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Wealth creator


Wealth creator

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									Invest | starting your portfolio                                                                                                                                                                                                                        Invest | starting your portfolio

   “They have a huge financial
                                             Case Study
                                                  Wealth creator
advantage,” says Somers, “but                                                                                                             Starting slow                                     Success breeds success                         John’s Portfolio
perhaps a considerable                                                                                                                    Rather than jump right in, Webb took              As it turned out, Webb bought at an
                                                                                                                                                                                                                                          Property                 Current value
psychological disadvantage.”                                                                                                              a couple more years before he made                opportune time and in a good location.
   Getting over that hurdle, however,                                                                                                     his first purchase – two house and land           But he admits it might not have worked        PPor                            $520,000
often comes down to just gaining                                                                                                          packages on the Gold Coast.                       out so well without a bit of luck, too.       Gold Coast                      $420,000
the confidence in property investing                                                                                                         In the time in between, he did research            “Looking back with the benefit of
                                                                                                                                                                                                                                          Gold Coast                      $470,000
by educating yourself in seminars,                                                                                                        and gained some confidence.                       what I know now, I’m amazed that
books and talking to experts – or even                                                                                                       “After reading Kiyosaki, I had the ‘what’      things did come out the way that they         WA                              $570,000
other investors. As Somers herself                                                                                                        to aim for, but not the ‘how’, “ Webb says.       did,” he says. “Basically, my first efforts   Qld                             $270,000
experienced, confidence can be gained                                                                                                     “So I spent the next two years buying as          were ‘dumb luck’. ”
                                                                                                                                                                                                                                          total                             $2.25m
by doing the research, adding up the                                                                                                      many property books as possible and                   After the first ones, he went on to
numbers and weighing it against                                                                                                           learning how to do it.”                           build a portfolio now valued at $2.25m,
other options.                                                                                                                               He found that while the approach was           including a couple of mining properties           With practice, however, that process
                                                                                                                                          always different, they all had a common           in Western Australia and Queensland, and      gets easier.
Tax and capital growth                                                                                                                    theme – it is possible to achieve wealth          his own residence, which is a fixer-upper         Finally, Webb says that surrounding
Paul Do says tax should be investors’                                                                                                     and financial freedom through property.           on a large block of land 10km from the        yourself with like-minded people
last consideration, but it’s an important                                                                                                    “That time was well spent. I needed            Sydney CBD.                                   is crucial.
one nonetheless. Capital gains, land tax                                                                                                  to convince myself that building wealth               While property investing takes some           “To me, this is paramount,” he says.
and possibly GST are all factors that                                                                                                     with property was possible,” says Webb.           effort, Webb says it has definitely been      “Because I have no one in my family or
need to be understood.                                                                                                                       He used a nest egg saved from                  worth it for him. And, when asked for tips    social circle who knows about property
   An important point to remember is                                                                                                      working overseas to buy the first two             to new or potential investors still on the    investing – or is even interested in it –
that you’re only taxed on capital gains if                                                                                                properties; one was for $234,000 and the          fence, he simply says: “Start now!”           I find it’s easy to take my eye off the
you sell your property.                                                                                                                   other, $297,000.                                      “Get educated, go to seminars, read       ball. But being among a group of fellow
   “Investors like Warren Buffett have                                                                                                       “I liked the idea of buying houses as          books, and seek out other property            investors keeps me attentive and focused
achieved huge returns over the long                                                                                                       opposed to flats, and two brand new               investors who can point you in the right      on my goals.”
term because they bought capital                                                                                                          houses in Queensland easily trumped               direction,” he says. “Learn as much as you
growth assets,” says Do. “You should be                                                                                                   one flat in Bondi,” Webb laughs.                  can about property investing. Then back       Planning ahead
buying high capital growth properties –                                                                                                      He borrowed 80% of the purchase                yourself and have a go of it yourself – do    Of the immediate future, Webb says,
and never selling.”                                                                                                                       price for both properties and paid the            it first-hand.”                               he’s looking to settle on a block of land
   If you buy high rental yield                                                                                                           balance in cash. Even though it was a
properties, though, you’ll be taxed                                                                                                       major purchase, Webb says he didn’t feel
