Your home is a very powerful asset
Many people I come across invest a lot of time, energy, and money into their biggest financial asset - their home. Most people even upgrade every so many years to meet their changing lifestyle.
Then they come across a book like 'Rich Dad Poor Dad' (written by Robert Kiyosaki) and get discouraged as they read that their home is their biggest liability!
The purpose of my blog today is to put your mind at ease and show you why buying your own home should be part of your game plan.
Think about it. The only asset remaining in Australia (that I know of) that has zero tax liability is the family home. Your PPOR incurs no Land Tax and if you sell your home and make a capital gain, there is no Capital Gains Tax.
Case in point. We were recently the underbidder for a home which sold for $1.85m. Our research revealed that the current owners bought the property back in 1997 for $187k (26 years ago - at time of writing). Not a bad investment in anyone's language!
The capital gain of $1.663m ($1.85m less $187k) will be enjoyed by the Vendors tax free. That's right, no sharing any of the profits with the ATO. Further, the home would not have been subject to land tax during the 26 years of ownership.
As you can see the family home is a very powerful asset as it provides you choice down the track and could in fact be part of your game plan for a more fruitful retirement.
Take the above scenario as an example. Let's say the Vendor sold the home in order to downsize and retire. They could downsize to a lovely villa unit for around $850k in the same suburb and still be left with ~$750k in cash (after selling and purchasing costs) to enjoy in their retirement years.
~$750k invested wisely can provide them an additional cash boost for a more secure financial future - in addition to their superannuation and other investments - providing them more choices during their retirement years.
So, as you can see investing in a more desirable home, even if it's in a more expensive area, can in fact be a wise strategy and should form part of your game plan. You can always downsize down the track whilst enjoying the capital growth of your PPOR.
I hope you find the above thought provoking and realise that you cannot take gospel everything you read. There are many strategies that will help you with your wealth creation goals however tailored advice is of utmost importance to ensure you achieve your bigger picture.
If you are considering upscaling your home, as part of your bigger picture, be sure to leverage our depth of experience, and runs on the board, to secure your desired home at the right price and on the right terms.
Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.
