1. ASK YOURSELF WHY YOU WANT TO BECOME WEALTHY: There’s no point making loads of money just for the sake of kicking it like Sean ‘P. Diddy’ Combs with a bottle of Cîroc and bevy of babes. It’s just unrealistic. A healthy nest egg, or indeed a surplus of wealth, comes about from acting on your core values, with integrity and deep motivation. Once you’re clear on this, it’s easier to put strategies in place to reach your goals.
2. SET STRATEGIES: These days it’s just not enough to save for a home deposit, buy a modest house and then spend the next 25 to 30 years paying it off. The only person who profits from this is the bank and it immediately puts you in a deep debt cycle for the rest of your working years. What will you have left to retire on? Bottom line — you need to get your money working for you NOW. If you can invest at an earlier age and spend 10, 20, or 30 years investing, everything that you could imagine for your retirement can actually happen. The best way to do this is through property investment.
3. DO NOT OWN THE HOUSE YOU LIVE IN: Forget everything you know — renting is not a dirty word. By leasing out the property you own and renting the property you live in, you increase your cash flow, which means you can enjoy life while building a property portfolio at the same time. It will also give you substantial tax breaks when you build a property portfolio. Ironically, the government ends up paying a big chunk towards holding your portfolio and helping achieve your financial goals.
4. GET SET TO TIDY UP: No, we don’t mean your Man Cave — we’re talking cleaning up your finances. It’s about assessing your financials and refinancing any or all bad debts into one. Do you have a home loan? A car loan? Any investments? Any bad debts such as credit cards or personal loans? If your goal is to buy an investment property and you have a good income but have bad debts, it can negatively affect your ability to buy an investment property. Refinancing with available equity such as your home loan can get you out of the bad debt and also give you extra funds with which to invest. This in turn impacts your ability to borrow money, reduces your interest costs, increases cash flow and significantly drops your monthly commitments. It allows you to improve your position in terms of financial commitments and increases your ability to borrow money to invest in more property, to create more wealth.
5. START A SELF-MANAGED SUPER FUND: This is a no-brainer. Why would you give the government or a retail fund your money to do with as they wish? I’d rather be controlling my retirement, over someone who is getting paid to take an extra-long lunch break on my money. Many Self-Managed Super Funds, such as The A Team Pro, offer superior high return strategies to customers with as little as $50,000 in super, with the added bonus of them being stable against a volatile share market. Don’t have enough? Consider consolidating with a trusted mate or family member. From there, you can leverage your pool of funds, allowing you to access better quality investment opportunities — in other words, use that property to make even more property investments.
6. BEWARE OF LAZY EQUITY: Lazy equity is effectively money that is tied up in your home or investment property that is not being used. Use it wisely, and it can instantly start generating you wealth and future financial security. So many people can become ‘overnight investors’ by tapping into their equity. Place those funds into an exclusive investment strategy and you could more than double your money in just over a year.
7. FORGET YOUR SECOND DEPOSIT: Saving for a second deposit? You’re doing it wrong! Look at an Equity Loan, instead. Imagine you have a $500K property with a $200K loan, and you want to borrow to buy an investment property worth 500K. The original $200K loan is considered a bad debt as it is personal and there is no way can use it as a tax deduction. However, if you borrowed $70K against that home loan to borrow from a different bank in order to buy a second home or investment property, the debt essentially becomes an equity loan which is then 100% tax deductible. It will also cover you for you stamp duty and provide a buffer for a rainy day.
8. TURN YOUR TAX RETURN INTO A MONSTER: Maximising tax benefits when you are a property investor plays a huge part towards being to hold more property. For example, if you are getting your tax back in a lump sum of between $10-$40K, imagine how much you can be assisted with your cash flow each year, or even put it towards a deposit towards a new investment.
9. PAY OFF YOUR HOME IN 10 YEARS: Yes, it can be done. Start by thinking about what makes financial sense. It certainly isn’t working your entire life just to own the place you live and then having no funds for retirement. Smart investors know to maximise their income, cash flow and available funds — to generate wealth. In capital cities, it’s cheaper to rent where you want to live and invest in a growing market or area elsewhere. With your available income and cash flow — on average, it is easily possible to hold three times as many of the right types of properties (ones that cover all the costs themselves and are in great growth areas) when renting and investing, as opposed to owning. Consider this — if you had three properties (worth $500,000 each) that cost you $50ea a week to hold versus one property worth $500,000, which would generate more growth and have a greater compounding effect? Paying off standard repayments on a normal principal and interest loan will only see you paying off 20% of the loan itself by Year 15 (halfway). On a $500,000 loan you are only paying off $100,000 in 15 years. If you were holding three investment properties that have conservatively doubled in value over 15 years, you would have created $1.5million in equity. This doesn’t even include the rental income increasing and actually making you money. Before buying a home, rent and invest first and you are set for life. If you have purchased your home, convert your home loan to interest only, use the surplus cash flow to hold two investment properties for 10 years and sell them to pay out your home loan in 10 years not 30.
10. DON’T GO IT ALONE: The key to succeeding financially is to build an “A Team” of professional advisors to pool resources, knowledge and expertise from a variety of areas, giving you everything you need to achieve success. You can leverage the expertise and experience of multiple people at the same time. In order of importance your A Team of professionals should look like this:
⊲ You — yes, your good self needs to bring the vision, commitment and action.
⊲ Mentor — someone who you can aspire to, who has achieved the results and success you desire and who can be your guide and coach.
⊲ Finance broker — forget dealing with the bank yourself. You need an experienced and tactical soldier in the field helping secure the best loans and rates to assist you in building a property portfolio. WARNING: Finance can be the trickiest and most frustrating part about property investing, so use an expert.
⊲ Tax advisor/Accountant — when you start building your property portfolio you want to be maximising as many tax deductions as possible. Make sure you are using a property investment specialist accountant, not a standard one.
⊲ Legal advisor — when purchasing property it is paramount to have all contracts reviewed by a solicitor who can spot any potential issues or hazards.
⊲ Personal insurances — a risk insurance specialist or personal insurance advisor will help protect you from unexpected events that could have a very large impact on your life in more ways than just financially. Important policies such as life insurance, income protection, permanent disability insurance… are essential when building wealth to protect you and your family.