It’s always fun when you go home and see the family and friends you grew up with, it’s often quite humbling and exciting at the same time.
I had a BBQ for some friends and family to introduce them to Arlene (my partner) most of them had never met her in the flesh so I had them all in one place to get to know her. Given the situation my mates took full advantage to tell them about all of my misgivings, embarrassing moments and ex-girlfriends. It then prompted my parents and family to join into the remembrance BBQ.
Well the dirty laundry was aired and to her credit Arlene still loves me. The most interesting bit is looking back at where you come from. You see one of the stories that I had forgotten was that when I was a kid we only had 1 toothbrush for the whole family. It wasn’t that Mum and Dad were against an individual toothbrush it was simply that like most middle class families back then we were cash strapped, now I wouldn’t say poor, we were just an average middle class Australian family in the 70s. We didn’t have a lot but Mum and Dad worked hard living from paycheck to paycheck and sometimes the paycheck didn’t extend to the end of the month.
I remember whilst still at school I was working 2 jobs at McDonalds and then at a Foodstore on weekends that I would hang out to be paid. McDonalds paid weekly and the Foodstore was great because it paid cash at the end of the shift but guaranteed regardless of when I got paid I had spend it by the next paycheck.
I have grown up since McDonalds, I now own a business that pays me a slightly bigger paycheck on a monthly basis and regular dividends as well as money from remortgaging my portfolio. The point is that I still receive a paycheck of sorts but I no longer worry about running out of money or hanging for my next paycheck.
Something changed in my life… I moved from living paycheck to paycheck to living a life by design. “By Design” I mean “My design”
My point is this…
Are you still living paycheck to paycheck? Do you plan your month around how much money you have left in the bank or worse, how much credit you have on your card?
It doesn’t matter if you had to share your toothbrush as a kid, it doesn’t matter if you just got divorced and they took everything. It doesn’t take a huge property portfolio to move away from the paycheck mentality.
Living paycheck to paycheck means you still have not mastered the fundamentals of money. Whenever I feel the need I come back to a book called “The Richest Man in Babylon” by George S Classon.
As the book says –
“If you have not acquired more than a bare existence in the years since we were youths, it is because you either have failed to learn the laws that govern the building of wealth, or else you do not observe them.”
It couldn’t be simpler than this. You either don’t know the rules or you don’t observe them. So which is it? No excuses, no reasons, nothing just a bare naked this or that answer.
So if you are living paycheck to paycheck then you need to do something different, change something.
The definition of stupidity – Doing the same thing over and over and expecting a different result.
Let’s get serious, 2008 has started and will end soon. If you don’t stake your claim on life now then someone will stake their claim on your life.
It’s not that hard to get out of the paycheck mentality, some simple changes, read a simple book, enlist a mentor and begin your path to taking back your purpose in life.
If you are unsure what I mean by all this then give me a call and we can get the wheels in motion. Make something of 2008.
Live with passion,
Brett Wood
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Brett Wood is an author and property investor. He runs a successful property investment consultancy in the United Kingdom. His strategies have helped thousands of investors to get on the property ladder and build successful property portfolios.
Originally from Australia where he was a successful mortgage broker he moved to the UK in 2002 and since then has build a massive portfolio of off plan and new build residential properties in the UK, Spain, Slovakia and Australia.
For further details contact Brett Wood at http://www.yourpropertyclub.com or directly on 0870 042 1188.
Should You Ever Pay Off Your Property?
This question needs to be broken into two questions. Should I ever pay off my home? Should I ever pay off my investment properties?
Let's deal with the home first. Yes you should pay off your home eventually because it is a non tax deductible expense if it relates to your principle place of residence. OK, so that was the accountant speaking in me and since l am a very poor accountant lets put my investor hat back on.
The extension of this answer is that until you have built up a significant enough portfolio to maintain momentum in your portfolio you will have no choice but to leverage your home. I think it is safe to say that most people have a home with significant equity especially if you have owned it more than 2 years. This equity is the key to build wealth.
By accessing this equity and using the leverage of a mortgage on your buy to let properties you can turn £100,000 equity into a million pound portfolio. The sole purpose you do this is to gain the advantage of capital growth. Until such a time as your portfolio self sustains its growth you cannot afford to pay off your mortgage. Once you have developed your portfolio then and only then can you take your principle place of residence out of the investment portfolio.
OK, now the investment properties. You should never pay your mortgage down on these, always opt for interest only because your mortgage balance will stay the same throughout but your value will double, effectively halving and more your mortgage.
