The Blogs that appear on this page may be sourced from outdated material so please seek appropriate professional advice. The blog material is in no way intended to be personal financial planning advice.

Catherines Chat

Wholistic Financial Solutions provides a lot of essential information and updates regarding the property investment industry. Check this page for the updates.

Property Investment Articles

Monday, March 07, 2011

This article describes the fourth strategy of nine property investment strategies.


Download the full report at www.wfscanberra.com.au

Strategy 4 – Buy and sell

Pros

 A simpler version of the buy, renovate and sell example above only that you don’t have to renovate. You simply buy, hold and sell for profit. This can be a great strategy in a fast upwardly moving market.

Cons

 Once again, transaction costs make this a very difficult strategy to profit from. You need your property to increase around $40,000 in value before you will even break even. This is on average one year’s capital gain. In my personal opinion, this is a strategy best avoided unless you know something about the future direction of a market that no-one else knows (sort of like ‘insider trading’ in the property market).

Download the full report at www.wfscanberra.com.au

Property Investment Articles

Monday, March 07, 2011
This article describes the THIRD ELEMENT of the SEVEN  elements to building a successful property portfolio so that you can reach your financial goals sooner”

Download the full report at www.wfscanberra.com.au

3. The Right Tax Advice  – “How to build your property portfolio using the tax man’s money”

The Right Tax Advice

“How to build your property portfolio using the tax man’s money”

 “It is crucial to get the tax strategy right from the beginning. The wrong choices during the crucial purchase period can result in losing tens of $1000’s in tax benefits forgone. It is also very costly to change the structure further down
the track.”

We will review individual personal situations, tax brackets of major stakeholders, future tax brackets, and many other issues so we can find way to legally maximize tax deductions such as depreciation and minimize income and capital gains taxes.

Issues that you need to consider before you invest in property are:

a)     What structure to use to maximize tax benefits – individual, company, trust, self-managed superannuation fund?
b)    What the income tax, negative gearing, capital gains tax and land tax issues related to each structure are – choosing the wrong structure can seriously increase your tax liabilities.
c)     Whose name to buy in to maximize tax benefits – most people think that they should buy in the higher income earner’s name and this may be correct but can exacerbate capital gains tax and land tax.
d)    Tax deductibility of pre-purchase and ongoing costs – can you claim the travel expenses to travel around the world (or Australia) looking for property? Perhaps.
e)    How to maximize tax deductions – how are you going to record all your expenses? Should you get a depreciation report? What about travel expenses for interstate properties? Can you renovate before a tenant moves in and claim these expenses?
f)      Structuring finance so as to maximize tax benefits – this is a very important step that many people get wrong.
g)    Is there any way of legally extracting the equity from your home and using it to buy your next home in a tax-effective manner? Perhaps.

At Wholistic Financial Solutions we are able to assess each and every clients individual circumstances and provide expert taxation advice as to the best was to structure your portfolio to minimize tax.

Download the full report at www.wfscanberra.com.au

Property Investment Articles

Monday, March 07, 2011
This article describes the SIXTH ELEMENT of the SEVEN  elements to building a successful property portfolio so that you can reach your financial goals sooner”

Download the full report at www.wfscanberra.com.au

6. The Right Coach – “Discover why most property investors fail – and what to do about it”
The Right Coach

“Discover why most property investors fail – and what to do about it”

This is very simple.

Most ‘wanna-be’ property investors fail because they fail to ‘act’. They really, really want to do something but they just don’t know where to begin. They start researching and get even more overwhelmed – there is so much out there! Many people then suffer from ‘paralysis of analyses’.

They get so caught up trying to pin-point the best time to buy, the best location to buy in, and the best type of property to buy. In the end they simply DON’T buy.

Many people want to research and research until they are absolutely, 100%, without-any-doubt sure that they are entirely correct and certain of their decision. If they wait till then they will simply never buy. As an experienced property investor I know you can never be 100% sure you have got it right. Even the most experienced investors get the 'D-Day’ (exchange and settlement day) jitters. It is human nature to have fear and doubts.

Other people want to do it but just can’t work out how to put aside that extra $2 a day. And I am serious, that’s all it costs at the moment to buy a property (depending on your tax bracket and the type of property you buy).

