Young buyers making sacrifices to get ahead

Young buyers making sacrifices to get ahead

Young buyers are sacrificing stamp duty and first-home buyer grant concessions by entering the market as investors rather than owner-occupiers in an effort to reach home ownership at a faster rate.

This phenomenon is being driven as a result of young first-home buyers being out-bidden by Baby Boomers with existing equity, but still eager to enter the market according to Members Alliance.

Members Alliance CEO David Domingo says young buyers are choosing to invest rather than become owner-occupiers because it also reduces any shift in lifestyle.

“In most cases we have clients in their mid-20s who know they have to take action early on in life in order to set themselves up financially – but are unwilling to move workplace or away from friends and family to live in their first home,” says Mr Domingo.

“This has actually encouraged smarter investing; it’s forced young buyers to think of what will make a great investment compared to buying a property they would only live in.
“This method also helps young buyers get ahead financially by having someone else, the renter, servicing their home loan.”

According to the Australian Bureau of Statistics (ABS), the number of first-home buyer commitments as a percentage of total owner-occupied housing finance commitments fell to 12.3% in April 2014 – the lowest figure since data collection commenced in July 1991.

The ABS is currently investigating how strong its first-home buyer loan data is after concerns were raised that ‘under-reporting’ could be occurring if some lenders were only able to accurately report buyers receiving a first-home buyer grant – something not every first-time buyer is eligible for.

“Young investors are stretching their dollar even further by pooling their funds with family members or partners to afford an above average investment in order to achieve long-term return,” says Mr Domingo.

“When the time comes to look at a second investment we’ll see these investors move out from their family home and into their first-bought home which they are closer to owning thanks to their strategic investment decisions.

“It’s one way to get ahead and it’s creating a new type of investor.”

If you need help with your first investment property, call 1300 365 731 to find out how Members Alliance can help.

Testimonial – Alexander & Nikki Spirkovski

26 August 2014

To whom it may concern,

I would like to express our thanks for the service received by all staff at Members Alliance in Perth during the purchase/building process of our new investment home in Adelaide.

From the very start it was Kobi Chillman who put me on to Members Alliance after having a short conversation about how annoyed I was at having to pay so much tax with owning a business etc.

Kobi suggested to me that we look at different options and one of them being building an investment property.

This sounded like a great idea but as my husband and I are not experienced with this kind of thing we were also very scared. After meeting with Kobi and her team we felt a lot more at ease and everything seemed to make sense. Our 1st investment home has just been completed and we are looking forward to not only one day having paid this home off completely but maybe even go through it again.

Anytime I had/have questions Kobi has made me feel comfortable enough that I can call or email her and she will help answer my questions as best as she can. The offer was/is always been there also to set up meetings either in their office, at our home or over the phone which was a great help to us.

We are now looking forward to the benefits of having our investment property and I am sure we will be more than happy.

The customer service and ongoing continued support we have received at Members Alliance was second to none and we would highly recommend them to any future prospective client.

Thank you so much Kobi and your Team at Members Alliance.

Yours Sincerely,

Alexander & Nikki Spirkovski

Parents can still lend a hand

Parents can still lend a hand

Times have changed since the 1970’s when Baby Boomers could afford their first home on a single income and jobs were stable – a stark comparison to Gen Y and today’s property market.

Young first-home buyers looking to invest are facing challenges their predecessors didn’t, such as the ever-increasing issue of job security and median house prices spiraling well above what the average wage can afford.

Members Alliance CEO David Domingo says the younger generation are now asking for their parents to lend a hand in order to enter the property market.

“Some are lucky enough to receive financial help from their parents to secure their first property,” says Mr Domingo.

“Direct financial assistance is useful, but solid advice is just as good – parents who are unable to help their children with a deposit can help in other ways like attending house inspections and spotting a good investment where their child otherwise wouldn’t.

“Teaming the determination of a young saver and the first home buyers grant with the experience of a parent is profitable combination.”

The International Monetary Fund (IMF) has found Australia has the third highest house price-to-income ratio in the world, which means this trend will only grow stronger in the coming years.

The IMF’s Global Housing Watch also confirms global house prices have risen consistently for nearly the past two years and are well above the historical averages.

Mr Domingo says house prices shouldn’t defer those who are ambitious to enter the property market.