When you consider that the biggest challenge with building a portfolio is maintaining cash flow, why would you pay additional money into the property when you know that it's going to double in the next 7-10 years. You are far better reinvesting the cash flow in further property. Long term this more effective use of your time. It also limits the amount of tax you pay.
--------------
Brett Wood is an author and property investor. He runs a successful property investment consultancy in the United Kingdom. His strategies have helped thousands of investors to get on the property ladder and build successful property portfolios.
Originally from Australia where he was a successful mortgage broker he moved to the UK in 2002 and since then has build a massive portfolio of off plan and new build residential properties in the UK, Spain, Slovakia and Australia.
For further details contact Brett Wood at http://www.yourpropertyclub.com or directly on 0870 042 1188.
Let's deal with the home first. Yes you should pay off your home eventually because it is a non tax deductible expense if it relates to your principle place of residence. OK, so that was the accountant speaking in me and since l am a very poor accountant lets put my investor hat back on.
The extension of this answer is that until you have built up a significant enough portfolio to maintain momentum in your portfolio you will have no choice but to leverage your home. I think it is safe to say that most people have a home with significant equity especially if you have owned it more than 2 years. This equity is the key to build wealth.
By accessing this equity and using the leverage of a mortgage on your buy to let properties you can turn £100,000 equity into a million pound portfolio. The sole purpose you do this is to gain the advantage of capital growth. Until such a time as your portfolio self sustains its growth you cannot afford to pay off your mortgage. Once you have developed your portfolio then and only then can you take your principle place of residence out of the investment portfolio.
OK, now the investment properties. You should never pay your mortgage down on these, always opt for interest only because your mortgage balance will stay the same throughout but your value will double, effectively halving and more your mortgage.
When you consider that the biggest challenge with building a portfolio is maintaining cash flow, why would you pay additional money into the property when you know that it's going to double in the next 7-10 years. You are far better reinvesting the cash flow in further property. Long term this more effective use of your time. It also limits the amount of tax you pay.
--------------
Brett Wood is an author and property investor. He runs a successful property investment consultancy in the United Kingdom. His strategies have helped thousands of investors to get on the property ladder and build successful property portfolios.
Originally from Australia where he was a successful mortgage broker he moved to the UK in 2002 and since then has build a massive portfolio of off plan and new build residential properties in the UK, Spain, Slovakia and Australia.
For further details contact Brett Wood at http://www.yourpropertyclub.com or directly on 0870 042 1188.
New Build Vs Off Plan Property - Which Is Better?
Firstly let's look at how I define each of these terms.
New build is classified as a development that is within 3 months of completion or has completed but has not yet been tenanted. Off plan is a development that is longer than 3 months out from completion or where the property has not moved earth yet.
Now some people may say that off plan is simply property "off the plan" or property which has not begun being built and technically they are correct, but let me explain why I consider it very different.
It's all about structure.
My definition is not really based on time it is based more on the fact that in most cases with newly built property you can exchange and complete at the same or within a short time. This simply means that if you have structured correctly your money will go into the property and come out very quickly, effectively realising your gain at purchase and exponentially growing your return of investment.
In an off plan scenario you would normally be expected to place a 5 or 10% deposit on exchange and then wait for completion which could be up to a couple of years later. Only at this time could you realise a gain from the property, prior to this it is simply a paper gain.
Hopefully now that you have a grasp of the two concepts we can move on to working out which one presents a better return. After all, that's all that should matter in property investing.
The answer is quite simple — It depends on the market. You need to look what the market is doing. This in property is what we call your strategy meeting the market. Choosing the appropriate strategy for the market
Let's consider two very different property markets and two different types of property and the relative results they achieve. The stagnant market
If you purchase an off plan property that is due to be completed in 18 months time and place a 10% deposit down at exchange, you would expect that because the market is stagnant the property will not increase in value over that period.
So therefore you have paid 10% and made effectively no return over this period but you have also taken a risk that the values, rentals, or market may change making it hard to get a mortgage. No looking so good for our off plan scenario.
On the other hand if you had purchased a new build property you would have paid your 10% deposit and within a short time received your 10% allowance upon successful completion back. Your actual cash tied up will be significantly less than the off plan scenario. This extra cash can then be used to purchase another property.
Therefore if you purchase off plan in a stagnant market you are likely to buy one property as opposed to new build where, for the same cash input you could buy perhaps three times as much property. Clearly in a stagnant market new build is a better proposition than off plan property. The galloping market
The same two properties purchased in a galloping market would mean that the new build is still a decent proposition except that you now have to consider that you have a mortgage to service. It will certainly go up in value more than in a stagnant market and because interest rates are low your cashflow is eased.
