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managing income debt during coronavirus

How To Manage Money And Debt During COVID-19

How To Manage Money And Debt During COVID-19

There’s no doubt about it … we’re living in unprecedented times.

Regardless of race, gender, socioeconomic status and the myriad of other factors that determine who we are, coronavirus affects us all.

It’s a world-wide problem and it’s going to take a worldwide approach to conquer this enemy.

Whilst the battle is raging, our lives will undoubtedly be affected.

To help you navigate these unchartered waters have a look at ways to manage money and debt…

Stay focused when managing your money

Watch Your Focus

Some people will experience anxiousness and fear as they read the headlines and listen to the media sound bites that dominate the horizons.

Others will feel the financial impacts this dreaded virus has brought about. This is especially so when businesses close and incomes are reduced.

Whilst these emotions are natural, they can lead us to be reactive and making flawed decisions.

To ensure you don’t fall prey to financial sub-optimal short-circuit decision making, try to defocus on all the bad news that’s being aired.

Acknowledge how you feel and then reach out to an expert who can help you deal with your financial affairs. We are definitely equipped to talk ‘finances’ over with you.

manage your income and expenses

Review Your Income And Expenses

Now is the time to look at what you earn and where your coin goes. Some people’s incomes will be affected.

Their incomes may even stop. Unfortunately, this doesn’t mean bills cease.

If you’re in this boat or if you think there’s a possibility your income could drop in the coming weeks, be proactive.

Make adjustments to your spending where you can and ensure you don’t worry about this on your own.

Talk to us as we’ve got the knowledge to help you manage in these trying times.

get rid of bad credit card debt

Get Rid of The Credit Card And Consumer Debts

Now more than ever, you need to be smart with money and that means being smart with debt.

An option may be to consolidate all your debts into your home loan. Why?

Because the interest you pay on a home loan debt is much lower than what you pay on consumer and credit card debt which means you’ll be improving your cash flow position if you take up this suggestion.

Let me give you a quick example of how we’ve helped clients achieve this:

Let’s assume that you have a 30-year term $300,000 principal and Interest home loan where you’re charged 3.20% per annum.

Your monthly repayments are around $1,300.

You also have a $5,000 credit card debt where you’re paying interest at 11.99% which see your monthly minimum payment around the $150 mark.

Now if you were to consolidate your credit card debt of $5,000 into your home loan your monthly home loan repayments would increase by just $20 per month.

That means you’d be cutting your monthly expenses by $130.

Whilst this suggestion means you’ll get an immediate cash flow benefit, you do need to be aware of the drawback attached to this method – you could end up paying a whole lot more interest if you don’t focus your efforts in eliminating the extra debt entirely by making payments in the future.

Still … the method helps you get through right now and gives you time to address the full repayment of the debt in the future.

Refinance to manage your money

 

Review And Refinance Home Loan

Even if you don’t need to consolidate all your debts into your existing home loan, you should be asking yourself if your current loan arrangements serve you well.

Recently, interest rates have significantly dropped and now could be an excellent time to look at refinancing.

We already know that if you have a home loan plus transactional account where you pay goes into – we have a solution that could save you thousands! And that’s just the beginning.

It costs you nothing to talk to us and explore these suggestions and if it results in more coin in your pocket, that’s a real bonus to you.

Summary

The best antidote to fear is action, but it has to be informed action that benefits you.

So, after reading this article, don’t fall prey to being an ostrich and burying your head in the sand if you have difficulties or being a rabbit and running from your situation.

Get in touch with us.

We’re here to help you through.

Remember, energy flows where focus goes so focus on improving your financial position now.

You’ll thank us in the long run – promise!

 

Salara Molenaar

Key To Australia Finance Manager

salara@kta.com.au

+61 7 5574 1331

  • March 30, 2020
  • News
6 reasons to invest in property

6 Good Reasons to Invest in Property

6 Good Reasons to Invest in Property

Do you sometimes wonder how seasoned property investors got started and why they invest in property?

Is property investing really that good of an investment and if so, why doesn’t everyone invest in property?

Let’s go through the top 6 good reasons to invest in property.

To invest in property takes more than just an income and a deposit, you have to have the determination and the right mindset to achieve success.

However, anyone can realise their dream of achieving their financial goals by investing in property.

For centuries investors have invested in property as a way to increase their wealth.  But what most people don’t realise is that the increase in value is not only the building but the actual land itself.

Land value increases over time whether there is a property on it or not, and the more valuable the land is the more you pay per sqm. For example, a 400sqm site in Sydney is worth more than a 400sqm site in Cairns.  But if you were to build the ‘Exact’ same property on both pieces of land it would cost pretty much the same, the only difference would be labour costs excluding any service connections.

Investing in property is not for everyone, as not everyone likes the idea of having that much debt, it can seem rather scary. But like anything you do for the first time, it’s always a learning curve, a little bit scary because of the unknown, but don’t let yourself focus on the negative aspects, focus on the positives.  If unsure ask for help from a professional.

Let’s go through the 6 good reasons to invest in property and hopefully that will help you decide to invest in property.

1. Financial Independence

Now, more than ever, it’s important to make sure you have the right steps in place if you want to live comfortably in your retirement.

The retirement age is increasing, and people are no longer able to rely on the aged pension as a sole source of income.

Depending on your age 20s, 30s, 40s or 50+ we have created articles to help you manage your money.

Dollar coin

But if you start now (no matter your age) you can build a property investment portfolio that will provide you with financial independence so you can enjoy retirement.

For some people, it means purchasing one investment property that provides a rental return.

For others, it means building a veritable monopoly of investment properties in an apparent bid to conquer the universe.

