So for the average Joe who is not the next Mark Zuckerberg or young millionaire, pay attention. The 4 wealth fundamentals you’re about to read are not only practical and realistic, but integral to your success.

Goal

When it comes to building wealth, always start with the end in mind. By knowing your goal, all your other decisions and actions will be better guided towards its attainment. Although it’s the most simple, it is also fundamental.

Ask yourself – How do I want to live after I retire? Comfortable? Lavishly? The answer will help find the solution to the next question which is – How much would I need in my retirement for this lifestyle?

Once you know this information, you need to create a flexible plan that can be adjusted as time goes by.

Income

At the foundation of your wealth building strategy will be your start up capital, which usually derives from the income you create.

There are a lot of factors that you need to take into consideration when it comes to income. One would be whether you know if your present income is going to be stable, increasing or decreasing in the future based on your circumstances and career. The answer will dictate how freely you’re able to spend or how cautious you should be with the money you’re currently making.

Aside from living expenses and leisure, your income should be set aside for a smart and proactive savings plan. This is a factor that is highly recommended especially if you’re young, as the earlier you begin the longer you have to build this up.

Investing

Only after your savings plan is set up and active, should you start investing. Every other factor in building wealth is based on surviving. The reason why investing is so important is because it’s geared towards thriving and having a great future instead of just preparing for a “rainy day”.

In many cases, time is the most important factor in investing, oftentimes more important than the amount you invest due to compound interest. The most important component is that you start as soon as possible, even if it’s a dollar that you can build on over time.

Expenses

Without a doubt, expenses are the one factor that if you get wrong, can cause failure for the rest of the fundamentals. The fact is, if you’re spending more than you’re earning, not only are you losing money, but you cannot save, invest or create a prosperous future for yourself.

If this is the case for you currently, feel good that you came across this article. Have a look at your weekly expenses, what are the musts and what are the purchases that don’t really matter?

This could be as simple as cups of coffee, excessive shopping or anything that you feel you do to an excess. Although cutting these are small at first sight, in hindsight you will find they build up to massive savings and will tip you over the scale to more income than expenses.

There are many more facets and factors to learn of course, but these tips will give you a basis of understanding on what to initially pay attention to. Wealth is a major component in our lives, so making these fundamentals a focus will be one of the most important decisions you make. Contact us today to discuss further. 

Although this seems like an ultimatum between the two, the truth is that you can be involved in both. This article will delve deep into both sides of the coin so that you can better delegate your funds to each one.

Paying off the mortgages

Focusing on paying off a mortgage can have its pros and cons. It’s always optimal to be aware of both. This section will give you insight on the main four factors that you will be both gaining and missing out on when paying attention to this area.

Advantages

Certain return

When most people think of paying the mortgage, it’s usually associated with clearing debt rather than making money. In fact it’s both. Every cent off the mortgage allows you to collect interest that would have been spent on the mortgage. Perhaps the best part about this is that there are limited risks, it is a guaranteed return.

Piece of mind

The main reason why people focus on mortgages rather than investing is because of a tendency to choose safety over risk. Perhaps the best benefit of paying off a mortgage is that you gain certainty that cannot be equaled in the volatile share market. Although you’re not playing to win big, you are securing your future in the sense that you won’t have an overbearing mountain of debt.

Disadvantages

Tunnel vision

Although tunnel vision may work well for athletes or anyone competing in certain industries, it does not apply to this. By focusing all your energy on paying of the mortgage, you can very often miss extremely lucrative investment opportunities that would otherwise have paid you a much higher return. Although you’re securing your financial safety, you might also be missing out on your financial freedom.

Eggs in one basket

Like the above, sometimes putting all your eggs in one basket can work. If safety and security is your priority though, this can often-times backfire when you place all your attention on your mortgage. When your capital is involved in only one asset, if anything goes wrong you have nothing to fall back on.

