The difference is usually in the timing.

I’m not talking about timing of the market where you buy at the bottom and sell at the top, (as if you can ever accurately pick those times anyway). No, I’m talking about you and the time you are right to move from investing to speculating.

You see, there is a significant difference between investing and speculating and to understand what I mean by that I think it’s instructive to look at the definition of each one.

According to Investopedia.com

“Speculation is the act of trading in an asset or conducting a short term financial transaction that has a significant risk of losing most or all of the initial outlay with the expectation of a substantial gain.”

While investing is defined as;

“Investing is the act of committing money or capital to a long term endeavour such as real estate with the expectation of obtaining an additional income or profit.”

One method has high risk attached to it and the other is a measured, long term approach to making money. Each method can make you money, no question about it. Looking at it another way we can say that your risk level will decide which way you will invest.

Searching for big profits quickly falls into the speculative camp while investing for the long term falls into the investor category. Again, both types can make money but the risk of losing it goes up with the level of speculation involved.

At CPS Property we want all of our clients to be better off after they have seen us. For most people this means that they are either new to investing or need more education in the fundamentals of property investing.

To fulfil this need we created our CPS Methodology and Asset allocation which is used to identify potential growth suburbs and to select the right property at the right price in the right location.

A long term investor will work their way towards a property portfolio using the same basic fundamentals each time. This type of methodology provides consistent results over the long term and is symptomatic of a systematic approach to successful investing.

By applying the key criteria we identified suburbs that our competitors weren’t recommending which made us pioneers if you like. Not everybody agreed with our selections but the interpretation of the data was very clear.

Even today, I still remember a potential client handing back a contract for a 1 bedroom Studio in Surry Hills priced at $420k because they thought there wouldn’t be any growth in that area after the GFC – I should mention that the same property is now selling in Surry Hills is $750K, just on 5 years later.

Naturally, we have identified other suburbs with similar results so we have no problem applying the CPS Methodology to locate new opportunities.

It’s worth pointing out that the CPS methodology cannot be used to identify opportunities for speculators. It utilizes data that can be interpreted for long term investment, reducing the risk to our clients. It’s a serious long term solution to investing in property.

Another difference between the two investor types is an Investor can benefit from the advice of a Financial Planner. Long term low risk investments fit nicely into a Financial Plan. After all, a Financial Plan is looking to get the result you are looking for, over a given time frame, and in line with your risk profile. It would be difficult, to say the least, to design a Plan that incorporates high risk, short term investments and still be confident of success.

The fundamentals we apply for our clients are designed to provide an acceptable level of risk in conjunction with an achievable Plan using a property that fits our methodology.

We also like to educate investors on how they can improve by reviewing their current property portfolio and borrowing position. Listening to the noise in the media and avoiding educating yourself is a sure way to create confusion.

Given that this is the message we have been preaching since 2005 there is little reason to change a successful formula.

Jacob O’Neill

Principal.   

There is an unprecedented amount of infrastructure projects currently underway in Brisbane. Amongst these include Queen’s Wharf, Howard Smith Wharves and the Brisbane Airport duplication. Di Marco urged the industry to look beyond the traditional media headlines and think about the longer-term prospects for the region.

“Invest for your children and grandchildren” Adam told Sky News hosts, former Queensland Premiers Peter Beattie and Campbell Newman. “You need to look at the scale of infrastructure projects currently underway and think about how these will impact the city and your investment.”

Source: https://www.theurbandeveloper.com/di-marco-says-ignore-press-brisbane-cusp-generation-boom-infrastructure-investment/

1. 75,000 new homes are expected to be built across Sydney in the next financial year, which is double the long-term average of 40,000, and Councils are under even more pressure to rezone more land for housing as part of the state government’s determination to increase the supply of new homes in the city.

2. Not only that, the recent budget committed a further $118 million over the next four years to deliver new infrastructure, housing and employment initiatives, review land use and infrastructure strategies for priority growth areas.

3. Another $19 million will be used to support the construction of 30,000 new homes in priority precincts, and almost $70 million will be allocated to fast-tracking the assessment of major projects, and helping merged local councils run planning systems.

