More young people are getting into rentvesting! One of the growing trends seen in recent years as house prices in inner city areas have risen.

In this article by Danielle Cahill from realestate.com.au, she explains the term and trend of rentvesting!

“One of the growing trends seen in recent years as house prices in inner city areas have risen, is that more young people are getting into rentvesting.
Working professionals are buying properties on the outer edge of the city or in an area where they can afford to and renting that property out while renting a home for themselves closer to the CBD in an area where they would prefer to live.
“I think it’s a fantastic idea, not just for younger people. We’ve helped dozens of clients go down the rentvesting path,” says Propertyology Managing Director Simon Pressley who adds “this affordable option can help out downsizers as well as first home buyers.”
Rentvestors can be “significantly better off” renting where they are comfortable living while buying where they can afford to, says Pressley. Rentvestors should research their options and consult a qualified financial advisor to ensure that the sums work in their favour, he adds.
If house prices in areas within 15km of our CBDs keep rising, is it time for some home buyers to radically reassess their options as reintvestors ?“

For further advice call Positive Properties now on 0405 100 146 to find out more about our variety of buy and hold strategies or contact us at www.positiveproperties.biz/contact/
This can also work as an option for some people struggling to pay off a mortgage, which means that the tenant contributes to the mortgage as well as covering the rent.
Clear as mud?
Let me tell you about Kevin and Jane
Kevin and Jane’s Story
Kevin and Jane up-sized from a unit to buy their dream family home in a coveted suburb in Sydney.
Shortly after moving in they realized that, as it was situated below a cliff, it was always in shadow and during the winter it was extremely cold. Jane was at home most of the time with toddler and baby, hence their electricity bills were through the roof. They put up with this for a couple of winters as they didn’t want to go to the expense of selling and then buying a new home.
In the meantime Kevin had got a promotion at work which put him into a higher tax bracket
– which actually mean’t his take home pay was less, and they were already struggling to pay the larger mortgage.
So I suggested to them “Rentvesting”
They knew that they could get $800/wk in rent for this house.
So they moved into a lovely sunny house in a nearby suburb, paying $600/wk in rent.
This gave them an extra $200/wk to go towards their mortgage plus much cheaper electricity bills.
The added advantage is that their original home is now an investment property so they can claim depreciation and expenses against their tax.
They also keep their prestige house and will reap the benefit of Capital Gain in the long term.
What’s all this information worth to you?
If you are like a lot of other people struggling to pay the mortgage and believe you can’t afford an investment property or don’t know how to get started phone Positive Properties now on 0405 100 146 to find out more about our variety of buy and hold strategies
or contact us at www.positiveproperties.biz/contact/

Attention: Small and Medium Business owners!

I recently found this article by Mark J Kohler and wanted to share it with you. He states the benefits of wise property investing so well.

(I couldn’t have done it better myself)

As entrepreneurs find success with their primary business ventures, many search for the proper investments for their profits.

Of course, we can and should all start with traditional tax preferred vehicles. These are the bedrock of good ‘benefit’ planning for ourselves and our employees. I’m also convinced more entrepreneurs should consider rental real estate as an important part of their portfolio,
so let me list a few reasons that may change your mind:

1. Gain more leverage. Real estate is one of the few investment vehicles where using the bank’s money couldn’t be easier. The ability to make a down payment, leverage your capital, and thus increase your overall return on investment is incredible.

2. Grow, tax-free. Buying rental property based on speculation of its value is a dangerous tactic since cash flow is the key. However, appreciation over the long-run is certainly realistic and at the least you should be considering a tax-deferred strategy. In the future, you may even consider a charitable trust, or an installment sale to lesson your tax liability further.

3. Tax free cash flow. It’s no secret that because of depreciation and mortgage interest deductions (if you leverage your capital), your cash flow should be tax-free. That’s right! The far majority of the time an investor will never pay taxes on their cash flow and can wait for capital gains on the sale of the property in the future.

4. The tax write-offs against your other income. Depending on your classification as an Active Investor or Real Estate Professional and your income level, there is a good chance your rental property will not only give you tax-free cash flow, but an overage of tax deductions you can use against your other income. With that said, this is something you want to discuss with your tax professional before investing so your expectations are realistic.

5. Increased tax deduction strategies. Rental property affords investors with another incredible opportunity to convert personal expenses to potentially valid business deductions. Don’t forget that rental real estate is a business. This means that travel expenses to check on your properties and payments to family members who manage your properties (such as students away at college) can be deductible and increase the tax benefits when it comes to cash flow and the future sale of the property.

