The #1 Mistake Homeowners Make when turning their home into an Investment Property!


Hey there folks! I’m Bryce, he’s Ben and we want to talk to you today about the Nmber One mistake homeowners make when they’re turning their home into an investment property. Now Ben, how many times… have we gone down the path where someone’s worked out this mistake, and you can see the blood drop out of their face and they go… “Uh…. if only I knew that probably 20 years earlier… it would have made a big difference.” Mate, it would have made a big difference in my situation. I got the wrong advice and made all the mistakes that we’re going to be sharing with you here. And I mean these days property is about getting up that property ladder right? So the first time you’re buying, usually isn’t your dream home. It is a step on the ladder, so you’re gonna upsize from there, what are you going to do with that original property? We’re going to teach you some of the things you need to… The solutions that you need to do as part of setting up your finances. So you get the best bang for buck! So let’s set this up. Now the mistake that you make.. is an honest mistake and I’ll tell you why it’s an honest mistake because… when we grew up, our parents… if you’re a..We’re Gen X. If you’re a Baby Boomer and part of the
Builder generation, what did they say? They said… don’t get into debt. And if you do, pay off the debt as quickly as you possibly can. So as good students,
of the elders that have come before us Ben what did we do? We got a loan and we
paid it off as quickly as we possibly could so here’s our property okay and
there’s our debt and so that’s going to amortize over time so that’s us paying
that debt over time isn’t it Bryce it is yep we also have equity here too so
we’ll set that up for the next stage so folks you’re by your parents they buy
home yep get a loan get rid of it as quickly as you can get to the end of the
journey and you have a fully paid off loan and that’s not a bad plan folks
because homeownership in this country it’s the greatest rolling dream it’s not
a bad idea to aspire to be under homeownership but what we’re going to
suggest to you is there might be an updated model to the model that’s been
passed on to you solution through the generations but here’s the typical
scenario I have my house and I actually want to go from having one property in
the portfolio mm-hmm to actually having to with an investment property so
typically beep that one so is where the mistake starts to amplify
and magnify itself because if you followed this plan here huh
you will paid off the debt now what typically happens is the way that you
turn your own home into an investor property is really simple all you do is
start advertising for rent mm-hmm you actually don’t have to have a tenant at
the moment that you start advertising for rent that’s when it becomes an
investment property there’s no form to fill in correct there’s no checkbox that
you’ve got a tick often people say what do you got to do okay yep they’ll
advertise it for you they’ll select hopefully the best tenant for you now
Ben but what is the problem here is what if I actually have zero debt yeah what
if I’ve actually followed the 101 model yeah that was passed on to us from prior
generations what have we’ve done that and I’ve got that down to zero and then
let’s just say our home is worth $700,000 men mm-hm and the investment
property that we want to buy is worth six hundred thousand dollars now zero
debt and we’re about to go into or make it where upsizing can we make so we’re
going to upsize that God so that make that nine hundred make that nine hundred
for us all right so so make that nine hundred all right so we’ll make this
nine hundred go I’m 700 to 900 so here’s the challenge so in theory what’s
happened is because we’ve got this debt level down to zero we are now going to
have rent that’s coming in and that rent is going to be positive which means that
we have to pay tax on that mm-hmm right so what if instead of paying that
down brass we did something which is better in terms of how we set our
lending up so if this is our home loan so there’s our home loan there and we’ve
been chipping away at that as you were just talking about Bryce and we
basically got that down to zero why is it that this original owner occupied
property now is going to be turned into an investment and this is going to be a
new owner of it so we’re going to have all of our debt as owner occupied down
so what we bit would have been off doing that is the problem is just
grabs so just just for clarity folks the reason that’s a problem is because
you’ve now wanting to maximize tax-deductible debt mm-hmm when you when
it becomes an investment property but for an owner occupier that’s not tax
deductible debt so what you’ve effectively done is change the equation
to be the wrong wrong scenario so let’s introduce this little transactional
account that we call offset so this is a mortgage offset account and instead of
putting all of that money in here instead we started off putting it here
and then we started building it up and so every dollar that’s in here still
saves us on the interest that we pay on the home loan so we get and then we get
it to that net position where it’s still zero but what happens is it’s never been
into the loan okay so that loan account still remains available to us so what we
do then do is package that money up so we grab all of that money and then we
move it onto our new home loan over here and that home loan is for this property
and that now means that we’re going to have a lower home loan because we’ve
grabbed all that and if this is our final dream home if it’s the final dream
home then you can pay it into the loan if you want to and add have a smaller
loan balance okay but if it’s number two of a bigger dream
and you want just rinse and repeat over here so we’re paying that down and that
means that that loan is still available now and that loan remains deductible so
let’s have a look at that as a comparison because Ben makes a very good
point so under one scenario what you’re doing is you’re reducing the principal
on the loan so that’s that first time-tested principle that your parents
passed on to you what we’re suggesting is an alternative instead of reducing
the principal you’re going to build up dollars in offset and the principal
remains untouched now the reason that you want to do this scenario is if
you’re an investment builder versus just going to have your owner occupier the
reason you do that is because there’s been said you can pick up
the cash and park it next to in this case if you had a loan you can park it
next to there or as been said you can put it into the loan and because what
what’s very very key in this argument meant is the purpose correct you have to
understand the purpose because here’s the mistake that the homeowners make
