Property Investing Concepts, Tips and Hacks for Small Business Owners

Small Biz Matters – a half hour program each week where you can work ON your business rather than IN it.
with Alexi Boyd from Boyd Office Management Services
Date: 10 April 2018

When was the last time you planned for the future. No, I don’t mean revisited your business plan or thought about which beach you’d be retiring on, but REALLY thought about your plan.

How many more years do you plan to work for? Are you even putting money aside for your own super? Is there a end goal or plan for you financially?

Let’s face it, Small business owners have very specific challenges, needs & motivations when it comes to investing. They often spend every available moment focusing on their business and fail to see the bigger picture or take the long view.

Plus there’s risk to consider  Small biz is risky, there aren’t a lot of anchors. A well planned property investment serves as a ‘safe point’, a plan B that creates psychological wellbeing and alleviates (financial) stress which equates to better personal and business performance.

Here today is a property expert who is different from the rest. Not only does he truly value the future but happily presents on his expertise; sharing knowledge about the market and strategies to help people and small businesses get a foot hold.

Welcome to the show Daniel.

Topics we’ll be covering:

• Succession planning
  • Beginning with the end in mind. (i.e. having a strategy) how much do you want to retire on? This is important because 4 out of 5 Australians will outlive their super.. For example if you wish to retire on $1000 a week income (in today’s terms), in 25 years time that will be the equivalent of $1950 a week because of inflation. Assuming a 4% return you’ll need $2.5M in income producing assets (property, shares, cash in bank) to fund that. How much do you have today? Can you get to $2.5M? How?
• Purchasing property is ‘the play’’
  • Small biz generates revenue but more often than not isn’t an asset that appreciates with time (benefitting from compounding). The smart guys use the revenue from biz to fund the acquisition of assets (property). That’s how true wealth is built.
• Take the emotion out of investing:
  • Run it like a business. Idea: property investing is buying a piece of dirt and putting a structure on it that someone else will pay to stay in it which repays the cost of the dirt whilst the value goes up.
  • Having a property focus is a great way for Small biz owners to maintain financial discipline/a savings goal/motivate us.
• Some important facts to remember:
  • property in australia doubles every 12 -15 years. E.g. a property purchased for $500k today should be worth $2M by the time you retire.
  • The family home, is it an asset? Hint, if you have a $4k a month mortgage and you can’t work/have no income now is your home an asset?
• PLAN the process:
  • If you’re self employed, borrowing is tough! How to find and work with a broker that loves small biz, is prepared to work extra hard for you and understands what lenders have attitudes and products sympathetic to small biz - such as only needing one year tax returns.
    • How can you find the right experts to surround yourself with?
  • Working with your accountant to show your income in such a way that you’re looked upon favourably by the bank.
    • What can this look like?
    • How much to borrow/gear when you’re self employed? Tip - don’t overstretch. Leave yourself choices.
    • Negative gearing = a really crap idea. Small biz owners should be cash flow neutral (but negatively geared just for depreciation) heres how to do it.
• HOW TO Use an SMSF to purchase property.
  • This one is a no brainer. If you have $200k in super (combined with spouse) you can purchase a $450k property that will be worth $1.8M in 25-30 years time, will be fully paid off and will be returning $72k a year (in rent.) Leaving your $200k in a managed fund, it will only be worth $610k and return $24k a year.
  • How small biz owners should be structuring their purchases.
    • Tip. Use family trust or choose tenant in common arrangement with % of ownership with their spouse in such a way it ensures maximum tax savings.
• Use The Family Pledge to get started/ahead it is a great vehicle.
  • What does this mean?
• What are the best types of investment property for a small biz owner?
  • Tip- must have a land component (the land is where the value is)
  • must save you stamp duty
  • must be new (low maintenance, no repair bills, rent easier, command higher rents, allow you depreciation)
  • must be in high growth area.’
  • Dealing with tenants and keeping the property profitable. Tip- put your rent up often! It must at least follow inflation!

To find out more go to their website: http://www.dpn.com.au/