WEALTH HUB JOURNAL

3 Areas to Consider When Planning Your Investment Strategy

You want an investment strategy that is tailored to your current financial position as well as your financial objectives. A blanket investment strategy for everyone won’t maximise your unique investment potential, earnings, or return on investment.

The right financial professional will ensure your investment strategy caters to you as an individual — wherever you are in your investment journey.

When planning your investment strategy, a professional will assess three key areas: rental income, capital growth, and tax benefits.

1. Rental Income

One of the main benefits of owning rental property is that it creates a continuous stream of income from your tenants. However, your investment strategy can calibrate its sights when it comes to the percentage of your expenses that will be covered by your tenants’ rent, and how much you’ll have left over.

For example, your strategy may expect your tenants’ rent to cover all your expenses, including rates, mortgage, and insurance. Whatever is left over becomes passive income for you.

When calculating rental yield, you’re assessing the potential income from your investment
property. From there, you can determine how much you could expect to earn from particular properties.

Here’s how to calculate net rental yield: take your rental income, subtract the property costs, then divide by the market value. The resulting percentage is your net rental yield.

When subtracting your property costs, remember to factor in council rates, the cost of managing the rental (including the amount you pay your property manager), strata fees, and insurance payments.

Keep in mind there are two ways of calculating rental yield:

1. Gross rental income
2. Net rental income

It’s best to base your calculations on the net rental yield. This is more accurate because it factors in all those expenses we mentioned.

2. Capital Growth

Ideally, your investment property will increase in value the longer you own it. This is called capital growth.

Here’s how you calculate capital growth: take the current market value and subtract what you paid for the property. The remainder is your capital growth.

Investors whose strategy is based on capital growth are playing the long game. The objective is to hold onto the property for as long as possible for the highest return on your investment.

3. Tax Benefits

Australia’s ever-changing tax landscape can be confusing. Laws and legislation are always keeping investors on their toes — which is one of the reasons why it’s so important to work with a financial professional at every stage of your investment journey.

A financial professional can help you navigate tax laws and find strategies to reduce your tax liability, maximising your investment.

For example, profit you earn from your investments is added to your taxable income. This means you’ll pay more in taxes based on the income from your investments. If your investment strategy is to earn a profit from your tenants’ rent, your investment is considered “positively geared”.

However, if you’re claiming a loss that’s deducted from your tax liability, then the property is “negatively geared”. While it may seem there is no upside to claiming a loss, this can put you in a lower tax bracket, reducing the amount you owe in taxes.

Contact Wealth Hub Australia Today

Wherever you are on your investment journey, Wealth Hub Australia can help you get the highest return on your investment. Our referral network of certified financial professionals will help you develop an investment strategy that perfectly suits your immediate objectives and long-term goals.

With our proven method, we will help you build wealth, achieve financial independence, retire well, and reach your financial goals. We help Australians make the best financial decisions based on your investment needs. Join Wealth Hub Australia and we’ll be with you every step of the way to help you reach your financial objectives.

For a free assessment, contact Wealth Hub Australia today.

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