To accumulate wealth using property, investors often have issues to be addressed depending upon their particular situations.

Accountants who are Property Specialists can help to resolve issues like:

• When should I sell or should I hold? Which property should I sell?
• What will be my capital gains tax obligation?
• Which structure is best to protect property and other assets?
• Should I rent or live in the property?
• I’m going overseas – what are the tax implications?
• What tax deductions am I eligible for?
• Is there a tax on subdividing land and selling?
• Cash flow – positive or negative gearing?
• etc.

Our Accounting partners have been specialy chosen for their knowledge and experience. They can assist and advise you about concerns that you may have in this area, for example:

• Regarding asset protection
  • buying a property in a trust, a superannuation fund or other suitable structure
• Property ownership matters
  • name(s) for title and percentage split between partners
• Tax minimisation
  • maximising tax deductions; tax planning for a property sales to minimise capital gains tax

As a Property Investor, you may have specific property accounting and tax needs, therefore you would be well advised to work closely with an expert property investment accountant. Our accounting partners also work closely with clients who aspire to grow wealth through investing in property and/or shares.

Our accounting partners will be able to put in place tax effective and tax structures to help you successfully protect and grow your wealth no matter what your circumstances are.

For access to our referral property investment accountants click here.

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Owning investment property may provide financial and personal benefits, including:

Rent. If your investment property is close to schools, transport – particularly for commuters, employment opportunities, local businesses for example, public facilities like libraries, etc., shopping and are places where there is a pleasant lifestyle, tenants may well be attracted and could create cash flow for you.

Ongoing income and source of cash flow. Your investment property may provide ongoing income to offset your expenses.

Potential tax benefits. Mortgage, home equity interest payments and property taxes and depreciation may present the opportunity for tax advantages. Of course you will need to consult your tax adviser on this or we can put you in touch with one of our referral partners to talk with – click here and leave your details.

How Much Income do you need in Retirement?

Define your vision of retirement

As you begin thinking about your personal vision of retirement, list your retirement plans and goals and then prioritize them. This will help you visualize how you’d like to spend your time in retirement and how your personal lifestyle choices may affect your income needs in retirement.

Retirement Priorities may include:

• Spend time with the family
• Volunteer
• Work part time
• Travel
• Pursue a favourite pastime.

Remember that retirement is shared between you and your loved ones. While you may hope to travel the world, your spouse or partner may want to see your grandchildren off to school each morning. Now is the time to make sure you are on the same page with anyone who plays a key role in your life.

Factor retirement risks into your overall retirement income strategy

Retirement considerations are changing— retirees are living longer, fewer companies offer pension plans, and Social Security benefits may not be your primary source of retirement income. And, that’s why it’s more important than ever to consider the factors which play a primary role in planning your retirement income and expenses:

• Living longer – We are living longer than ever before and it’s important to understand the risk of outliving your retirement savings.
• Inflation – Inflation lowers the purchasing power of your dollar, so be sure to factor inflation into your overall retirement saving goal.
• Market volatility – Your investment assets may lose value if the financial markets decline.

Other potential risks to your retirement income are the rising cost of health care and care generally. while it’s important to educate yourself about market and event-driven risks, it’s equally important to put your money to work and Structure your retirement investments in a manner that will help mitigate these risks.

How much money should I spend in retirement?

The next step is to estimate expenses and income needs in retirement each year. While many industry experts suggest you’ll need about 80% of your pre-retirement annual income to live a comfortable retirement, you may need more or less depending on your personal retirement goals and projected retirement expenses.

Dividing your expenses into the following three categories may help you plan for your retirement income needs.

• Essential expenses are basic, ongoing expenses like food, mortgage or rent payments, transportation, insurance premiums, taxes, basic health care costs, and other nondiscretionary living expenses.
• Discretionary expenses include nonessential expenses, such as entertainment, travel, recreation, charitable giving, and major purchases. Because these expenses are not essential, you can adjust them if your lifestyle or financial situation changes.
• Unexpected expenses include various long-term and unexpected expenses, such as major health care needs, long-term care services, and personal emergencies.

And, as you plan your retirement budget, remember that a truly realistic approach to retirement planning doesn’t just allow for changes in your personal and financial circumstances, it takes them as a given. That’s why it’s important to have a dynamic spending strategy — one that you can adjust as your circumstances change. Here are a few steps you can take today:

1. Print our retirement worksheet to help plan your retirement expenses and income sources.
2. Create a personalized budget. How will your budget change when you retire?
3. Track the purchases you make using Wells Fargo credit cards, debit cards, Bill Pay, and checks. How will your spending patterns change in retirement?

The equity that you have in your home is the difference between the value of your home and how much you owe the bank for it. So, if your home is worth $400,000 and you owe $220,000, you have $180,000 in equity.

Equity can be used as security with the bank – you can borrow against it:

• to renovate your home
• to buy a car
• to go on a holiday, or
• for any other use that the bank allows.

Most importantly, you can use the equity in your home to buy an investment property.

However,  you can’t use all of your available equity. Since the bank is lending you money against the value of your home, they won’t lend you the full amount. You see, if house prices dip, they don’t want to have a security that is worth less than a customer owes.

Typically, banks will lend you 80% of the value of your home, minus the debt you still owe against it. However, it is possible to borrow more than 80% by taking out Lenders Mortgage Insurance (LMI).

Let’s look at how much the bank might let you borrow at 80%.

Value of your property x 80% = $________

Minus your debt = $________

So for example, using the method above, if the value of your home is $400,000 and your debt is $220,000:

$400,000 x 80% = $320,000

Minus the $220,000 debt against your home = $100,000 of useable equity.

So what value investment property can you buy with your useable equity?

Well, a simple rule of thumb is to multiply your useable equity by four to arrive at the answer. So 4 x $100,000 means your maximum purchase price for an investment property is $400,000.

But why multiply by four?

If you are buying an investment property worth $400,000, the bank will lend against your future property just like they would against your current home. As we know, the banks will lend 80%, or $320,000 in this scenario, but the property costs $400,000. This leaves an $80,000 gap, which is your deposit.
You also have purchase costs like stamp duty, legal fees and so on. This works out to around 5% of the purchase price, ie. about $20,000 on a $400,000 property. Therefore, the total amount of funds required to purchase this $400,000 investment property is now $100,000. $80,000 deposit plus $20,000 costs.

So if you multiply $100,000 by four, you get $400,000. The value of the investment property you can purchase.

One more thing

You may have lots of equity but that does not mean you can borrow against it. The bank takes in to account your income, how many children you have, any debts and a range of other items. Before you get serious about investing speak with your banker or broker.

But please, above all, remember to stay safe. If you don’t have any spare funds aside from the equity in your home, then do not use all your usable equity to invest in property, just in case you need to draw on it in the event of an emergency. Even if it means you can’t invest for a while, it is always important to keep yourself protected.
With thanks to Michael Sloan from the NAB.

The information in this article has been written by Michael Sloan is provided as an information service only and therefore does not constitute financial advice and should not be relied upon as financial product advice. None of the information provided has taken into account your personal objectives, financial situation or needs.