I'm proud to present this tutorial CD for new & established property investors.

It will help provide you with a basic knowledge to help you make the right choices on the road to securing your financial future through property investment.

Throughout this CD you will be provided with many checks & pointers to help you avoid the most common pitfalls that regularly trap many property investors.

Approached correctly Property Investment is a proven, secure & stable method of creating real future wealth without enormous risk or capital outlay.

COVERED IN THIS PRESENTATION.

• The proven record of property as a secure investment.
• We’ll discuss how inflation can work for you!
• Turning tax into a positive rather than a negative.
• How making the right choices now can make a huge difference in your future
• We’ll provide you with a real understanding of gearing
• Consider what to look for in an ideal investment property
• Getting started by using your current equity - rather than cash
• How to choose the right loan option.
• Increasing your affordability by bringing your tax benefits forward.
• We’ll go through the process & explain an actual example
• Consider the importance of working with the right agent
• Look at the philosophy of buying and holding property long term.
• And the recipe of planning for effective wealth creation.

SOME PROVEN FACTS

Many of us believe that our next pay rise will be the solution to all our financial woes, only to find that nothing really changes.

You may be amazed to see just how little you need to put aside from your salary to make an enormous difference.

Many Australians just like you have discovered that a little discipline & a few dollars each week put towards property investment can quickly produce real wealth.

THE SECURITY OF PROPERTY

Ask yourself, "Had you purchased a property 20 years ago in a good location, would you be  smiling today about its increased value?"

Not taking 20 years but in just six short years, this property has increased from $135,000 to $210,000 … that’s a 36% increase.

The secret to building wealth with property is to not only to buy wisely, but to then ... increase your holdings as often as possible, and HOLD LONG TERM!

History shows us that, as time goes by the percentage of our income that we pay to the tax department continues to increase.

Wouldn’t it be nice if you could divert some of this money away from the taxman & into your own future wealth?

In other words, turn the certainty of tax into a tool for your own future security!

PROPERTY V SUPER & ... SHARES

With Super & Shares:

• You are usually dealing with an intangible asset
• There are high broker’s fees
• You have little control
• Your returns tend to fluctuate considerably
• The share market can be very volatile. [Fortunes made & lost in a day].
• And, financial institutions do not seek shares as security for borrowing.

Now lets compare property

• It is very tangible.
• You can see it, feel it & .. drive past it.
• As a purchaser, you do not pay agents commissions, the seller pays these.
• With property, your in control, you may be advised by your chosen agent or property manger but you make all of the final decisions.
• As has already been demonstrated, the record of property as a stable long-term investment is 2nd to none.
• Banks advertise daily that they will lend up to 98% of the value of residential properties and if you already have equity in your own home, they will lend you 100% plus any other funding that you require.
• There is no argument that Superannuation is a positive move. It’s an undeniable fact that we have an aging population that before long will not be able to support a pension system.
• Rather than just relying on a super fund that may only give you a third or half of what you currently earn, why not start building a solid property portfolio & be sure of an increasing long term income long after you retire

MAKING THE RIGHT CHOICE

You may consider land to be low maintenance but, although there is no house to maintain, you miss out on rental income and there is absolutely no tax relief at all.

First time investors should consider and balance these risks carefully before making their choice. Importantly, tax deductions can only be claimed on income producing properties!

GEARING

When investors use the term "gearing" they are usually referring to their degree of borrowing against their overall equity and how much income they are receiving from their portfolio compared to the amount they are paying out.

You are considered to be positively geared when your rental income exceeds your total out-goings, but it is worth keeping in mind that you will pay tax on the excess income.

The term that you are more likely to be familiar with is Negative Gearing.

This refers to the situation where your rental income is less than your total outgoings.

This shortfall is a tax claim for you & Negative Gearing is popular with many investors because it effectively means that you can use money that would normally be paid to the ATO, to support your property investment portfolio.

LET'S LOOK AT A NEGATIVE GEARING EXAMPLE

1. In this example the rental income $8,000.
2. With mortgage repayments & other costs the total outgoings amount to $13,000.
3. This leaves a pre tax shortfall of $5,000.
4. Taking depreciation into account, $3,000 in this instance, we increase the tax claim from $5,000 to $8,000.
5. You would receive a percentage of this $8,000 as a tax refund.
6. The amount would depend on the level of your income and the amount of tax that you have paid in the relevant financial year.