So don’t get bogged down in thinking you need 10 or 20 investment properties to retire well, just start out with your first then work your way up.

At Key to Australia we like our clients to aim towards owning (debt-free) 4 investment properties which will give you around $2,000 passive income per week ($500 weekly rent), that’s $8,000 per month.  If you want more passive income than that then just purchase more or one of our Dual Key properties (high cash flow), but most Australians are happy with 4 properties.

Talk to us about earning $2,000 passive income.

2. Create Passive Income

Invest in property for cash flow, which is called passive income, don’t be a speculator and try and time the market to achieve capital growth.

Capital growth comes over time and that’s why it’s important to start now no matter what the market is doing.

So your main goal is to invest in property to create a passive income (rental income), this will grow over time as rents increase and your debt (mortgage) decreases.

how to grow passive income through investment property

The idea is to have zero debt on your property at the time of your retirement so that passive income is paying you to live.

Think of passive income like your Super.  You put money in to pay down the mortgage and your employer is your tenant who pays you also to cover the cost of the mortgage and other expenses.  But this is where property investing gets really exciting, once you have no debt and rents continue to rise you still get paid, plus the increase in capital growth has happened over 10+ years so you can either sell the property and live off the capital or pay down debt on another property.

At Key to Australia we help ordinary hard-working Australians purchase an investment property.

We help you find the property in the right area so you can achieve passive income and capital growth.

We make property investing easy and simple by helping you invest in property and live the life you deserve in retirement. Apply for a free consultation today.

3. Take control of your own property investments

The great thing about investing in property is that you’re completely in control of what you purchase whether that’s old or new, and you can take steps to ensure that you give yourself the best chance of achieving excellent capital growth or rental return (cash flow) figures.

take control of your investment property

Property investing is also great because you can touch, smell, see and renovate your investment, try renovating your share portfolio, well I suppose you could print out your shares on embroidered paper!

When investing in property you have the choice of the tenant you choose, how your property looks and which bank you get a loan through.

You have control of your assets which makes property investing very exciting. But for those who don’t want to be too hands-on, you can find help via a property manager, builder, accountant, lawyer and or mortgage broker.

If you would like our help contact us for a free chat.

4. Grow your portfolio as your equity increases

Once you start investing in property, it’s sometimes difficult to stop.

You start to get the bug and realise that it’s not actually that hard once you get the support and professionals around you to help.

One investment starts to grow which allows you to purchase another, and before you know it you have a nice little collection of properties making money for you.

grow your property portfolio

 

This is one of the major reasons you are able to purchase more than one rental property by using equity.

Equity enables you to borrow a percentage of the properties value (equity) to use as a deposit to purchase another rental property.

How cool is that!

You don’t have to save another deposit you just use growth from one property and put it into the next, the more properties you have the easier it is to purchase more.

But newbie property investors beware, invest too fast and it can all come undone if the market drops or your cash flow dries up, always be smart and invest wisely.

5. Capital Growth

If you choose wisely, you should be able to achieve strong capital growth on your investment properties.

The key is to choose the right type of property in the right area, don’t just expect to buy a property anywhere and achieve capital growth.

This might not be an area where you would choose to live – it just needs to be an area with lots of potential for growth.

moscow city with capital growth

When you’re looking to purchase an investment property don’t buy on your emotions, the numbers need to stack up, just because it’s a cheap house in the middle of nowhere doesn’t mean it’s a good investment.

To achieve capital growth you need to make sure you buy in the right area, it is not a guessing game.

Find an area that has a population of over 100,000 (that’s growing not declining) or most major cities, where jobs are being created, current infrastructure and is growing, public transport, as well as local, state and federal government spending in the area. Avoid towns or cities that rely on one industry, for example mining towns, they boom in mining times but worth nothing when the mine closes.

All of these factors contribute to capital growth.

6. Tax Deductions

We all want to pay less tax, legally of course, so when you invest in property there are a number of tax incentives you are able to take advantage of.

In this article, I’m not going to go through them all as it’s best to seek help from an accountant for your personal situation.

tax to pay investment property

If you have a job (employed by someone) you are paid a wage or salary, you receive that wage but tax is taken from your wage before you are even paid.

However, if you have an investment property, you receive your rental income which could be $500 per week over the year that’s $26,000 in income. You then take off your expenses which include, interest payments, property management fees, maintenance, accounting costs, council rates, insurance to name a few.

This could mean you have expenses of around $20,000, you would then take your income of $26,000 less $20,000 (expenses) to give you a taxable income of $5,000, this amount would then be taxed on your income tax rate.

This is one of the reasons which enables you to invest in property.

Please note tax deductions or negative gearing are not the reasons to invest in property, they are simply reasons to help you invest in property and build wealth over time.

 

Invest in Property the Right Way

Investing in property is an exciting way to build wealth and have fun doing it.

But don’t underestimate the research and due-diligence needed to purchase the right property in the right area.

If you do the leg work at the beginning it will pay off in retirement.

If you hope to achieve a good rental income from your investment properties, you should purchase carefully, and keep your ideal tenant in mind.

Don’t let fear stop you from investing in property, either way, always seek the help of professionals.

At Key to Australia, we know the market, we know the areas and we have the processes already in place to get you into your first investment property.

Good luck, let us know if you would like our help.

  • February 17, 2020
  • News
American money

Do You Know Where Your Money is Going to Come From When You Retire

Money

No matter what age you are we all dream about what life could look like and if we had lots of money, like winning the lottery, right!

But realistically we aren’t all going to win the lottery, here are the odds for winning the lottery in Australia and New Zealand. Hint, the odds are not in your favour.