4. The Planning Minister, Anthony Roberts, said the government’s “number one priority” was to get more houses built in order to make new homes more affordable. “We are working on many fronts to make owning a home a reality for more people, by streamlining and simplifying the planning system so housing approvals can be fast-tracked and are continuing to release and rezone more land.”

5. Combined with the reduction of stamp duty for first home buyers purchasing properties between $650,000 and $800,000, this is all good news.

Find out more from the original source: https://www.nsw.gov.au/improving-nsw/projects-and-initiatives/first-home-buyers/

The fact is, to secure a mortgage loan, a lot of boxes have to be ticked, so be sure to make yourself aware of this crucial step in the house purchasing process.

Stay consistent with your job situation

Job security, as you may know, is one of the main criteria selections for lenders to decide whether they trust you or not. The absolute last thing you want to do before a mortgage loan is quit or change your working arrangement in a way that severely affects your finances.

This still applies whether you’re securing a mortgage or have a current lender. If there is any shift in your employment and income status, banks and lenders are forced to reevaluate you, which could mean trouble.

Do your research

As you become more aware of your job security, you also need to know your job situation for the industry you’re in so that you can find the best mortgage broker. You will find that many lenders and brokers have a very conditioned selection criteria, which makes it hard for individuals who are self-employed or contractors.

Ensure that when you do your research, you find a mortgage broker who is compatible with your situation.

Be clear on your credit score

For the amount of time it takes to find out what your credit score is, it is mind-boggling as to how many people never review it until the last minute. Often this lack of initiative can lead to rejection of mortgage application due to the individuals being unaware of their low score.

The simplicity of this step shouldn’t downplay its importance, ensure that you clean your credit history and handle any problems regarding it.

Don’t let lenders control your budget

Oftentimes, banks and lenders are quite generous in the fact that they will initially offer you a larger loan even if you cannot afford it.

This may seem good on the surface, but down the track, you are going to be put in a high-pressure situation, and as a result, face the consequences.

Ensure that you dictate your budget before you even ask for loans, and never be tempted to spend higher than your budget if they’re willing to lend a larger amount.

For more info

Contact us for more information and advice on your property investments.­

1. Concessional tax on rental income
Where you hold an investment property in your own name, tax will broadly be payable based on your personal rate of tax, which could be as high as 46.5%. Similarly, if you were to hold an investment property through a company, the tax rate is 30%.

Due to the concessional tax rate that applies to superannuation investment earnings, rent received by your SMSF will be taxed at a maximum rate of 15%. And, because certain expenses related to the ownership of the property such as land rates, property maintenance etc will generally be tax deductible to the fund – the effective tax rate may come down even further.

2. Concessional tax on future capital gains
Special superannuation tax rates also apply to any capital gain made as a result of an increase in the property’s value. As a result, depending on when you decide to sell the property, any capital gain your fund makes on the sale of the property may be completely tax-free.

To summarise:

If you sell the property while still in the “accumulation” phase, the fund will generally pay CGT of up to 10% on any growth in the property value assuming that the property has been owned for at least 12 months).
On the other hand, if you decide to sell the property after you have transferred it into the “pension” phase, within your SMSF, any capital gain will be exempt from tax altogether!

3. Increased superannuation opportunities
In addition to the above, where the property owned by your SMSF is the property from which you run your own business, superannuation rules require your business to pay a commercial rate of rent to the fund – providing you with a way to accelerate your superannuation savings.

The rent that your business pays into your SMSF will be tax deductible to your business, but more importantly for superannuation purposes, it will not be treated as a superannuation contribution.

Because the tax benefits available on superannuation contributions are currently limited to $25,000 a year, or $50,000 if you are aged 50 and over1 , the ability to make tax deductible rent payments into your superannuation fund – without this rent counting towards these limits – enables you to build your retirement benefits quicker and tax efficiently.

4. Other benefits
Depending on your personal circumstances, there could also be other benefits from holding property within your SMSF.

For example, superannuation assets are generally protected from creditors in bankruptcy situations. So, in the unfortunate event that you fall on difficult times, holding property within your SMSF may provide you with some added protection.