“The sooner they get started the better – home ownership doesn’t have to be out of reach for Gen Y, but they may need to ask for help at some stage, be it from their parents or the bank,” says Mr Domingo.

When thinking about your first property investment, talk to the Financial Advisors at Members Alliance who specialise in property investment advice. Call 1300 365 731 to see how they can help.

Fair go for investors and first home buyers

Fair go for investors and first home buyers

Negative gearing survived this years’ Federal Budget but there are still calls for a review in order to correct property prices and level the playing field between investors and first-home buyers.

The inflation of property prices caused by negative gearing is making it harder for investors to build their portfolio and for first-home buyers to purchase their first property.

Members Alliance CEO David Domingo says something needs to be done about the tax breaks that are distorting the property market and making home ownership for the younger generation a thing of the past.

“Negative gearing is ingrained in the Australian property market – it won’t be an easy fix,” says Mr Domingo.

“I’m not talking about a complete overhaul, I’m talking about a very minor correction in the property market, and incentives targeted to first-home buyers like stamp duty concessions.

“It’s becoming one of those situations where you can’t live with it and you can’t live without it, something needs to be done.”

Rather than reforms to negative gearing, wealth creation companies like Members Alliance believe small changes in the right places will see these inequalities in the housing sector corrected over time.

Mr Domingo says steps to address the policy’s effect on investors and young home buyers would see confidence restored in the Australian Dream of owning your own home.

“At the moment, investors are facing fierce competition in capital cities and first-home buyers are getting frustrated that house prices are well above the average wage,” says Mr Domingo.

“Without some sort of change to policy, investors will keep paying well over market price and the younger generation will be subject to a lifetime in the rental market.

“It’s a hard line to walk, on one hand you have experienced property investors who use the method to create wealth, and on the other hand you have these young hopefuls just wanting a place to call home.”

The Financial Advisors at Members Alliance can develop a customised property investment plan to help you own your own home or build your portfolio. Call them today on 1300 365 731 to find out how they can help.

Is your SMSF being administered correctly?

Is your SMSF being administered correctly

The rise in popularity of the self-managed super fund (SMSF) has been confirmed with new statistics from the Australian Tax Office (ATO) showing numbers have reached over one million funds.

Many Australians have switched to the hands on approach of a DIY fund due to the appealing factors of control and flexibility, but may be unaware of the compliance issues that come with being a trustee.

Members Alliance CEO David Domingo says some trustees of SMSFs are having trouble mastering the simple yet mundane aspects of running the fund.

“All too often we see the trustees’ who are running the fund lacking the skills or time necessary to keep a SMSF compliant, and it’s the poor management of these funds that bring about penalties,” says Mr Domingo.

“The rules and regulations surrounding the Superannuation Industry (Supervision) Act are constantly changing and without the help from a professional service like Members Alliance, it’s difficult to keep up to date with industry changes.

“Negligence and improper dealings of your fund will no longer be overlooked or dealt with lightly, but that’s why we offer our services, to help people navigate their way through their SMSF to a comfortable retirement.”

From July 1, the Australian Taxation Office (ATO) will have new powers to reinforce the sector’s standards and prevent manipulation of the retirement fund to-be.

A number of new punitive measures will be put in place for the 53,000 members of the 27,000 new SMSFs setup last year including compulsory education courses and fines of up to $10,200 per trustee.

The ATO isn’t only cracking down on existing non-compliant trustees, but new ones too, which Mr Domingo says is fair but tough.

“Those new to the DIY super fund will no longer be able to plead ignorance and unfortunately, they’ll be subject to close scrutiny in their first year,” says Mr Domingo.

“Their behaviour and performance will determine the ongoing level of monitoring from the ATO – but any mistakes made in filing returns and contribution amounts will see them labelled as a case to watch.

“Going into a SMSF unassisted is a risky move – even the most financially savvy investors need assistance and advice.”

Aside from the ‘innocent’ mishaps, common contraventions reported by auditors include improper dealings with related parties, inappropriate loans and borrowings as well as incorrect use of limited recourse borrowing to buy property.

With the new changes taking effect this year, this is the first time the ATO will be able to utilise a range of actions for both minor and major contraventions.

Australians with SMSFs will be watching closely at how the ATO will hand down its new sanctions, but Mr Domingo says trustees would be wise to ensure their SMSFs abide by all the necessary legislation to safeguard themselves against a range of new penalties.