Others are just not sure whether they should invest first or buy their ‘white picket-fenced’ house for the Golden Retriever and the kids and invest later. Others simply think, “I can’t do it. It would be too hard for me.”

So what’s the answer?

Get a coach!
“What?” you say, “What’s therapy have to do with investing?” Well, a lot actually.

 What is a coach?

A coach can help you determine things like:
 What is your definition of success?
1.      Are you there yet?
2.      What do you really want to achieve in life?

 A coach can give you the support and encouragement you need to achieve your goals. They are someone who is on your side, objective and ready to assist with any blocks or challenges you may face along the way. A coach will provide guidance and help inspire you to design your financial and life journey. They will celebrate the good times with you and provide encouragement during the challenges. They can teach you to how to examine your financial beliefs and values, trust your instincts and build your excitement to be the best that you know you can be.

A coach will help you:

•   find out where you are at right now
•   look at alternative options should anything not be working for you
•  put into place the new actions to help you reach your desired destination

At Wholistic Financial Solutions all our sales agents are trained as property ‘coaches’ not just sales agents.  They will not ‘shove property down your throat’.  They will simply work with you, your goals and dreams, and hold your hand along the investment journey.

Download the full report at www.wfscanberra.com.au

Property Investment Articles

Monday, March 07, 2011

This article describes the third strategy of nine property investment strategies.


Download the full report at www.wfscanberra.com.au

Strategy 3 – Buy, subdivide and sell or hold

Pros

Fantastic opportunity for those not faint-at-heart.

Serious profits can be made by buying land capable of subdivision and doing what the previous owner was obviously too scared to do.

Cons

You need a large amount of capital (i.e. cash) behind you as, particularly in the current environment, the banks are simply not willing to lend serious money to even the most experienced property developer. If you are a novice your

chances of getting finance are seriously slim. It still can be done but you will need to put in a large portion of the funds for the development yourself. There are ways around this, such as: vendor finance, joint venture partners, and obtaining pre-sales. Above all else – seek professional advice.

In this instance, the tax man will definitely see you as a property developer rather than an investor. This means you will be subject to income tax and GST as opposed to the far more lenient capital gains regime.

You will also need to become involved with local councils and their development approval processes, surveyors, architects, etc. You will need to make this almost a full-time job.

Download the full report at www.wfscanberra.com.au

Property Investment Articles

Monday, March 07, 2011

This article describes the second strategy of nine property investment strategies.


Download the full report at www.wfscanberra.com.au


Strategy 2 – Buy, renovate and sell or hold

Pros

 Can maximize potential gain by improving areas of the property that are unsightly such as an un-landscaped front yard, a messy entrance way, a run-down bathroom or kitchen.

Good strategy for those with the time and skills (i.e. tradesmen or women) that can complete the renovation themselves.

Exceptionally good strategy for those that have the lifestyle suitable to living in the property for a year or more, whilst they renovate it, and then sell it capital gains free as it was their principal place of residence. (Beware – you do need to be careful with this strategy as the tax office has regulations against it – seek professional advice.)


Cons

The main disadvantage of this strategy is the chance of getting it wrong and making a loss.
  
  “Adding value by adding    improvements needs to be carefully planned and executed. Not everything adds value. It is easy to over-capitalize and not get your money back. What you do need to be is ‘market appropriate’.”
Transaction costs are another major disadvantage of this strategy. In a market moving quickly upwards, good profits can be made but in a slower moving market you need to make serious gains on your improvements just to cover the transaction costs (see above re costs).

Beware the tax man – as above. Do this strategy too often and you will not only lose your capital gains exemption but also could be viewed by the tax man as a property developer and lose the capital gains 50% exemption as well. A bad outcome – so seek professional advice.

Download the full report at www.wfscanberra.com.au

Property Investment Articles

Monday, March 07, 2011

This article describes the first strategy of nine property investment strategies.


Download the full report at www.wfscanberra.com.au

Strategy 1 – Buy and hold

Pros  

‘Buy and hold’ must certainly be the number one strategy we come across and for good reason. The main disadvantage of property over other forms of investment is transaction cost. It costs you approximately $20,000 to get in and $20,000 to get out, compared with, for example, shares, where it costs you as little as $19 to get in and $19 to get out (as long as the market hasn’t crashed in the meantime).

