Expert Advice: by Sam Saggers

Have you been considering property investment but thought “I don’t have the money”? Did you know that you could be losing up to 70% of your income before you even do your grocery shop? You’re potentially losing hundreds of thousands of dollars due to financial inefficiencies.

If your salary isn’t making it to the end of the month, you may need to reassess your money management. We aren’t taught how to administer our finances in school (unless you studied accounting, in which case, kudos) but I promise, it’s not some big secret! The ideas you’ll see here aren’t new but they are effective. By using smart financial strategies and structuring your properties well, you can not only reduce your debt and financial inefficiencies, but also make a profit.

As you can see from Your Investment Property’s latest magazine, our clients Bianca and Matthew were able to build their investment property portfolio with incomes of only $40,000 p.a.! This is proof that anyone can do it, as long as they have smart money strategies.

There are commonly three financially inefficient areas in people’s lives. Most of this comes down to what people do and don’t do with their wages, particularly if they are PAYG earners.

Not Maximising Your Salary

There are so many different ways to use your pay more efficiently, especially if you own property. If your salary is just sitting in your bank account until, by the end of the week, it’s all gone – then you’re missing out on so many valuable opportunities to build wealth and save your salary. Also, if you haven’t got any deductions to offset your tax then you’re giving away money that you shouldn’t have to. The taxman takes just under 25% of your lifetime earnings. Think of all you could do with that money. Lucky for us, Australia’s laws are designed in favour of property investors. Now that’s a reason to celebrate. This is one easy way to fund your real-estate investment dreams.

Solution: Talk to your accountant to discover how you can save your salary.

The Wrong Superannuation Fund

Chances are you haven’t looked into your options for superannuation lately. Some institutions offer very average returns for very high fees. Some people could be paying up to $250k in superannuation fees in their lifetime! The whole principle of superannuation is that the government doesn’t trust you to be responsible enough with your money. They don’t think you’ll be able to survive beyond retirement, so they lock your money away until you’re over 60 years of age. Doesn’t seem fair, does it? The sad truth is that only four per cent of Australian’s aged 65 and over are self-funded retirees. Clearly, the current system isn’t working.

Solution: Find out more about Self Managed Super Funds.

Your MortgageNow time for the hard truth. You know your owner occupier home, the one you plan to raise your kids in and are relying on to fund your retirement? It seemed like a good idea at the time to buy a house as soon as you could, even if you barely had the income to support it, and pay off that $300,000 mortgage as soon as possible. Yet, did you consider the length of your home loan? The average mortgage is set-up for 30 years. Consider this: if your interest rate is 7% and you have a mortgage of $300k, you are potentially paying $418,000 in interest. You can’t claim it back, that money is gone forever. Wouldn’t that $418,000 be better spent on your retirement or your children’s education? Or maybe even your next holiday.

Solution: By moving out of this home and renting, not only will you be able to gain rental income, but you’ll also be able to use the existing equity to purchase another investment property.

All these aforementioned bills, deductions and fees are crippling you from making money, saving money, and most importantly, from having a sustainable financial future. The majority of Australians are left with 30% of their income before they’ve paid for their petrol or groceries. Imagine a future where 100% of your income is yours.

It’s not just a pipe dream; it’s possible with the right knowledge and the right people behind you.

Sam Saggers is CEO of Positive Real Estate and Head of the buyers agency which annually negotiates $250 million-plus in property. Sam's advice is sought-after by thousands of investors including many on BRW’s Rich 200 list. Additionally Sam is a published author and has completed over 2000 property deals in the past 15 years plus helped mentor over 2200 Australian investors to real estate success!

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Disclaimer: while due care is taken, the viewpoints expressed by contributors do not necessarily reflect the opinions of Your Investment Property.