Expert Advice with Philippe Brach 23/02/2016
In a perfect world, we’d all be able to invest in property with all factors moving forward in our favour.
Interest rates would be low… Property prices in your chosen investment area would be affordable, but tipped to surge… The lending environment would be positive towards borrowers, and rental vacancies would be tight.
While all of this is going on, our own personal situation would be happy, healthy and conducive to grow your wealth in a proactive way.
In reality, however, this isn’t always the case. I was reminded of this recently when I had an enquiry from a woman in her 40s. After separating from her husband almost two years earlier, she was confused about what to do next and so she approached us to get a clear understanding of her options.
Defining your post-divorce strategy
Defining a strategy is the single most important step you’ll take in any investing venture. Becoming successful doesn’t just “happen”; it requires intelligent and careful planning, followed by action to get those plans off paper and into real life.
To do this, you need to understand the limits of what can be done within the confines of your new situation. You are now investing with one income, not two, which will change your borrowing power and investment goals.
Your cash flow considerations will also have changed. You may now be hesitating to invest in property, as managing a potentially negatively geared investment may prove too much of a burden on your own. Or, if you have moved to a more modest home on your own and your own lifestyle expenses are now lower, you may have a higher disposal income to invest with.
Whatever your situation is now, the key to success when investing post-divorce is to be really honest with yourself. You need to get clear on:
- Your current situation. How much money or equity do you have available for a property deposit?
- Your options. Can you realistically get a loan as a solo applicant, or do you need to look into joint ventures to move forward with property investing?
- Your end goal. Do you want to buy your own home as a first priority, or are you focusing on building wealth first and foremost?
Philippe Brach is CEO of Multifocus Properties and Finance
Disclaimer: while due care is taken, the viewpoints expressed by contributors do not necessarily reflect the opinions of Your Investment Property
Once these three factors are clear, you can work out what the first step is, and how to get to the second step. Be sure to seek advice from your lawyer and financial advisor, and find an experienced mortgage broker who is able to work with you and your situation to help you reach your goals.
3 Essential steps for financial growth
Following a divorce or break-up, there are three things every person should do to try and protect their financial goals. Whilst I am not a financial advisor, I do have more than 25 years of experience specialising in finance, accounting and investment and I’ve learnt that the following actions can make a huge difference:
1. Get your property/ies valued
As soon as reasonably possible after you separate, have any property assets you own valued by an independent, professional valuer. Having these figures in writing from a reputable source will help you in determining who should get what, when assets are split down the track.
2. Separate your finances where possible
It’s very likely that you have joint bank accounts, savings account and credit cards. To minimise potential conflicts over spending and debt repayments, try to work with your spouse to separate your finances where possible. This might mean paying out credit cards that are held in both names (then cancelling the card), or transferring a mutually agreed-upon amount of cash from a joint savings account into your own separate transaction accounts.
3. Engage professional support
A divorce can be a very stressful and emotional experience, one that is difficult to navigate on your own. As soon as you’re comfortable, speak with professionals such as a family lawyer, an accountant, a financial planner and a mortgage broker. This will not only help you work out where you stand now, but will give you an idea of your options moving forward.
Remember, your journey towards creating wealth and growing a property portfolio doesn’t stop simply because your relationship has ended. With the right support and guidance, you can continue buying good quality properties that move you forward on your path towards financial freedom.
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