To minimize transaction costs most investors choose to buy and hold and bank on the average capital growth of around 10% per annum (reference needed). This way the transaction costs are averaged out over the years that the property is held and become far less significant. It is safe to say that a ‘buy and hold’ strategy should be implemented for at least 7–10 years and the longer the better.

Another major advantage of the ‘buy and hold’ strategy is that it adds to the ‘sleep-at-night’ factor. You don’t need to be constantly monitoring the market, every latest deal and every market movement. You simply buy a good property in a good location with good rental returns and high tenancy rates and then you forget all about it. You set yourself a goal of say, one property every 6–12 months and then once you have this property you just forget about it. You can continue on with your day job knowing that the property is on ‘remote control’. 

“The ‘buy and hold’ strategy allows you to withdraw equity from each property as it grows and use this towards your next purchase. This saves the significant transaction costs of constant buying and selling.”
Cons
 The main disadvantage with the ‘buy and hold’ strategy is liquidity. Due to the longer timeframe required for this strategy, if you need quick cash for emergencies it can be sometimes difficult to access. That is where having the right strategy in place won’t over-expose your financial well-being. At Wholistic Financial Solutions, we’ll teach you how to set up your portfolio without being over-exposed.
Download the full report at www.wfscanberra.com.au

Property Investment Articles

Monday, March 07, 2011

This article describes the seventh strategy of nine property investment strategies.


Download the full report at www.wfscanberra.com.au

Strategy 7 – Refresh your portfolio

Sometimes it is necessary to ‘go back to the drawing board’. You may have a portfolio that is not quite right. You may have had good intentions, theories, dreams or hunches when you bought particular properties but looking back you realize you made a mistake. But that’s OK. As they say, “There is no such thing as failure unless you fail to get back up again.” The successful man is one who fails four times but gets back up five times.

There are times when the best thing to do is sell – count your losses and move on.

Other times you may need to sell because you did not seek the right advice in the first place and you have the wrong loan in place or have bought in the wrong name.

 “A common example we see regularly is the client who has bought a home and done ‘what their parents always told them’ and focused on paying down the mortgage. Now they want to upgrade and rent this property out. Bad news- the reduced loan amount means the property is positive geared and they will be taxed on the excess of rent over interest.  Worse still, they will have to take out a large loan to buy their ‘home’ and this will be a non-tax deductible debt.

Another common example is the couple who has brought an investment property in joint names. A few years later the wife leaves work to raise a family and half of the negative gearing benefit is lost.”

 There are some very innovative strategies that can assist in these situations but sssssh…! These are a secret only to be shared amongst the elite investors (or clients of www.wfscanberra.com.au

Download the full report at www.wfscanberra.com.au

Why use a Mortgage Broker

Monday, March 07, 2011
“How to be confident that you have found the right loan and structure so that you can meet long-term financial goals and avoid serious costs – potentially saving 1000’s of dollars in long-term exit fees and interest rates”


“Finding the right loan to meet your needs can be a very daunting task. With so many lenders to choose from and so many products within each lender, it is almost impossible for the average person or investor to sort between the products (including all the fine print). It is important that you are sure the finance you are choosing is the best one for your circumstances.’

We like to use the example of buying a car.

If you walk into a Ford car yard and describe all of the features you want in a car and the salesperson thinks to themselves, “Gee, the latest Holden Statesmen would be the best,”– will he tell you that? No! He will convince you that the latest Ford something-or-other meets your needs. It’s the same with the banks. If you walk into a bank, any bank, you will only be sold that bank’s products.

We would recommend that everyone who wants to take out a mortgage should use the valuable services of a mortgage broker. Whether you are buying your first home or investment property or whether you are building a huge investment portfolio you should consult a mortgage broker. The advantages of using a broker are twofold. Firstly, it is free – the bank pays the broker the commission – and secondly, the broker is aligned to scores of banks and will find the best for you. It is in the broker’s interest to find the best product because they want your continued business.


Brokers have access to over 30 banks and lending institutions, including all of the majors (CBA, St George, NAB, Westpac, etc) and many popular smaller and non-bank lenders (ING, Bankwest, Rams, Suncorp, etc). Mortgage brokers will help you find your way through the complex maze of product choices and help you decide the best one for you. Everyone’s situation is different and different products suit different circumstances.

