How to Start Creating Real Wealth Through Real Estate by Helen Collier-Kogtevs

Author:Helen Collier-Kogtevs [Collier-Kogtevs, Helen]
Language: eng
Format: epub
Tags: Personal Finance, Real Estate
ISBN: 9781877006210
Publisher: Port Campbell Press

Property investors provide shelter for more than one million households, or around three million Australians, each year.

On the surface, it may seem that positive cash flow or positively geared properties are the obvious choice, but that's not always true.

Finding positive cash flow property will more often than not mean you have to go searching in regional towns. The problem with regional towns, however, is that populations in these areas are generally stagnant and capital growth, which is related to demand, is usually not as strong as it is in capital cities. Therefore if you want/need this type of property to satisfy your investment strategy, you may need to sacrifice long- term capital growth in order to enjoy current cash flow.

Alternatively, if you're a high income earner with good borrowing capacity and you pay more than your fair share of income tax, you might consider looking for a negatively geared investment property with high depreciation levels that will help you to decrease your tax bill. Generally, negatively geared properties are located in capital cities where long-term capital growth is virtually assured. Negative gearing investors must be prepared to be able to sustain a hit to their hip pocket each week in order to sustain their negatively geared property. The positive to this is that they should be able to create wealth faster than with positive cash flow properties.

As you can see, there are plenty of investing pathways that you can choose. While none of these are definitely 'right' or 'wrong', some are higher risk than others. In the end, however, you will usually settle on a strategy that suits your goals and circumstances.

Balancing your portfolio

I've found that in most cases, a balanced investment portfolio is the ideal pathway to real wealth. By this I mean that for every negatively geared property, it makes sense to add a positively geared property to neutralise the balance sheet. However this does depend on your personal financial situation and your goals, so it is important that you create the right strategy to fit your circumstances.

That doesn't mean you should stick with that one strategy forever -- far from it. Your investment strategy should be continually updated to account for changes to your lifestyle, financial borrowing capacity and goals.

Developing your strategy

An investment strategy that suits you and your lifestyle can take up to three months of effort and planning to properly develop. Once developed you will then need to develop an action plan that outlines how you intend to implement the strategy.

Generally I like to work with my clients to create a two-phase investment strategy that will move them towards creating real wealth for their retirement:

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