Let’s say your current taxable income is $60,000. The rent would have the initial impact of increasing your taxable income by $8,000, to $68,000.

However, you would then subtract your interest & other costs including depreciation.
In this case $16,000, this would then give you a new taxable income, down from $68,000 to $52,000.

And you would receive a tax rebate, at 35%, of $5,600. Depending on the level of tax paid, you may receive an even larger rebate.

Firstly, it is ... very important to buy right!

This may sound like common sense, but unfortunately many people treat the purchase of an investment property the same as buying their own home rather than considering important issues like: will the property be sought after by tenants, will it show a good capital return and will it provide an attractive rental income.

Other considerations are;

• Buying in the bottom or middle of a suburb’s price range rather than the top range as the latter option leaves little room for growth.

• Choosing a property with a practical floor-plan

• Avoiding properties that are unusual in design or construction as these will only ever appeal to a limited market.

• Proximity to transport, shops and schools - is important.

• And, timing the purchase of your properties is imperative. The old advice "buy in gloom, sell in boom" may be an over statement but it's never a good option to buy at the top of a booming market.

There are many other considerations in making the right choices & it's our advice that you seek the services of an agent who specialises in dealing with property investors rather than one who concentrates on the general owner occupier market.

Once you have chosen & purchased your investment property it's important that you add value by maintaining or improving the property.

If you do purchase a house that is in a run down condition, be sure before you make it available to tenants, that you renovate it to top standard. These costs should be taken into account when you make your offer to purchase as history show that many "run down bargains" by the time they are renovated, turn out to be more expensive than buying a house that is already in top condition.

The temptation may exist to mange your own properties, but consider the traps, you will usually find it easier & possibly, less expensive, to use the services of an experienced property management company.

When compared to the overall picture, the outlay is small, especially since it's a tax claim, but a qualified & experienced property manager can save you thousands by avoiding the pit falls that often trip up, the do-it-yourselfers.

Things like;

• Complying with the Tenancy Act & statutory requirements in your State/Territory
• Gaining access for inspections
• Ensuring that the rent is paid on time, every time & knowing what remedial actions are open to you as the owner.
• Evicting tenants if it ever becomes necessary.
• Keeping in mind that good property mangers know how to avoid this by selecting the right tenants in the first place.
• Having access to the REI and other defaulting tenant data base check lists.
• Asking for and achieving reasonable rent increases.
• The records show that self managed properties invariably return a lower rent than those that are professionally managed.

A professional Property Manager provides a necessary buffer between you & your tenant. They will be fair to the tenant but firm in applying the rules & regulations that have been designed to protect all parties.

THE FIVE RULES

[1] Residential is first choice.

As we stated previously, regardless of the state of the economy, people always need a roof over their heads but even in good economic times many businesses fail to prosper and are forced to close leading to vacant shops, warehouses & factories.

[2] Don’t just buy any old house or unit.

Do some homework on your area & continue to grow your knowledge about investment before you begin to search for your investment property.

[3] You may not love it.

If you are living in your second or third home, which tends to be the case with many new investors, you are unlikely to fall in love with a property that you‘ll buy for half the price of your current home. This is normal, however it's important that the property fits the recommended criteria

[4] You must be able to drive past it and ... feel good.

Although you may not love your investment properties as you do your own home, you must be able to drive past it, and feel good about its inclusion in your portfolio.

The chances are, if you feel good about the property, so will the bank, prospective tenants and future buyers.

[5] Work with an investment specialist.

The majority of real estate agents sell properties for and to owner occupiers and although they may dabble with the occasional investor client, they do not specialise in this field. In most areas however, there will be one or two agents who have a definite focus on providing specialised service to investors.

They work predominantly with investors, run regular information seminars and manage properties for investors. These are the people to seek out, discuss your plans with them and they should be able to provide you with advice on every aspect of property investment including the sourcing of suitable properties.

Like anything that we do in life,
property investment does have it's share of pitfalls.

Let’s, now have a look at some of these & how you can avoid them.