on the rent.                                                                                                                              too overwhelmed by the process at the                “Property investing is a process. The
   The luxury of that option, however,                                                                                                    time, because he was well prepared –
might depend on what your financial                                                                                                       and confident.                                       destination should be financial freedom,
situation is. Somers says if you have a
low wage and savings, you really
                                                                                                                                             “By then, I knew buying property
                                                                                                                                          was the right choice,” he says of his calm           and a property portfolio simply the
need to sacrifice growth and go for
yield, but the opposite is true for those
                                                                                                                                          demeanour at the time. “Perhaps
                                                                                                                                          it helped that it all seemed so surreal.          vehicle to get you there”
with a well-paying job. With that in                                                                                                      I was signing my name against
mind, she adds, you should select                                                                                                         purchases of half a million dollars in              He also suggests looking at property        with a view in Western Australia, and
properties accordingly.                                                                                                                   one go – it just seemed so absurd,”               investing as a process, rather than a         putting a house on it. He could then sell
   For more information on other                                                                                                          he recalls.                                       destination. Instead, the destination         it, eventually, to finance rebuilding his
tax matters, check out the tax section                                                                                                       “I’d never have dreamed of such a thing        should be financial freedom, and a            own home. He’s also looking at buying in
in this magazine. It usually comes
down to personal circumstances,
so seek out a property accountant
                                              J   ohn Webb started out with a high-
                                                  income job in IT. He worked hard
                                              and it paid well, but he told himself
                                                                                              “The book introduced me to concepts
                                                                                           of wealth I’d never known,” he says. “I
                                                                                           come from a poor background so neither
                                                                                                                                          happening. I’d wanted a new direction –
                                                                                                                                          and got it in spades.”
                                                                                                                                             From that point on, Webb says, he was
                                                                                                                                                                                            property portfolio simply the vehicle
                                                                                                                                                                                            to get you there. Webb says it’s that
                                                                                                                                                                                            philosophy that has made it easier
                                                                                                                                                                                                                                          Queensland to develop units.
                                                                                                                                                                                                                                              An overall goal of his is to have 10
                                                                                                                                                                                                                                          mortgage-free properties, but he’s
for help.                                     it wasn’t something he would be able         my parents, family or friends had any idea     able to look at his property purchases in         for him to deal with such large dollar        already been warned by other investors
   Before any property purchase, it’s         to do his whole life. The question           about wealth creation.”                        more abstract terms.                              amounts, and to broaden the range             that once he gets there, he may not want
crucial to understand the tax issues          was – how could he find a different             One particular idea the book left him          “I went about my day hardly thinking           of properties he might not otherwise          to stop. Nevertheless, Webb says he’s
first, otherwise it could end up costing      way to make money outside a                  with was that wealth held income-              about it,” he says. “I just put my trust in the   have looked at.                               happy with where he’s at – although,
you later.                                     salaried position.                          producing assets. With that thought,           process. Nowadays, I’m quite comfortable            Investors should also beware of             looking back, he wishes he had
   Following this general introduction,          “In my 20s, I was happy to push my        Webb decided the most appealing asset          dealing with such large amounts.”                 getting too emotionally involved with          started earlier.
in the next issue we’ll be exploring          career hard,” he says, “but I knew that my   class to him was property.                        Some parts of the buying process are           their purchases.                                  “If I’d started in my early 20s, I’d be at
some of the next steps required to            priorities would change as I got older.”        “It felt tangible to me, easier to          still a bit challenging, and frustrating too,       “Learn to turn off [your emotions]          my endgame by now,” he grins.
start your property portfolio, by                Then in 2000, aged 32 and renting a       understand – and safer,” he says.              he finds.                                         and focus on the task at hand,” Webb              Webb also regrets passing up some
going into greater detail on the              flat in Bondi, he got an idea from a book    “Suddenly, I had a goal, a strategy. I would      “It was a whirlwind of legalese and            advises. “They can affect your ability        earlier deals he wasn’t sure about at the
strategies and decisions of how, when         that would ultimately steer his life in      continue with my career, but with the          paperwork,” says Webb, “and with each             to take action, and it’s the first action –   time. Rather than timing, he says, the
and where to make your first purchase –       a new direction. The book was Robert         aim of building a property portfolio that      new purchase, that frustration doesn’t            the first step into anything new – that’s     key is to find good properties where the
or purchases.                                 Kiyosaki’s Rich Dad Poor Dad.                would eventually replace my day job.”          seem to abate.”                                   the hardest.”                                 numbers stack up.
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