What if you could earn up to $28K per year without spending a cent from your back pocket?
Uncertain about your financial future?
In these uncertain times, it’s even more crucial to look at investment options to secure your financial future.
There is so much information out there on what is or isn’t a good investment right now, and with the current economic climate there is plenty of risk.
Financial markets are haemorrhaging and are incredibly volatile, interest rates are at an all-time low, and with the current COVID-19 epidemic, we have no idea how long the instability will last.
So, let's have a look at some of the most common investment options available today.
Stocks
The ASX has been on a bumpy ride since the 20th of February where there was a huge amount of wealth wiped out within weeks affecting people’s dividends, shareholdings and superannuation.Term Deposits
The big 4 banks are offering 0.5%-1% return on your investment which is very unlikely to outpace inflation so you may actually be losing money with the net effect of inflation factored in.Gold
Gold is considered by many investors to be one of the safest investments, recovering its value quickly through economic downturns. ... Though physical gold does not return consistent dividends or income like stocks or real estate.Stand-alone Property
It is no secret that Australians love property and it has been the key to success for so many investors through great capital growth. This is great for a long term investment strategy, though from a cashflow perspective, investing in stand-alone properties, especially in the capital cities, will most likely be negatively geared which will be adding to your expenses and increasing your risk. So, if you are planning to invest in real estate, the key is to aim for a property that is neutrally geared or positively geared.Creative strategies such as granny flats can help achieve this.
Our final option to explore:
A Granny Flat on your existing property
Two-bedroom Granny Flats on Sydney's North Shore and Northern Beaches typically return anywhere from $550 - $700 per week. That’s $28,600 - $36,400 per year.So, let's do some math.
If we remove operating expenses such as property management fees plus home and landlords insurance of approximately $4,000 per year, interest charges of approximately $4,500 on a $150,000 loan (based on a 3% interest only loan for 3 years to get through the challenging economic conditions ahead), you would be left with additional income of between $20,100 to $27,900!
That’s a Net Yield of 13.4% - 19.8% using the banks money.
Not a bad little income top up for not spending a cent out of your own pocket and just capitalising on the banks low interest rates and some spare space in your yard!
What are the Risks?
What if the property market crashes?
If the market crashes you still will see the downturn on your current property’s value regardless. That said, if you have the extra income, this will help you weather the storm until it passes and prices rebound again as they always do.
What if I can’t find a tenant?
If the rental market slows rents may be affected. However, you can afford for rent to come down to $165 per week before you start to lose out. This is near impossible with the high demand for Sydney’s northern suburbs and the rapid growth plans in motion by NSW Department of Planning, Industry, and Environment which projects that the Greater Sydney population will grow to 8 million people by 2056. This will only add to the need for more rental properties, and drive demand and rental prices higher.
What if interest rates go all the way back to 17% like they were in 1990?
Firstly, it is extremely unlikely that the Reserve Bank will be making any moves up on interest rates for the foreseeable future with unemployment rising rapidly and some extremely challenging economic conditions ahead. Though, if they do make an upwards move, you will now have additional income that can help service your existing debt on your property that you never had before. This puts you in a much safer position than most!
How do I take the next step?
So, we have looked at investment options, and we all know that with interest rates so low, money is cheap!
Now you are looking how you too can get exceptional returns on your equity in arguably the safest asset classes around. Property!
We at Bungalow Homes are still operating at full-speed to help other locals (just like us) get through this uncertainty and plan for the future. We are the experts in all the rules and regulations around Granny Flats, and can easily help you through the process of determining if your property is suitable for this type of investment.
So contact us today. We can help you look more specifically at your circumstances and potential returns, as well as the feasibility of your block to create security for you and your loved ones.
Disclaimer:
The information provided on this website is general in nature only and does not constitute personal financial advice. All statements made on this website are made in good faith and we believe they are accurate and reliable. You should consider seeking independent legal, financial, taxation or other advice to check how the website information relates to your unique circumstances. You should consider seeking independent legal, financial, taxation or other advice to check how the website information relates to your unique circumstances. Bungalow Homes is not liable for any loss caused, whether due to negligence or otherwise arising from the use of, or reliance on, the information provided directly or indirectly, by use of this website. Many of the claims and views have been made by Bungalow Homes’ Director, Chris Willoughby, based on many years of property investment and construction experience.