they go I am going to buy this house but I’m going to get the debt against the
investment property so therefore shouldn’t the debt be tax-deductible
because it’s secured against the property that’s the investment no no no
no it’s not no deal folks that’s the problem because the purpose because if
the ATO comes and audits this scenario Ben they’re going to say what was the
purpose of the loan in the first place and your answer is going to be if you
are going to tell the truth which we hundred percent suggest you do is the
purpose was for a private purpose which was to put shelter roof over our head
whereas you wanted to actually have the purpose of the loan being for investment
now you don’t have the decision to change that you do not have the decision
but under this scenario that we’re proposing either you were to build up
offset this loan would remain untouched you wouldn’t be paying the principal
back so when you actually advertised moved out moving to your own home this
one here all you would have done is move the money over and this loan has not
changed therefore the purpose of this loan is for that property therefore the
purpose is now tax-deductible bus I think you summarized the point and that
is this type of lending structure gives you the option okay not doing that and
paying that down but redrawing it against the equity in their property No
Deal it means that you the purpose of that money was to secure your new
owner-occupied home your principal your new principal place of residence
potentially and so that means non deductible but by setting up this
structure here if you choose never to get that next property you’re still in a
position where you’re in control of liquidity so from our point of view it’s
just it’s about structuring the right way to give you that choice into the
future and the same thing if we did the same
thing over here where we set up a new mortgage offset because even though this
is going to be a home for the next five years or so it’s still not that may not
be that dream home so we rinse and repeat
and we said exactly the same thing up when we build that up because one day
that might be investment property number two because you’ve just turned this into
investor property number one now more broadly speaking why would you do this
well it’s clear how and why you would do it is because you’ve got an asset that
assets going to grow in value over time even if you do have some debt against it
if you’ve held it for a reasonable period of time you might actually find
that the cash flow is neutral on that property so it doesn’t even cost you
anything to actually hold it so why not do that and then over time you will pay
that day then it could be an amazing townhouse in an amazing location that
you just outgrew yep and you needed more space but it’s still in a really great
investment great location and 20 30 years time from now it’s going to be
worth hundreds of thousands maybe even millions of dollars so from that point
of view it sets you up and then over the long term as you build out wealth we do
want to retire all the debt we don’t want to just keep building debts up we
get that debt paid off and we love live off the passive income so that is 101
property investing in terms of getting the knowledge right getting your
solutions where they need to be understanding the problem with doing it
at the wrong way and then implementing the right strategies and tactics to give
you that choice in the future well so much so that the reason it is the number
one mistake is this folks if you just understand everything we’ve just gone
through the reason it’s the number one mistake is because when you realize mmm
you’ve made it you probably do not have a lot of time left to correct it because
as we said before paying off this paying off this debt or building up this offset
that doesn’t happen overnight now that’s over a whole accumulation journey so
when you go all if I hadn’t made that decision 20 years ago I’d have been in a
much more powerful position so the reason it’s not now is because you need
to make a decision now you talk to an investment survey mortgage broker who
understands this so that you can actually be one of the folks that do not
make this number one mistake now then going to we’ve got a whole range of zeal
to the story as well there’s more to the story that we’re going to share on the
webinar yes good segue because we have got a webinar coming up this Thursday
folks it is Thursday the 3rd you know we’re going to cover the seven deadly
sins of building a property portfolio in a changing market going to cover three
secrets the first secret is how to overcome glass ceilings Ben yeah and
make sure you’re not one of those folks who stops 73 percent of all property
investors stop at one so they’ve done the hard yards but over the line and
then all of a sudden they stop the one I’m going to suggest you probably three
to five good ones so we’re gonna cover that second thing we’re going to cover
is how to build a future proofed yes portfolio Ben where you can still enjoy
your lifestyle today we’re not asking you to scrimp and save to the point of
no lifestyle and how you actually do that and we’re going to show you hidden
money money that you didn’t necessarily realize you had in the family budget and
by re crafting your finances we could potentially show you how to own one or
more investment properties when you think well I’m not in the position to do
anything so that hiddenness possible and the family is already under pressure it
is I’ll show it to you we’ll cover that and the third thing we’re going to do is
we going to show you the one thing Ben that you need to know so that you can
avoid all the negative market noise forever so there’s those three those
three things and much much more it’s called the seven deadly sins of
building a property portfolio in a changing market we’d love for you to
join us click on the link below we’ll have it across the screen where
you can come and join us Ben but there is a catch more brass these these
webinars are popular and off the couch our system can’t handle everyone going
on there so you know we have we get the most we can possibly get but even then
we tap out so people who register early and who turn up early can guarantee
themselves near the band width of these webinar platforms can only allow a
thousand people right that’s a big number but I’m telling we get bigger
numbers we get more people who don’t get the ability to turn up so it is
absolutely critical then beat me to it folks that was the
catch I was talking about it’s free great content you’ll love everything
about it you just gotta make sure you register make sure you thrown up so
there will be a link here at the bottom of the screen so go to that link or
simply click on the link below and we’ll see you next Thursday at 7:30 p.m.
Australian Eastern Standard Time you

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