The Blogs that appear on this page may be sourced from outdated material so please seek appropriate professional advice.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 Clock is Ticking

Wednesday, March 02, 2016

Herron Todd White's Property clock noting Toowoomba, Canberra, Brisbane and Sunshine Coast as rising markets. good picks in my opinion too


 

 

 

Wealth Creation Strategies for the Average True Blue Aussie

Thursday, February 05, 2015

 

Wealth creation strategies for the average true blue Aussie

When the average person thinks of wealth creation strategies they generally think of ‘financial advice’.  However, there is a fundamental flaw in the financial advice industry in that it relates very little real wealth creation strategies.  In addition, it is neither accessible nor comprehendible for the average Australian family.  So the very ones that need financial advice, the average Australian family, cannot access it or understand it.  Even those that are lucky enough to be able to afford very basic financial planning, aka wealth creation advice, find it overwhelming and not comprehendible because the very term financial planning is misleading. 

Wealth Creation Strategies Definition

So what is the definition of ‘wealth creation strategies’?  One financial dictionary defines it as Accumulation of assets (especially those that generate income) over a long period of time.

Let’s see if real wealth creation strategies actually relates to financial planning.  It is actually very had to find an agreed definition of the term ‘financial planner’.  However, a ‘financial plan’ is defined as  ‘a comprehensive evaluation of someone's current and future financial state by using currently known variables to predict future cash flows, asset values and withdrawal plans

Yet when the average Aussie thinks of financial planners they generally think the person will be a highly educated and experienced professional that can assist them across all areas of their financial life.  Someone who can help them budget and save, then invest these savings in various investments including property, and also someone who will be able to reduce all the complicated financial strategies into a simple to understand no easy to implement plan.  However, this is not what happens when they see a financial planner. 

Financial Planners

Financial planners are basically product sales people getting paid commissions based on how much they sell. Worse still, some of them, are not highly educated at all, as a financial planning diploma can be obtained via internet based training courses. Some of these courses are quick and easy to complete and are more designed to make the supplier of the course money for course fees as opposed to ensuring a high quality financial advisor.  Financial planners also do not advise on property investing which is a key investment for financial wealth building and an investment that average Aussie wants included in the 'financial plan'.

Why is this such a problem? Clients want wholistic advice cross all financial fields. They want financial coaching that includes saving, budgeting, investing in shares, super, property, tax minimisation, asset protection, finance and more.  But each of these topics is dealt with by different professions.  A financial planner will sell you share or superannuation investments and convince you to take our high commission insurance policies.  But they won't help you invest in property.  An accountant may help you minimise tax, my even explain how to do this by investing in shares and property, but they can't actually advise on investing in such.  Mortgage brokers can advise on the best finance but can't advise on anything else. And the of course are the Property spruikers.  They will advise on property investing but they are generally unlicensed, uninsured and uneducated. They also get seriously high commissions on anything they sell you.  So can you trustee advice.  I think not. 

So why aren't their advisors who are licensed, insured, educated and experienced across all financial fields?  There are, but they are few and far between.  The difficulty for such advisors is the complications that the various governments have introduced via legislation that make it near impossible to give wholistic advice across all financial fields. 

Buying Property in an SMSF

Let's look at an example.  Say you want to buy property in an SMSF.  A very common and effective wealth building strategy at the moment.  Who do you turn to for advice?  If you see an Accountant they can set up an SMSF do you but they can't advise whether you should or shouldn't do so.  You can see a financial planner who needs to do a very complicated and expensive Statement of advice SOA to advise whether you should or shouldn't set up an SMSF.  The price of this Advice alone puts most clients off.  If you’re willing and able to pay for such and they do advise you to set one up, they can't actually set one up, you need to go back to the accountant for that.  Then you need to find a suitable investment property.  The financial planner and accountant can't assist you with this.  So you end up trying to hunt for one yourself and getting caught up with not so scrupulous real estate agents and property spruikers.  Once you find a property you need a loan. A mortgage broker can help you with this but the broker can't advise on whether you should do this and the banks require you to get advice so you are now back to the financial planner for another very expensive SOA to recommend you should take out a loan to buy the property.  Then you need an accountant to account for the SMSF accounting and taxation needs.

Does the process above seem overly regulated, overly complicated, overly off putting or is it just me that finds it ridiculous?  From my own experience what generally happens is that the wealthy who can afford the advice persist and get the right advice and grow wealthier.  The Average Aussie family can't afford the advice or even if they could, it just gets so overwhelming and complicated that they give up and don't get the advice they need to grow wealth.  And so, the divide between rich and not so rich continues to grow. 

So what is the secret to wealth creation?

Find a professional advisory firm that is licenced to advice across all financial fields.  A firm that can assist you create real wealth creation strategies.

The Importance of a Valuer when Purchasing an Investment Property

Tuesday, September 09, 2014

A valuer can be the linchpin to the transaction.  A valuer can make or break the transaction.

A valuer is used to assess the market value of a property.

