Goodbye Renting
Page 6
one that I know will remain mine without me having to worry about
interference from real estate agents wanting to show people through, or
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owners deciding they want to move back in. It means peace of mind
instead of wondering when I’m going to be asked to move on because
the place I’m in is going to be sold. For the most part, this place is mine
for as long as I can pay the mortgage. In the meantime I have the ability
to make it as comfortable as I see fit while I watch it develop into a wise
investment.
What many people aspire to with their first home is often unrealistic.
In fact, the need to be seen living in something that is aesthetically
appealing can put many people in a position of becoming well and truly
overextended with their finances.
This egocentricity is one of the biggest factors that stops people from
pursuing their own home, because they would rather pay rent for ‘a nice
place’ (that will never be their own) than forego a few things in order to
have their own home.
Unfortunately, it is a way of thinking that can have dire consequences
in the long run. For others who do eventually get the four bedrooms, two
bathrooms fantasy as a first home, the cost can be much higher than the
mortgage repayments.
The added stress on income can impact on family relationships and
stop other aspects of life being pursued. Put simply, it can stop you
living life!
To maintain and keep the home in a state of ornamentation plus
service a loan that has left minimal leeway for much else, a person must
give up some of the basic pleasures of life in order to keep that roof over
their heads. Now, while I am very much in favour of going without and
making sacrifices in order to achieve the goal of owning your own
home, there are some sacrifices people will make that could be
damaging theirs and others’ lives and personalities. Yes, personalities.
The sacrifices I am referring to are the ones made for the look of
material wealth. To look like we are doing well to the outside world can
cost dearly because to keep up the look can deprive people of other life
experiences. In order to maintain an appearance of ‘I am doing well’
often requires incessant money, time and an intrusion on personal
growth. Frequently, so much energy is applied into keeping up
appearances that the more enjoyable aspects of life can easily get eroded
away. This is where personalities are affected and so too are family
relations.
In other words, if we look like were’ doing well, then that’s all that
matter. The fact that we are miserable and don’t have the ability to enjoy
what life has to offer (because of the financial death grip), means the
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cost is far and away too high.
For some reason or other, in the western world, we seem to have
become so focused on demonstrating we have material wealth that we’re
losing the ability to live and enjoy what life has to offer. It has been my
experience that when you deprive yourself completely of the basic
fundamental pleasures of life, it can have an adverse effect on one’s own
personal growth, especially when that self-deprivation is in place in
order to have material items that showcase a level of ‘acceptable’
wealth.
Before I go much further with my spiel on living within your means
and accepting less than desirable surroundings, my dear daughter has
pointed out that I may in fact sound like a hypocrite, given how I now
enjoy the luxurious surroundings of what is considered an opulent home
with all the modern conveniences.
This is in fact true. I do indeed now have that pleasure. But what has
to be realised here is that to get there was a process, a bit by bit, step by
step, process. I didn’t just wake up one morning with a handful of cash
and purchase my lovely home. A great deal of blood, sweat and tears and
an awful lot of sacrifice preceded this purchase and the reward is one I
had to wait for.
Having said all that, and even though I now enjoy the home I am in,
nothing will ever replace the feeling of actually getting the home that
was the little dilapidated unit on the Sunshine Coast, which helped me
get to where I am now. It was a process of moving up gradually and
starting from a minimal environment that improved slowly and step by
step.
Let’s get excited, baby!
The first and most important aspect about getting into your very home
is the absolute desire to do it.
So get excited!
Stop thinking that you’ll never own your own home and start thinking
you’ll be in your own place very soon.
If you really want something badly you have to go out and get it - but
you must start with the belief that it will happen.
It’s up to you to make it happen - now!
Yes, yes, there are a whole lot of obstacles to overcome, but isn’t that
what life is all about? It’s all about the journey and it’s the getting there
that’s the fun part. Treat all those obstacles as learning experiences for
later life, put them in your memory storage bank and move on by finding
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alternatives to overcoming the problem.
I cannot emphasis enough how vital it is for you to regard this
challenge as a foreseeable prospect. It is one which can be achieved
with the right frame of mind to begin with.