Mortgage brokers also assist you with all of the paperwork, submit the loan, handle all the bank’s annoying questions, co-ordinate the process with your solicitor and real estate agent and basically take all the stress and pressure from you. They’ll ‘hold your hand’ the whole way through and deal with any complications that may arise.

Mortgage Brokers: pros –
·       May save you time in shopping for loans.
·       May save money if fully independent.
·      Usually free.
·      Sometimes, given the broker-lender relationship, a bank will accept a loan application that they would otherwise have rejected.

Mortgage Brokers: cons –
·       You may pay more for your loan than necessary if the broker is not independent.
·      They may charge excessive fees or undisclosed commissions.
·       You may be persuaded to borrow more than you need, as this will boost their commission.

The cons can be easily overcome by using a broker aligned with Wholistic Financial Solutions as we ensure our brokers do are fully accredited, trained and ethically in all regards.

So, once you have chosen a product how can you be sure the ‘structure’ is right?



“It is very important to get the ‘right finance’ right from the start but it is also just as important to get the ‘structure’ right. It can be very costly, frustrating and time-consuming to act hastily and rush the finance part of the property transaction and not get it right. Realizing your mistake later can cost you tens of thousands of dollars in break fees, discharge fees, re-valuation fees, applications fees, fees, fees, and more fees.”

 
  
For example, we are seeing countless clients who locked in at 8.5% for five years. They are now paying far more for their mortgage and are coming to us for advice about breaking out of the loan. We had one quote from a bank of break fees in the order of $66,000. The client is simply locked in and has no way out other than the pay these exorbitant fees.

Other clients we have seen have taken out what they thought was a very simple and easy to understand loan. However, when they have come to us to buy their next investment property, we’ve had to inform them that to restructure this loan they’d be paying deferred establishment fees in the order of $16,000. And not only that, they would have to refinance their whole portfolio because their bank had


‘cross-collateralized’ all of their properties across all of their loans. A very simple mistake that could be avoided with the right advice.

Another common example is the client who has taken a loan to buy their home with the intention of eventually upgrading to a bigger home. They did what they thought was the right thing and paid as much as they could off the loan. Then when they came to us for advice about buying their dream home and using the existing home as an investment property, we had to give them the unpleasant advice that they would now be fully taxed on all their rental income and their large loan for their home would be non-tax deductible. Another simple mistake that could have been avoided.

So, as we explained above, it is very important to use the services of a mortgage broker. However, you need to be careful about choosing the Right Mortgage Broker. The average mortgage broker is ‘transactional’ – they just get the best deal for you for that transaction. They do not normally consider your long-term strategy and whether the loan they are signing you up for will be the right loan for you 12-months down the track when you buy your next property. We have seen so many clients who were signed up for the wrong loan and are now paying the price.

To determine whether your mortgage broker is the right one for you ask the right questions.

Questions to ask your mortgage broker:

·       How much does the service cost and when do I have to pay?
·       Do you belong to an industry association such as the MIIA/MFAA and if so, does that association have a dispute resolution policy? (Ask to


see it in writing. Disgruntled borrowers can also contact the Mortgage Industry Ombudsman on 1800 138 422.)
·       How do you identify the best solution? Is it simply commission-based or do you use a software package? (Their criteria for selection should be logical and transparent.)
·       How many lenders (and which lenders) do you represent? (Make sure the broker deals with a spread of lender types i.e. banks, mortgage managers and others.)
·       How do you get paid? (Ask them to disclose all commissions and payments.)
·       Can you provide comparisons of any loans recommended, including upfront and ongoing fees?
·       Can you clarify the actual cost of the loan, including and excluding interest, fees and ongoing costs?
·       Do you comply with the Privacy Act?
·       Do you have professional indemnity insurance?
·       How long have you been in the industry and can I read your testimonials from previous clients?

Property Investment Articles

Monday, March 07, 2011
Once you have decided the Right strategy, organized the Right finance and sought the Right tax advice you then need to source the Right Property.