So let’s get realistic for a minute or two.

I invite you to start dreaming about your perfect life.

What does it look like?

Feel like?

What about your perfect day?

  • How does it start?
  • What do you do?
  • How do you spend your evenings?

How much do you earn?

  • What will you do with the money?
  • How does it help you and your family?
  • What fun will you have with it?
  • How will you ensure it never runs out?
  • How can you make your money work for you?

You see the first thing I would love you to dream about is your perfect life, in other words…

 

What is Your Vision For Your Future?

 

For yourself, your family, your career or business?

Without a plan, a vision, a dream of what you would like to have in your day, your life… there is no destination.

Now I know the popular “bumper sticker” that says something like “Life is about the journey – not the destination”.

But honestly, without a destination, how will you know if where you’re heading is to your best life?

It’s like giving you the keys to a car and not knowing where to go. Eventually, you either run out of fuel and/or motivation to keep going.

So, start thinking today about your best life.

Go back to before your earlier days… what did you dream of?

So often we get caught up in our days just spinning our wheels, so deeply involved that we forget why we started in the first place.

I invite you to go back to the beginning… to dream… write down what you want, what you will do to get what you want, how much you would like to earn, to save, to invest.

Come up with some tangible numbers that have a meaning for you.

Essentially… come up with the ‘WHY’.

Why do you do what you do? Why does it bring you joy?

money

 

Then Come up With The What

 

The ‘WHAT’ is your income metrics, the hours you work, what you will do in your day that ensures your best future life, what you will stop doing – those habits that bog you down and stop your best life from gaining traction.

Then there is one more step you need to consider – and that is the HOW?

The ‘HOW’ cannot consist of working until you retire, then you retire and what? Live on the pension? That destination is not your best life!

The ‘HOW’ consists of a wonderful thing called PASSIVE INCOME!

It’s all well and good to be focussed on ‘the now’.

However, without at least part of your vision focussing on the future, your present will soon become your past and your dreams will remain just that – dreams!

Passive Income

 

With Passive Income, your dreams become your reality, your best life is now easier to reach, and your destination has blue skies, open highways, and without a care in the world.

You’ve probably heard of Robert Kiyosaki, and his well-known book “Rich Dad, Poor Dad”. He also penned other well-informed, intuitive and practical guides to securing your financial freedom through the use of Passive Income Strategies.

His book, “The Cashflow Quadrant” explains this further. In this particular book, he draws our attention to this concept, where a table is divided into four areas.

E and S quadrants are on the left-hand side and B and I quadrants on the right-hand side.

 

Cash flow quadrant money

The above diagram illustrates this concept of Robert Kiyosaki – Cash Flow Quadrant

The goal is to progress through the quadrants and become more on the right-hand side of the table where you use leverage.

So, what do the quadrants represent?

  • Employee – when you are employed by someone
  • Self-employed – when you work for yourself
  • Business Owner – when you work for yourself and have employees. Businesses that sell products and services
  • Investor – you have real estate interests, shares and/or stocks and bonds

Active Income is defined as trading your time for money.

So, to make money you must perform a task or many. Every day you start from Zero.

Passive income is defined as not having to be present to generate income. Think real estate, stocks, bonds and other sources of passive income. You are literally making money while you sleep – 24/7.

Back to the Quadrants

Employee

Most people only live in this area.

You work for a company and trade your time for their money. If you want to earn more money, you need to trade more time.

Another option is to work for another company that pays you more for your time.

There is no passive income in this quadrant. If you don’t work, you don’t make any money.

Self-employed

This is one step better than an employee, but you are still trading your time for money.

You may own your own business, but really, the business owns you.

The upside is you have more personal and financial freedom than an employee.

Business Owner

A business indicates you have systems in place. You have others working for you as employees.

You’re not selling your time for money, but rather selling a product or service.

Put simply, you may not have to be working in the business to generate income.

Investor

This is where you really have a passive income.

Investments like real estate, shares, stocks and bonds generate an annual cashflow.

These are investments that will allow you to retire.

So, to know where you’re going, you need a strategy, a plan to move you through from the left-hand side quadrants over to the right-hand side.

Your goal needs to be to get to the investor quadrant as much as possible, as soon as possible.

 

We specialise in Passive Income strategies.

Your vision of your future just got brighter. And all it takes is reaching out to one of our team, to start your own road to success!

Enjoy one of our free property investing consultations to help you get on track or to continue to grow your wealth and passive income.

  • February 3, 2020
  • News
Kitchen of house

Why the Time is Right for Home Owners With Equity to be on the Lookout for Investment Properties

Why the Time is Right for Home Owners With Equity to be on the Lookout for Investment Properties

If you have equity stored away in your home, now is the perfect time to tap into that for an investment property and begin your journey towards financial freedom!

We’ve talked before about equity

What is equity

It’s the difference between the value of your home and what you owe on it.

So, if you have a property worth $500,000 and you only owe $200,000, then you have $300,000 equity.

Timing is right

The first reason that the time is right is that property prices have flattened across most of Australia in the wake of global uncertainty.

But key indicators in the United States now point to a recovery there, which our market is likely to follow, especially given our strong economy.

So, not only is now a buyers’ market, but there is a good chance of capital growth in the first few years of ownership.

Interest rates are low

The second reason, interest rates a remarkably low.

After the most recent drop in official rates, there is strong speculation they will continue to remain low, for quite some time to come.

Housing shortage

The third reason, we still have a housing shortage here in Australia, which continues to drive low rental vacancy rates.

This means good properties rent easily.