The first thing to look for when appointing a valuer is to ensure they have the correct accreditation.  You need a valuer who can provide reliable, accredited assessments on the value of all types of real estate property.

When will you need a valuer?

If you are applying for finance your bank or lender may require a valuation of your existing assets to ensure they are able to calculate the actual equity you have within your real estate investments.

The bank providing finance will usually require the usage of their own valuers and they will generally err on the side of caution when making a valuation of your existing assets to ensure they are well-covered when offering you loaned money.

Valuers use a combination of market information, land values, development investigations and other analysis techniques to come about the valuation for the property.

Why do I say Valuers are the lynchpin?

The sale of a property is often dependent on the valuer.  Often the purchaser needs to raise finance against the property being purchased and possibly against their existing properties.  If the valuation on the properties fall short than the purchaser if often unable to raise enough finance.  Also a purchaser may decide to back out of a purchase if the valuer says that the property is worth less than the sales price.

So why aren’t valuation precise?

Valuations are an ‘INEXACT SCIENCE’.  There is no set value for a property.  The value is heavily dependent on the individual expertise and opinion of the selected valuer.

Valuers are poorly paid and need to do many valuations.  Pumping them out quick is the only goal.  They don’t take the time to examine all of the specific aspects of a property that add value. To make matters worse, the Global Financial Crisis (GFC) has caused lenders concern and lenders are specifically instructing valuers to value properties at FIRE SALE value as this reduces the lenders exposure to loss. Fire sale value is what the properyy would sell for in a quick, urgent sale and this is often far less than the achievable sale price in a normal market.

Valuers are also protecting themselves from personal litigation by adopting a conservative. 

How to possibly avoid a bad valuation on a property you are selling:

  • Try to develop a personal relationship with a valuer in the area
  • Sometimes it is possible to request the bank to use your chosen valuer
  • In any event, prepare a report for the valuer that contains
    • The house plans
    • Photos of all the special features of the house
    • A list of all the special features of the house that add value
    • Most importantly – a summary of comparable sales in the area that support the estimate of value that you are aiming to achieve

The Importance of a Property Coach in Property Investing

Friday, August 22, 2014

property coach


Investment Property Coach


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


Why Do I need an Investment Property Coach?


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.


investment propety coach


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 property coach?


An investment property 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


RIGHT INFORMATION + RIGHT MOTIVATION = all you need for SUCCESS.


Subscribe to investment property coach Catherine Smith:



For More Investment Propety Advice check out the video below


Real Estate and Superannuation is the most Powerful Wealth Creation tool of all

Monday, July 14, 2014

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 opponent’s 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 over Super OR Super over Property, when you can have the best of both worlds instead!

So 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.

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.

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.

Property Investment in Brisbane Real Estate is better than Shares

Monday, June 16, 2014

 

Real estate and shares are often considered the two most popular investment options.

Both are long term investments.

The most obvious difference between the two is the amount that can be the amount invested - an investor in the share market can start small by buying shares worth a few thousand dollars whereas real estate investments generally involve a commitment of hundreds of thousands of dollars.

Of course, the fundamental objective of an investor should be to find an investment which generates maximum returns.

A small stock holding will not lead to an early and easy retirement unless that company enjoys an absurdly spectacular escalation in its share price. This rarely occurs. It can happen with mine shares when an unknown company strikes oil or gold.  Betting your future on finding such a company, at the right time, is simple gambling and not a sound investment strategy.

The stock market can be extremely volatile, and driven by sentiment rather than rational financial thinking.   In terms of today's share market, an investor needs to be financially well-educated and prepared to monitor their investment portfolio constantly or pay the often considerable price for professional management.

At times, there is only a very small window of opportunity in which to make the right decision about a share investment.

By comparison, real estate investment delivers the comfortable expectation for a well-chosen property of significant capital growth over time, combined with other attractive benefits which include:

  •     consistent rental income
  •     lower risk
  •     tax advantages
  •     the security of "bricks and mortar" and
  •     the capacity to manage and control your own investment   

The aspect of control is a very important consideration -- shareholders who supposedly "own" the company have no idea of what is really going on with the management of their investment and even if they did, they have no control. Property is a much more tangible option, and as the owner, you can see exactly what condition your investment is in.

But perhaps the best way to compare the two is ‘by the numbers’.

Let’s say you have $500,000 to invest in either Property or Shares.

 


The figures above speak for themselves, shares provide a superior net wealth increase BUT what happens when you take tax benefits into account?

 

 

 

When you take into account the fact that you can ‘borrow more’ or use more ‘leverage’ to invest in porperty the numbers change.

Real Estate is a more Effective Wealth Creation tool than Business

Friday, June 06, 2014

 

Check out the "rich lists" and you will find many business owners. A lot of these entrepreneurs started out with a small business operation or an innovative idea which developed over time into a very large corporation.

There is no doubt that business investments can deliver an extremely lucrative outcome but there can be drawbacks.