Splitting Funds Between Mortgages and Investing

Alternatively to the above, it is possible to use your capital for both options. Although you will be diversifying your focus, there are benefits as well as the negatives that you will come across.

Advantages

Potential for large return

The beauty of investing in things like shares is the potential for long term income that is likely to be more lucrative than what you would save in interest by paying off your mortgage. This also allows you to better pay of your home whilst having excess cash to spend.

Asset diversification

We mentioned that putting all your eggs in one basket is not always the best option when it comes to money. This is why investing alongside mortgages is phenomenal for securing a safe future. This means that if one of your assets is performing poorly, it is likely that another will balance it out.

Compound interest

If you have ever heard of the term “making money work for you”, this would be the closest thing to it. The compound interest effect of investing cannot be overstated when you give time for it to grow. This is why if you choose to go down this route, invest as soon as possible even if it’s only a dollar, so that you can begin taking advantage of this principle.

Disadvantages

Experience required

Although not much, a decent level of understanding is required if you desire to be successful in investing. This can be a negative or positive depending on your situation. If you are in the situation where you lack the experience or knowledge, either learn or find an individual who knows what he or she is doing.

Higher risk

The potential for bigger gain also comes with the potential of a large loss. The risk in investing is real and must be minimised when making decisions as to where to put your money. Factors such as unexpected market fluctuations and so on all happen regularly. A long term approach is much more ideal for minimised risk as opposed to a short term approach which rarely works out.

As you can see, both options are viable depending on your personality and circumstance. If you are someone with confidence and experience in investing, the latter will always be ideal. Alternatively if you’re not, you can always minimise the amount you put in initially compared to the mortgage so you can at least get your feet wet.

Interested in learning more about investing? Contact us today!

Although unfortunate, it is a fact that frivolous lawsuits are an issue and people are taking advantage of our legal system. Wealth can be acquired throughout an entire lifetime, and taken away by one superficial claim. This article will go about explaining the different ways you can protect yourself from this fact so that you never have to suffer from a frivolous creditor.

Individual ownership of assets

The best way to shoot yourself in the foot in terms of asset protection is to own investment properties in your own name. In the case of being sued you are at risk of losing everything under your name.

Many people would argue the tax benefits and cost effectiveness you would receive by using your own name, and they would be right, but the argument for the potential loss is a much better one if your focus is on protection.

Company structure

An alternative to individual ownership is using a company structure, which is characterised by being a separate legal entity from the owner. In the case of asset protection, this is a much safer and wiser choice as the risk is transferred to the shareholders in the company.

The issue with this structure is that if the individual happens to own all the shares in the company, much of the asset protection benefits you would receive from this form of ownership would dissipate.

Trust fund

Typically, property investments owned in a generic trust are the way to go over the above examples. The benefit of this is clear, the individual does not own the asset, but rather the trust does. The individual however, does control it.

During the situation of a lawsuit, a person with a trust does not bear any potential loss or risk that a company structure and individual ownership do. The only caveat is that you must know what trust is right for you for many reasons including tax effectiveness; whether you’re a business or on your own will have a lot to do with this.

What about insurance?

Many individuals mistake asset protection for insurance and make the fatal mistake of choosing one over the other. The truth is, both supplement each other and are mandatory. Having insurance provides many benefits towards asset protection including legal fee assistance, funds to settle lawsuits and so on.

Now that you’re aware of the main forms of ownership in relation to protecting your assets, you can judge your situation and make an informed decision. Contact us to discuss your investment options.

The 5 tips in this article are foundational life lessons of those who have crossed the property investing path before:

Head over heart

Like poker players, experienced property investors all know to leave their emotions at the door. This is not a home that they’re buying for their three children and wife, this is a vehicle through which they intend to make money with.

If you’re a beginner reading this, your tendency will be to go with your emotions because of the thrill, which is why you must internalise this lesson and take it with you to avoid that trap.