If you need help either setting up or fine tuning your SMSF, call 1300 365 731 to find out how Members Alliance can help.

To pay off or invest, that is the question

To pay off or invest, that is the question

If you are a homeowner, there may come a time when you will be faced with two decisions – one is to pay off your home loan, the other is to invest elsewhere.

Odds are that circumstances would have changed since you first acquired your home and a loan to service the debt. If you are 10 to 13 years into your loan, you would usually be earning more money and have extra funds to invest.

With so many homeowners facing the same situation, Members Alliance CEO David Domingo shares his advice on what to do when reaching that point.

Understand the type of debt

At this stage you should have the expertise to make sound financial choices. But if you have accumulated bad debt, paying it off is the first step to making the decision whether to pay off your home loan or invest elsewhere.

Bad debt usually resembles things that depreciate and offer no tax deduction for having purchased them. It typically includes cars, televisions and credit card debt.

You should aim to pay off your bad debt as quickly as possible. By accelerating the reduction of your bad debt you can reduce your total interest payments.

Make the most of your extra cash

As an established borrower, you should use your extra cash to pay off your home loan, as well as build wealth through other investments.

Dividing your cash between your home loan and your superannuation fund will give way to a number of benefits you will start to see now and in the future.

While making higher or more frequent repayments on your home loan will allow you to slash the overall interest and cut your loan time by a considerable amount, almost all homeowners do not have the additional funds to do so.

You could also commit your extra cash for salary-sacrifice contributions into your super. Income for your retirement comes from a solid financial plan and early investing activities, so acting now will ensure you have a secure financial future.

Paying off your home loan and investing in your super at the same time will create a welcome boost to any wealth creation plan.

Use the power of leverage

Once you have channeled that extra cash into your home loan and your retirement nest egg, you should think about leveraging the equity in your home to expand your assets.

Many Australians don’t realise their financial potential, and it’s at this time when the financial decisions you make will have the greatest impact on your lifestyle during retirement.

Using the equity in your home to invest in property is one of the safest ways to build wealth.

This advice should be used as a general guide only. Talk to a Financial Advisor at Members Alliance on 1300 365 731 to develop a wealth creation plan specifically tailored to your financial situation. 

Age Discrimination Adds Fuel to the Retirement Fire

Age Discrimination Adds Fuel to the Retirement Fire

Retirement and the pension have been the focal point of the federal budget ever since it was handed down by the coalition last month.

Disgruntled soon-to-be retirees have voiced their concerns saying the rise in retirement age to 70 will backfire without trying to eliminate workforce discrimination against older people.

Members Alliance CEO David Domingo says it’s now more important than ever to have a plan for retirement that doesn’t depend on employers or the government.
“The budget has sent shockwaves throughout Australia, effecting both the young and old, and it comes as a wake-up call that retirement is something you should be taking into your own hands,” says Mr Domingo.

“It’s no secret that employers are unwilling to hire older people and unfortunately, the value of an older worker is remarkably undermined.

“The older generation possess the qualities that run a great business; they understand the worth of a dollar, they’re punctual and enthusiastic and they have a lifetime of skill to offer – I say this because all too often we hear of Generation Y lacking the basic skills that make a valuable employee.”

While certain industries and occupations support the older workforce, according to Age Discrimination Commissioner Susan Ryan, 1 in 10 businesses admit to having a cut off age averaging around 50.

This combined with the Coalition’s decision to scrap the Mature Age Workers Tax Offset, which provided tax concessions of up to $500 for people over 55, has made it even harder for the older generation to find and secure employment.

Research from the Australian Human Rights commission shows one out of three unemployed people aged between 55 years and 64 years fell into the ‘long-term unemployed’ category in 2010-11.

Mr Domingo says soon-to-be retirees shouldn’t let the government determine how they will spend their golden years.

“The government’s blanket resolution of raising the retirement age to 70, when implemented, will increase the pressure on future retirees to build up assets to help protect their future standard of living,” says Mr Domingo.

“They can guard themselves against potential changes by securing their financial future through strategic planning and investment.

“The last thing we want is people reaching 60, realising they won’t be able to afford retirement and start to make irrational financial decisions that could see negative repercussions for years to come.”

Members Alliance specialise in providing tailored financial programs, derived from an analysis of your current financial position and identification of your financial goals.

If you want to start planning for retirement, call 1300 365 731 to find out how Members Alliance can help.