Lunch Money Property Investing - Step 2 - Protect Your Pocket


The second step to successful investing is Protecting Your Pocket.  Unfortunately most people starting out on their own buy the wrong property and end up costing themselves a lot of money out of their own pocket.  Being a Street Smart Property Investor means you protect your hard earn money.

Transcription

Hi, I'm Phil Anderson from LifeCorp, the home of street smart property investing. Are you thinking about buying an investment property? Well, I've been a property investor for more than 20 years, and the advice I would give any property investor thinking about buying today would be to protect your pocket. You see, I believe that you can buy incredible properties right now in growth markets all over Australia. But the mistake that most people make is they buy the wrong properties. They buy properties that are so hard on their take-home incomes that they steal away the lifestyles they could be having today. Sure, we need to invest for our future, but I also believe we need to protect our pockets today, and enjoy a lifestyle, even during our working years. Let me show you how it works.

Okay, so let's have a look at it together. One of the first things you will need to draw your attention to is, the way that we earn money, that most people earn money. There is a net wage component that most of us would be very familiar with. It's how much money we take home each week after tax. There is, of course, the amount that we give to the tax man. And there is our super contributions, our super funds, whether they may be sitting in a managed super fund or a soft managed super fund. But, the reality is, let's focus on how most people buy property, because this where the problems start. For a lot of Australian families, they buy family homes, which must be serviced out of your take-home income. And for a lot of people, we tend to stretch ourselves in this regard. One of the biggest problems that happens in the Australian property market is, most people buy family homes that they really struggle to be able to afford, pushing their budgets as far as possible, and all of these costs must be serviced out of your take-home income, making the family home the hardest property you will ever buy. But this is the great Australian dream, so most people justify, they don’t just justify it, they stretch the boundaries as far as the can.

Now, I'm not gonna try to talk you out of that, because most people are certainly very focused on owning their family homes. The thing I will draw your attention to is when they buy an investment property. You see, most people that buy investment properties, more than 90% of investors, get it very wrong. They tend to buy of investment properties that are very ineffective at using their tax and still tap into their take-home income, obviously pushing this all down. So, what ends up happening is their house and their investment property needs to be services out of their take-home income, and then we've got a compounding problem. The line that we had here is obviously going to get stretched down even further, and we're going to be in a situation where your family home and your investment properties are going to leave you with not much left over at the end of each week. And unfortunately, like I said, this is way, way too common.

So, of course we're going to allow for the fact that most people will still choose to buy that family home. Most people will still choose to have that mortgage, and they will need to service it out of their take-home income. Now, the difference is, if you really become familiar with how A-grade investors buy property, they try to use their tax money. You've heard me talking about a lunch money property in the past, I hope. They've been calling me the Lunch Money Property Millionaire for years, because I like to only put in about a lunch money budget out of my take-home income towards buying an investment property. I would try to buy properties that are mostly being serviced by your tax component. But, you know, the rental incomes, and all of those other components as well. But as far as your money goes, the tax component should be able to service the loans and help you out to make sure that all you're putting in out of your take-home income is a maximum of- with the interest rates how they are today- a maximum of $20 a week. Even when interest rates are back to normal sort of interest rate levels, I would never allow above $100 a week to service an investment property. I prefer them to stay around $50, $60, $70 a week. But at the moment, $20 a week is plenty. Most of the properties that I've been involved with over the last- buying myself, and been involved in helping people be able to identify in the last sort of six or twelve months, they're basically cashflow neutral from day one. So, $20 is plenty of budget.

Many of those people have actually found that by following my system, they've been able to add a couple of properties in here, still keeping it below $20 a week. $20 a week, lunch money budget. And they've still got their super up their sleeve. There are government laws that allow people to buy properties inside of this as well, and that might be something you want to investigate as well. But one of the big steps in my process- I have seven key steps that I suggest to people to follow to make sure that they achieve results from being a property investor, effectively, and safely, and so forth- but this is step number two in a seven-step process. It's all about protecting your pocket, making sure that the properties are working effectively in these areas of your take-home income, or your income streams. Protecting your take-home income to make sure you can have a lifestyle today. I'd even go one step further and say we should be able to get rid of that home loan much sooner, to make sure you've got even more take-home income as quickly as possible.

Protecting your pocket is an incredibly important step in the process. Like I said, I've got seven steps in the process. I've actually attached below a free gift for you. It's an info-graphic. It's a seven-step guide, a seven-step info-graphic, that I think you're really going to enjoy. It'll give you all seven steps of what I believe are the most important steps to getting safe, effective, and very reliable growth and performance out of your property investment portfolio.

So please, click on the link below. I'm sure you're gonna enjoy the content that's there. It's a little free gift from me. But remember, at the end of the day, if you're gonna buy an investment property, if you can't buy it with your lunch money, don't buy it.

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