This can be an extraordinarily time-consuming, complex and confusing process. You can do it yourself if you have ample, and I mean ample spare time to spend hours upon hours every night and weekend researching and ensuring that you are completing your due diligence. You will need to research:

·       the best states to invest in all across Australia
·       the best suburbs within those states
·       the best streets in those areas
·       the demographics (in relation to those in the area – their age, sex, marital status, average income, family size and whether they are renters or owners – both now and predicted)
·       the capital growth of the area – both now and predicted
·       the average rent of the area – both now and predicted
·       the infrastructure of the area – both now and predicted
·       the government zonings of the area (now and planned changes)
·       the government’s plans for development of roads, hospitals, schools, shopping centers, etc
·       the government’s planned changes or improvements to surrounding roads, highways and suburbs
·       plus many, many more factors


Once you have researched all of the above and you are sure that you have located the right area of Australia to invest in, you will then need to contact all the local real estate agents, set aside a few weeks of your time, try to arrange all of these agents to show you the stock they have on hand at that time and hope you can find a property that meets your criteria during this time, otherwise you will need to re-book the trip and go again when new stock reaches the market…

…or you can simply use a property buyer’s agent service or a property aggregator…


What is a buyer’s agent or property aggregate? 

You need impartial, independent and reliable advice in order to be successful at property investment and that’s precisely what buyers’ agents and property aggregators are in the business of providing.

Buyer’s agents work for the buyer NOT the seller’.

Imagine that instead of having to contact heaps of different real estate agents and developers and then having to sift through all of the competing and contradictory information they give you, imagine if you could contact just one agent and they would do all the running around for you.  They would contact many different vendors, real estate agents, developers, etc and, after determining what your needs and wants are, they will then present a summary of the best options available on the market at the moment that suit YOUR NEEDS. 

That’s what Buyer’s agents or Property Aggregators’ do. They work for you.






They provide market analysis and identification of growth areas in the capital city markets. They identify, source and negotiate specific investment properties in keeping with market conditions and the client’s requirements. Clients are provided with recommendations in a written report covering:

·       indicative investment cash flows
·       detailed market demographics and commentary
·       specific property recommendations
·       property plans, ,photos, specifications etc
·       full financial spreadsheets
·       assisting clients with the inspection and purchase of appropriate investment properties
·       negotiation of purchase price
·       coordination of the purchase process and ongoing client support


What to look for in a buyers agent

Independence is the number one factor. Ask them if they:

·       Sell more than one product from more than one developer
·       Have access to all of the fast-growing states of Australia.
·       Are knowledgeable about investment strategies.
·       Are experienced in property investment. Do they walk their talk? Ask them, “How many properties do you own?” Don’t be afraid to interrogate them. It’s your money they will be spending so you need to ensure you are 100% comfortable with their knowledge and experience.
·       Have access to every other specialty field necessary to help you complete the transaction, that is:                                          
1.     property strategists
2.     a finance team
3.     tax advisors
4.     property managers
5.     life coaches


“A really good buyer’s agent is knowledgeable about most mainstream investment strategies. They have an understanding of what the client’s needs are on a more personal level with regard to their goals, strategies and fears. They have the ability to ‘hear’ the client’s views and to take them and turn them into fully-realized achievements.”







Why use a buyer’s agent?

In a nutshell, because they save you the time you would otherwise spend researching. They save you the cost of the trips (all of which are non-tax deductible as you haven’t selected a property yet). AND THEY ALLOW YOU TO SLEEP AT NIGHT because you have done your due diligence by focusing on selecting the right buyer’s agent, trusting them to select the right property.

Buyer’s agents are experienced professionals who buy properties on behalf of clients on a daily basis. They have extensive contacts and have many buying strategies at their disposal. In other words;

They take a client’s request and apply their experienced strategies to deliver the best result for that client. You wouldn’t ask a boxer to do brain surgery…why not use an expert property sleuth to find the right investment for you?’

Property v Super (SMSF's & Property)

Monday, March 07, 2011

Is the Age Old Battle between Property & Superannuation finally over?

Why is there a war?


Since time immemorial it has been argued by numerous opponents as to whether the benefits of investing in property outweigh the tax concessional environment of superannuation. 

From a cynic’s point of view, one could say that the opponents opinion’s debate varied considerably depending on their own bias.  And this bias seems to be greatly influenced by the advisor’s commission structure. 

Funnily enough, analysis provided financial advisors proved, without a doubt, that superannuation and shares is the way to go whereas just as convincing arguments, raised by property spruikers, real estate agents and mortgage brokers, suggested that property was by far the superior investment.