Listen to others

At the end of the day, the decision is yours to choose which property you want to invest in. However, although this is true, getting several third party opinions can go a long way for many reasons. Like the above tip, emotions can get in the way of rational decisions, which is why getting a logical third party opinion can help in giving you perspective.

Despite your experience or lack thereof, there is almost always one or two things your investor buddies know that you dont, which is why it’s essential to gain this birds eye perspective. If you are a beginner, this tip should go without saying.

Building inspection

One mistake that is unfortunately prevalent is not having a building inspection. Experienced investors realise that this mandatory in order to avoid any unexpected expenses down the road. Aside from this, you do not want your tenants giving you a hard time for any hidden faults or insects crawling around once they move in.

It’s a business

There is a misconception that investing is a “side-gig” towards your real job and that it should be treated as such; this is a mindset that will lead you to failure. Whether this is your only source or just a side source of income, you need to treat investing like you would treat your own business.

This means that the activities conducted by you should involve standard business procedures like setting up financing, protection, relationships with other smart investors and so on. Like everything in life, you get out what you put in, and unfortunately you’re at risk of losing a lot of capital if you treat this with little regard.

Long term > short term

Many people are overly dramatic about the short term fluctuations in investing, and how to seize them. The problem is that these are quite unreliable and very volatile. On the other hand, long term charts provide a very good scope of statistics that are much more proven to be profitable if followed.

In terms of property investing, going in for the long haul is much smarter than short term gains. Of course, there are situations and people who profit of the latter, though for the general public it’s much like gambling.

So remember, if you’re just beginning in the world of investing, you could save years of heartache and pain by learning from others mistakes instead of making them yourself. To get started on your investment journey, contact us today!

The benefit of this method is purely financial, the investors return on rent is in direct proportion to their fraction of the property. Many individuals do not have the means to make such large investments in properties, and as a result use fractional investment as an alternative.

Low start up fees

With fractional investing, you can literally start with as low as $75 and own part of a property. Although this is a low entry, you do miss out on some of the benefits that traditional investing involves. Factors such as in person inspections are not included with low investments, rather you just gain a slice of the returns.

It’s no surprise that with the opportunity of low risk, fractional investing is attracting a lot of young people. With the Australian market as expensive as it is, this form of investing targets a very large market of people who desire to put their money to good use, but cannot afford absurd prices or don’t want to take massive risks.

Where to find fractional investing platforms

Like other forms of investing, there are different mediums through which you can operate to succeed in fractional investing. BrickX and DomaCom are two of the main companies in Australia that allow you to invest in fractions with there own unique advantages.

BrickX

With a minimum requirement of only $100, the BrickX online service allows you to buy “Bricks” in a unit trust. Bricks as labeled by the company allow the individual holder to receive returns in proportion to their investment, they can be compared to shares. The notable benefit of this being is that there is no minimum holding and the investor is able to list there bricks for sale whenever they want.

DomaCom

With a Managed Investment Scheme structure, Domacom allows investors to invest in properties using not only fractional, but crowd funding methods also. The company has quite a low minimum entry at $75 and is regulated as a managed fund. One of the unique aspects of this company is that they offer a bookbuild process that allows investors to collect their funds together and invest in any of the hot properties in Australia.

With the Australian property market still showing high prices and not giving any signs of reversing as of yet, fractional investing has nowhere to go but up. Society at large and young people in general can barely afford the demands of the market, let alone spending their money on a full property for the purposes of investing. Fractional property investing is just beginning in terms of its popularity, and may be the next mainstream way for Australians to invest. Keen to know more about fractional investing? Contact us today.

This article will outline some of the fundamental mistakes that property investors make when starting out, so be sure to keep them as your guide as you head into the world of property investing. 

Narrow focus

Many investors, and beginners in particular, tend to get very excited at the first site of a promising property and totally cut off all other options. This can be for a number of reasons including an authority figures’ influence.