6. Rental real estate is a forced retirement plan. Australians are terrible savers. We lack the self-discipline to put a monthly deposit into our accounts. However, buying a rental property is a significant commitment that you are required to commit to and maintain. You will always be grateful in the long-run when you don’t give up on it and build future cash flow and wealth.

I meet with a lot of successful entrepreneurs, and almost every one of them has taken profits from their businesses over the years to invest in rental property. Based on this fact and the list above, I have consistently urged my clients to buy one rental property a year and already have clients with rental properties earning them money they never imagined they’d have.

The far majority of us will never get rich overnight. It takes long-term investing and a diverse portfolio to build true wealth. Don’t forget Real Estate as an important part of the equation!
Entrepreneur Coaching – Mark J Kohler

Andrew and Amanda are a young couple I helped through the experience of buying an investment property.

They asked me to go with them to see a property at Helensburgh, just south of Sydney, which they really liked but were undecided as to whether it was a good deal.

Although it was a fairly new home there were many things demographically wrong and the eventual rent would have been much lower than their mortgage repayments.

They were looking for somewhere they could live in but rent out in a few years when their family outgrew the house. They were both working in the City and they also had a toddler. I pointed out to them that it was a very long commute to the city and neither day care nor the railway station was conveniently located.

They needed someone to take the emotion out of the situation.

I suggested they look at Holsworthy where, at the time, there was an over-supply of low cost housing. There was also a lot of new development in that area. They bought a small 3 bedroom place which was an easy commute to the City with shops, medical centre and pre-schools within walking distance.

They now have 2 young children and have recently moved to a 5 bedroom house. Their 2 rental properties are a very solid start to a portfolio which should see them in good stead during their retirement.

How can I run when I can’t even stand up!

At the end of last season I went to watch my 5 yr old grandson play football at his  Gala day .

The first game was very successful, then he played in the sun on the lunch break with his ‘grown up’ friend who had come to watch him play.

After lunch, for the second match, he was not keen to play and collapsed in tears by the fence. His mother tried to persuade him to go out on the field, as did Nanna and one of the player’s mother. We all know kids are resilient and if only we could get him on to the field he would forget about the pain in the back of his knees. Eventually I managed to persuade him to sit on the bench and watch with us.  After a bit of coaxing his reply was,

“I really want to play, but how can I run when I can’t even stand-up?”

Eventually at half-time the coach said to him,

“I think you would be able to get a goal in this match, why don’t you just stand by the goal mouth and your team can kick you the ball.”

He then allowed himself to be picked-up off the bench and taken out on to the field. After a minute or two he was running around with the others and eventually he scored a goal.

Is this like many of us? We know that we can run, but we don’t know how to stand up and take those first steps towards the goal.

If you feel overwhelmed about  finding  your own Investment Property and don’t know how to get started or where to look, Download my  FREE  Tips “7 Questions you need to ask yourself  before buying an Investment Property!”

The Difference Between Positive and Negative Gearing

“Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”~ David Copperfield

Whoever thought that two hundred years ago Charles Dickens would be describing the difference between positive and negative gearing!

Over my years of investing it has really surprised me to discover how many people do not know the difference between positive and negative gearing.

It really is as simple as Charles Dickens explained of making sure that the entire income from any Rental property is more than the expenses.

When weighing up the expenses you must include everything: the sale price, stamp duty, solicitor’s fees, land tax, council rates, water rates, renovations & repairs and, if it’s a unit, strata fees. Strata fees can be a killer. Many people have got out of holding a unit just because the strata fees were too expensive.

Did you know that only 10% of people in Australia have an Investment Property and of that 10% only 5% have more than two?

If you would like to have a positive Cash-flow investment portfolio to give you a secure retirement then I suggest that, as this is close to the beginning of the year, you should plan to buy at least one investment property this year.

In my coaching program I help people build up their portfolio over their working life so that they have several properties bringing in a positive cash-flow, passive income to secure their retirement.
How many properties do you think you could buy if your properties were negative geared? Because you’re paying for them, out of your salary, you will probably only be able to afford two. However if you have positive geared properties and you can show the bank that the loans can be serviced you should be able to afford an indefinite number!

Nowadays, with interest rates below 5%, it’s a lot easier to find positive geared properties, where the rent will cover the mortgage repayments. However, what if interest rates increase? How would you cope when they do go back to 7, 8 or 9 percent if your property is already negative geared?

So if you plan to retire before you are 70 on more than the aged pension, I strongly recommend investing in property with some expert advice.

Anita Fursland
Positive Properties
02 9545 5005
0405 100 146
www.positiveproperties.com.au
anita@positiveproperties.biz