DISCLAIMER This e-booklet contains general information only This information has been prepared as a general guideline, and is not intended to be an exhaustive or a complete analysis of the topics in question or issues raised in this e booklet. There are many particular legal, taxation and accounting matters which have not been dealt with in this e booklet and readers are urged to discuss any aspect of the operation of any of these matters discussed herein with their professional advisers. In particular asset protection, estate planning and superannuation are potentially very litigious areas of law and you will need specific advice before you take any actions if you want your wishes complied with. Before taking any action or implementing any strategy you should seek professional advice from your lawyer, accountant and or financial planner who will take into account your specific circumstances and objectives. Whilst reasonable care has been taken in preparation of this information, subsequent changes in circumstances (including legislative changes) may occur at any time and may impact on the accuracy of this information. Chan & Naylor Australia Pty Ltd nor its directors, officers or associated and related entities including the author take no responsibility for any omissions or inaccuracies in this information and will not be held liable for any losses or damages that may result in the use of this information. The information contained is accurate at the time of publication being 13/02/2015
The information contained herein is not intended to represent or be a substitute for specific financial, taxation, legal or investment advice and should not be relied on as such. Before acting on any information you should seek specific professional advice taking into account your specific circumstances and objectives.
The Five Essentials to the Acquisition of Property The 5 Pillars 1. Summary The key is to find and unlock this wealth which requires you to start before you purchase and understanding that real wealth is primarily derived from understanding and using debt to have the largest possible asset base.
These 5 pillars are created to ensure that each investment will maximise your return while minimising your risk.
I.
Knowledge a. b. c. d.
II.
Structuring a. b. c. d.
III.
IV.
Control Taxation Issues Asset Protection Estate Planning
Financing a. b. c. d. e.
“Property wealth is not under the floor boards but under your eyes.”
Invest in your education Setting and meeting goals Where and how to look Understanding basic financing and valuation
Line of Credit Refinance No cross collateralisation Bank or non bank lending “Serviceability”
Location a. Rental Yield
The Get SmartTM process of identifying, creating, protecting and liberating property wealth.
V.
Uniqueness a. b. c. d. e.
Capital Growth – market Capital Growth - manufactured Borrowing Rate (Deposit) Wholesale Purchase Price Superior end value
The information contained herein is not intended to represent or be a substitute for specific financial, taxation, legal or investment advice and should not be relied on as such. Before acting on any information you should seek specific professional advice taking into account your specific circumstances and objectives.
2. The 10 Commandments for Investing When contemplating an investment you must follow the 10 commandments.
Commandment 1
Money that you invest must carry minimum risk. • • • •
Banks “love” residential property and will generally lend 80-95% of value giving you massive leverage Banks have not been known to reappraise a loan in a market downturn The market is massive at over $800 billion with over 70% being owner occupiers. Less than 30% investors Unless a serious mistake is made property does not fall below its replacement market over time
Commandment 2
You must achieve the highest possible returns on the money you invest as opposed to the return on the total asset value • • • • •
Maximise your returns by investing the minimal amount Residential property gives the highest long term return on your equity You can sometimes borrow over 100% of the property value No clear market price for property Property carries a lot of emotion
The information contained herein is not intended to represent or be a substitute for specific financial, taxation, legal or investment advice and should not be relied on as such. Before acting on any information you should seek specific professional advice taking into account your specific circumstances and objectives.
WCI
Commandment 3
You must invest your money in incoming producing assets that outperform inflation and return no less than 7% over the 10 year period • • •
Residential property has two incomes rental and capital growth with tax advantages to help outperform most other assets Residential property can normally always be rented out. There is no guarantee that companies will pay dividends Do not invest for average returns as you may get below. Invest in highest growth properties over a cycle.
Commandment 4
You must invest in assets that appreciate in value showing proven historical growth performance. • • • • •
Specific residential property is one of the only investments with consistent capital growth Residential property is limited in the numbers capable of being produced thus creating supply issues Residential property is the only asset absolutely required by the majority of people
You do not pay tax on capital growth Capital growth creates equity which can then be borrowed against
Commandment 5
You must invest where tax benefits are plentiful. Residential property provides: • • • • •
Do not invest just for a tax benefit as this can be sort lived Negative gearing benefits on a high loan to valuation ratio Deductible borrowing costs
Depreciation allowance on both the building and fixtures. Some leisure properties have increased allowances Depending on taxation rules at the time superannuation via an Enduring Family Superannuation Fund may improve your wealth creation
The information contained herein is not intended to represent or be a substitute for specific financial, taxation, legal or investment advice and should not be relied on as such. Before acting on any information you should seek specific professional advice taking into account your specific circumstances and objectives.
Commandment 6
You must invest in assets that can be insured and protected. Residential property allows for a multitude of these benefits • • • • •
Fixed interest rates Land lord insurance Personal protection Constant market research by third parties Always in demand by the majority of the population
Commandment 7
You must have an investment system that is specific and all encompassing. Residential property has many avenues for strategic investments system. • • •
System that ensures investors focus on all the cash flow streams ie purchase price, rental, capital growth. Banks do not tend to call in loans if repayments made Many different entry points
Commandment 8
You must invest in assets which require minimal input. Residential property can provide you with this type of investment. • • •
Once purchased there is minimal management The asset is self fulfilling in that you can regularly refinance and extract profits (no tax) Property seems to consistently double every 7- 10 years thus ensuring minimal investments to achieve desired outcomes
The information contained herein is not intended to represent or be a substitute for specific financial, taxation, legal or investment advice and should not be relied on as such. Before acting on any information you should seek specific professional advice taking into account your specific circumstances and objectives.
WCI
Commandment 9
You need to invest in assets which require little to no money while maximising your capital growth. Residential property allows for massive leverage due to the power of borrowing. • • • •
Residential property can be secured with minimal down payments Residential property allows for extended settlements thereby increasing your returns prior to purchase Off the plan means buy now pay latter. Growth with no mortgage Residential property can be purchased with options again reducing the impost on your cash
Commandment 10
You need to be able to input your control over assets. Your input should increase the asset value. Residential property is the only assets that allows this • • • •
Renovations and refurbishments Minor changes can greatly increase value Residential property is not subject to unscrupulous management which can destroy all value Residential property allows for passive income without the need to continuously review your asset
The information contained herein is not intended to represent or be a substitute for specific financial, taxation, legal or investment advice and should not be relied on as such. Before acting on any information you should seek specific professional advice taking into account your specific circumstances and objectives.
Do you think you could potentially use any of these strategies? Talk to Chan & Naylor first about getting a Strategic Review of your situation to see what’s right for you and to help you plan for a future of financial freedom.
Visit our website www.chan-naylor.com.au or Call us 1300 250 122 to find out more about or arrange a Financial Strategic Consultation with a Chan & Naylor Partner at one of our 16 offices located in NSW, QLD, VIC, SA and WA.
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