What about an investment property ?
Which leads to “Is debt a good investment” ?
Sounds ridiculous doesn’t it ?
Many of us have started off small and slowly built a real estate portfolio.
And each time, the experiences make us smarter.
A good business education is knowing the difference between a good debt and a bad debt.
Since we encourage our clients to invest their money into houses, we are often asked, “should I also diversify my investments” ?
We use the common acronym F.O.C.U.S.
Follow one course until successful !
Then keep doing it.
If you are going to be successful as an investor, and buying an investment property, you will find that diversification is good for the average investor, but if thats what you want to be, then have a good life.
Because we don’t want ourselves or our clients to be “average”.
You have to learn how to cut through the good investments from the bad investments, the good advisors from the bad advisors.
Many canny investors have made more money, from real estate, during economic dips in the worlds economies than when the worlds major economies are doing great.
The essence of this model is, how do you design a business, that doesn’t keep requiring you to raise capital ?
Lets get back to basic income.
The first type of earned income in Australia attracts around 21%- 45% Tax.
But that tax is to high!
Or as Warren Buffet says “Its a shame that my secretary pays a higher percentage of taxes than I do”.
Can you see where this is leading.?
Even though Buffet is earning billions of dollars.
The second type of income is Portfolio income or capital gains income, which attracts a capital gains tax.
For instance if you buy and then sell a house, you would attract a capital gains tax on the profit.
And don’t forget that Capital losses cannot be offset against normal income.
Capital losses can be offset against capital gains, and net capital losses in a tax year may be carried forward indefinitely.
And the third and most interesting to us and our clients is passive income.
Many of the wealthiest people have worked hard initially, and established a great passive income.
This is where the big money is.
And if you know what you are doing, you can get massive tax breaks using the right methodology.
Just by using the government condoned, and legal, tax incentives.!
Are there risks involved,in trying to be an entrepreneur ?
Of course there are, but these are all calculated risks.
Look at Henry Ford for instance, he went broke at least five times.!
Steve Job`s own board fired him.
And on and on it goes.
So the average person is afraid of losses, so paradoxically, they never get ahead.
And one of the reasons is, as children we are taught, if we make a mistake then logically, you are a failure.
But thats not the real world.
But we still have not discussed something we are all taught as children.
You must save.
Here is the problem.
The Reserve Bank departed from the gold standard with the Commonwealth Bank Act of 1932, which made the notes no longer exchangeable into gold.
The bank did not have to keep any gold reserves.
From 1931 until the early 1970s the Reserve Bank Of Australia had tried keep a stable exchange rate with the pound sterling.
Then the notes were no longer tied to anything tangible.
Which means that the value of your money, is always going down, as the banks keep printing money.
As the value goes down, prices go up.
Which is called inflation.
A new way of looking at this is, your not trying to save your money, you are trying to “hedge” your money.
We are not so much as betting on real estate, we are betting against the value of the Australian dollar.!
Yet you will watch tv and see the treasury spokesman say “A weak dollar is good” and then they will mumble something about this being good for exports and tourism.
If you look at historical examples, the production of money, not tied into something like gold etc,leads to a gradual decline in the value of the “currency”
Thats why we recommend an investment property.