Who should you believe? 

A new battalion – property and superannuation join forces?


The battlefield has changed and changed dramatically. 

Why would you choose;

Property instead of Super

Or

Super instead of Property

When you can have the best of both worlds instead.

Why has the front line shifted?


New laws introduced in September 2007 allow Self Managed Superannuation Funds (SMSF’s) to, for the first time, buy geared property in a simple and uncomplicated manner. 

SMSF’s can now select a property of their choice, be it;
·         residential
·         commercial,
·         or rural
and borrow up to 75% of the value of the property. 

Previously an investor had to choose between;

·         using his spare funds to invest in a negative geared property,

·         OR contribute the funds to superannuation.  Let’s have a look at an example comparing the two alternatives.

For advice, assistance and to get started with Property and or SMSF go to www.wfscanberra.com.au

Comparing the two – Option 1:



Take Johnny who is 35 and purchases an investment property.

Presuming average capital growth of 7% and rental yield of 5% (both very achievable) the following scenario occurs at age 60.

Value of Property:  $1,775,328
Mortgage owing: $350,000
Net Value: $1,425,328


Plus, the property has been cash flow positive since year 7 netting a cash flow of $584,480 which Johnny could use for further property investing.

Taking tax out of this amount will bring the returns down to:
Net Capital Gain: $1,211,529
Net Cash flow: $409,136
Overall Outcome: $1,620,665

(*Presuming a 30% tax rate,8.5% IO Mortgage rate,rent yield grows at 6% in line with property growth, excess cash flow taxed)

Comparing the two – Option 2:


Compare this to Sally who invests the same amount as Johnny into superannuation. Presuming the same growth and yield (if his superannuation was invested in a well diversified growth portfolio) he would achieve a superannuation balance of $432,658 by age 60.  This is well short of the gains made by Johnny.


(*Presuming a 15% tax rate, contributions include the initial deposit and the cash flow shortfall and cease in year 7 when property cash flow positive, no CGT as investment held until after age 60)

Comparing the two - An un-biased opinion


As any professional advisor and serious investor should know there is more to consider than the pure numerical outcome.  Whether considering property or superannuation other important factors need to be considered. 

One of the most important factors is the stage of the investor’s lifecycle. 

In the working years of an investor’s life a strong cash flow allows the possibility of using gearing strategies to maximize returns thus making property a preferential option. 

Once the investor reaches the pre-retirement phase, it may be unwise to take on the risk of gearing.  Therefore, this may be the preferential time to consider locking away as much as possible into super.

The most common investment strategy seen in the baby boomer era was to invest all surplus funds into accessible investments including property and shares and then cashing these in and contributing the funds into super just prior to retirement.  The only disadvantage of this strategy was a potentially very large Capital Gains Tax bill.

Who shot this strategy down?


However, this strategy has been dramatically hampered by the Governments new contribution rules which only allow $25,000 a year (and $50,000 a year if over 55) of concessional contributions per year.  

The effect of the new contributions rule is to significantly disadvantage generation X and Y.  It is fair to say that most young singles and young families have better things to do with their money and more pressing needs than to make the most of their $25,000 per year contribution limit.  Then when they are getting closer to retirement and have more surplus funds they will be prevented from, like their pre-decessors, making large contributions just prior to retirement.

So taking the above example a little further let’s suppose Johnny sold his property at age 60 with the intention of rolling the funds into superannuation. He made a gain of $1,425,328.  Capital Gains Tax will be incurred on the sale bringing his net gain down to $1,211,529.  Can he contribute this to his super fund?

Under the current rules he will only be able to contribute $50,000 as a concessional amount (that is; tax deductible) and $100,000 as non-concessional.  Anything over this will be taxed at 48.5%.  If the current rules still apply when Johnny is 60 he may be able to bring forward three years worth of contributions and contribute $450,000 in one year.  This will still leave $761,529 outside the super fund that he is prohibited from contributing. 

So what does this mean?


What the above analysis means is that the age old argument of super Vs property is superfluous.  It is redundant and advisors and investors alike need to re-consider their strategies.

The contributions restrictions require investors to consider super much sooner than later.  And the new borrowing rules within SMSF’s open up a whole gamete of possibilities. 

