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Speaker 1: Which property goal should we be tackling first? Answering this

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Speaker 1: question right now as part of Start Here Welcome back

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Speaker 1: everyone to Start Here, the very special mini series within

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Speaker 1: Sugar Mama's Fireplay where I answer your real life money

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Speaker 1: questions with confidence, with clarity, and with actionable steps to

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Speaker 1: help you get started and move forward. Today's question comes

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Speaker 1: from our listener in her late forties, who wrote, Hi, Canna,

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Speaker 1: my husband and I are in our late forties and

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Speaker 1: would really appreciate your guidance. We have thirty thousand dollars

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Speaker 1: left on our mortgage. Both work full time and for

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Speaker 1: personal reasons, we don't want to invest in shares. I

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Speaker 1: have one hundred and eighty thousand dollars in super and

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Speaker 1: my husband has none. We have a few goals we'd

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Speaker 1: like help, prioritizing building a granny flat to rent out,

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Speaker 1: buying a small apartment overseas in my husband's home country

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Speaker 1: which we may also rent out when not using it,

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Speaker 1: and eventually purchasing a two bedroom investment unit here in Australia.

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Speaker 1: Our questions are what is the smartest order to pursue

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Speaker 1: these goals? How could each option realistically generate rental income

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Speaker 1: for us? And how can we best start saving to

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Speaker 1: actually achieve these goals. Thank you so much for your advice. Okay,

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Speaker 1: first of all, thank you so much for your honesty,

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Speaker 1: and thank you so much for trusting me with such

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Speaker 1: big financial dreams and goals. You know, these are really

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Speaker 1: thoughtful goals, and the fact that you're asking me how

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Speaker 1: to prioritize rather than just rushing in headfirst into something

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Speaker 1: that you may not fully understand, tells me that you're

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Speaker 1: going to make some really wise decisions here now, before

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Speaker 1: we dive in, I need to make something abundantly clear.

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Speaker 1: This is general advice only. I don't know anything about

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Speaker 1: your financial situation. I only know the surface level details,

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Speaker 1: so I can't tell you exactly what to do. But

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Speaker 1: what I can do is help you understand the key considerations,

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Speaker 1: the risks, the strategic order in which these decisions often flow,

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Speaker 1: and the essential questions to be asking a financial planner

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Speaker 1: and an accountant before you move forward. So together, right now,

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Speaker 1: we're going to break this down step by step to

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Speaker 1: help you get started, all right. Step number one and

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Speaker 1: this part I think is the most exciting part for you,

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Speaker 1: and that is to clarify your goals but also the

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Speaker 1: time horizon for these goals. This is essential when you

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Speaker 1: have multiple goals like these, especially property goals. The first

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Speaker 1: step is not to choose which one feels the most exciting,

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Speaker 1: as tempting as it may be. You need to take

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Speaker 1: a moment to stop and ask yourself a few questions

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Speaker 1: to get a really deep understanding as to what's going

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Speaker 1: on here and what really does matter and why. So

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Speaker 1: there are some simple questions I would recommend you ask

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Speaker 1: yourself such as, why does this particular goal have the

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Speaker 1: most emotion attached to it? What is it behind it

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Speaker 1: that really mean something to you? Which goal is urgent,

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Speaker 1: Which ones do you want to get done as a priority,

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Speaker 1: Which goal is actually the most financially efficient one to

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Speaker 1: attack and to I guess get started with that will

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Speaker 1: actually help you be financially independent. And what are the

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Speaker 1: time frames for each of these goals? You questioning the efficiency,

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Speaker 1: taking away the emotions, understanding what is actually going to

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Speaker 1: serve you and actually make life easier for you in

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Speaker 1: your late forties in building wealth now, particularly because you've

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Speaker 1: got such a small mortgage and you're at such a

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Speaker 1: sweet spot where you really are going to see your

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Speaker 1: wealth accelerate, if you make the right decision. So, for example,

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Speaker 1: you might look at the granny flat and think, you

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Speaker 1: know what, this is one that we really should prioritize

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Speaker 1: because it's not going to cost too much to build, perhaps,

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Speaker 1: and it will start earning a rental income for us

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Speaker 1: really quickly. And then you might look at say the

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Speaker 1: overseas apartment and you think, well, you know what, that's

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Speaker 1: actually more of a lifestyle driven goal rather than a

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Speaker 1: financial one, so perhaps we can just hold off on

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Speaker 1: that for the time being. And then you might go

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Speaker 1: through the idea of the Australian investment property and you think,

