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Sorry to interupt guys, but getting back to the education thing….
I am a secondary teacher, and the school I currently teach at offers a subject called Personal Finance. It is a compulsory subject for Year 10 students.
After reading this thread I talked to the teacher about the content that is taught. He said that mainly they teach information such as, Budgeting, Credit Cards, Investments (such as stock market). They do activities such as paper trading on the ASX website, and making their own budget.
The teacher said that most of the kids see the subject as pointless, as their parents pay for everything they want. The only kids who seem to take it more seriously are those that have part-time jobs and can actually put a budget into practice.
I asked whether they had thought of teaching something about financial strategies in order to be rich (eg, something like what Robert Kiyosaki says in “Rich Dad…”). I thought that maybe, if it actually captured their imagination to be rich, they may get really interested.
The teacher said that the kids just don’t care about being rich. At the beginning of the term they look at the effects of compound interest and how it is better to save when you are young, rather than in middle age or later because the money grows better. The kids’ opinion is that, if they can buy it now…why shouldn’t they.
They don’t seem to have the maturity to grasp the idea that, if they delay gratification for the first 10 years of their adult life, they could be overwhelmingly rich and get anything they want then.
This made me think that it is not JUST the education system that needs to teach kids this… It is ALSO a parents responsibility to teach their kids, and to teach them as early as possible (as Marc is… Congratuations on the saving success of your child!). Teaching them the value of money, and that it needs to be worked for, and that it can work for you if you manage it correctly, to pay yourself first, to buy assets and not liabilities, etc… etc…
As parents we can give our kids the keys to their financial freedom.
Kelly
A few different books…
There is a book called “The Five Lessons a Millionaire taught me”, but I don’t know who it is by. It is about general wealth creation, easy to read.
Another book I have just finished is by Kim Kiyosaki called “Rich Woman” and it was really good. Told in a story format, generally suited to women who have not been taught all there is to know about wealth outside of work. A nice easy read as well.
Another book that is not directly related: “7 Habits of Highly Effective People”. It is hard going, but I really liked it. It is a bit more about “who” you are rather than “what “you do.
Kelly
Thanks contrarion,
That seems to be the best strategy open to most people for making the most of your Capital Gain.
Kelly
For anyone who is interested in this topic, small businesses are able to get CGT deferred or tax concessions if they sell business assets (that are not investments).
There has seemed to be some debate since 2002 to have a stepped rate of paying CGT, so that the longer you hold an asset, the less you pay of CGT.
There has also been discussion to lower the percentages of CGT in order to make Aus CGT more similar to other western countries, such as UK and US.
As far as I can tell (reading reform and tax papers from government websites!) neither of these have yet to occur.
Of course there is CGT reductions for share investments, but not real estate investments. There are also CGT rollovers for some things, like transfer of assets through marriage settlements, the destruction of a property (like the bushfire example earlier) and business mergers and takeovers etc…
After hours of sifting through wordy tax documents… all I discover is that, unfortunately, none of that applies to me!!!
Oh well,
KellyHi Dutchie,
Don’t know if your looking for positively geared one or just Capital gains…
Pakenham would also be an interesting one. It’s on the other side of Berwick and Narre Warren, just two suburbs further away from the city. Got a lot of promising things that seem to be happening. Its the next empty space that goes out that way.
There is also a new Pakenham bypass going through that will reduce congestion in area. Worth a look, but I don’t think you’ll find much +CF.
Kelly
There have been lots of good ideas for creating extra cashflow…
…selling sheep for profit…
…horse agistment…
…new houses…
…camping area…
…public pool…
…public tennis courts…
…football oval…Hope the ideas pay off and they don’t scare away your tenants!
Good luck!
KellyThanks everyone for your responses.
I knew that you could do it in the US, and I thought it wasn’t available here in Aus. (Otherwise everyone would know, hey!) But one of my friends said that she knew about some way to do it in Aus, but so far I haven’t found it.
Unfortunately (or maybe fortunately) I am not over 50 yet, so any CGT I have would not go into my super.
Thanks, Kelly
Some basics…
Do a budget and analyse where all your money goes, so that you can maximise your savings before you move out of home.
A mortgage of $220,000 will cost you around $1500 a month, so start by saving this amount (less any rent or board you need to pay currently). (Or alternatively calculate how much your likely mortgage and resulting repayments may be and pay that to your savings account). That gets you into the “paying a mortgage” mentality.
Consider buying an investment property that is positive cashflow (if you can find one… or make one…) and just rent when you move out, as the cost of renting is roughly half of the cost of owning.
Invest in your education. Read books about mortgages, real estate, making your money work harder, different types of investing, etc, etc… This may expand your mind to see opportunities that you couldn’t see before.
Hope some of this is helpful for your situation…
Kelly
That’s it, people have to live somewhere.
And if house prices in their area are unaffordable, where do they go? They go out… further from the CBD, further from the larger suburbs, and then the infrastructure is built to support all these people moving further out… I guess that’s how cities grow.
I’m not an expert, so I won’t try and predict anything!
I’m a little confused…
You have a granny flat that could sell for 650K?!
It is hard to know about capital gains, because some areas of Aus are going down or sideways with their growth, but others are going up (in mining areas etc…). I imagine it may depend on the area and maybe also whether your property is a median house or the up-end of the market in the city/suburb/town where it is.
