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. 

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.

However, with $6.5 billion in NSW Government funding set to reinvent this once industrial port city, Newcastle is on the verge of significant property price growth.

In this three-part series, we explore the reasons Newcastle is becoming the next investment hotspot – and why you should keep this city firmly on your radar.

Part 1: World class infrastructure: the future looks bright for Newcastle

With a proud history as a former industrial heartland, Newcastle has slowly been transforming since the closure of BHP steelworks in 1999. And thanks to a government-funded urban revitalisation program, the former steel and coal capital is gradually turning into a vibrant and innovative global city.

Revitalising Newcastle’s CBD

Nowhere is this more evident than in Newcastle’s CBD, which runs along the mouth of the Hunter River and looks out towards one of Australia’s busiest ports.

The NSW Government has committed more than $650 million to its Revitalising Newcastle program. The program aims to transform the city centre by improving transport, renewing public spaces, creating job opportunities and building affordable housing to cater to a growing population and tourism industry.

Over the next few years, the program is set to deliver the following:

• Newcastle Interchange – a new multi-modal transport interchange at Wickham in the city’s west
• Light rail between Newcastle Interchange and Newcastle Beach, reinvigorating Hunter and Scott Streets
• Road and footpath upgrades
• An overhauled bus and ferry service
• Renewed land dedicated to providing affordable housing, job opportunities, tourist attractions and public open space.

Embracing innovation

The Revitalising Newcastle program follows the opening of the $90 million Newcastle Courthouse development and NeW Space, a $95 million city campus for the University of Newcastle that prides itself on its innovative approach to education.

The university is one of Newcastle’s biggest employers, and with student numbers projected to swell to 40,000 over the next decade, it will become one of Australia’s top three regional universities.

Not only do these projects indicate a growing confidence in Newcastle as a place to invest, they also signify a transition away from the traditional blue-collar sector to knowledge-based services (NeW Space focuses on law, business and creative industries). The impact this will have on the area’s demographics and income levels will be significant.

Connecting Newcastle with its surrounds

As well as transport improvements within Newcastle, travelling to and from Newcastle has also been made easier.

The Hunter Expressway, which was completed in 2014, has reduced travel time between Newcastle and Sydney, and Newcastle and the Hunter region.

And the Newcastle Inner City Bypass, which is only one stage away from being fully completed, will improve traffic flow across the western suburbs of Newcastle and connect key destinations such as Charlestown, John Hunter Hospital, Newcastle University and the Pacific Highway.

Recent upgrades to Newcastle Airport, including terminal expansion and improved security and technology, mean that it’s a step closer to direct international flights. Although no major airlines have confirmed they will start operating international flights yet, the airport is doing everything it can to secure them.

This has the potential to put Newcastle on the map as an emerging global city, and be an additional incentive for regular business or leisure travelers to relocate from nearby areas.

What does this mean for you?

Significant investment in infrastructure, urban renewal and innovation means that Newcastle represents a truly exciting investment opportunity. But the time to get in is now, before the completion of major infrastructure programs drives property prices further.

Want to know more?

We have a number of exciting investment opportunities coming up in Newcastle soon. Please contact us today to find out how we can help you build wealth through smart property investment.

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.­

Most people don’t begin investing with enough to cover the entire cost of a property. And chances are, you don’t have a tidy million sitting idly in your bank account just waiting for the right property to pop up.

So, what are your options then? A little thing called leverage.

What is leverage and how does it work?

Leveraging is an investment strategy, whereby you use borrowed money to finance an investment that you couldn’t afford to buy without those borrowed funds, and hope that it increases in value over time so that your return on investment (ROI) also increases.

Although some investors see it as risky, leveraging property allows you to purchase more property, thus increasing the size of your portfolio, than you would otherwise be able to afford.

When you invest in property, a financial lender will require you to put in, or pay, an amount of money towards the investment, but this amount is usually just a fraction of the overall value of the investment. Then, as the investment increases in value over time, so does your future ROI.