Although third party advice is viable and definitely recommended, most of them have another agenda which is why it’s always smart to do your own research and seek advice from various sources. Avoiding this pitfall opens you up to a world of financial opportunities and rids you of financial stress by not choosing the wrong property.

Using emotions over logic

Choosing a house for an individual is a very intimate decision, it’s a place where they will call home and create many fond memories. Unfortunately, these same emotions tend to arise in people when they are choosing a property to invest in, which can lead to all kinds of chaos.

When going to look at your potential investments, always look at it as an investment to make money with. The garden in the backyard may bring back blissful memories of your childhood, but are your potential future buyers going to care? Not likely. This is a skill in its own and will require time to develop, but it is crucial to your decision making process and must be consciously utilised.

Untouched rent adjustment

Many times property investors go into a deal thinking that it is done once the papers are signed, and this isn’t so. There are several things that require monitoring for your income to keep flowing as well as increasing, and rent payment adjustment is one.

As the rental market changes, you need to be able to adjust the per price cost of your property accordingly. Most importantly, this needs to be performed incrementally rather than all at once.

Disregarding external factors

It’s common knowledge to include the neighborhood and surrounding area, but many investors underestimate its importance. The conveniences in the local area can be the make or break for any tenant no matter how good the property is, so it makes sense to pay it as much if not more attention than the property itself.

Depending on the area and your ideal tenant, the external factors can range in level of importance. In general, factors such as neighborhood safety, education, transport and shopping luxuries will all play a major role.

Not having enough capital

This applies mainly for freedom of choice rather than the ability to invest. For starters you will need enough to even invest in a house, but that should not be the marker. For a safe and profitable decision, you need to have enough to consider as many options as possible rather than the ones that fit within your budget.

This is a mistake for a simple reason, missing out on opportunities. The last situation you want to be in is having to settle for a less than great house where all you would have needed is more funds to seize an extremely profitable property.

Many of these mistakes are instinctual rather than situational, meaning that if you don’t consciously decide to avoid them, you may find yourself doing them out of human nature. Be patient and take your time, avoid these common pitfalls and it will pay off in the long run. To discuss this further, contact us today.

If there is one thing for sure, it is that high-end renters want an apartment that stands out from the norm on a grand scale, the following are some features that will accentuate and affirm these expectations of yours.

Luxury Features

There is no doubt that some of the best benefits that come from purchasing or renting a high-end apartment are not even in your living space. You should expect no less than several facilities such as a working gym with views of the surrounding city, pool area, accessible storage, and outdoor areas such as open rooftops.

Exceptional living space

This includes everything from simple kitchen appliances to the materials used for bench tops.

Views overlooking the city or your surroundings are expected and should be one of your main focuses if you value it. Fortunately, this is always a given if you are renting on a top floor.

In addition to the views, your apartment should always be provided with enough sufficient light during the day that you don’t need to use any of the electronics, as well as an abundant amount of space to move around.

Important factors to remember are simple things such an efficient sound system, congruent colors, working appliances, and quality materials used on your furniture, which should be marble, stone, or something of similar value.

Location

Although the buyer chooses the location, you should expect any high-end apartment to be positioned in a place that is central to many high importance venues and areas. This means that areas such as shopping centers, parks, gymnasiums, public transport, and doctors should all be within walking distance.

Of course, you can’t expect everything you want to be perfectly positioned around your building, but there should be an expectation for high-end apartments to have these luxuries more than anything else, all you need after that is some personal research to find the optimal one.

Consistency

It is true that the main attraction and expectation is to have a quality living space, but if the rest of the building does not meet these standards, then it is truly not a high-end apartment. You should expect everything from the lobby to the halls to depict what the apartment standard is.

A good way to test the above is when entering the building for the first time, are you surprised when looking at your potential living space due to the incongruence with the rest of the building? The answer will tell you a lot. Consistency means that everywhere you go in the building whether it be where you live, swim or train, are all depicting high-end quality.

