Inadequate financial literacy is robbing many Australians of a chance to secure their financial future through safe and relatively simple property investments, writes Richard Sheppard.
Here’s a quick quiz.
Do you know how much you have in superannuation? Do you know how much equity you have in your property? Do you know how much it costs a week to fund a typical investment property?
If you are like most Australians, you will struggle to answer these questions. The truth is that many people lack a basic level of financial literacy – and this shortfall comes at a potentially high cost because people often make poor investment decisions, or they ignore the wealth benefits of property investment.
So even if you seek out the services of a specialist property adviser – and that is always a good idea – it’s important to understand fundamental investment principles.
Workshops a fast way to learn
The positive news is that financial nous is fairly easy to acquire. A reputable, one-day property investment seminar can teach you a lot about how to make informed decisions. This knowledge can then put you on the path to transforming your wealth future.
For a start, you’ll get a better understanding of cash flow and the fact that most investment properties cost less than $50 a week to fund after rent and tax benefits are factored in. So you’ll only need the value of the property to grow about 1 per cent a year for you to break even. To put this in context, with the benefit of trusted property market research it is almost always possible to identify markets growing at 7 per cent to 12 per cent!
Workshops will also give you an understanding of how property markets function, identify strategies to target growth areas, and get you up to speed on risk management, including the importance of borrowing extra money to provide a buffer in the event of unexpected financial setbacks.
Education and advice the key
Given the numbers, why do many property owners resist the chance to reshape their finances and future? It usually comes down to a general lack of education and advice about property investment. We do not learn these simple principles at school – and in later years the frenetic pace and work and family life leaves little time to learn about investment.
In next month’s column, I will discuss how this lack of financial literacy contributes to the biggest single mistake that most property investors make.
Watch this space.
Richard Sheppard is the Managing Director of inSynergy Property Wealth Advisory. inSynergy provides professional property investment advice, property market research, specialised mortgage broking services and is an accredited investment property buyers’ agent. Visit www.insynergy.net.au or phone 1300 425 595.
Important Note and Warning: This information is general in nature and should not be considered personal tax advice. We highly recommend you discuss these concepts with your accountant, property investment adviser and investment finance mortgage broker jointly to ensure any considered concepts are suitable for your personal financial situation, as one effect of the concept may negatively impact another part of your plan.