在澳大利亚 The pool at of an IP needs to be resurfaced (or so the pool doctor says), the cost was estimated to be $10K ($10,000), after recoverying from my impresssion of a cat coughing up a fur ball, it just seems far too much. Its just a standard poo I need some advice regarding a property purchase. Property - semi-detached house Bedrooms - 2 Condition - average needs internal reno to modernise Street - one of the best in suburb Location - excellent Close to schools - yes Transport - 50m
Hi All ,
So I have decided to take charge of my future and start putting in place some investments that should help lead me to a financially free future. God that sounds like a sales pitch.
Anyways I have been doing a lot of research and want to put in place some security and safety mechanisms to safeguard myself should something go wrong, or should something happen to me.
I want to build a stratergy that includes mutiple investments, not just RE.
So far I have discovered two important things to start implementing prior to launching into the market space:
1. Income Protection Insurance. This one is obvious. (included with my super account)
2. Firewall or silo finances with finance from different vendors for each investment if finance is needed
I am a little confused as to whether I should be setting up a trust with my wife, or just leave it as per normal.
I would initially be looking at investing in a property to reduce my taxable income, bumping my super annuaution up to maybe 15% total, and then considering blue chip shares and another IP (positive geared). I am also considering investing in gold.
Any advice on startup gotchas and must haves would be great!
One of the main things to look at today, is that resources do you have, and what are you willing and able to put to use.
Its alll good and well to talk about asset protection but you need to ensure your efforts dont go into the too hard basket becasue the lending structure you want limits the chance of you being able to do anything useful, or the extra super contribs are making it impossible to do much else etc
Rolf Latham said: ↑
Its alll good and well to talk about asset protection but you need to ensure your efforts dont go into the too hard basket becasue the lending structure you want limits the chance of you being able to do anything usefulClick to expand...I think what Rolf is saying is that the LVR is lot lower for trusts. Hence you can't easily borrow enough for your investments. Is this right?
I would personally
- add nothing to the super (just that min of 9% is enough)
- have the income protection outside the super. It should give better cover and also tax deductable
Don't put the cart before the horse. All well and good to have asset protection but you need to make money first.
I should note my wife and I are on a combined income of almost 200K, and have a mortgage of just over 230k on our PPOR. So as far as not having money, thats not an issue at the moment. As I said, I am looking for advice on precautionary measures, and safeguards to help me make the most of my investments moving forward.
Just run a few hypertheticals.
1. If I were to go bankrupt
2. If wife were to go bankrupt.
4. incapacity etc
See how this affects your situation and plan for it if you think it will be a huge issue.
adzza said: ↑
I should note my wife and I are on a combined income of almost 200K, and have a mortgage of just over 230k on our PPOR. So as far as not having money, thats not an issue at the moment. As I said, I am looking for advice on precautionary measures, and safeguards to help me make the most of my investments moving forward.Click to expand...When I say making money, I mean from the investments, not from your salary - as this is the entire point of proper structuring.
I personally use trusts etc but mainly for commercial ventures such as developments and/or commercial investment properties. They can be useful for residential property investment but it's something a good accountant needs to advise you on. If you are a PAYG - asset protection isn't such a big deal because you have no real personal risks. If, however, you are self employed (or looking to become self employed) then trusts (particularly family trusts) may be beneficial for you.
If something ever happened to you, the best way to provide for your family is to have a good will in place and adequate insurance to cover your income.
devank said: ↑
I think what Rolf is saying is that the LVR is lot lower for trusts. Hence you can't easily borrow enough for your investments. Is this right?Click to expand...not so much a lower lvr, though for some trusts its hard getting above 80 % but in general if the resources arent there to start with sometimes a trust structure(s) arent helpful.
WE have since clarified respources in both equity and income position are ok to make use of such structures IF deemed suitable
When embarking on an investment strategy you certainly do need to give consideration to asset protection and risk mitigation.
You're on reasonable incomes. A trust holding entity might suit your needs to but it might also restrict some opportunities. Consider with a discressionary trust:
* Flexible distribution of income and profits.
* Excellent asset protection (give consideration to if this is actually required, for many people, it's not).
* Costs money to maintain.
* Gearing losses are quarantined against future profits - no negative gearing.
* Land tax is likely to be higher.
If the portfolio is to be neutral or positive geared, a trust may be the way to go. Also consider that a mix of properties initially in your own name and later in a trust can also work well.
You've also raised an excellent point regarding income protection. If your portfolio is cashflow negative, you need to thing about what might happen to your investment plan if you're unable to work for an extended period of time. Also give consideration to other insurances as income protection does not cover you against all potential problems (you're far more likely to claim on trauma than anything else).
Having insurances is a prudent part of a risk management strategy to ensure that if things go wrong in life, your wealth creation plan doesn't fall to pieces. Risk management also needs to be reviewed reguarly as circumstances change, such as having children, changes in asset/cashflow balances, etc.
Running through the hypotheticals proposed by Terry can be useful here.