It is always natural to have expectations when buying a new place, especially when putting labels such as high-end on it, which is why it is integral always to do your research and seek knowledge from professionals.

We take a retrospective look at median dwelling values across the suburbs of Australia to show the deterioration of more affordable housing across the capital cities.

A retrospective look at median dwelling values across the suburbs of Australia shows the bracket creep that has occurred over the current growth cycle, highlighting the deterioration of more affordable housing across the capital cities over the past five years.

At the end of 2016, 7.6% of suburbs nationally had a median house value under $200,000 and 5.9% of suburbs had a median unit value below $200,000.  To put these figures into some perspective, 11.4% of suburbs had a median house value of at least $1 million and 3.0% of suburbs had a median unit value of at least $1 million.

Over the five years to the end of 2016, there has been a substantial decline in the proportion of suburbs with a median value below $400,000.  At the end of 2011, 53.5% of suburbs had a median house value of less than $400,000 and 69.8% of suburbs had a median unit value of less than $400,000.  By the end of 2016, the proportion of suburbs with a median value of less than $400,000 had fallen to 41.0% for houses and 55.3% for units.

Suburb median values by value range,

National, December of each year

A five year retrospective look at the individual capital cities highlights the significant shift in the proportion of suburbs with a median value under $400,000, particularly in Sydney and Melbourne.

In 2011, the proportion of total suburbs with a median house value below $400,000 across each capital city was: 21.2% in Sydney, 28.9% in Melbourne, 40.9% in Brisbane, 40.5% in Adelaide, 31.1% in Perth, 69.2% in Hobart, 2.1% in Darwin and 1.1% in Canberra.  Units offer a more affordable option highlighted by the proportions of suburbs values below $400,000 at: 38.8% in Sydney, 48.2% in Melbourne, 81.7% in Brisbane, 94.3% in Adelaide, 59.8% in Perth, 92.7% in Hobart, 53.3% in Darwin and 44.6% in Canberra.

Suburb median values by value range,

Capital cities, December 2011

By 2015, the proportion of suburbs with a median house value below $400,000 had shifted to: 1.2% in Sydney, 12.2% for Melbourne, 31.4% in Brisbane, 29.5% in Adelaide, 15.5% in Perth, 55.7% in Hobart and 0.0% in both Darwin and Canberra.  For units, the proportion of suburbs with a median value of less than $400,000 in December 2015 were recorded at: 10.9% in Sydney, 34.9% in Melbourne, 64.4% in Brisbane, 87.7% in Adelaide, 37.2% in Perth, 88.4% in Hobart, 51.4% in Darwin and 50.5% in Canberra.

Suburb median values by value range,

Capital cities, December 2015

The proportion of suburbs with a median house value of less than $400,000 at the end of 2016 was recorded at: 0.1% in Sydney, 6.3% in Melbourne, 29.2% in Brisbane, 28.0% in Adelaide, 18.9% in Perth, 52.1% in Hobart and 0.0% in Darwin and Canberra.  For units the proportions were recorded at: 6.5% in Sydney, 31.8% in Melbourne, 62.7% in Brisbane, 85.1% in Adelaide, 46.4% in Perth, 88.4% in Hobart, 57.6% in Darwin and 45.8% in Canberra.

Suburb median values by value range,

Capital cities, December 2016

Five years ago every capital city except for Darwin and Canberra had at least 20% of suburbs with a median house value of less than $400,000.  At the end of last year, it was virtually impossible to find houses for less than $400,000 in Sydney, Darwin and Canberra while less than 7% of suburbs had a median house value below $400,000 in Melbourne.  Across each city there has been a substantial decline in more affordable housing over the past year despite the fact that outside of Sydney and Melbourne there has been only moderate value growth over the period.

Even units have recorded a fairly substantial decline in the proportion of suburbs with a median value of less than $400,000 over the past five years.