Let’s look at a common property scenario. If an investment property is $400,000 and you need to put down 10% for a deposit ($40,000), then you’re using a relatively small percentage of your own money to finance this purchase, with the majority of funds being borrowed. Assuming this investment has everything going for it and appreciates by 5% per year, your net worth from this one investment would grow to $420,000 in just one year.

If you then compare this to an unleveraged investment, where a $40,000 property is purchased outright (and if you find a $40,000 property, let us know!), and the same 5% rate of appreciation occurs over one year, your net worth would be $42,000.

A difference of $18,000!

Now figure out those figures over multiple years, and it’s easy to see why so many investors choose to leveraging property to build their portfolios and net worth.

The benefits of leveraging property

Using the $40,000 as an example again, if you placed that money into a term deposit at a bank, you could feel safe and secure knowing exactly what your interest rate is and what you will earn from this investment. This is a hassle free investment option with virtually zero risk involved.

However, to really maximise your wealth, you need to be able to take risks. As risky as leveraging may seem, the financial rewards can also be far greater than other investment strategies.

The main benefit of leveraging property is that it frees up your capital because you only have to front a fraction of the property value. This also means that you have the potential to have more than one investment going simultaneously.

You also get to enter into these investments faster than if you had to save for the entire property, meaning you can get into the property market at today’s prices, but benefit from them in years to come.

The risks of leveraging property

Just as leveraging property can increase your wealth, it also has the potential to decrease it. If your investment property drops in value, that extends to your overall net worth. If property prices fall low enough, you can even end up owing more to your loan than what the property is worth! Choosing the right property in the right area is a good way to minimise this risk.

In an ideal world

It’s important that you have a clear plan for your investment strategy. Leveraging property is quite common, especially when you consider that most people require a mortgage to purchase a home. To get the most out of your leveraged investment strategy, ensure that you have a financial buffer in place for unexpected costs, and consider buying in metro areas where property demand is higher.

Ideally, you would buy below market value and only properties with a strong yield so that they are also paying themselves off.

To learn more about how you can make leverage work for you, contact us today.

Property investing is seen by many as a way to secure one’s financial future, but with statistics showing that 50% of property investors sell up within the first 5 years, where are we going wrong?

If you want to avoid having the same regrets as investors before you, check out our top five complaints from property investors:

Poor cash flow

Not thinking ahead, organising finances or having a buffer in place are all causes for alarm when it comes to cash flow and ongoing management of your cash flow.

Life can be unpredictable, so you’ll need to consider big life events that may stall your cash flow, such as children, and you also need to allow for cash flow to cover any negative gearing shortfalls. Many investors find it helpful to have at least 6 months worth of savings in case they need to access it, even if it is there just for their peace of mind.

Unhappy with property selection

Many investors, for different reasons, end up with buyer’s remorse. This could be because they felt pressured into buying a property from a salesperson or their family, or it could be that they bought in a supposed ‘boom’ town that didn’t quite boom. They may have overpaid, or they may simply be unhappy with how their investment property is performing.

Followed the wrong advice

Everywhere you look there are property advice pieces just bursting to tell you all you need to know to make millions and be a property success. Some advice can be quite conflicting, and confusing – so how are you to know what is right?

Many investors can make mistakes simply because they followed the wrong advice. That’s not to say that all advice should be taken with a grain of salt – but you need to know your boundaries and your desired outcome from your property investing before you start listening to random advice. They aren’t the ones that will have to deal with your financial losses, so make sure you seek advice from reputable property experts, managers or investors. They can help you form your property investment strategy and help you understand exactly what type of property will suit your needs.

They missed out

Too often we see property investors miss out on great opportunities because they weren’t sure about the next step to take, or they’re waiting for the perfect property or the perfect timing.

Property cycles are hard to predict and they often vary greatly between cities and states. By doing your research and by having realistic expectations on the property market and your budget, you can try to avoid missing out in the future!

Issues with property management

Property investors will often to to cut corners or save money when it comes to managing the property with their tenants. Many opt to self manage and quickly come to realise how time consuming it can be. By hiring a good team of professional property managers, you know that your investment is well looked after and generating the best possible rental income for you.

