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FAQ's
Q1. I thought property investment was for high-income earners or the wealthy?
Q2. What if I have no deposit for an investment property?
Q3. Historically, what happens investment-wise with residential real estate?
Q4. What if interest rates rise?
Q5. We were brought up to believe that we shouldn't borrow money. Were Mum and Dad wrong?
Q6. Why hasn't my accountant told me everything about investing in property?
Q7. I don’t need advice; I already have an accountant / financial planner?
Q8. Are shares or property a better form of investment?
Q9. I’m not in a position to do anything so is there any point in talking to you at the moment?
Q10. What are the advantages to using a company such as AFPS as opposed to doing it on my own?
Q11. Why shouldn’t I just concentrate on paying off my mortgage?
Answers
Q1. I thought property investment was for high-income earners or the wealthy?
Statistically in Australia, over 70% of property investors are on incomes between $35,000 and $40,000 per annum. Over 90%
of all millionaires become so through investment in real estate.
"It's not how much you earn that counts, it's what you do with what you earn"
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Q2. What if I have no deposit for an investment property?
What you mean is that you have no cash deposit. Cash is not really necessary when you have equity in your own home. Having
sufficient assets against which to borrow is all that is required and in this way, you can borrow the full amount plus all the
additional costs.
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Q3. Historically, what happens investment-wise with residential real estate?
It is the compounding effect of property value increases which is so powerful. As each year passes growth occurs on top of growth. If a
property is worth $100,000 today and next year it increases in value to $110,000, then the year after that if it increases at 10% again the
value will be $121,000, that is $110,000 plus 10% (or $11,000) and on goes the escalation. Its exponential growth accelerating at a faster rate
as each year passes.
To use a well worn gardening analogy, it is a little like planting a tree. Early growth is slow, but as it establishes itself
it grows faster, and starts to fruit. The fruit drops, and more trees grow and start bearing fruit. Before we know it, we have
an orchard. It is a similar kind of compounding effect with property. Property wealth comes ever so slowly at first, but eventually
arrives in abundance. You have to make a start, no matter now small. With prudent property investment all that you need is the right
information, time and patience.
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Q4. What if interest rates rise?
Never before have fixed interest rates been so competitive. Major banks are offering 10 year fixed rate deals that can take all the
guess work and stress out of this decision. A choice between variable and fixed must be made by the investor and should be carefully
judged by the amount of debt and the security of your tenure at your place of employment. In general we recommend fixed-interest only
loans for investment properties. If rates rise, then you are insulated against rising repayments. On the other hand, if rates fall you
should still be smiling. Have you noticed how low interest rates are usually followed by an increase in property prices? Also, if
variable rates do rise, the tax refund buffers you.
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Q5. We were brought up to believe that we shouldn't borrow money. Were Mum and Dad wrong?
Yes and no! The golden rule of borrowing money is to borrow for appreciating assets such as property, not for consumables that
depreciate in value. Our parents were right in deterring us from borrowing money for cars etc, which over time can become worthless. However,
when using debt for appreciating assets such as property, it is the most important tool to building wealth.
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Q6. Why hasn't my accountant told me everything about investing in property?
When you go to the service station for petrol, does the mechanic come running out to suggest that your brakes need checking or that it's time
for a tune up? We probably expect too much of accountants. They should be able to answer all of your questions competently, but don't
expect them to be creative in guiding your wealth creation program. Accountants are usually specialists in their area of expertise –
accounting. They will expertly complete the tax forms for you after you have provided them with all the figures. They are usually not
specialists in property investment and should not be relied on as such. However, there are some accountants who do specialise in property,
and some even have rental property of their own.
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Q7. I don’t need advice; I already have an accountant / financial planner?
That is great. We do not try and replace them. You will find that your accountant is an historian he will work with what has happened whereas your
Financial Planner works with you in relation to your shares. We deal specifically in property and mortgage elimination and work closely with your accountant.
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Q8. Are shares or property a better form of investment?
Our specialty is property and thus our opinion is biased towards property however, we do believe that a mix of both can and will provide for a fulfilling
retirement.
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Q9. I’m not in a position to do anything so is there any point in talking to you at the moment?
Many of our clients often feel this way, how would they know otherwise? As professionals we often can help or find ways to improve the personal circumstances
of our clients where they felt there was no hope. No one knows what they don’t know therefore unless you ask or try to find out, how will you know?
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Q10. What are the advantages to using a company such as AFPS as opposed to doing it on my own?
You will be working with experts who practice what they preach; they are fully qualified and accredited in their areas of expertise. You visit a specialist for
everything else a Doctor, Dentist, Hairdresser and Mechanic - why not speak to an expert in relation to your financial freedom?
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Q11. Why shouldn’t I just concentrate on paying off my mortgage?
Paying off your mortgage is only one of the many financial challenges that many Australian families face. A more effective strategy covers areas such as
retirement, travel and children’s education in conjunction with paying off your mortgage.
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