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Have you wondered how many investment properties you would need for financial freedom?

I have found that whilst most property investors hope to one day replace their personal exertion income with cash from their investment properties, most don’t have a strategy to achieve their goal. Furthermore the sad truth is that most people do not even think about doing this or for that matter even consider financial freedom; or we would not have 85% retiring on less than $35,000.

Here is a brilliant example of this:

I was speaking with a friend of mine the other day and it was suggested that I should speak with the son about investing in property, as he was earning very good money, but blowing most of it on an expensive lifestyle and not saving. This of course is not unusual for many young people and I said that I would be very glad to chat with him.

My next question was; “So what property have you invested in?”
Answer; “None.”

Here is someone with a good income, living in a house worth about $950,000. So I my next question was; “What is your mortgage?”
Answer; “$50,000.”

So let’s look at this as a case in point. My friend has equity of about $900,000 in their home, which they could easily utilise to grow their wealth and yet they have no investments towards creating wealth or a nice nest egg to retire on!

There would be a number of reasons for this, most of which I have touched on ad nauseam. However, the main reason is ‘lack of education’ in creating wealth through property. This is a subject close to my heart and I promise that I will be offering to educate you on this subject next year.

So, I asked a mortgage broker (http://ozloanmates.instapage.com) that I know about this case, to explore the possibilities and it would appear that my friend (let’s call the friend John) could easily borrow around $550,000 and much more; if the rental was factored into the mix.

So John could go out and purchase a residential property (for say $550,000) that would have a rental return of 4%, which translates to $22,000 pa or $1833 pm before costs or say $19,500 after costs or $1625 pm after costs. The repayments will be $1833 on an interest only loan. The difference is $208 per month or $48 per week.

Note that I have not factored in tax deductions for depreciation, building allowances etc. etc. which would make it a positively geared property or let’s say neutrally geared property, that is increasing in it’s value by 10% per year on average. That being the case in 10 years the property is worth around $1,000,000 and will be returning $40,000 pa.

The possibilities are endless, because John could even buy 2 or 3 properties given the $900,000 equity in the home. I could go on and on, but the simple question is how many people are sitting on good equity in their home and not using it to increase their wealth. All it takes is a phone call or an email to open the doors to new possibilities.

So do yourself a favour and at least start thinking about it. They do not teach you this stuff at school and be mindful of property spruikers flogging their properties and I promise that I will be doing more to educate you on the endless possibilities of wealth creation through property.

For any questions, email: bertram@itsabreeze.com.au

So you have made a decision to create wealth through property, you have educated yourself about what to buy and where, you have created a strategy and now it is time for taking the right action.

Does this sound like you? If not this blog post might be of value to you.

Setting up your team when it comes to property investment is very important. So whom do you have on your team?

The property team should consist of an accountant/financial advisor, conveyancer/solicitor and mortgage broker and to get the right information and create the right strategy you should have a mentor/property advisor to guide you.

I have covered the subject of property spruikers before with their ‘free’ seminars and ASIC has been very busy tracking down over 80 or more of them recently and pulling them into line. So please stay away from them.

So we start with the accountant/financial advisor. As you would know all accountants are not financial advisors and furthermore all financial advisors are not really financial advisors. They do a very important job, but ultimately their role is to put the right beans in the right columns. What you need to know, to determine if your accountant is the right one for you, is to find out if they are financially secure themselves and whether they understand how to create wealth and have the knowledge and the experience to do just that.

And don’t forget your depreciation schedule for your investment property. You need to be sure that your accountant has competent knowledge of this plus planning, tax returns, trusts, self-managed super funds etc.

Don’t be afraid to ask what your advisors experience is, remember they are helping you build your way to financial freedom, and their advice needs to be in line with your goals.

As far as a conveyancer/solicitor is concerned I am a bit old fashioned and would rather have a solicitor rather than a conveyancer on board, because at times you might need advice on legal structures for your purchase and if any complications arise they are ‘Johnny on the spot.’ That said, you would be looking for a solicitor that did plenty of conveyancing work.

I will touch on Mortgage Brokers and Mentors/Property Advisors next week, as they are a very valuable ally on the journey of wealth creation.

 

Here is an interesting piece regarding dodgy Property Managers and some shonky practices.

 Click here to read

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