Proper Investment? What is one anyway?
What is a proper investment? While Wealth with Property is primarily focused on residential property investment for average income earners and above, one should never say that this is the only way to invest. I happen to love property and have made money through both renovations and passive investment. I certainly hope that my passion for it is spread right through this web site and some of it rubs off.
However, that's not to say there are not or you shouldn't use other investment vehicles. Certainly I have tried a good few but I keep coming back to property for so many reasons.
Which brings me back to what is a proper investment?
The ideal behind any investment whether its shares, gold, property, taxi plates, opals, antiques, porcelain dolls, holy dollars or a thousand others, is to make money or get at least get a positive return on investment.
Never should you invest one dollar in order to make 50 cents!
Don't laugh at the seemingly obvious. Many a person that I know have invested into an investment (film making comes to mind and Ostrich farming is another off the top of my head), because they would get a tax saving. Woop-de-doop! So you get your marginal tax break back for the privilege of no return or certainly extremely high risk of getting any return at all!)
Can I advise that it is more common than most of us would probably recognise because "pay less tax, avoid tax, minimise tax or just plain don't pay tax" is an Australian fetish and ultimate goal for many of us.
Now there is absolutely nothing wrong with arranging our affairs with up-most legitimacy to minimise our payment to the tax man. I think I recall a very famous and very rich Australian business man in the name of Kerry Packer advising those very words when being investigated over his business dealings. I think he went on to say words to the affect... 'Why on earth would you want to give it (money) to the tax department? They’ve proved that they certainly can't spend it responsibly so it is far better off in our pocket than theirs.'
Anyway back to what is a proper investment. Any investment should cover off on the ‘risk reward’ question and then...
1) When this has been satisfied to your liking it should mean that it is not only considered safe to leverage into but indeed should be leveraged into!
This alone should or will magnify your returns. It means that you will indeed be doing more with less and as a wage earner this is a critical point to understand.
You can not save your way to wealth. It just is not possible for the average income earner and is even extremely difficult to do for very high income earners! So if you fit the average category, you are left with the fact that you will have to leverage your money. (Don't worry; a fine example for more than 70% of Australians currently doing this in a small way is home owners.)
2) Investment dividends and ‘Legitimate Tax Deductions’ will primarily fund the interest bill on your borrowed funds used to own this investment. For property this means your dividend or rent from tenants plus your depreciation allowances pay for the majority of your interest bill.
3) Your investment has a known element of capital growth that works for you 24 hours a day and it has proven itself to be reasonably consistent over a long period of time. This not only enables you to build on your asset accumulation but to also be able to comfortable forecast an outcome in a given time. Yes there are bottles of wine and old Holden cars (even fords) that have proven to attract prodigious capital growth.
But, could you have predicted or in deed planned on a 351-V8 Ford that you bought back in the 70's being worth 12 times or more what you paid for it… some 40 years later? Simply no!
Guess what? You can with property! And you can predict the value of property to a relatively accurate degree. Certainly to a point, you can comfortably forecast your financial worth at any particular time in the future.
4) In Australia the penalty imposed on an investor from an investors point of view is that the capital gain of an investment is taxed.
It’s the governments way of say we give you tax deductions to make your wealth we want a little bit back when you sell.
So the next thing obviously that a proper investment should enable you to do is to minimise any capital gains tax on investment. Guess what? Yes you can do that with property.
4.1 Plus, you can also get to defer any liability owing making its true rate far less than any incentives received. Current capital gains payable is set to a maximum of 24.25%! Plus again… you get to be able to leverage that capital gain for as long as you want to! How good's investment property!
So what is a proper investment? While I may appear to be bias with property, if you can cover off on the above information with any investment then I think my definition of a proper investment will be fulfilled.
But really, ask yourself this question.
When I can get all of the above with property, why would I bother trying to emulate it with any other investment that is not so glaringly obvious?
Understand this. If you have not yet picked up on the fact that property is a proper investment, than take notice of one fact. Property or the investment in to be more accurate has made more millionaires than any other investment vehicle on the planet.
And I guess that almost says it all. All you need to do now is become a part of it!
Return from Proper Investment (this page) to Tax Deduction Information
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