The sad truth is that many accountants and finance practitioners do not understand the devastating effects poorly structured finance can have on the property investor's tax position, cashflow and security of key assets, especially the family home. It's a disgrace.
For too long we have watched property investors fall victim to poor finance structuring – a mishandling that has delayed the dreams of early retirement. We see investors struggling with cashflow and losing tax entitlements worth many thousands of dollars every year, while unwittingly putting their home and life savings on the line.
The reason: their advisors aren’t spending the time necessary to carefully craft finance structures and strategies to extract every possible benefit. Typically, accountants claim tax deductions from funding arranged by a financier who, himself, often has limited understanding of tax principles.
Maximum tax benefits, profits, optimum cash-flow and security depend on an inclusive, personalised strategy.
Your advisor may have considered the merits of interest-only versus principle and interest repayments. They may have compared the benefits of loans with fixed and variable interest rates. They will no doubt have looked for the cheapest rate. This is the usual, simple "set and forget" approach many financiers adopt. Instead, they should be considering crucial issues such as:
'How can I maximise and preserve my client's tax benefits indefinitely?'
'How can I protect my client's family home and life savings?'
'How can I enhance my client's cashflow and lifestyle?'
'How can I boost my client's profit and passive income to fund an early retirement?'
.It is all about the nuances of the finance structuring. Issues such as: When and how to use a line of credit? When to use redraw facility? Is an offset account appropriate and what type of offset account is called for?
Key points include what accounts to open, where to hold savings, where to deposit income and where to draw expenses from?
The consequences of these issues are infinitely more powerful… or devastating for the investors than thinking, 'which loan or bank, or who has the cheapest rate today'. It is true to say that after property selection, finance structuring and strategies are the most important factors in building a substantial portfolio producing strong passive income.
These are the questions and issues we address in these next special posts that we have filled with real life examples to help you understand the benefits so many of our clients enjoy.
We hope you enjoy reading these next posts as much as we enjoyed writing them for you.