Paul Glossop: Hello guys, and welcome once again to Pure Property Investment one on one. I’m here again today with Tristan Scifo. Tristan, welcome to the studio again, mate. The objective of this session today to walk through with Tristan as a financial planner and wealth coach, to really understand a little bit more about intentions of home buyers/would-be investors and, look, we get it a lot where people will say that, potentially, save have the deposit or say their parents or someone related to them happy to go guarantor, and effectively be ready to buy.
Now the question therefore comes, I want to buy, or I want to invest down the track as well, which one should I be doing first, and what are the pros and cons of each, so hopefully, mate from your side of things, working the wealth coach space, you might be able to give us a little bit of insight to what they need to think about.
Tristan Scifo: A great question, Paul. It’s probably the most, most typically asked question that I get with all my clients, it’s always on their mind, if it’s not on their mind in that first meeting, it comes up in that first meeting and the answer is, it depends, I’m sorry to say, but it really does. The first thing I’d get you to do is, if you have a significant other, ask them, because their opinion is going to really matter, and one of you is really going to want to know when they have their home, especially if kids are either on the way, or already there.
So ultimately buying a home is a lifestyle decision, before being an investment, it is a lifestyle decision, so you have to work out where your personal plans work, and we do a lot of coaching work with our clients, to work out what are their goals, what really matters to them in life. Where do they want to be, not just a few years away, but a decade from now, where do they want to be, and if owning a home is something you want to achieve in the next few years, then it’s realistic that it might very well be your first investment. But then, there’s affordability, and then there’s strategy, there’s investment plan, so there’s a lot, there’s a lot of pros and cons to investment, and to owning a home, of course.
And just one simple illustration, clients I’ve met recently have owned their home in the past, but have since moved out. Living in Sydney, you’ll find that the rental, although it feels expensive, is actually much less than what you’d be paying for a mortgage of an equivalent property, so what they’re doing now, running their own business, is living really close to where their home was, in the same area that they love, but they’re able to claim the rent that they pay as a business deduction, so gaining the tax benefits there, whilst also having their house rented out. In the meanwhile, the income from that rental, the rental investment is now, meaning that the loan, is tax deductible as well, and on top of all of that, because they once lived in that property and they don’t have another principal place of residence, they’re able to still keep their capital gains tax exemption as if that home was their actual home.
So, a bit complex, but ultimately, they get tax benefits for renting, they get tax benefits for their loan becoming like an investment, but they still keep that capital gains tax exemption on their home, so just a simple idea of how having a home, but also renting is possible and if you think that is just one possible strategy, how many other strategies are there out there? You’re really going to have to work out what’s going to suit you.
Paul Glossop: Yeah, absolutely, I think you really illustrated key that it’s not going to be a cut and dried scenario, you can do this, or you can do that, and just on that basic example there you talked about different parameters of capital gains tax exemptions, you’ve talked about different options for negative gearing, you’ve talked about benefits for getting access to grants if you buy as a first home buyer or stamp duty exemptions as well, things such as those exemptions come into the fold or out of the fold depending on your intention to buy the property. Absolutely keen. You can see straight away there’s a myriad of things to consider.
One thing, speaking from experience, a lot of the time first home buyers buy that first property, even if it is your home, the likelihood that’s going to be that that’s going to be big enough and well positioned enough for you to want to spend the rest of your life there, is very unlikely, and the fact of the matter is that, if you’re going to buy that property and at some stage upgrade, or turn it into an investment property, have an investment mindset. Irrespective you might want to buy it to live in, and that’s fine, have the intention to say, is this property going to be a well performing property over the long term, if it’s not going to be the “forever” house, and you know, couples with no children who’re eventually going to have children might say, well, I don’t necessarily need to think we can live in this 2 bedroom, 1 bathroom accommodation, forever, so we’re going to have to upgrade to an extra bedroom, an extra bathroom, a backyard, a front yard, proximity to schools, etc., but you might want to still hang on to that property, so thinking about every purchase with that investor mindset will always leave you in good stead to think about pros/cons, irrespective of your intentions of buying that property.
There’s a mouthful there. There’s a lot you want to consider if you’re going to buy your own home, you’re going to buy that investment property, which one come first. I think the first and foremost for me is the best place to start is talking to a professional about what you can do, what you want to do, and the pros and cons of each.
If you do want to get in touch with Tristan or his team for those discussions, feel free – his details are at the bottom of the screen. Likewise, from a property specific perspective, we’re always happy to have a chat and our details are at the bottom as well. We’ll catch up with you soon. Cheers!