Good quality investment properties

The fourth reason, we specialise in good properties, in growth areas, with the infrastructure families are looking for.

So renting properties sourced by Key to Australia means quality, happy, long term tenants.

Every landlord’s dream!

australian investment property use home equity to buy

I have equity so how do I start?

You start by talking to both Key to Australia and Power House Financial Services.

Together with this team of highly motivated professionals, with years of experience in their chosen fields, will see you turning that equity into your very own money tree.

Some decisions you will need to make include…

Capital gains or rental returns?

You will need to determine what fits best for you, do you want strong rental returns or decent capital growth over the next several years on your investment?

If you are in a high tax bracket and looking to create a tax advantage through investment, then capital growth is probably your choice.

First-time investors can add equity

First-time investors looking to establish a portfolio of properties would also be aiming for capital growth.

This will easily establish equity for the next property purchase.

Rental returns

Some investors are not in a hurry for capital growth and prefer their properties to be cash flow neutral or positive from the start.

Potential for both.

Right now, is the right time for both.

There’s potential for decent capital growth and good rental returns for property investors who chose the right property in the right location.

Finding the right property… we do all the leg work for you!

Number one rule in property investing

The number one rule is to invest in property with your head and not your heart.

Easier said than done.

That’s where we come in, we will always have your best interests in mind.

We know that you want a property that is:

1. Close to public transport and other amenities, like shops, schools, especially “in demand” schools that only accept students in their local catchment areas.
2. Brand new, low maintenance, high quality builds.
3. In areas with potential for capital gains.
4. In areas with low rental vacancy rates.

Another common piece of advice is to “stick to familiar areas”.

However!

With us by your side from the start, and all through the journey, leave it to Key to Australia to source the properties with these most important 4 contributing factors.

You don’t need to live close to where you invest, as long as you have us by your side, investing just got a whole lot simpler, easier and by far, a more well-informed decision on your part.

Key to Australia investment property use your home equity to buy

Managing your investment and your tenants

We’ve mentioned Key to Australia, and our finance house, Power House Financial.

Now let us tell you about Key to Rentals, our property management company.

The team that will ensure you have quality tenants and your property is maintained, managed and looked after regardless of where you live.

At a very competitive rate, Key to Rentals will advertise and then interview prospective tenants, giving you a “short-list” of only the most suitable applicants for your final decision.

The team will also make sure the rent is paid on time, arrange for any repairs and maintenance and recommend appropriate rental increases.

You can even authorise what repairs/maintenance can be carried out automatically, and what needs your approval first.

We pride ourselves in being your complete “one-stop-shop” when it comes to property investing, and our team of highly motivated professionals will ensure that your journey is smooth flowing, rewarding and exciting.

Exciting enough for you to purchase another investment property in as little time as you feel confident and comfortable doing so – because at Key to Australia, it’s what we do best!

  • December 16, 2019
  • News
New Zealand sheep

Can New Zealanders Buy Property in Australia?

Can New Zealanders Buy Property in Australia?

Do you live in New Zealand?

Are you a New Zealand citizen or resident?

Are you interested in looking to purchase a home or investment property in Australia?

Then you need to watch this video because I’m going to give you the answer to the number one question I always get asked by Kiwis.

Can New Zealanders actually buy property in Australia?

You can either watch the video below or read the transcript.

Subtitles available in English, Hindi, Chinese (traditional and simplified).

To view in your selected language (1) click the wheel icon (settings, bottom right corner of the video) then (2) click on Subtitles/CC and choose your language.

How to find the captions for your language

 

Can New Zealanders Buy Property in Australia?

I get asked this a lot and I want to expel the myths behind, “Can New Zealanders buy property in Australia?”

I’m also going to cover borrowing and how finance works between New Zealand and Australia.

I will also share with you, how the construction process works, in Australia, because you will be shocked at what I have to tell you.

After watching this video, make sure you leave a comment sharing the myth you have heard about New Zealanders and why they can’t buy property in Australia.

If you are from New Zealand and would like help with purchasing an Australian investment property or a home, contact us today.

We also offer free property consultation to see if we can help you reach your property investment and wealth creation goals.

Are you a New Zealand citizen or resident?

There are two parts to this and it all depends on whether you are a New Zealand citizen or a permanent resident.

New Zealand citizen

Firstly, if you are a New Zealand citizen, you can buy new or second-hand properties in Australia.

In Australia, we have a Foreign Investment Review Board or the FIRB, that gives all New Zealand citizens an automatic approval and there is no fee.

Australia has introduced a 7% surcharge for foreign buyers, which is added to the existing 3% stamp duty, and therefore the rate is 10%.

However, this can be reduced to 3% for New Zealand citizens following certain criteria.

This is what we do for our clients on a daily basis.

New Zealand permanent resident

Secondly, if you are a New Zealand permanent resident but not a New Zealand citizen, you can buy property in Australia but you can only buy brand new.

There is a $5000 fee payable to the Foreign Investment Review Board and the stamp duty is 10%.

You can not reduce your stamp duty like a New Zealand citizen can.

So now you know that New Zealanders can buy property in Australia.

The next part of the question is.

pohutukawa tree

Can New Zealanders borrow money in Australia to buy an investment property?

Most banks in Australia will lend up to 80% on an investment property in Australia for New Zealand citizens and 70% for non-citizens.

The same rules apply in Australia and New Zealand for the servicing of clients.

So make sure you keep a good credit rating.

The 20-30% deposit plus costs come from either borrowing against property in New Zealand or from funds you have available.

Once you have finance approved in Australia and the deposit ready in New Zealand then you are ready to finance the property.

