Property StrategiesAt Residual Wealth we specialize in helping your with the following strategies depending on your investments goals and outcomes:
Buy & HoldThis strategy is sometimes called 'buy and hope'. Most property investors (80%) only own one property and that property tends to be negatively geared. At residual wealth our research department are searching constantly for positive cash flow property opportunities. We have significant opportunities in the Surat Basin and also in the Bowen Basin. For investors whom are looking for a buy and hold opportunity, we have many opportunities where it is possible to make in excess of $450 per month ($5,400 per annum) to in excess of $650 per month ($8,000 per annum). There are many factors involved when assessing this equation including the area where the property is based (some areas have higher building costs thereby increasing depreciation benefits), taxable income of the investor, structure in which the property is purchased (individual, trust or self managed super fund) and rental returns. Some of the principles we assess when looking to develop capital gain in a property portfolio are:
As previously mentioned, statistically most property investors only hold one or two investment properties. The reason they stop accumulating is generally due to lack of cash flow. In addition with the choice of positive cash flowed properties, to turbo-charge a property portfolio, the buy and hold strategy should be used in conjunction with cash flow strategies such as short-term property developments and stock market income generation strategies (namely option selling). One aspect of the buy and hold strategy which we address with our clients is the ownership of the property. There is always the need to weight up carefully the ownership of property - whether it should be in a personal name, a trust or a self managed superannuation fund. The various issues to be considered include land tax, asset protection and depreciation benefits. These are all issues that we cover with our investment property advice consultations. NRAS (National Rental Affordability Scheme)The new NRAS has assisted many of our investors achieve above average returns for their investment properties. The government has been trialing a new scheme in Western Australia for some time where the government provides a non income assessable tax rebate of $8,763 per annum (indexed for the next 10 years with the national rental inflation rate, currently at 8% per annum) to investors who will reduce the rent on their investment property by 25%. This only applies to brand new properties or off the plan properties. Residual Wealth has access to NRAS properties through our network of developers. This strategy has the ability to provide more tax advantages (due to the rent reduction providing more negative gearing benefits) and then provides a tax free rebate which takes a property return into very positive territory.
DevelopmentAt Residual Wealth we regularly advise our clients to get involved in small property developments such as duplexes and townhouse developments (3-6 units). With these developments the risk is limited as they are small projects and there are not likely to be any large cost blow outs if the due diligence has been carried out correctly. Below is an example of a recent project:
This example represents a current project developing a Duplex. There is a projected profit of $57,988 which is a 52.65% return on cash required for the project. The project time is generally 8-14 months depending on the local council. All costs have been taken into account including the selling agent’s fees to for both units. Clients expressing interested in learning how to do these small developments can be coached (with lots of ‘hand-holding’) through the entire process. This is a great way to add additional cash flow to an investor’s portfolio. Each project has a different risk/reward ratio. Obviously the higher the risk the more reward can be generally expected from the investment. The main risk factor is the builder, their financial stability as well as their expertise in being able to deliver a quality product in reasonable time frames. This risk is mitigated to some extent working with our builder, Suncrest Homes. If one builder fails then another can be easily sourced out of the network of builders whom are with Suncrest Homes. TopSuperannuationProperty investors now can purchase residential property in a self managed superannuation fund (SMSF). Generally these purchases must be at 70% LVR (loan to value ratio). So if the property is worth $400,000 the deposit must be $120,000. There some set up costs over and above the normal closing costs for a property which range from $2,000-$10,000 depending on the lender. The loan must be principle and interest and one of the disadvantages is that as the equity grows in the property, it cannot be drawn down again for future purchases or for other use. The loans are generally 20 or 25 year terms. At the end of the loan the house will be owned free and clear by the SMSF providing a rental income which can be set up as an income stream tax free (once the SMSF is in pension mode) back to the members of the SMSF. It is possible to develop a portfolio in SMSF at the same time as developing a portfolio of properties outside of the SMSF. The main benefit of owning a property in a SMSF are the capital gain tax (CGT) exceptions. If the property sold while the fund is in accumulation mode then the CGT is 10%. After the SMSF goes into pension mode then the CGT is zero. Ensure that you speak with an accountant to get advice on your specific circumstances. Another factor to consider when investing in property using a SMSF is that the property must be completed before purchasing. It is also not possible to purchase property WebinarsThis would have to be one of the best value wealth creation tools available. During October 2009 we will be rolling out regular webinars feature property experts such as Robert Yandell and Bob Andersen. There will also be regular seminars hosted by Mastering Wealth for our graduates and clients to learn more from trading experts Bill Ryan and Matt Brown. Join our newsletter to be notified of when they are coming up. TopSo You Want to Become a Property DeveloperBob AndersonBob is our resident property development expert. He is a member of a select group of property developers with over one billion dollars worth of projects under his belt. He has well over $100 million worth of projects currently in development nationally. Bob is Author of "Residential Real Estate Development" and is featured in the “Australian Property Investor” magazine (API). Bobs experience in developing small townhouse developments is second to none. With over 481 completed townhouse projects over the last 21 years and a perfect track record, never once having a project that did not make substantial profits. Bob is offering an amazing value package for just $1,997.00 where you can learn what it takes to become a property developer and turbo-charge your real estate portfolio. He also has various mentoring programs where you can access his knowledge and experience first hand. For more information... Short-termA short term strategy is to construct properties at wholesale and then sell them for a profit. This works best in 'property hot spot areas'. This strategy can be used quite well when you actually occupy the property as you get a capital gains exemption being your principle place of residence. The building company we work with, Suncrest Homes, create packages that are target marketed. They will consider the size of the house, the pricing, appropriate upgrades in specifications, and the area. It is possible to generate 10%+ per project which can create a good additional cash flow. |
Contact UsResidual Wealth Tel: 1300 737 997 Testimonial"Just a short note, thanking you for arranging the necessary refinancing for my home purchase. Your advice regarding the type of loan and sourcing the loan was comprehensive and accurate. Your staff was very helpful in explaining all of the details when answering my questions regarding each step of the process..." Hellen Scriven |