At the end of 2016, looking at both houses and units, 20.5% of Sydney suburbs had a median value of less than $600,000 compared to 38.5% of suburbs having a median value of at least $1 million.  To further highlight deteriorating housing affordability in Sydney, 34.6% of suburbs had a median unit value of less than $600,000 at the end of 2016.  In each other capital city, a higher proportion of suburbs had a median house value of less than $600,000 than the proportion of suburbs with a median unit value of less than $600,000.

If you’re interested in starting or growing your property portfolio, contact CPS Property today.

What is stamp duty?

Stamp duty is a tax, charged by the government, from the sale of a property. It covers the costs of things like changing and transferring the title and ownership of the property. Each state or territory government sets their own stamp duty, and you are required to pay it for property purchases within 30 days of settlement. The amount you will need to pay is set in relation to the value of the property, meaning the more expensive the property, the more stamp duty you will need to pay.

How much is stamp duty?

The fees vary greatly depending on property value, what state or territory you live in, and if you qualify for any concessions or exemptions.

For many new buyers, stamp duty can be a bit of a surprise, so it’s a good idea to know ahead of time how much you’re likely to owe. There’s plenty of online stamp duty calculators available, and can save you from being underprepared. While the calculators won’t be an exact, locked in amount, you’ll get a fair idea and can budget accordingly.

What else do I need to know?

When saving and preparing to purchase a property, ensure that you factor stamp duty into your budget, and you’ll save yourself a lot of stress down the track. There are concessions and exemptions on stamp duty, such as concessions for first home buyers and different rates for buying land, so depending on your personal circumstances you may qualify for one. Again, these differ by state or territory, and have quite a few restrictions so, like all things in property investing, make sure you do your research and speak to professionals for extra guidance.

To get started on your property journey, contact us today.

So who is your ideal tenant? Simply someone that pays rent on time? To have a smooth and successful journey as a property investor, there’s a few more things you need to look into when choosing the right tenant.

Here are our top tips when it comes to choosing the right tenant for your investment property:

1. Know your target audience

It’s important to understand the type of property you have and who it might attract. For example, is it a house that’s close by to schools and parks, or is it an ultra-modern inner city apartment? The differing factors between properties is what attracts different demographics, so make sure you’re aware of your situation and keep it realistic.

2. Remain objective

Choosing the right tenant for your investment property needs to be an unemotional and objective process. You might even find it helpful to have a checklist of all the things you would or wouldn’t like, as this may make it easier to refer to when narrowing down your choices.

3. First impressions count

If you present the property in a clean, well-presented manner, you’re representing how you would expect the property to be maintained. It might mean you need to give the property a fresh coat of paint, update the fittings, or other minor renovations and improvements, but this will all be worth it when you attract people willing to keep it as well maintained as possible.

4. Do your research

Ensure that the asking rent for your investment property is in line with the area it’s in and to similar properties. If it’s too low you might attract too much unwanted attention from people trying to simply snag a bargain, or too high you will financially rule out many people and be without rental income for longer.

5. Screen thoroughly

When it comes to screening applicants, you need to read between the lines and glean as much about your potential tenant as possible. The biggest factor is whether or not they have the means to pay the rent, and this can be figured out based on their income statements and other supporting documents.

Make sure to call at least three references and find out as much as you can about the applicant’s rental history, or simply who they are as a person in general. You should also speak with their previous rental agency or landlord and find out as much as you can about their renting history, such as if they paid rent on time, if they left damage at the property, or even if there were major communication problems. All of these questions will give you a better understanding of the applicant than just what is written on their paperwork.

Although you can search for and choose a tenant yourself, many investors find it helpful to get the advice and experience from a reputable rental agency when it comes to looking for the right tenant.

Here at CPS Finance, we can take out the guesswork, and assist you in choosing the best tenant to continue your investment journey with. Talk to us today!