Missing the boat
So what do I mean by this statement?
I mean that procrastination, pondering, mulling over, or you can call
it what you like, can have a negative effect on your long-term life. Many
people think about something, see the potential, get the vibe, want it
badly, but then don’t or won’t put themselves out to achieve it.
Here’s an example:
I hope my brother will still love me after this story…
In 2001, my younger brother moved into a two-bedroom unit on the
Sunshine Coast with his new wife. At the time, the owner of the unit was
trying to sell it, but he was struggling to get anything close to hwat he’d
paid for it ten years before. The property market was flat at that time so
he offered to my brother for a mere $85,000.
I urged my brother to buy it.
My brother attempted to get a loan from a bank but was knocked
back. Again, I urged him to keep trying. After all, I had eventually
secured a loan after a lot of knock backs, so I knew that it took a bit of
effort and to keep on trying.
My brother half-heartedly tried for a loan via the phone but didn’t
pursue the task any further. He had credit card debt and other personal
loans to pay and was declined a home loan on that basis, but he was also
encouraged to work at paying some money off the debts quickly so that
in the near future the amount of money owing could be consolidated into
a home loan.
Six months later, the property market started to move and the unit’s
value went up. Within a year it had doubled in value and by 18 months it
had trebled. Unfortunately, my brother didn’t follow th e advice of the<
br />
lender and his one refusal for a loan prevented him trying any further.
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The unit is now valued at more than a quarter of a million dollars, my
brother still rents it and the owner has happily used the equity from that
unit to buy many more units.
How do I know this? I talked the owner into keeping it and using it to
buy more properties, which he did. He liked my ideas so much he
married me!
My brother on the other hand has regretted not trying harder for that
loan ever since. Now he can see that it was one opportunity he passed up
that could have set him up for a very long time. Instead, the original
owner capitalised on the rebuff and didn’t make the offer again!
The point I am trying to make here is that while there may be
obstacles, knockbacks and rejections along the way, the need to keep on
going is imperative if you really want to get that home you aspire to.
If you get any advice from the lenders on how you can achieve your
goal… then listen and take it onboard. Remember, nowadays it is also in
the best interests of the lender to help you reach that goal because they
also get a financial kickback if they can get you a loan.
What do I need to do?
You need to get your mindset in place by making a commitment to
yourself that you will work towards your goals even when obstacles do
get in the way. Know that challenges will confront you and hurdles will
need to be jumped over but that is all part of the exciting journey - I.e.
overcoming them!
Remember to really visualise your most desired outcome and feel
how good it will be.
‘You can’t expect a different result if you’re always doing the same
thing.’
Then plan.
Bit by bit, you need to work towards achieving your goals.
Start with something simple and something that can be controlled by
you, such as your mood.
Today is the first day of the rest of your life so make it count by
elevating your thinking with positive thoughts.
Plan your goals for next week, next year and in five years time and
write them down. Take time to really visualise them and revisit them
often.
I would like to put forward an alternative not generally considered
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when sourcing your first home. It is an option that will not only help you
get into your very own home, but will also assist you with making your
own money grow.
I am asking that you consider something that is completely out of the
box by suggesting that when you can’t get affordable housing within
your own country, State or locality, consider buying an investment
property elsewhere first.
“Whoa!” you might say. “I’m battling to afford the cost of my own
accommodation, much less support an investment property as well.”
If you live in Australia you may respond with, “If I do that then I lose
the First Home Owners Payment of $7,000, why would I want to do
that?”
Or
“I want a home for my own family not someone else’s.”
While these may seem like good arguments, they are the very same
arguments that continually prevent people from ever getting their own
home or for that matter getting ahead financially. ‘The times are a
changing’ and we need to continuously change our mindset to stay in
front.
I am suggesting that we need to start
having a complete rethink about the way
in which we approach the ‘foot in the
door’ scenario.
I want you to go back and reread the preface of this book. As we have
established, the married couple in the story was in fact my husband and
I, but what if we were first home buyers just starting out?