For this example, we will use a new build, which is a land and build contract

This is to construct the property.

How is the property financed then constructed?

The funds from New Zealand are transferred to an Australian solicitors trust account.

Once the property is fully approved, land settlement then takes place using the New Zealand funds and part of the Australian loan.

The bank provides a letter confirming that the bank holds sufficient funds to complete the construction.

Now we’re actually getting to the exciting part, which is the construction of the property.

The property is constructed using progress payments, such as;

  • Base of the property;
  • Framing of the property;
  • Enclosing of the property, things like your brick walls and tile roof;
  • The full fit-out, including the kitchen, bathrooms, fixtures and fittings.

And then there’s finally, the completion.

Construction of a new building usually takes 14 to 16 weeks

Yes, that’s right, 14 to 16 weeks.

Penalties will apply to the builder if it takes longer than what is actually stipulated on the contract.

This is quite the contrast to building in New Zealand, as it can take 28 to 52 weeks to complete.

At each stage, an invoice is provided by the builder and council approval is issued along with photos of the progress.

This then needs to be signed off by you and then sent to the bank.

The bank has a valuer to confirm the stage before the builder’s invoice is paid, at no time has more been paid than what has been completed.

This gives you great protection as an owner.

At Key to Australia, we arrange a buffer in the mortgage to cover interest during construction.

So it doesn’t affect your cash flow and you don’t have the headache of suddenly realizing you need to find more money.

Finally, on completion, a certificate of occupancy is provided by the council, prior to the bank making the final payment.

Congratulations, you now own an investment property in Australia

Wow, how great is this, owning an investment property in Australia even though you’re a New Zealander.

The next time someone says to you, “New Zealanders can not buy property in Australia.”

Send them to this article and I’ll explain it all for you.

If you’d like to know more about buying a property in Australia, come along to one of our New Zealand property investment seminars.

Buying property in Australia from New Zealand is a great way to increase your property portfolio.

New Zealand is very expensive and requires a 30% deposit for investment property, where Australia is only 20%

If you would like to meet with one of our consultants based in New Zealand and talk about buying property in Australia enjoy one of our free property consultations.

maori

New Zealanders purchasing property in Australia

So if you’re a New Zealander looking to purchase an Australian home or an investment property, Key to Australia can help you all the way through the process.

We help Kiwis and Aussies find a property, help with finance, construction, accounting and then property management services if you would like our help managing the tenant.

We will be with you every step of the way.

If you have any queries or questions regarding this video or anything else about buying a property in Australia from New Zealand, add a comment below and I will answer them for you.

Also, if you’ve liked this article, make sure you share it with your friends.

  • November 29, 2019
  • News
Risk australian investment property

If You Have $110,000 Where Should You Invest It?

If You Have $110,000 Where Should You Invest It?

The Bank, shares, New Zealand property or an Australian investment property?

In this short video, I explain the options and show you the results. You can either watch the video or read the script below.

Australian investment property in ChineseSubtitles available in English, Hindi, Chinese (traditional and simplified).

To view in your selected language (1) click the wheel icon (settings, bottom right corner of the video) then (2) click on Subtitles/CC and choose your language.

Should you invest $110,000 in the bank?

Buy shares?

Purchase a New Zealand investment property?

Purchase an Australian investment property?

Watch video below to find out what is the best investment option.

I’m going to share with you what would happen at the end of 10 years if you put the same amount of money, which is $110,000 into the bank, buy shares, or purchase a New Zealand property, or purchase an Australian investment property.

Make sure you read to the end as I have a free gift for you.

Hi, my name is Mark Scarrott, I’m the CEO of Key to Australia.

We help New Zealander’s and Australian’s purchase investment property in Australia to help them increase their wealth and reach their retirement dreams and goals.

So let’s get into it.

Should you invest $110,000 in the bank, buy shares, or purchase an investment property.

Put $110,000 into the bank

Put your money in the bank or buy an australian investment propertyThe first scenario, what would happen if you put the $110,000 in the bank. If you were to invest, or maybe you already have $110,000 in the bank, the current rate of interest is around 2.8%, and that’s taking an average over all the banks. Let’s say the interest rates stay the same for the next 10 years.

That first year of interest is $3,080 and then it’s compounded thereafter, after ten years, the profit is $34,985. That’s a 31.8% return on your investment.

 

Buy shares

Put your money in shares or buy an australian investment propertyThe second scenario is buying shares, to keep the example uniform, we’re gonna assume 6% growth for shares and property.

If we were to invest that $110,000 into shares, a growth rate of 6% per annum for 10 years, your profit is $86,993.

That’s a 79% return on your investment.

 

Buy a New Zealand Investment Property

Put your money in new zealand investment property or buy an australian investment propertyNow let’s take our third scenario. Use our $110,000 to purchase an investment property in New Zealand, this is where we’re talking about leverage. This is where you use a small deposit and borrow the balance to own real estate.

So by buying a New Zealand investment property, with the New Zealand current lending requirements, you have to have a 30% deposit.

This limits you to purchasing a property for just $360,000 and where do you think you could purchase a four-bedroom, stand-alone house for $360,000 in New Zealand?

Definitely not in a growth area. If you were to look on Trade Me, you can only buy a second-hand property, definitely not new, in places like Gore, Greymouth and Timaru.

For the purpose of this example though, we will add a growth rate of the same 6% every year for the next 10 years. This will take your $360,000 property to $644,705 That’s a profit of $284,705. 258.8% return on your New Zealand property investment.

Buy an Australian Investment Property

australian investment propertyNow, let’s look at the same property scenario if you were to buy a property in Australia.