Following on from the above example:


Johnny already has $50,000 in his retail super fund selected for him by his employer.  He chooses to roll this over to his own SMSF and use that to pay a deposit and purchase the investment property in the SMSF.  Instead of paying the negative gearing shortfall personally he instead salary sacrifices this amount to his super fund to enable the super fund to meet the mortgage commitments.

At age 60 Johnny has accumulated the same gain on the property as above, that is; $1,425,328 but he can now sell the property Capital Gains Tax Free (assuming he is on a pension).  The positive cash flow from the rental income has also been taxed at 15% instead of 30% netting him an additional $64,150

The total gains from simply
holding the property in his
SMSF instead of personally
are over $277,949.

And of course he could have used the positive cash flow to fund another 4 or 5 properties increasing the gain to well over a million.

For advice, assistance and to get started with Property and or SMSF go to www.wfscanberra.com.au

Why would you buy property in a SMSF instead of personally?


For many reasons including;

  • you get the benefit of ‘leverage’,
  • a maximum of 15% tax on any rental income in excess of costs,
  • you receive a tax deduction for the loan repayments of principal (which is normally impossible) via salary sacrificing the amount required to cover the shortfall,
  • asset protection – the asset is protected from creditors in the event of a lawsuit or bankruptcy (some conditions apply),
  • the property can still be sold and the loan repaid at any stage,
  • any capital gains on the property when sold will be taxed at a maximum rate of 10% (if asset held for more than 12 months)



But the biggest incentive of all – if you keep the properties until age 60 and commence a pension from the fund;
·       any capital gain on the property will be TAX FREE,
·       any rent on the property will be TAX FREE,
·       any income paid out to you will also be TAX FREE.


The laws are only new and law complying products are now being introduced and marketed.  It is envisaged that these products will hit the market like a storm once investors realize the potential.  There are already over 350,000 SMSF’s operating in Australia and it is likely that this figure will increase exponentially once knowledge of the loan products becomes widespread. 

In fact, as at May 2010, SMSF’s are growing at a rate of 2500 per month.

It is also interesting to note that this may be the first time in history that all advisors (financial planners, accountants, auditors, property advisors and mortgage brokers) have a common ground for advising clients.  All advisors have something to gain by assisting clients into these products. It’s not only a busy time ahead for advisors but a time to join forces and put a cease fire on the battle.

How to End the War and Live in Peace:


1.          Establish a SMSF – your advisor can do this in 24 hours

2.          Open a bank account with a bank of your choice

3.          Write to your existing funds and request them to rollover your funds to your SMSF bank account

4.          Find a property – recommend that you do this through a buyer’s agency. (See our Free Report as to why)

5.          Arrange a loan through a broker who specializes in SMSF loans.

6.          EASY AS THAT

For advice, assistance and to get started with Property and or SMSF go to www.wfscanberra.com.au

Most importantly GET Proper Advice


Ensure you consult an independent advisor who is licensed to provide Property Investment Advice, qualified and experienced in taxation and finance and regulated by ethical industry associations.

Your advisor should be willing and able to advise you, in writing;

·         How many properties you can afford to buy,

·         Where to buy and why,

·         What returns you should expect on your portfolio,

·         How much will it cost you to hold your properties per week (after tax),

·         How to minimize tax,

·         How to buy – individual name, company, trust or SMSF,

·         Your exit strategy,

·         How to insure your portfolio is safe in the event of any unforeseen circumstances,

·         What will be the ‘end result’ – your exit strategy,

·         And most importantly – will this enable you to achieve your long term income and lifestyle goals in years to come.

For advice, assistance and to get started with Property and or SMSF go to www.wfscanberra.com.au


Yours Sincerely, Catherine Smith
Wholistic Financial Solutions
www.wfscanberra.com.au
02 6162 4546
Bachelor of Commerce / Masters Degree Taxation
Diploma of Financial Planning / Diploma of Mortgage Broking / Diploma of Real Estate / Justice of Peace(ACT)
Certified Practicing Accountant. Fellow of NTAA.
Recognised Taxation Specialist.
Public Accountant.  Tax Agent.
SMSF Specialist.
Training Consultant for Property In A Box
PASSIONATE PROPERTY INVESTOR FOR OVER 20 YEARS

Discover How to Build A Property Portfolio The Right Way Right From The Start

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