Hi Colrose
Marc makes a good point.
It may be a good idea to analyse where you want to be in 5 or 10 or 20 years, because that may make a difference to your strategy. It is important to acquire some assets that produce income WITHOUT you having to do anything (like building, reno’s etc…).
If you are going to acquire several properties, I assume that at some point you will need to have several loans, so don’t assume that only having one loan is a safer option.
The level of risk associated with loans is probably more to do with your Loan to Value Ratio (LVR) than it is to do with how many loans you have. EG. Having a loan of 95% of your homes value (when it does not produce income) may be more risky than having 3 loans for IP’s that are 70 or 80% of the value but are income producing.
Some food for thought, anyway…
Kelly
Hi Waratah,
I think it depends firstly on your bank. (I’m sure some the people who specialise in home loan stuff on the forum will be able to answer better that me!) It may be a good idea to ask your own bank and see what they reckon for you own circumstances.
Secondly it depends on how much risk you want, as a higher LVR will increase your debt riskiness. Eg. if you have borrowed 95% of the value of your home, which some banks allow I am told, then you run a higher risk of everything going pear-shaped.
I think that borrowing up to 80% of the value of your home (less your mortgage) is generally considered to be ok. (Of course depending on the circumstances).
Kelly
P.s. I must admit, I have never heard of Opinion 1 (borrowing 80% of the equity value).Hi Ana,
I have been recently looking into the transportable home idea myself, though I have never bought and used one. (I am presuming a Kit Home is a similar thing to a transportable).
One website is
http://www.fleetwood.com.au
but these people are based in Perth, so the costs may be massive if they don’t have an outlet closer to youAnother is
http://www.kentuckynapier.com.au
and these are mainly in Victoria, but I think they have a centre in Toowoomba.At least these sites may give you a starting place for prices and what is included. I have had no personal experience of these companies though.
Kelly
Great to hear (sorry, read) all the comments.
We leased a Holden Commodore for one year through my husbands work (Secondary teacher) in 2003.
His old car broke and we couldn’t afford a lump sum at that time to buy him another. The lease was only about $110 a fortnight before tax (about $80 after tax if I remember correctly) and the price included registration, insurance, services and roadside assist, but not fuel.
It was great (but it broke down, because that model had a problem with the radiator and I got stuck up in the middle of nowhere with a car that would start and water pouring out of the motor! They fixed it for free, as it was under warranty, etc… but it was still a damn nuisance!).
As I was saying, it was great to have a nice new car, but we almost did too many klm’s on it and we certainly couldn’t have afforded to buy it out at the end of the year. We did have to pay an extra $800 at the end of the year because of some minor scratches etc…
All in all, it worked for us because we were able to save a few thousand to spend on a bomb for my husband.
We always have driven 15-20 year old bombs which have cost us money in repairs, so I can see both sides of the “cost” equation. More recently we have ‘up-graded’ to 8-10 year old cars (always bought with cash, NO CAR LOANS) and they have been much better with fuel economy and repairs/general running.
The moral: Investigate options, and make a decision that makes financial sense for your circumstances (though not all of my decisions have made sense…I admit it!)
Kelly
Hi Ali,
Maybe it depends on the city/area. I live in Melbourne and there has been a shortage in rental accomodation, and so rentals have gone up in a lot of places (even by the train line).
But in other areas, (for instance, Salisbury QLD in the previous reply) the situation may be different.
Kelly
Hi Kenlea,
Whilst the rule doesn’t strictly apply in the current market, Steve (in his new book) does talk about how it can still be used as a guide to see how close a property could be to being positive cashflow. This then gives you an idea of how much you may need to do.
For eg, if you are only $20 or $40 a week in the red (or negative cashflow) you may be able to do some improvements to the property to increase the rent legitimately (say, add a carport, or put in airconditioning, etc…)
In the case of another alternative, Steve does go through some other guides that will help you sort out the riff from the raff! He gives about 4 or so different number crunching formulas that give you a picture about how the property may perform, so then you can make the right decisions about it.
As to why the deposit (I presume this is the deposit for your IP) is not included with the interest costs (I presume these are the interest costs for the loan you have on your IP), whilst it is a cost, it is not an ongoing cost. Therefore you can separate the cost you will intially have at the start, and then you can calculate the ongoing cost for the property. The ongoing income that you recieve (rent) can then be compared to the ongoing cost and will (hopefully) cover all the ongoing costs you incur.
I hope this answers your question. (?)
It can be very confusing!Kelly
I hope everything is going well with your investment property.
I am in a similar position: a stay-at-home mum with 3 kids, a husband on 60K, a house mortgage of $210K and struggling to know where to start on our investment journey.
One thing I suggest is to always value your knowlege and learning, and invest in that before anything else. When you know ‘stuff’ it helps to recognise other opportunities that are worthwhile, rather than just go out and hope for the best as you invest.
The other place I have started is controlling our family expenditure, so we can save some money in order to have something to invest with (as we don’t have much available equity in our home).
Start at the beginning and take it step by step. Thats how mountains (of millions of dollars) are climbed and conquered.
Kelly
I know it is common to see this in Melbourne (at least where I live), and I have been told by many agents that the + means 10%. So a $300K+ house would put it in the region of $330K.
We found the + sign very confusing when we bought our first home.
Kelly