At CPS Property we can help you understand the ins and outs of property investing. Contact us today to chat about your future as a successful investor.

Benefits of buying old

There are a myriad of benefits to buying an older property, all of which will either help cash flow, capital growth or equity.

• An older or established property offers the opportunity to add value to the existing structure, and therefore potentially increasing your equity in the property quite quickly. Whether it be a cosmetic makeover or a full overhaul, having the scope to improve on the existing property is a wise investment option for those willing to outlay construction costs to reap the rewards long-term.
• A cosmetic makeover to your investment can also improve the rentability of the property and therefore the rental return.
  Dependant on the style of property, there is a potential to subdivide the property to allow for an additional income stream with a dual occupancy property, or granny flat.
• Established properties are lovely to maintain their value or experience minimal fall during a slow marketing period, whereas newer properties are often more heavily affected by these movements and rely on the market solely to increase their value again (as there is no scope for renovation or upgrades.)

Benefits of buying new

Aside from the shiny newness of a fresh property, there are some significant wins for an investor purchasing a new property.

• Many would argue the biggest benefit to purchasing a new property is the tax incentives. There is significant scope for depreciation which are a helpful way to minimise your tax. A new property allows you to claim on the building value including fittings and fixtures. The ATO will also provide a substantial refund if the property is positively geared.
• The newer the property the more likely you are to attract buyers should and when the time arises to sell the property. The bones of the property including plumbing and electrical should still be in good condition easing a buyers mind for potential expenses upon purchase.
• Along with more buyer interest, comes more interest from renters. If you have a new property, you’re likely to attract quality tenants who will pay decent rent and make rent payments on time.
• Similarly to purchasing a new car, having a newer property does bring peace of mind that everything is in the best possible condition from the outset. Knowing the plumbing and electrical are new, the walls are freshly painted and the property presents well, is enough to ease an investor’s mind for years.

There are many pros and cons to purchasing either a new or older property. If you’re after wealth as a long-term solution, our advice would be to invest in an older property where there is larger scope for improvements. However like with any major investment purchase, it does depend on your individual circumstances and objectives. Seeking the help of trusted professionals will be able to guide you in the right direction.

Contact CPS Finance today to discuss the options available to you.

Negatively gear

A common and effective way to invest in property, is to negatively gear any investments in such a way to maximise tax benefits. Negative gearing involves purchasing an investment where the interest charged exceeds your rental income, therefore incurring an annual loss. This loss is deducted from your annual income which ultimately reduces the amount of income tax you pay while helping your cash flow. To do this, an investment property should be purchased in the name of the higher-income earner in order to offset the value of the tax deductions against their income.

Put it in a trust

Setting up a family trust and using it to structure or secure your investment purchases can help save money off your overall household tax bill. Trusts give couples and families the ability to work between family members and protect assets from creditors while continuing to build wealth. Trust distributions can be allocated to an unemployed family member or partner on lower tax rates, and therefore save thousands in tax.

It is important to note that when using a trust for investment properties, a couple will not be able to distribute a loss; making this a less suitable option for negatively geared properties. Furthermore, properties in a family trust are not entitled to the first homeowner’s grant or stamp duty concessions.

Use existing equity

If you or your partner already own a property, you may have untapped equity. Equity is the value of your asset less any debt. For example, if your property is worth $500,000 and you owe $200,000 on your loan, your equity is $300,000. This equity can be used strategically to purchase another investment property reducing the financial burden. If you have equity, you can use it to borrow more for an investment loan, or you may not be required to pay a deposit to secure a purchase when using your equity as security.

Reduce debt

Reducing your debt essentially reduces your financial liabilities. Before committing to a new loan, ensure any other outstanding debts are minimised as much as possible to help with cash flow. If your partner is producing little or no income, the less pre-existing debt you have will help lenders approve a loan to secure a property.

An investment property is a long-term strategic financial decision, and it’s important to seek relevant and trustworthy advice before making any decisions. Contact CPS Finance today to discuss your investment options.