Kara Colins from Yellow Brick Road Mackay shares advice on property investment and suggests you shouldn't be afraid of tax.
When I was in my early 20s my mother gave me two of the best pieces of financial advice I’ve ever received.
My mother is a very intelligent lady, a corporate accountant who knows a thing or two when it comes to tax and property investing. She has always given me great advice though, like most early 20 somethings, I didn’t necessarily adopt all of her advice right away. I thought I knew it all and sometimes needed to learn the hard way.
One of the first pieces of great advice my mum gave me was when I was sitting at home with her. I was trying to convince her that I should purchase this great investment property. I thought it would be a great way to save on tax by pouring money into it every month to cover the expenses. That way I’d have a fabulous investment property that would lose me money. Everyone (except mum) thought it was a brilliant idea. She told me:
Don't ever think it's a good idea to spend $1 to get back 50 cents.
This was the best explanation of negatively gearing a property I have ever heard to this day. Negative gearing is effectively used by many however at that stage in my life it wasn’t the right strategy for me. I thought ‘wow that really sums it up and isn’t at all what I wanted to be doing’.
The other piece of advice my mother passed along to me was ‘don't be afraid of paying tax. It means you are doing well and it means you have been successful in what you are doing’. This one was mainly aimed at capital gains and cash flow positive properties.
Well today I am the wealth manager with Yellow Brick Road Mackay based in the Mackay and Whitsundays region and I still haven't forgotten that advice.
I am currently busy building a property portfolio with my husband that will give us a passive income and allow us to have a terrific work-life balance, something that really wouldn't have been achieved with having negatively geared property… or at least not for a very long time!
Of course, in certain circumstances there might be reasons why a different strategy is best, but I’ve found for my family, following my mother’s advice has worked well. We live and breath this advice now and I often share my personal experience with family, friends and clients when discussing property investment.