You’re only required to provide a 20% deposit for an Australian investment property which means with your $110,000 you can purchase a $500,000 property and that includes the stamp duty and the exchange rate.

But this property won’t be an existing property, but a brand new, 4-bedroom, 2-bathroom, double-garage house on a 400 square meter site. These are all in growth areas with populations over 600,000 people.

We will still use the same growth rate of 6% per year for the next 10 years.

This will take your $500,000 property to $895,424. Less the capital gains tax which we pay here in Australia of $34,500 which will give you a profit of 360,924.

That’s a 328% return on your Australian investment property.

So, as you can see, if you have $110,000 sitting in the bank, under your mattress, or buried out the back of the yard, the best return on your investment right now, is purchasing an Australian investment property.

Let’s go through those scenarios one more time

The return on your $110,000 investment, the bank will give you a 31.8% return over the ten years.

Shares are 79% return.

New Zealand property, 258.8% return.

Australian investment property, 328% return which is the best investment option if you have $110,000 to invest.

So the best option in the investment market is purchasing an Australian investment property.

If you would like to know more about purchasing an Australian investment property in Australia, contact us via our website.

  • November 22, 2019
  • News
Property market to boom

Decline in Construction Means Property Market to Boom Again

Property Market to Boom Again

You may think that Australia is in a downturn, especially after the housing market bubble burst, but the Reserve Bank of Australia is already forecasting the property market to boom again.

RBA expects construction activity, which is already surprising slow to continue declining into next year, creating a supply shortfall.

As demand returns to the market, there won’t be enough stock to cater for it, leading to yet another price surge especially in the cities of Sydney and Melbourne, but this will roll out through Brisbane as well.

residential dwellings

“While the increase in supply has finally met the earlier increase in demand, demand will continue to grow given population growth but supply is going to decline.

So there is quite likely to be a shortfall again in the foreseeable future,” RBA deputy governor Guy Debelle

The major problem with a decline in the supply of housing is that it takes a long time to get it going again.

The same thing happened between 2012 and 2017 where prices increased by 58% and 75% in Melbourne and Sydney, if supply doesn’t out pass demand property prices climb and they climb fast, especially in the major cities.

Debelle said, “Building approvals are around 40 per cent lower than their peak in late 2017.”

“We are forecasting a further 7% decline in dwelling investment over the next year and there is some risk the decline could be even larger, Debelle said, noting that 2020 could be the year construction bottoms.

Property Cycle

Of course, if you look at the Property Cycle this is pretty predictable.

During the boom period of the property cycle, you see lots of construction happening, and you notice by the number of cranes throughout cities.

Property buyers are excited by the boom and look to get in on the action (little do they know its too late).

Then as the market cools, which it has done for the last 12 to 18 months, construction slows as properties are not sold as fast off the plan, auction clearance rates drop and lending is tighter.

This results in construction companies holding off on current builds, reducing the number of dwellings being built and passing off land to other developers because costs and overruns are getting too tight.

Property Cycle Infographic: Recovery, Boom, Slow Down and Slump

Whether you are starting out in property investing or have been investing for some time one of the major things you should know and understand about property is the property cycle.

This will help you decide when you should buy and or sell property to make the most of the timing of the market.  There is nothing worse buying at the top of the boom or anywhere in the slump cycle. The same goes for selling, you don’t want to be selling in the slump or slow down where you will get top dollar buy selling in the boom cycle.

With this in mind, we have put together an infographic containing the property cycle process from recovery, to boom, to slow down to slump and back to recovery.

This will help you briefly understand the property cycle, feel free to share it with your friends.

Property Cycle Infographic

Population Growth

Australia has a population growth of 1.6%.

The data refers to the estimated resident population (ERP), which takes into account the “natural increase component” (that is, the number of births minus the number of deaths), as well as net overseas migration (NOM).

Accordingly, Australia’s population at December 31, 2018 was 25,180,200.

This represented an increase of 404,800 people (or 1.6 per cent) over 2017.

Anna Boucher, a global migration expert at the University of Sydney, said that compared to other OECD countries, Australia’s population growth was “on the high end” of the scale.

“A lot of OECD countries have declining populations, mainly because of population ageing,” she said.

“We have more healthy fertility rates and we have higher — much higher — migration.”

Overall the decline in construction is part of the standard property cycle process that happens and has been happening for years.

What we take from this is the ability to know that the market is on it’s way back and property prices are making their recovery.

 

Contact us today if you would like to have personalised property investment consultation and advice around purchasing an investment property in the right area that is positive cash flow.

  • November 12, 2019
  • News
debt

Should You Pay Down Debt When Interest Rates Drop?

Should You Pay Down Debt When Interest Rates Drop?

So, your bank has reduced your home loan interest rate…happy days, less debt!

Both the Australian and New Zealand Reserve Banks have dropped their cash rates to new record lows, commercial banks, in turn, have passed on these OCR cuts on to their customers.

Though some banks are not always in a hurry to drop their own rates, however, most banks get on board pretty quickly and reduce their interest rates.

The official cash rate (OCR) is the term used in Australia and New Zealand for the bank rate and is the rate of interest which the homogeneous central bank charges on overnight loans to commercial banks. This allows the Reserve Bank of Australia and the Reserve Bank of New Zealand to adjust the interest rates that apply in each country’s economy.

The OCR cannot be changed by transactions between financial institutions as this does not change the supply of money, only its location. Only transfers between the central bank and an institution can affect the OCR.

Currently, the Australia OCR is 1.00%

Currently, the New Zealand OCR is 1.00%

The Reserve Bank of both Australia and New Zealand are expected to cut the OCR again in the near future.

