Whenever I speak to people about property investing, I always ask them about their ‘why’. What is the real driving force behind their dream to accumulate wealth? What do they hope to achieve and what is the end goal?
A lot of people tell me they are embarking on this journey to not just avoid the stress and worry about having insufficient money to live the life of their choosing in the here and now, but to build a legacy for the future and beyond. Something that says to the world that they were here. And they made a difference.
While it may sound somewhat lofty, leaving a legacy can mean something as simple as leaving a substantial donation to a charity you’re passionate about. Or it could be as profound and meaningful as building something that will continue to grow and thrive for generations to come. A family business, a healthy property portfolio that provides for your family’s future or creating a powerful model of financial literacy for your children to emulate; all of these are meaningful legacies.
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With either a cut or pause, in interest rates on the horizon, now is the time to take advantage of mortgage rates that still remain at historically low levels. A stable and low-interest rate environment is perfect for property investors to take the opportunity of consolidating their portfolio, refinancing, and potentially accessing more favourable terms from lenders.
As we inch closer to an end to rising interest rates, let’s take a look at what this could mean for Australian property investors and explore some key considerations that may help with your short-term and long-term investment plans.
When we talk about legacy, the focus invariably turns to the subject of financial capital and what physical imprint we want to leave. But just as important is the collective human capital in your family or family enterprise.
All the financial capital in the world means nothing if the human capital is not thriving. If family members are not feeling connected to purpose in their own lives or seeing your quest for wealth leaving you time poor and in a state of constant stress, that’s certainly not an environment where financial capital can do the greatest good.
Yes, there are sacrifices to be made. But if you don’t take time to enjoy the journey now, your legacy may not be one that is remembered as fondly as you would like.
” As much as we watch to see what our children do with their lives, they are watching us to see what we do with ours. I can’t tell my children to reach for the sun. All I can do is reach for it, myself.” – Joyce Maynard
I had a humble upbringing during the Cultural Revolution in China when the society was in turmoil and material possessions and finances were scarce, but fortunately, love and wisdom were abundant.
l learnt so many lessons from the years of turmoil and lean living;
All through my childhood, my mother never told me that I needed to respect people, work hard or be kind to others. She didn’t need to tell me because she showed me every single day in all her own actions.
This made such an impact on me that I’ve repeated this behaviour with my own children. I now proudly watch them take on extra work without having to be asked, be the first to offer help when and where it’s needed and show the greatest respect for people from all walks of life.
A pause on the cash rate means that potential investors have more time to consider their investment objectives and determine whether it is the right investment for them. Ultimately, investing in property means not only keeping a close eye on trends within the current market but also staying abreast of changes in the economy and any potential shifts that could affect property prices. Additionally, keeping the interest rate steady may lead to a reduction in costs as banks will try to remain competitive in a historically low-interest rate environment.
One strategy investors can take is to review their investment home loan and, if possible, refinance their existing loan for one with better terms. This may include securing a lower fixed rate or moving to a variable rate that offers a lower interest rate. Investors who are looking to purchase an additional property during a rate pause should identify their ideal loan-to-value ratio before taking out a new loan.
By keeping your LVR thresholds in check, you can ensure that you’re always getting the best rate possible. A lower loan-to-value ratio makes it easier to qualify for more competitive terms, so it pays to be aware of where the bank’s risk levels are set. Planning ahead, and taking proactive steps towards ensuring an attractive LVR profile is the key to securing favourable loan rates — and maximising returns on your investments. When interest rates are low, investors should be mindful of the risk of over-borrowing and try to stay within their capabilities.
My children are lucky enough to be living a lifestyle where lack of money is not an issue. It’s a lifestyle that has been gifted to them as a result of hard work and sacrifice from myself and my wife.
But I believe the most precious gift we have given them is the opportunity to see and learn about the importance of financial responsibility, social responsibility and the true value of hard work.
I know the subject of wealth is somewhat taboo in Australia and certainly not considered polite dinner conversation, but pursuing wealth is not about greed. It’s about giving yourself and your family more options in life, the freedom to follow your true passions without the stress of wondering how you’re going to pay your bills looming over your head like a constant dark cloud.
I consider financial literacy such a priceless legacy of knowledge – ‘talk early, talk often’ is one of our family mantras. Involving our children in discussions from a young age about where our family is heading – and what wealth is for – has united us as we all move towards a common goal of financial security. And the earlier they learn, the more likely they are to make smarter financial decisions as they get older and start to chart their own course.
Parents also shy away from talking about our failures and what we did wrong, but by sharing our losses and what we learned from them, we can help our children avoid some of the mistakes we made.
Making sound investment decisions during a rate pause can be tricky, but it doesn’t have to be intimidating. To ensure success, focus on portfolio diversification, budget management and understanding the market you’re investing in. By leveraging the equity accrued in existing properties, and carefully monitoring cash flow, investors can take advantage of the potentially lucrative opportunities afforded by a period of extended rate stability.
Real estate investing is a long-term game. A rate pause provides an ideal opportunity to carefully plan each move of your strategy, making sure you stay ahead of the curve and make the best decisions possible.
By leveraging these tips, investors can take advantage of a period of relative stability in the market, and create sound strategies that will set them up for success when property prices begin to rise once again.
While there’s an ongoing debate between the circumstances of the baby boomer generation and the young people today, the reality is they are far more financially vulnerable. While they may earn more income, the cost of living has dramatically increased and combined with increasing home debts and uncertain superannuation funds in retirement, the future is looking less certain.
Focusing on building generational wealth and creating a family legacy is not just about giving your children money and assets, it’s about giving them the tools and opportunities to create a better future that extends beyond their own lifetime.
Take the first step towards better results. Book your expert consultation today!