Investopoly

Question one: What didn’t work well in 2018? When planning, a good place to start is to ask yourself what were the one or two things that didn’t work well in 2018. Maybe you planned to sort out your super and didn’t get around to it? Or maybe you didn’t have a good enough handle on expenses (spending)? The idea is to identify one or two big things that didn’t turn out how you had hoped and develop...

Last weekend, The Australian newspaper published the blog I sent you last week where I predicted that the property market is close to the bottom and that prices next year would either be unchanged or improve slightly. Well, that article received over 60 comments and none of them were complimentary or supportive of my prediction. Upon reflection, I wanted to share some very important comments and o...

I think we are very close to the bottom of the property market – if not already there. In fact, I believe that price growth next year will be positive. I appreciate that this prediction is contrary to most, if not all the predictions in the marketplace – most notably AMP Capital’s chief economist, Shayne Oliver predicted last week that property will fall by a further 15%. I explain my view below....

Paul Nugent, the co-owner of Melbourne-based buyer’s agency, Wakelin Property Advisory , sadly passed away recently. I first met Paul back in 2004. Over the past 14+ years, Paul and I have given many presentations, shared a large number of mutual clients and have had numerous conversations and debates about property investment. Not only was Paul a true gentleman with an encyclopaedic knowledge of...

Nice family homes in blue-chip suburbs are becoming increasingly difficult to acquire from an affordability perspective. This also puts pressure on one’s capacity to fund an investment strategy whilst repaying a large loan. So, a few years ago, a strategy called ‘rentvesting’ was popularised. But this has some limitations. I have formulated an alternative strategy which I’ll call livevesting . Wha...

With the tightening in credit and the reduction in borrowing power, many investors capacity to invest has been adversely impacted. For example, an investor who planned to invest in two properties worth say $750k each might find that when it comes time to purchasing the second investment property, they can only afford to spend say $400k due to a contraction in borrowing capacity. This begs the ques...

No one wants to buy at the peak of the property market! Imagine if you buy a property and then a month later property values fall and it takes more than 2 years to recover to the amount you paid for it. That two years of holding costs (interest) for no gain. Would you kick yourself if that happened? This begs the question, how important is property market timing? How important is good timing? I us...

You must have a robust methodology for selecting the right share, property or bond to invest in. If you select the right asset, your investment returns are likely to be very healthy in the long run. However, if you make a mistake, it is likely to cost you money – in terms of opportunity cost and/or in real terms. The best way to prevent making a mistake is to use a methodology for selecting the ri...

There has been a lot of commentary in the media about the “credit crunch” that we are in at the moment. Why is the credit crunch going to impact you and your plans? And what can you do about it? Why has credit tightened? Over the past year I have written ( here and here ) about how the government has tightened up lending standards in an effort to cool the property market and reduce the volume of i...

How many properties do you think you need to own to generate enough wealth to fund a comfortable retirement? Most people think they need more than 3 properties to become independently wealth. Of course, the answer will be different for everyone because it depends on your income, existing assets, time until you retire, goals and other factors. However, having been involved in developing hundreds of...

The two certainties: death and taxes There are two unfortunate certainties in life; death and taxes. And, unfortunately, tax cannot be avoided (legitimately) even by dying. Australia is one of the very few countries in the world that has no death taxes. However, although there is no tax levied on the property of a deceased person, there may be tax consequences flowing from the dealings with the de...

The last thing you want to happen is that you work hard throughout your whole career, invest successfully and then lose a large amount of your wealth due to an unexpected event. Therefore, asset protection is just as important as asset accumulation. Asset protection is a subject that most investors fail to consider, don’t get good advice on and/or take the wrong advice. The goal of this blog is to...

Paying minimal tax probably appeals to most people. And as tax is often our biggest lifetime cash outflow, it might seem logical that minimising it is a great way to build wealth. However, I’m going to suggest that perhaps you need to pay more tax to build wealth. A higher tax bill typically means you have a higher income and therefore a higher borrowing capacity. I have seen lots of people cut th...

Significantly tighter credit, the potential abolition of negative gearing and increase in the capital gains tax rate, falling property prices, new apartment supply… these are some of the head winds facing property investors today. Given these challenges should you give up and not invest in property? I don’t think so. In fact, good investment opportunities tend to reveal themselves during times whe...

According to the ATO, over 70% of people engage the services of a tax agent/accountant. However, according to Blackrock , only 15% of Australians have a relationship with a financial advisor. I believe that many people would benefit from having both. In fact, to crystallise the most value it is imperative that they have a close working relationship. To make my point, I would like to share some rea...

Over the past few weeks I have seen a couple of financial plans produced by firms that have experience in providing advice on investing in residential property (i.e. not the traditional managed fund/shares type advisors). Unfortunately, the quality of the advice was very poor and not worth the fees paid in my opinion. It upsets me to see people pay several thousands of dollars for financial advice...

All the clowning around in Canberra last week is likely to have increased Shorten’s chances of winning the next election. Given the ALP’s proposed changes to negative gearing and capital gains tax, will these policies spell the end for property investor? Why the change? According to the ATO[1], approximately 2 million Australians invest in property and 61% of them claim negative gearing benefits....

I typically strongly recommend to property investors to never contribute any cash into an investment property acquisition. I’m not suggesting that you should blindly borrow more and therefore pay more interest. What I am suggesting is that if you have cash to contribute towards an investment that you do so indirectly using an offset account. Contribute cash into the offset instead Instead of contr...

Whilst historically ATO audits were targeted at big business and the wealthy, this has changed. Now more than ever, individuals, business and self-managed superannuation funds are at risk of being selected for an audit, investigation or review. The Tax Commissioner, Chris Jordan has confirmed the ATO has been instructed to undertake random audits targeting over claiming of business expenditure and...

Last week, I highlighted some evidence that indicates investment-grade apartments in Melbourne are perhaps intrinsically undervalued. The topic of this week’s blog is all about whether a house or apartment makes a better investment, specially: 1. If your investment budget is $1.3 million or more, should you invest in one house or two apartments? 2. If your investment budget is in the range of $700...

I wrote this blog in February suggesting that I thought investment-grade apartments were intrinsically under-valued. Well, according to Jarrod McCabe, director of Wakelin Property Advisory , “the investment-grade apartment market in Melbourne is showing signs of growth this year”. My view that apartments are intrinsically under-valued has become even stronger over the last 6 months and I would lik...

Some interesting information and data has been released this week which I would like to discuss with you. Variable mortgage rates will probably rise soon Interest rates that apply to interbank lending have increased significantly since the beginning of the year. These benchmark rates are used to set the banks borrowing costs. This benchmark rate has increased significantly compared to the RBA’s ca...

Are you a spender or saver? Do you find it hard to stick to a budget? Do you find it difficult to save towards a goal? For some people, saving money comes easy to them. For others, it’s like pulling teeth. You might need to adopt a different investment strategy depending on your answers to the above questions. Success requires some income Surplus cash flow is oxygen for any financial strategy. Wit...

Employers must contribute 9.5% of your salary (up to a maximum of $20,050 p.a.) into super. But should you make additional super contributions? This is a question I’m asked regularly. Of course, like many financial planning matters, the answer does depend on your individual circumstances. However, there are some fundamental concepts that help us understand whether additional contributions are goin...

Over the past two years lenders have been incrementally increasing interest rates on investment loans and loans with interest only repayments (as opposed to principal and interest). As the chart below illustrates, the average interest rate margin between a principal and interest home loan and an interest only investment loan is now 1.04% p.a. As recent as January 2016, interest rates for these loa...