You have debt – a mortgage, what should you do?

But what now, should you still continue to pay down your debt at the same rate or enjoy the extra cash flow?

You could just leave it in your “spending account” and splurge on some take-out and a couple of movie tickets.

Or, do what the wealthy wise do, and make that money work for you.

On an average home loan of $400,000 with an interest rate of 4.28%, your monthly repayments would be around $1,975.

With that rate reduction, your interest rate is now sitting at 3.78%, and your monthly repayments have dropped to $1,860.

That’s $115 per month that can drive down your credit card debt, or your personal loan, or your mortgage!

Good debt versus Bad debt

We have discussed Good debt versus Bad debt before.

Good debt being debt that creates a passive income, sees you enjoying the tax benefits, sees you owning your own home sooner, sees you retiring sooner, and sees you not playing the banks game.

Bad debt sees you paying compounding interest, sees you with a 30-year home loan, personal loans, savings accounts and credit card debt, sees the equity in your own home not being utilised and sees you playing the banks game.

Not in your best interests at all, do you need help in debt consolidation contact us, it’s a free chat.

Coins debt

How the wealthy use interest rate cuts

The wealthy wise see it all very differently and the following example of just how the wealthy view even a $115 a month “windfall” by way of that interest rate drop is quite interesting, and something to consider.

It doesn’t sound like much really, but $115 per month adds up, and creating a financially healthy mindset begins with seeing that windfall’s potential (and it’s not in pizza and the movies!).

One way is to keep paying the same repayments you did before this “windfall”, after all, you were managing it, so why change it?

That’s financial maturity right there!

Another is to pay that extra $115 you now have into your other personal debts, your credit cards, for example, to help start a debt recovery.

Although, if you’re truly switched on, your home loan has the correct facilities, and you don’t have additional personal loans and credit cards.

But if you’re still playing the banks game, and you have a credit card, then realise that the interest rate on that is probably 4 or 5 times higher than what your home loan interest rate is and paying an extra $115 per month off that is certainly a very responsible thing to do.

Why a credit card at 19.99% is not reasonable

Financial maturity starts with recognising the true potential of your money!

For example, say you have a credit card with a $10,000 limit – fairly standard these days. Also, fairly standard is the interest rate of 19.99% (how anyone can think that’s standard, reasonable or acceptable is beyond our comprehension!)

Let’s say your current balance sits around $7,500.

Your bank will ask you to pay the minimum payment of $155.26 for that month.

It will take you 50+ years to pay off that $7,500 if you do what the bank has asked you to do!

Let that sink in for a minute … FIFTY PLUS YEARS!

Use this free credit card calculator to calculate how long the amount of interest you pay.

Let this sink in too – you have then paid in excess of $30,000 in interest – on the initial amount of $7,500.

But!

Pay that $115 into the same credit card, each month as an additional payment, and you can potentially pay off that credit card – in full – in about 3 years.

You end up only paying about $2,500 in interest – instead of $30,000.

That’s valuing your money, and making it work for you!

Credit card debt american express, visa, mastercard

How to save $60,000 in interest and be debt free

Let’s use the same math in figuring out what that $115 extra per month can do for your home loan.

Using our initial example of a $400,000 home loan, if you did just keep paying the same repayment of $1,975 per month, you would reduce your home loan from 30 years to 27 years.

That’s 3 years and over $35,000 saved in interest!

And all you’ve done is what you’re doing right now, paying the same repayment. Now here’s something your bank probably didn’t mention.

Still using the same example as above, but pay your mortgage fortnightly, instead of monthly.

Keep paying the same amount of $1,975 and … You have just reduced a 30-year home loan to 24 years!

And saved in excess of $60,000 in interest. Better than pizza and movies!

This is a very basic example, and your Mortgage Broker can certainly show you even smarter ways of not playing the banks game any longer.

It doesn’t matter which bank you’re with, they all have facilities in place and strategies that allow you to own your home sooner, to build equity for your future wealth creation.

They all have these, yet few will help you in the way a Broker will and fewer still will set your accounts up in a way that serves your best interests.

Banks are in the business of making money, not saving you money

Banks will happily sell you a personal loan, a credit card or two and make it really easy for you to just pay the minimum amounts due.

They even put that on their credit card statements – “Minimum payment due”.

Sadly, for a lot of people, they unwittingly play the banks game.

“Well, if that’s all the bank wants this month, then that’s what I’ll pay”. (and keep paying, for years on end!).

The banks make money by selling you money at high-interest rates on home loans, or even astronomical rates on credit cards and personal loans.

Yet when it comes to paying you for your savings money, the rates are somewhat less, by a lot!

Own your home sooner

Play the long game that sees you owning your home sooner, creating equity in your home and using that equity to start your investment strategies, your portfolio of properties earning you an income.

Convert your Bad debt (home loan) into Good debt (investment properties) and it all starts by not buying pizza and movies on the $115 you gained when the Reserve Bank of Australia or New Zealand dropped the cash rate to an all-time low.

Use the bank’s money wisely to create wealth not bad debt

It starts by seeing a Mortgage Professional and becoming part of the wealthy wise, who see the potential in that $115 working for them.

Remember the saying a dollar saved is better than $2 earned!

Still the same mindset today, for every dollar you don’t have to work for, but you can benefit from, is worth double that to you in creating a financial future that benefits you, and not the banks.

european eagle owl

Use their money to create your own wealth.

Pay that money back quicker, smarter and with the least amount of compounding interest, and you are becoming part of the wealthy wise!

Talk to us today for debt help, and start this journey for yourself, for your family and leave a legacy to be proud of to be debt free.