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Speaker 1: you know what, that's actually going to be the foundation

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Speaker 1: of our wealth accumulation journey. So perhaps we need to

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Speaker 1: actually set up an account that starts saving now, not

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Speaker 1: necessarily by really spend time exploring each of those goals

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Speaker 1: and understanding why you want to achieve these goals and

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Speaker 1: what they represent and how they're going to add efficiency

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Speaker 1: to you and your financial goals. You know, your time

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Speaker 1: lines really do matter here because if you are in

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Speaker 1: your late forties, your retirement is say in the next

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Speaker 1: fifteen in to twenty years, so we want to make

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Speaker 1: sure that your cash flow the level of debt that

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Speaker 1: you take on, the tax structure that you may use,

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Speaker 1: and of course superannuation. They all support these goals and

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Speaker 1: they're actually all working together in harmony. And this is

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Speaker 1: where a financial planner can really add so much value

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Speaker 1: here and so much clarity. Whilst a financial planner cannot

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Speaker 1: recommend direct property as such, they can run some really

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Speaker 1: helpful projections to help you gain some important clarity and

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Speaker 1: insight as to which one would be most efficient for

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Speaker 1: you to actually work on immediately as a priority. And

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Speaker 1: then you can add back in the emotions to help

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Speaker 1: you make the best decision that serves your goals but

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Speaker 1: also helps soothe your lifestyle goals as well. This is

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Speaker 1: so incredibly important. Don't begin this process without doing this step.

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Speaker 1: So the next step is to understand the value of superannuation.

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Speaker 1: This part is vital. You mentioned that you have one

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Speaker 1: hundred and eighty thousand dollars in your super and your

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Speaker 1: husband as none. Okay, I'm going to be really honest here.

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Speaker 1: I had alarm bells ringing when I read that. You

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Speaker 1: know and whilst you are like focusing on property, which

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Speaker 1: is obviously a long term growth asset, can I deeply

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Speaker 1: encourage both of you to just pause and consider a

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Speaker 1: few things, mainly around superannuation. Yes, property will help build

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Speaker 1: your wealth, but superannuation also helps you build wealth, but

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Speaker 1: in a far more tax efficient, passive, and sometimes possibly

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Speaker 1: a more reliable way than owning a property directly. Outside

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Speaker 1: of super. Superannuation is taxed at fifteen percent as an

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Speaker 1: absolute maximum under current legislation. You know, property rental income

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Speaker 1: is taxed at your marginal tax rates unless you're using

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Speaker 1: company structures or tax structures. The reason I mentioned this

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Speaker 1: is if your husband has zero super at his age,

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Speaker 1: then contribute to his super, even just modestly, maybe one

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Speaker 1: of the highest value, lowest risk wealth strategies that you

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Speaker 1: could actually put into place and get started with today.

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Speaker 1: So remember you can make spouse contributions. You also may

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Speaker 1: be eligible for co contributions. And this is again where

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Speaker 1: a financial plan will be so helpful, and you could

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Speaker 1: probably both look at some salary sacrificing strategies. But I

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Speaker 1: would not be ignoring your superannuation. I would really be

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Speaker 1: prioritizing this if I was you and getting some professional

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Speaker 1: personal advice as soon as possible. And by no means

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Speaker 1: does focusing on super mean that you are giving up

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Speaker 1: on your goals around investing in property. In fact, a

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Speaker 1: financial plan may even suggest looking at a self managed superfund.

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Speaker 1: But these are things you've got to consider if you

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Speaker 1: are really serious about building wealth over the next fifteen

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Speaker 1: to twenty years and setting yourselves up to be financially independent.

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Speaker 1: Superannuation is going to seriously strengthen your financial foundation dramatically. Okay,

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Speaker 1: Step number three. So I get a little bit pasionate

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Speaker 1: sometimes and that is seeking professional advice early now. Because

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Speaker 1: one of your goals involves property outside of Australia, this

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Speaker 1: is a non negotiable for me. You need a licensed

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Speaker 1: financial planner and they can help you model the cash flow,

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Speaker 1: look at the risks, you know the retirement outcomes, you

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Speaker 1: know all the loopholes, that is the legal loopholes and

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Speaker 1: obviously that sequence of your goals. An accountant, though, an

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Speaker 1: accountant who specializes in international tax, specifically the tax laws

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Speaker 1: in your husband's home country. Now you might be thinking, why, well,

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Speaker 1: this is really important and you get it wrong, it

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Speaker 1: could be very expensive to fix and come with a

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Speaker 1: lot of regrets. So some countries have foreign tax ownership

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Speaker 1: rules and they're quite different to what we have here.

