Estate Planning

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Benefits of Investing in Real Estate

Entrepreneurship is the one and only path through which individuals can realize their financial dreams and one of the easiest and most effective mode of investing comes in the form of real estate. Real estate is a perfect avenue to make substantial financial gains over a long period of time while keeping the costs and liabilities low. Below we discuss some of the reasons that make real estate a perfect investment option for budding entrepreneurs.

Stable Cash Flows

The most attractive feature in real estate is the stable and regular cash flows. Most businesses make millions in profit, but struggle to maintain a healthy cash flow required to meet their financial obligations and continue investing towards their long-term financial plan.

Cash flows from real estate are far more stable and predictable as compared to other businesses in America. This is an amazing advantage to have when an entrepreneur is in the initial stages of his investment. Having an extra sum in your hand can be great for ups and downs in an individual’s life.

 

The Loan Payment

Most individuals hesitate to start their own business due to the high risk of losses or lack of strong financial backing. But in real estate, it is extremely easy to take loans from the bank. These loans would be essentially paid by the tenant and the investor would continue enjoying the increase in the net worth of the asset over time.

Today an investor might owe $200,000 on a property, but next year as the tenant continues to make the payment towards the loan he may only owe $195,000, which means that he gets $5000 wealthier without doing anything. When the loan is completely paid off on the property he would have a substantial asset in his hand that he can sell or continue renting out for a regular cash flow.

Tax Benefits

If a business earns $100,000 during a year and a real estate business also earns $100,000 during a year then the real estate business would be able to keep more of its money. There can be different kinds of perks and tax benefits that ensure that the real estate investors get higher savings on their earnings.

Inflation and Capital Appreciation

There is an established economic principle that the value of money declines over time and commodities become more expensive while for other kinds of businesses this means lesser profits or higher costs, but for a real estate investor the prices of the properties increase in line with other commodities but their liabilities on mortgage payments remain fixed. This amazing feature ensures that the investor earns rent at the market rate that would keep increasing over time while his liabilities remain fixed at a certain amount.

The decline in the value of money would also inflate the price of the property that means the investor would be getting dual benefits out of his money in the form of capital appreciation while having to pay off fixed amount of mortgage payments.

For more information and advice on investing in real estate, please contact our team at Anne Street Partners or call 135 444 today!

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Anne Street Partners Estate Planning

Estate Planning is a strategy (Estate Plan) for the distribution of your assets accumulated during your lifetime to special people and causes that you select.

This can include:
– Will
– Enduring Power of Attorney
– Enduring guardianship medical directive
– Family trust

Find out more about Estate Planning in our fact sheet below:

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Simply put, estate planning involves the arrangements you make while you’re alive for dealing with the money, property and other assets and liabilities you leave behind when you die. Australian law decides what becomes of your things if you don’t. While its provisions are generally favorable, you really want to take control of asset distribution yourself.

This is most often done through a will. While a lawyer is usually involved in creating a will, it should generally do the following things:

Name an executor. That is, put someone in charge of carrying it out.

Take into account tax laws. With a lawyer’s help, you can make sure your choices have as few negative tax implications for beneficiaries as possible.

Protect your assets from being squandered. If a person inheriting can’t be completely trusted, there are provisions and instruments that can help out.

Clearly spell out who gets what. Companies and trusts that aren’t in your name may not be part of your estate in some Australians states, so get your ducks in a row before creating a will.

Deal with your superannuation. It may or may not be paid into your estate, and you might like to make a Binding Death Nomination instead.

Consider family relationships. If your will doesn’t provide for your spouse, children or other dependents, it could more easily be challenged in court.

And that’s not all. Every aspect of your financial and legal life should be reduced to writing in a will to make sure that you’re still in charge of your assets even when you’ve no longer with us. That’s what estate planning is all about. We can help take the stress away from organizing your finances. Give our team a call today and one of our advisors will be happy to help run through your options.

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Take control of your super

 It can be hard to think about your Superannuation and long term financial goals when retirement can seem so long way away. Ask any person approaching 50 and they’ll agree that they should have paid more attention to their Superannuation earlier in life.  But, all is not lost. Making a few simple changes now, can make a dramatic difference to your lifestyle when you finally do hit retirement.