Now consider the off plan. You still secure with a 10% deposit but over the course of the build program your property may have increase in value by say 10%. You don't have a mortgage or cash flows to worry about.
Now here's the power of off plan in a galloping market. Say the property is worth £200,000. You place a £20,000 deposit on it. Now if it goes up 10%, it goes up on the entire value (£200,000) not just your deposit so you have just doubled your money before you have even completed. (£200,000 x 10% = £20,000)
So consider the above before you go and get sold a heap of rubbish about how great off plan is.
There is no doubt that in the right market and the right circumstances it is a fantastic proposition but don't caught up in the hype of the sales pitch and thinking that doubling your money before completion is easy. This is where working with a professional portfolio manager will make you job so much easier, they will explain the pros and cons of each decision.
-------
Brett Wood is an author and property investor. He runs a successful property investment consultancy in the United Kingdom. His strategies have helped thousands of investors to get on the property ladder and build successful property portfolios.
Originally from Australia where he was a successful mortgage broker he moved to the UK in 2002 and since then has build a massive portfolio of off plan and new build residential properties in the UK, Spain, Slovakia and Australia.
For further details contact Brett Wood at http://www.yourpropertyclub.com or directly on 0870 042 1188.
New build is classified as a development that is within 3 months of completion or has completed but has not yet been tenanted. Off plan is a development that is longer than 3 months out from completion or where the property has not moved earth yet.
Now some people may say that off plan is simply property "off the plan" or property which has not begun being built and technically they are correct, but let me explain why I consider it very different.
It's all about structure.
My definition is not really based on time it is based more on the fact that in most cases with newly built property you can exchange and complete at the same or within a short time. This simply means that if you have structured correctly your money will go into the property and come out very quickly, effectively realising your gain at purchase and exponentially growing your return of investment.
In an off plan scenario you would normally be expected to place a 5 or 10% deposit on exchange and then wait for completion which could be up to a couple of years later. Only at this time could you realise a gain from the property, prior to this it is simply a paper gain.
Hopefully now that you have a grasp of the two concepts we can move on to working out which one presents a better return. After all, that's all that should matter in property investing.
The answer is quite simple — It depends on the market. You need to look what the market is doing. This in property is what we call your strategy meeting the market. Choosing the appropriate strategy for the market
Let's consider two very different property markets and two different types of property and the relative results they achieve. The stagnant market
If you purchase an off plan property that is due to be completed in 18 months time and place a 10% deposit down at exchange, you would expect that because the market is stagnant the property will not increase in value over that period.
So therefore you have paid 10% and made effectively no return over this period but you have also taken a risk that the values, rentals, or market may change making it hard to get a mortgage. No looking so good for our off plan scenario.
On the other hand if you had purchased a new build property you would have paid your 10% deposit and within a short time received your 10% allowance upon successful completion back. Your actual cash tied up will be significantly less than the off plan scenario. This extra cash can then be used to purchase another property.
Therefore if you purchase off plan in a stagnant market you are likely to buy one property as opposed to new build where, for the same cash input you could buy perhaps three times as much property. Clearly in a stagnant market new build is a better proposition than off plan property. The galloping market
The same two properties purchased in a galloping market would mean that the new build is still a decent proposition except that you now have to consider that you have a mortgage to service. It will certainly go up in value more than in a stagnant market and because interest rates are low your cashflow is eased.
Now consider the off plan. You still secure with a 10% deposit but over the course of the build program your property may have increase in value by say 10%. You don't have a mortgage or cash flows to worry about.
Now here's the power of off plan in a galloping market. Say the property is worth £200,000. You place a £20,000 deposit on it. Now if it goes up 10%, it goes up on the entire value (£200,000) not just your deposit so you have just doubled your money before you have even completed. (£200,000 x 10% = £20,000)
So consider the above before you go and get sold a heap of rubbish about how great off plan is.
There is no doubt that in the right market and the right circumstances it is a fantastic proposition but don't caught up in the hype of the sales pitch and thinking that doubling your money before completion is easy. This is where working with a professional portfolio manager will make you job so much easier, they will explain the pros and cons of each decision.
-------
Brett Wood is an author and property investor. He runs a successful property investment consultancy in the United Kingdom. His strategies have helped thousands of investors to get on the property ladder and build successful property portfolios.
Originally from Australia where he was a successful mortgage broker he moved to the UK in 2002 and since then has build a massive portfolio of off plan and new build residential properties in the UK, Spain, Slovakia and Australia.
For further details contact Brett Wood at http://www.yourpropertyclub.com or directly on 0870 042 1188.
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