What if, for argument’s sake, we wanted to get into our first home but
just couldn’t manage the costs associated with the price of homes in our
own area much less get the finance needed to buy anyway, so we opted
for another way of doing it?
Instead, we decided to purchase an investment property first, in
another locality or State or country, for that matter. The property would
be at a more affordable price, probably smaller, and not necessarily in
pristine shape but the upside would be that we could actually borrow
most of the loan including the added costs and interest repayments.
Tenants would be paying off most of the loan and amount we needed to
kick in to sustain the loan would be tax deductible. In addition,
depreciation and most other associated costs, including maintenance and
rates, were also tax deductible, giving us a much more lucrative tax
return each year. In other words, the high level of tax we currently paid
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each year was going to come back to us as a legitimate tax deduction in a
much more lucrative way. Most importantly, the investment property
had the ability to grow in capital value (just like your own home) and it
would provide equity that not only builds net worth but also provides the
means for getting into your own home.
Now let’s think about those statements that many would probably say
in regards to getting an investment property first.
“I’m battling to afford the cost of my own accommodation, much
less support an investment property as well.”
While you think that the cost of supporting a property will be too
much on top of your current rent, it could be very cost effective… if…
You are prepared to cut back in the initial stages, even if it means you
need to downsize your rental expenditure and/or cut costs in other areas
such as clothing or meals out. The long-term (but sometimes much
shorter than you think) benefits, can come back tenfold when you get
your tax back for many years to come. All the tax you currently donate
to the government each week has the ability to come back to you,
reducing your tax substantially, while your property grows in capital.
Are you will me? As much as this scenario is like ‘the horse before the
cart’, it is one that has a great deal of potential as a way of getting into
the market even if it isn’t a home you will necessarily live in.
If you live in Australia you may respond with “If I do that then I
will lose the First Home Owners Grant of $7,000, why would I want to
do that?”
Firstly, that is not necessarily the case as you may still be entitled to
the FHOG if the property has not been your principle place of residence.
You may still be able to claim the grant. However, circumstances vary,
so always check with your state’s Revenue Office before making your
purchase.
Secondly, the FHOG could seem insignificant when the market is
moving thousands of dollars a week. Sometimes it’s better to forego a
small payment in order to achieve a grander capital gain.
Alternatively, you could just hold on a bit longer before purchasing
and watch the real estate market surge further forward while you
desperately try to save the extra money to catch up. Meanwhile, you’re
getting pushed further away from affordability and that mere $
7,000 get
eaten up in surging costs anyway.
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Remember, when we bought one of our properties it had
grown in capital by $65,000 in two months. IF we had been
first home owners and foregone the First Home Owner Grant
of $7,000, we would have been left with $53,000 in capital
growth. Now, I don’t know about you but most intelligent
people would still rather have accrued that amount of money
than take what is considerably smaller amount just because it
was a freebee. Do the sums!
“I want a home for my own family not someone else’s.”
This last statement is one I have heard many times. Of course you
want a home of your own, but this is a statement that reflects an attitude
without the means to getting there. What needs to be focused on here is
the way in which your goal can be achieved. If buying an investment
property first progresses your ability to getting into your own home
sooner, then what’s the problem?
Investing in property first allows you to buy into the market without
the same restrictions a home loan has attached to it. Remember, many of
the costs associated with buying an investment property are covered by
your tenant and the other costs can be claimed later on in your tax.
Personally, I have been without regular employment for a period of time
(to consult, write and manage a property portfolio), which would prevent
me from getting into a home if I was to apply. However, because the
properties are for investment purposes, I have managed to purchase more
properties, even without regular employment, because the requirements
are different for accessing the loan.
If you are prepared to go down this path of buying an investment
property first, take the time and spend the money to get some financial
advice and guidance by a good accountant and financial adviser. How
this process is set up is very important to the long-term outcome. Again,
if you take the time to get informed about this endeavour you will find
that this process can be a beneficial way of getting enough after-tax
dollars to put down on your own home.
This option is a means to getting there that hasn’t been really
considered in the past, but one that has a great deal of merit in it. In