Or pizza and movies and keep the banks happy.

  • August 22, 2019
  • News
Cash Rate Stays The Same But Are More Cuts Coming?

Cash Rate Stays The Same But Are More Cuts Coming?

Cash Rate Stays The Same But Are More Cuts Coming?

Welcome to our quarterly review of interest rates, lending conditions, finance and the latest info on what’s happening with mainstream banks and non-bank lenders throughout Australia.

Our specific interest rate review will enable you to make the right decision when it comes to purchasing a home, investment property or refinancing.

This information could literally save you thousands of dollars!

RBA cash rate holds

Last Tuesday (6th August) RBA has decided to keep the official cash rate on hold at 1%.

The cash rate remains at its lowest level in Australian history.

The RBA’s recent decisions have prompted plenty of movement in interest rates amongst the lenders. Some have passed on sizeable reductions in variable rates, while others have been slammed for not passing on the full rate cuts.

Variable mortgage rates have dropped to an all-time low, with the market continuing to take shape following the RBA’s monetary policy adjustments.

A new analysis from rate comparison site Canstar has provided a snapshot into the mortgage rate environment following the Reserve Bank of Australia’s (RBA) recent monetary policy adjustments, which had the cash rate fell to a record low of just 1%.

The central bank states that the primary motivation behind the cuts was to stimulate the labour market, with the RBA’s Monetary Policy Board claiming that lower interest rates would help support the necessary growth in employment.

key to australia brisbane

Are interest rates actually dropping

The cuts garnered an immediate response from the mortgage market, with most lenders passing on the reductions, either partially or in full.

Canstar’s analysis found that as a result of the cuts, the average variable owner-occupied Principal and Interest mortgage rate has now dropped to 4.05%.

Although this is accurate, many non-bank lenders have interest rates in the low 3’s.

It is wise to shop your mortgage and find the best rate with the right facilities for your particular circumstances.

This is where your Mortgage Broker comes into their own.

Canstar also found that the average Investment Interest Only loan has dropped to 4.76%. Again, whilst this is accurate, we have lenders offering high 3’s in this arena.

It makes sense to contact your Mortgage Broker today, as unlike the banks, Brokers will always have YOUR best interests at heart (pun intended).

Mortgage rates may not have hit their floor for 2019 with at least one more cash rate adjustment expected before the end of the year.

In minutes released following the central bank’s last monetary policy decision, the RBA noted it is prepared to adjust interest rates again if needed to get closer to full employment and achieve inflation targets.

key to australia cash rate

What should you do?

A savvy mortgage owner will keep their loan repayments the same, regardless of the reduction in rates. Using this simple as strategy, find out how you get to own your home sooner and get rid of that mortgage altogether.

Better still, with the right facility in place, you make sure your money works for you and minimise the amount of interest the banks can charge you anyway.

Sounds interesting?

Others have done it already, and so can you.

Contact us if you would like advice or help with finance, lending, refinance or personal wealth growth strategy

  • August 8, 2019
  • News

Are Australian House Prices Set to Make a Come Back?

Australian house prices are expected to make a come back as early as July, leading economists say. The housing downturn is expected to come to an end with auction clearance rates higher than they have ever been.

Sydney recorded preliminary auction clearance rates of 69.9 per cent, according to CoreLogic, which is expected to achieve its best final clearance rate for the year adjusting for slippage.

The final rate will likely fall in the low 60 per cent range, compared to the 56.6 per cent the week before. The combined preliminary capital cities rate jumped to 62.6 per cent from 57 per cent the Saturday before.

Australian house prices

Some of the main factors, of course, have been the result of the election giving buyers more certainty about the future as Labor Party’s proposed policies to change negative gearing and capital gains tax concessions are no-longer an issue.

If the Labor Party had got into power and looked to overhaul property policies, it may well be a different story. Australian house prices could have continued on their slump if this was the case.

Along with Scott Morrison’s victory, this gives certainty to home buyers and investors as they look forward to growth throughout the country.

Prime Minister of Australia Scott Morison will hope Australian house prices will rise after his election win

Scott Morrison – Prime Minister of Australia

Prudential Regulation Authority

Not only just the election results are a helping factor, but the Australian Prudential Regulation Authority will be removing the guidance that customers should be able to repay their loan if their interest rate increased to at least 7 per cent.

And of course, there is the factor that the Reserve Bank of Australia will most likely cut the cash rate next month could also bring back more buyers to the property market to boost its growth. If this was the case Australian house prices may or may not increase though definitely will bring back buyers to the market.

One of the big factors for those looking to purchase a home is tax cuts, will they and when will they happen. Tax cuts put cash in peoples hands, makes them feel wealthier and predominately potential home buyers will feel more financially secure about purchasing a property.

This will all equate to a rise in property sales

Don’t be fooled though, we are not going to see Sydney or Melbourne jump back to double digits with rapid growth so soon, but there are other areas of Australia that are seeing growth including areas outside Brisbane and the Gold Coast, so shop around there are plenty of great opportunities out there.

Right now, it’s a buyers’ market, but for how long no one knows and as an investor if you are buying at the right price in the right area and you can buy – then there is no better time than now.

Far too many buyers try and wait until the market hits the bottom and then buy, but the problem with that is you never know where or when that will be.

Buyers continue to wait and wait for the perfect moment, but by the time they get back into the market the property market has already been on the rise for several years and you end up being back in a seller’s market.

If you would like us to help you purchase a rental property in Australia that suits your future wealth creation planners contact us below, for a free 1 on 1 consultation. Or click here

  • May 31, 2019
  • News