streets are alike in any property market. The property market you choose will have pockets of property with more capital growth potential than others. You need to research your chosen area to find these pockets – they’ll be areas where public transport links are close or will be established soon. They’ll also be close to amenities such as shopping centres, business centres, parks, schools and hospitals.

Generally speaking, to support capital growth potential, you need to make sure your investment property is going to be popular with prospective tenants and will be easy to sell when the time comes for you to cash in your investment. Avoid areas where the crime rate is increasing and look for areas on the improve – those adjacent to popular or trendy suburbs are a good place to start.

Research the value of the property you choose
Once you find a likely investment property, the next thing to do is make sure you’re not paying too much for it. You can research the value of the property by getting it valued by an independent professional valuer. You can also compare the recent sale prices of similar properties in the area to do your own valuation. Once you ascertain the correct price for the property you wish to purchase, negotiate hard to get it for the lowest price you can.

Make sure your research is ongoing
Once you purchase your investment property, you’ll need to review and assess it annually to check that it is achieving the level of performance required to meet your investment strategy. That means performing tasks like researching its performance in the marketplace with regard to capital growth, and researching the rental market to make sure you are getting the maximum rental returns.

Last but not least, you’ll need to keep a constant eye on your financial position and the loan market. We can help you assess when the time is right for you to access the equity in your investment property to make your next purchase and also help you to make sure you’re accessing the best loan  product for your needs.

If you need access to reliable property market data, ask us for assistance. We can also refer you to the right people to assess your tax position, legal requirements and more. Remember, the first thing you need to research is your financial position and that starts with your mortgage broker. So why not give us a call to chat about your investment plans today?

5 SepIs it possible to reduce your tax payments when Investing in Property?

Like it or not taxes are a part of the property landscape. It doesn’t matter if you are an investor or a home buyer, we get slugged.

The biggest whack of the stick is a tax called stamp duty. The state governments issue this tax, therefore the amount and the way it’s implemented vary from state to state. Here in SA, the Stamp Duty is the highest in the country. Added to that it isn’t tax deductible up front, it can only be added to the cost base when you sell an asset (for investment purposes).

A possible way to reduce stamp duty is to construct or buy off the plan. This allows for stamp duty to be calculated on the land component only and doesn’t not calculate on the final value.

This can save you as a purchaser tens of thousands on the initial investment. Sometimes State Governments provide incentives for apartments close to the city, to reduce urban sprawl. If you are interested in apartment investments, this could save you tax monies in reduced stamp duty also.

When it comes to investing in property there are many tricks, traps and strategies to maximise your tax benefits and reduce your tax payments, the above scenario’s illustrate to carefully consider your decision and the consequence before you act, I always recommend speak to your Accountant for tax advice.

Nieuvision offers Property Strategy planning and tax advice in a packaged service. Download our free Investment Property Finance Guide

11 JulHow to buy property

When we talk property and we talk how to buy property what do we do?

 

The first and easiest question is just buy it in our name, be that as single person or husband and wife. This alone is fraught with implications. How do we split the ownership? This split can influence your returns for the good and the bad.

 

Let’s consider John and Jane. John decided to stay at home and be the parent as his income was less, Jane a professional on a great salary in the 38% tax bracket stayed at work. They anticipated this to be the situation for the next 10 years. Jane was also annoyed at the tax she paid and wanted to look at property to reduce her tax payable.

 

John and Jane however went 50-50 on the contract meaning Jane would lose half of the tax benefits in rental losses as they would pass on to her husband even though he will gain no benefit. The flip side to this is 50% of the capital gain will also go to John, so if the property is sold whilst he is still a stay at home day, then tax will be reduce.

 

No person in this situation is the same. Ensure when you decide to enter into the property market you not only think for now but think for the future, whilst it can be unknown we have to plan for all aspects of investing.