Golden Rule #1: Money that you invest must be absolutely safe.
Residential properties in Australia that are held over the long term are some of the safest investments you can have. Banks typically lend up to 90% on residential properties as they know the properties are reliable, and, as such, it is far more likely that the bank will lend money to secure the purchase.
Golden rule #2: Invest in assets that appreciate in value.
Residential property in Australia is one of the only investments where consistent capital growth is generated over time. Over a 10 years period, historically property prices have risen from 5%-10% per annum.
Residential property in Australia is one of the only investments in which consistent capital growth is generated over time. History shows that, over a ten year period, property prices have typically risen from 5% – 10% per annum. Think about it… What was your home worth 8 years ago, compared to its current value?
Golden rule #3: Insure your assets.
Ensure that you have adequate property insurance that includes both landlord protection and building insurance. In addition to this, ensure that you also source sufficient personal protection insurances.
Golden rule #4: Use leverage to achieve highest possible returns on investment.
Property always outperforms all other investment classes, simply due to leverage. For each dollar you invest, the bank lends you nine dollars, hence the return on your money is ten dollars. Using leverage provides you with greater return on the money that you actually invest. Where possible, invest in the minimum amount in order to maximise the return on your money.
Golden rule #5: Maximise tax advantages.
Residential property holds the most attractive tax advantages compared to any other investment. With negative gearing benefits, you can claim on building costs, fixtures and fittings, borrowing costs and any other finances associated with the investment property. This includes property management fees and insurance fees. The combined tax benefits and rental income on a residential investment property can offset all holding costs, and may even provide a positive cash flow.
Golden rule #6: Invest your money in income producing assets.
On average, residential properties hold a rental return of 4.5 – 5% per annum and outperform inflation on average of 2.5%.
Golden rule #7: Source a proven investment system.
You must have a proven investment system. This should be one that implements all the golden rules of investment and requires minimal involvement on your end. Following this investment system will help you to avoid headaches and potential risks, and will furthermore maximise the upside rewards.