You know what? There’s so many young Australians right now busting their arse trying to get into the Australian property market to just slug away at their mortgage for the next 30 years. What’s this known as – “The Great Australian Dream”. I call it the Great Australian Myth!
This ‘dream’ is based on you studying hard at school, get a really good job, save up a deposit to buy your own home, and then just work and slug away to pay it off for the next 30 years. Then no one can take your home off of you when you bought it and you paid it off, right?
That’s a really poor mindset because here’s the thing – if you’re paying off your own home right now and you’re not currently investing – unfortunately, you don’t have a wealth creation plan!! Seriously. This is proven by your response this these next questions:
When you stop going to work and exchanging your time for your employer’s money, where does the ‘cash flow’ come from in your life? How do you keep providing for the lifestyle that you deserve when in retirement?
So how about we just tweak things a little – to break your mindset and avoid being stuck in a 30 year mortgage trap. Let’s have a think about this – if you’ve got your own home at the moment with your own home loan…perhaps you have some equity in your own home? By the way, if you’re not utilising that equity, it’s called ‘lazy equity’. So just have a think about that…. how much equity do you have in your own home right now that you could be using for something more purposeful?
In my opinion there is no better purpose for that equity than to go and buy an investment property. It might be your first, or it might be another investment property, it’s no difference. This property should be acquired in the location that will provide you with the best chance of capital growth. Importantly, that may not be in a suburb close to where you are living. You need to be adult about that possibility and take all of the emotion out of wanting to ‘drive past it every week, to keep an eye on it’…. how about instead you go and do something else with your spare time (that everyone complains they have none of!).
Keep in mind that the property will have its own rental income. So between the rental income and your tax return, the property will likely pay for itself after tax (depending on a number of factors). Awesome – now you are in the property market – You’ve taken the first step and you’re playing the game of property investing! What’s next?
As smart and confident property investors, you know that you aren’t just buying property – you are buying TIME. You do not need this investment property to double in value straight away. In this instance, depending on market conditions, you should expect that in about three years that property has grown in value and subsequently gained enough equity (just like you had in your own home), so you can go ahead and repeat the process. This is where stuff gets exciting!
You acquire another investment property in the #1 place in Australia that will provide you the most amount of capital growth.
Now you’ve got your own home AND two investment properties that are sitting in the right markets, being mainly paid off by the tenants and the taxman and growing in value.
Let me close this off – if you did absolutely no further investing for the next 7-10 years, because those two investment properties have gone up in value and they’ve gained additional rental income, you can go and now grab chunks of equity and move it across to your own home loan and you can then pay off your own home loan in one single day! This is not black magic. It’s the power of investing and having your money work for you!
CONGRATULATIONS. You’ve escaped the 30 year mortgage trap.
Don’t bust your arse trying to pay off your own home – change your mindset and make sure you have a wealth creation strategy. You owe it to yourself.