Home' API Magazine : July 2014 Contents 43
API JULY 2014
JULY 2014 API
By focusing on appreciating assets, rather than depreciating
assets, the savvy couple sees the negative gearing as a way of
saving for a better future.
“We invest and work damn hard for it,” Adam says.
“People buy new boats and cars but those things we don’t need.
We both drive Holdens and it costs minimal to drive a smaller car.
“For us, if the Joneses want to go streets ahead, we’re quite
happy with looking after ourselves and setting ourselves up for the
That doesn’t mean this gen-X couple misses out on enjoying
family time together. They still book a family holiday to
Queensland every year, they just make sure they put as much
money as possible into that offset account in the meantime.
“It’s about setting ourselves up and our kids up for the future in a
way our parents couldn’t,” Adam explains. “We now have good jobs
and we’re quite happy in terms of our security.”
He advises any gen-Xers thinking about investing to be
comfortable with the numbers and negative gearing.
“We have only ever made a move when we have been
comfortable with it,” he says. “We just remind ourselves when the
money gets a bit tight at times and when the credit card looks
nasty at other times that it’s all okay. There’s a plan in place and it
all evens out in the end and this is all for our future.”
Sacrifice now, enjoy later
Ten years ago, Adam and Kim Walsh were
keen to invest and set themselves up for
the future. But like most gen-Xers, the now
41-year-olds were also busy progressing in
their careers, paying down their own prin-
cipal place of residence (PPOR) and raising
two beautiful boys. It’s a typical scenario for
many people in this age group and perhaps
somewhat of a difficult time.There are many forks in the road, many
bills and education expenses, but also some equity in the family
property and hopefully some career progression.
“We felt we wanted to set ourselves up as well as our kids for the
future,” Adam explains. “We figured our super wasn’t going to be
enough to live on in a way in which we wanted.”
The big question often facing young parents in their 30s and 40s is
what to do next – is it better to pay down the family home or perhaps
buy an investment property? Shares weren’t an option for Adam and
Kim, because Adam simply didn’t see value in them. After all, people
will always need somewhere to rent but they don’t always need
shares, he says.
Fortunately, Adam, a university lecturer, and his wife, a national
sales manager, had plenty of equity in their own property.
They bought a four-bedroom property in Strathmore for $428,000
in 2006 and estimate it’s now worth close to $750,000.
“Once we put to our mind that’s what we were going to do, (buy an
investment property) we developed a strict budget. We were diligent
savers and we put money in our offset account. Once it was in the
offset account, we never touched it. The advantage was we then also
paid less interest – it was amazing how quickly that money grew.”
They were able to pay down their mortgage and also build a deposit
for an investment property at the same time. Three years ago, they
felt they had enough equity and spare cash to make their next move.
They also felt comfortable with the outlay they’d have to fork out and
so started searching for their first investment property.
They attended open homes for a full 12 months before settling on
a two-bedroom apartment in a small block of six, in the Melbourne
inner-city suburb of Travancore. The property’s fantastic location and
proximity to amenities was well worth the wait and the couple paid
$434,000, using cash and some equity to come up with a 20 per cent
deposit. Fortunately, this purchase turned out to be successful and
has been a capital growth winner. It now rents for $375 per week and
is worth around $500,000.
Adam and Kim could have settled on owning a PPOR and
investment property but gen-X investors usually have solid income
and plenty of time to build for retirement. Keen to accumulate
wealth at an important phase of their lives, they decided to continue
growing their portfolio. They started searching for their third property
last year, and just settled on a four-bedroom house in the Melbourne
suburb of Gowanbrae. Although they paid $820,000 and it’s only
renting for $450 per week, they should get good depreciation on the
property. Adam says the area is also
going “completely ballistic” and will
hopefully have strong capital growth
in the future.
However, the large difference in
the purchase price and rental return
means the property is negatively
geared at the moment. Adam says
lots of gen-Xers buy new cars or new
gadgets, but spending more money
on their future is what matters
during a wealth-building phase.
and Kim Walsh
Strategy: Buy and
> Accumulate as many
properties as possible.
> Don’t waste money on
expensive cars and toys.
> Focus on capital growth.
> Establish an offset
> Only buy when you can
Adam’s top tips
GENERATION WEALTH \\ COVER STORY
Links Archive June 2014 August 2014 Navigation Previous Page Next Page