Further, if you are a small business owner, superannuation assets are not included when determining your eligibility for the generous small business CGT concessions that apply when you sell your business or retire. By planning ahead, you can ensure that you better qualify for these concessions.

Unfortunately, these feelings can cloud our judgment; the following are crucial considerations that you must make before purchasing a house and land package.

Inflation

Ensure that before any major decision, you do your research and find out how much the properties are worth, this includes confirming that the property is not being purchased for more than the market is willing to pay for it.

It isn’t uncommon for the estate owner to inflate the buying price or add more structures to raise it, this could mean that the decision to purchase the land independently and gaining quotes from professional could be the better option.

Fixed prices aren’t always so fixed

This is where your original budget could, in fact, be wrong due to unforeseen circumstances. Numerous cases result in the buyer purchasing the property and having it built for a fixed number, only to find additional add-on costs due to the property sloping and ongoing building issues, as well as upgrades.

Therefore, it is integral to make sure that your budget is always a little higher than your willing to spend, it is always optimal to have breathing space.

Blue Chip Areas

Ideally, you want to aim for the high quality and premium locations, and never settle for a lesser estate.

The best way to ensure this is only to be interested in areas where there is total congruence, which means landowners and developers are targeting owner-occupiers, and the positions are relatively premium and limited. Although this is a higher cost option, the high maintenance and care from the locals will make up for it.

Decide

Once enough research is completed, make your decision and act on it almost immediately as soon as the house and land package is released and has the lowest entry point price.

As the property stays on the market, the price will continually rise as the supply and demand are quite high, this creates an urgency in the buyer, and rightly so.

Never let the notion of constant price increase rush your research and judgment, but never dwindle with your time, make your conclusions and act on them while the prices are still low.

These are only a few but vital considerations to make when purchasing a home or land packages, have a look at https://www.cpsproperty.com.au/contact-us/ for more information.

Work out a budget

Many of us are unaware how much money we actually spend paycheck to paycheck. By analysing your spending habits and expenses you’ll be able to derive a realistic budget and identify where potential savings can be made. Factoring in all costs is critical to paint the full picture; honesty is the best policy throughout this process. Being rational about your budget will mean you can make clear, objective decisions about your budget and forecasted savings.

Compromise

Saving for a deposit is going to mean an adjustment to your lifestyle and your spending habits. Setting boundaries on unanticipated expenses will stop you from overspending, including limiting your budgets for birthday and christmas presents, or social events.

It’s a good idea to have a look at your expenses and categorise them into ‘necessary’ (such as rent, or electricity) versus ‘luxury’ (such as cable TV or gym membership). This an easy way to identify what can be stripped from your overall expenses and identify where expenses can be substituted for savings.

Save 10 per cent

As soon as your pay hits your account, take out your savings. As a rule of thumb, 10 per cent is a realistic aim. Ideally you would add to your savings pool at different stages of the year, however if you stick to this rule as a guide, anything additional is a bonus.

A great tip is to ensure your savings account is not easily accessible. That is, make sure there is no bank card linked to it so you can’t be tempted to use the funds. This will make you think twice before making impulse purchase decisions.

Pay off your debt

If you have less than five per cent of the purchase price for your desired investment in unsecured debts, it shouldn’t be difficult for you to pay off those debts while you save up enough to get a loan. However if you have more than five per cent of the price of the property in debts including personal loans, car loans or credit cards, it is best to pay as much of these off as possible upfront. That way you’re not copping interest while trying to save for your deposit. In addition to plumping up your deposit, paying off your debts will increase the amount of money you can borrow, and it will also free up your cash to use towards mortgage repayments once you’ve made your purchase.

Sell unnecessary assets

Over the years we accumulate assets that we no longer use or need. Selling these assets and putting the cash towards your deposit will mean you turn your unused possessions into something more useful. Cars, bikes, artwork, exercise equipment, technology and even clothes can help clear your home of clutter, but also inject thousands of dollars into your savings account.

If you’d like financial advice on how to accomplish your investment goals, contact CPS Finance today.