Interviews with high net worth business owners reveal a common theme -- an intense focus on the business and a very significant commitment of time, often at the expense of personal needs and relationships. Today's business world is an extremely complicated scene with various facets to consider -- you are required to wear many different hats or pay for a lot of professional advice.

By contrast, an investment in real estate can deliver all the benefits of a business investment and more, but without all the management headaches.

As with a successful business investment, real estate will give you capital growth, an income stream and tax advantages however with business investments there is an appreciably higher risk (many businesses fail) and a drop in liquidity (it can often take a very long period of time to sell a business operation and they can be difficult to value).  The easiest way to say it is that wealth through property investing is just so much easier, understandable and far less risk.  Far more investors lose in business than by property investing. Property investing, by its very nature, investing in bricks and mortar, provides a far more stable and secure investing foundation.

Another factor is funding -- often lenders are reluctant to support the growth plans for a business because it is difficult to get a clear picture of its current financial situation or future prospects. There are generally no such problems with real estate loans because of the easy availability of records and financial data and the more tangible and transparent nature of property assets.  For example, banks will lend up to 95% of the value of a property whereas in most cases they want lend at all for business unless you have property to offer as security. 

While it is possible to operate as a "silent partner" or withdraw from a lot of the day-to-day worries and workloads of a business investment by employing managers, it is in an investor's interest to monitor a business closely.  Property can be a set and forget investment basically as your property manager can look after it for you.  Whereas a business requires constant day to day management.

Property Investing is simply far easier than business investing.

Property Provides Opportunities to Add Value

Monday, May 19, 2014

 

Very little effort can bring about substantial gains by adding value to your real estate investment.

Something as simple as clearing up the garden, a coat of paint, new carpets, modern bench tops or a new bath room can easily add value to a property.

Investors who are able to add value to their property may also do so while enjoying the benefits of tax deductions – either outright in the year incurred or depreciated over a number of years (more about this later on the ongoing costs and tax effect chapters).

Value-adding can also increase the property's cash flow potential - for every $10 extra rental income you get you can usually add an extra $5,200 to the valuation of your property.  This extra equity may be all that is required to get you over the line for your next purchase.

Deciding how to add value to the property is the biggest hurdle and you do not want to over-capitalize on the investment or its capital growth potential.

The simplest rule to follow when value adding to your real estate investment is to keep it simple.

If the kitchen is old and run down and potential tenants are deterred by its state it's probably worthwhile investing in a kitchen renovation. This can be done simply; maybe all you need to do it replace the bench top, splash back and repaint.

Similarly, re-painting the main rooms of the house can be cheap (particularly if you are able to do it yourself) and it can make the house far more appealing to renters (and valuers). 

Every little bit counts when it comes to adding value to your real estate investment -- and it's usually little changes which come at low costs that are most worth your while.

The more equity you have as capital leverage when re-borrowing the better.

 

Do you want to know more? Click here to watch five free webinars on - ‘Proven, Must Know, Property Investment Advice’

Brisbane takes over other Major Cities for Capital Growth

Friday, May 09, 2014

Sydney and Perth halt, Melbourne and Canberra fall, but Brisbane will be where the action is this year – RP Data

RP Data-Rismark figures for April show that Brisbane had the strongest growth of the major capitals at 1.1% in April, while Sydney property prices grew at a paltry 0.5%, and Perth only increased by 0.2%.

All capitals recorded some rise in dwelling values during April except for Melbourne, which fell 0.5% and Canberra, down by 1.1%. Some cities experienced their lowest monthly growth for nearly a year, including Sydney.

Brisbane is going to be the strongest housing market going forward from here and that is purely because the gap in pricing between Sydney and Melbourne compared to Brisbane has really widened and that was always the thing in the past that attracted people to Brisbane, according to RP Data.

This lower rate of growth, especially in Sydney and Melbourne, where property values have surged since the end of 2012, signal that these markets are moving through the peak of their growth cycle.

The growth that Sydney has seen is having an adverse impact on buyers’ ability to afford property, especially at the lower end of the price range. Affordability constraints are now entering the market.

And the lower end of the Melbourne market is also slowing as the higher prices mean that a lot of buyers aren’t in a position where they can afford to buy a property.

Queensland Home Sales Rise

Thursday, April 24, 2014

 

According to recent data from the Housing Industry Association, Queensland home sales went through the roof in February and increased by 17.5 per cent! 

A recent RP Data report also proves Queensland property sales have been booming. Since January, more than 10,500 properties have sold in Brisbane. This means an average of 116 properties sold per day.

Western Australia also recorded strong sales growth of 9.3% per cent.

Although new home sales and building approvals were more popular in New South Wales and Western Australia before, new home sales are increasing across Australia by 4.6 per cent in February.

Detached home sales decreased by 6.9 per cent across Australia, while multi-unit sales increased by 6.8 per cent. Queensland and Western Australia recorded the top sales figures for detached homes, while Victoria came in 2nd with a 8.8 per cent increase.


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