Start to get to know your super

 It is actually yours! But are you aware of its current balance?  Superannuation can be a very complicated topic and for many Australians it will represent the largest asset outside the family home.  For this reason alone, it makes sense to get to know what your current balance is, which funds you’re with, and the types of investments that you hold.  Consolidating multiple super funds is the easiest way to save on un-necessary fees and its something you can do right now.

Strategies for every stage in life

 You don’t need to be a millionaire.  Even though starting early will reap the biggest rewards, it’s never too late to build a better future, so if you haven’t paid a lot of attention to it – it’s not too late to start now.  Retirement will mean different things to different people.  A person in their twenties will have a different strategy to someone in their 40s.  But you’d be surprised to see how much difference a little involvement in your Superannuation could make towards your lifestyle when you retire – so the motto is be involved.

So you’re just starting out

 You hear it all the time – but although it’s probably one of the things that is further down your priority list, you can relax,  just  a small additional contribution now could mean a real boost to your Superannuation balance and lifestyle when you do retire.

Make sure you get an understanding of your entitlements too. You may be entitled to further boost your Superannuation through a Government Co-contribution.

With time for compound interest to do the work for you, even small contributions can grow (and grow…that’s the compounding part..!)

Think about taking a little more risk – you have the time and a high-growth investment strategy might be right for you.  Whilst this type of strategy may be riskier in the short term, with many years before retirement to ride out market fluctuations, it may prove to be a prudent choice.

Creating Wealth

 At this stage in your life you have started accumulating wealth through investments and may even have a family.  It can be hard to juggle all your financial commitments, although paying close attention to your Superannuation now may prove to be a wise decision as retirement is not actually that far away.  As time to retirement decreases, it may be worthwhile to review your investment strategy and take a more conservative approach – because you don’t want to risk losing what you’ve already gained.

 Retirement time

 You might have stopped working, but your Superannuation shouldn’t.  It makes sense to leave your money in Superannuation for as long as possible to maximise your retirement benefits.  Dependant on age, your Superannuation can start working for you as regular income or in lump sums.  With Superannuation changing constantly, it pays to keep up-to-date with what’s going on. The great thing is, at this point you have the time to take a firm interest in any changes that could affect you.

What about Self Managed Super Funds (SMSF)?

 Self managed super isn’t for everyone, but it can provide investment options and benefits far out of reach to most funds. Having a good financial adviser means you don’t need to be a genius to make SMSF work for you.

Firstly there is the control – the ability to take control of your own investment decisions is what drives most people towards an SMSF.

Through the control over investment choice, SMSF trustees have the ability to purchase investments that may have been restricted in their existing fund. This may range from direct shares or direct property all the way through to gold bullion or rare collections (which are known to have generated good returns). For business owners an SMSF may even own the business premises and lease these back to the business.

 There can be Tax Advantages – An SMSF allows personalised strategies to effectively manage tax. Some strategies include but are not limited to:

  • reducing contributions tax to zero,
  • reducing tax on investment income to zero, and
  • reducing tax on capital gains to zero.

These are not catered for in a retail or industry fund, as the trustee does not keep your personal situation in mind when making its decisions.

 Estate Planning – An SMSF has the ability to provide an effective estate planning vehicle which can retain wealth for future generations. An SMSF does not stop when you retire, nor does it necessarily stop upon a member’s death. In fact through the use of prudent trustee structures and investment strategies, an SMSF may continue almost indefinitely over multiple generations.

Personal Insurances – By placing personal insurances such as Life, TPD and Income Protection inside an SMSF, you may be able to free-up personal cash flow for alternative uses. Furthermore, an SMSF may be able to claim a tax deduction for policies that are otherwise not deductible in a personal situation.

What do I need to know before starting?

 In order to realise the benefits that come with managing your own Superannuation, you must also accept a level of responsibility. Your Financial Adviser, along with your fund Administrator/Accountant, can guide you through the requirements.  This responsibility mainly involves the realisation that:

  • You do not have direct access to the money in your Superannuation fund and it must be held within the trust until you can access it on the advice of your Financial Adviser or fund Administrator/Accountant.
  • The sole purpose of the Superannuation fund must be to provide for your retirement benefit. Generally, you cannot enjoy a benefit from the investment, and investments must be for commercial purposes.

Want to know more?

 Talk to us. The superannuation team at Anne Street Partners have the knowledge to help you with complicated superannuation topics every day. We can guide you along the way and assist you with setting up the right fund or reviewing what you have. We’re here to help.

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