How much will
you need to live on once your income stops? Let’s
say $50,000 a year. If we assume a safe return on your
investment of 5%, how much capital would you need to
generate earnings of $50,000 per annum? The maths is
simple: $1,000,000.
“Just forget it”, you’re probably
thinking. “We could never save $1,000,000. There’s
already too much month left at the end of the money”.
But before you dismiss the idea, just think about
the value of your own home. Chances are that if you
bought it ten years ago for around $250,000, it could
be worth at least $500,000 today.
Government statistics show that real estate generally
doubles every ten years. That boils down to an average
growth rate of 7.5% compounded every year.
So if you keep the property that’s now worth
$500,000 for another ten years, bingo! It’s then
worth $1 million. And everyone – including the
banks – would be very surprised if this were
not the case. So why not repeat this growth strategy
with another property? This is the secret to profit
through property.
Leverage and time are the keys
The secret to wealth development is borrowing the
money that you have in equity to invest in an asset
that history has shown grows and doubles in value every
seven to ten years. Banks and building societies are
aware of this. They place great trust in the growing
value of property in Australia.
Provided you have a regular job and want to buy real
estate, they will lend you 90% to 100% of the
value of the selected property for a period of 25 to
30 years. This time factor is important. The sooner
you act, the sooner you can achieve gains!
Most people buy their first home and then stop. When
they have reached 60 or 65, it might occur to them
that their house that is now worth a million dollars
could easily have turned into two properties worth
two million dollars! That’s what you call a real
missed opportunity. Don’t let this happen to
you.
Pay off your home loan with your investment
property profit
Many people believe that they should wait until their
house is paid off before buying another. That’s
called “conventional wisdom”.
However, times change, and so do conventions. Today
the bank will lend you the money to buy an additional
property while you pay off the first one. This means
that you can hold two properties at the same time and
enjoy the compounding value increase on two properties
rather than one. Once their homes have doubled in value,
many couples then “think outside the square” and
sell the investment property and pay off their original
mortgage. This is an approach called “back burning”,
and it is highly effective in creating a mortgage-free
result.
Time is running out
Time is one of the key ingredients in the recipe of
successful investment. You need time to let asset values
and rentals grow. The longer you leave the decision,
the less time you have to reap the benefits. And if
you are not careful, you may reach the point of no
return, and face the kind of unsatisfactory retirement
experienced by the majority of Australians today.
You need to make sure that when your work stops, your
income doesn’t. The only way to do that is
to develop a sound investment plan, and act on it.
You’ll kick yourself should you ever come to
realise that there was a solution, and you simply never
sought out or discovered the knowledge that would have
enabled you to retire in relative comfort, financial
freedom and independence.
How do I do it?
For many people the starting point has been the McCarthy
Lifestyle Planning Workbook. It’s a simple six-step
guide that starts out by helping you to calculate where
you are right now in terms of your current assets and
income. It also shows where you are likely to end
up using current projections. You then work out how
much income you’ll
need to retire in the kind of lifestyle that you’ve
enjoyed while working and that you plan to continue
to enjoy once you’ve stopped.
The workbook is essentially a roadmap of the path
to investment success, and it can be worked through
in the comfort of your own home, leaving you with a
clear picture of what you need to do.
Need help with your property investments? Contact
us now
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