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Speaker 1: There also may be double tax rental income. You also

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Speaker 1: may need to lodge your taxes in two different urisdictions.

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Speaker 1: They're also maybe withholding taxes. And in some countries foreigners

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Speaker 1: can't actually borrow money, which means if you want to

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Speaker 1: buy a property overseas, you may potentially have to pay

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Speaker 1: for it outright, which means cash, which means having a

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Speaker 1: lot of savings ready to go. Your overseas purchase might

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Speaker 1: still be a wonderful goal. I'm not here to get

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Speaker 1: in your way, but it's important that you understand the tax,

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Speaker 1: the legal issues, and the ownership implications before you start

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Speaker 1: transferring any money overseas and going and buying a property.

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Speaker 1: So please go and see an accountant that specializes an

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Speaker 1: international tax as well as a financial planner. Step number four. Okay,

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Speaker 1: let's talk about the granny flat here. You know, a

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Speaker 1: granny flat can be a fantastic first goal because it

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Speaker 1: can obviously generate rental income pretty quickly, you know, depending

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Speaker 1: on where you live. You know, some granny flats rent

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Speaker 1: out for say three hundred and fifty to six hundred

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Speaker 1: dollars per week. In fact, one of my really good

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Speaker 1: friends has built a granny flat recently and she rents

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Speaker 1: it out on Airbnb and is doing really well. That

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Speaker 1: might be an option for you for short term leasing.

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Speaker 1: And also, you know the fact that you already own

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Speaker 1: the land. You know, this increases your return on your

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Speaker 1: investment because you're not paying for that underlying property all

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Speaker 1: over again, and you're almost mortgage free, only thirty thousand

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Speaker 1: dollars left on your mortgage. You may be able to

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Speaker 1: borrow for the construction relatively easily without expensive interest, depending

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Speaker 1: on obviously on the bank's assessment. So these are the

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Speaker 1: things I would really consider. Obviously, the council rules and approvals,

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Speaker 1: you've got to get a DA. You've got building costs

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Speaker 1: and will there rental income affect any future tax issues

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Speaker 1: that you may have. Obviously there is the ongoing maintenance,

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Speaker 1: the wear and tear. There's also like privacy and lifestyle impacts.

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Speaker 1: You know, you've got someone essentially living in your backyard.

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Speaker 1: But then there's also the massive upside. This can really

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Speaker 1: help fund another investment, So that say three hundred and

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Speaker 1: fifty dollars per week that it pays, you could help

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Speaker 1: build up a deposit to help fund that. Australian investment

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Speaker 1: property that you spoke about. This is exciting. This is

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Speaker 1: that flow on effect, that domino effect where you can

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Speaker 1: see your wealth really start to explode when you've set

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Speaker 1: things up correctly, wisely and with proactive advice and consideration.

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Speaker 1: That rental income from the grunny flat will speed up

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Speaker 1: your savings and it could actually be a really smart move.

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Speaker 1: And then step number five and that is the overseas apartment.

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Speaker 1: Now this is where emotions and logic really need to

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Speaker 1: work together. Lifestyle property is beautiful, it's a luxury, you know.

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Speaker 1: But the thing is, with eyes wide open, those rose

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Speaker 1: tinted glasses taken off, it rarely yields high rental returns

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Speaker 1: because it's your home and you're using it, say as

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Speaker 1: a holiday home or you know, sort of limited times

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Speaker 1: during the year you need that access, so there could

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Speaker 1: be long vacancies. You also may face like foreign ownership rules,

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Speaker 1: particularly if those rules change, and you've got to understand

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Speaker 1: the obligations both in Australia and in your husband's home country.

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Speaker 1: This could be incredibly complicated. And then there's of course

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Speaker 1: the currency fluctuations. This can work for you or it

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Speaker 1: can work against you. So timing here of transferring money

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Speaker 1: and taking rental income back is going to be really

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Speaker 1: needs to be mindfully navigated with fluctuating currencies. But on

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Speaker 1: the other side, it can also be a wonderful goal

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Speaker 1: if you plan to use it on a regular basis.

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Speaker 1: You know you can afford to use it without any

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Speaker 1: financial strain, and you've got some fantastic advice with amazing

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Speaker 1: clarity around how the rules work in both countries. So

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Speaker 1: this is why I recommend the overseas property may be

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Speaker 1: considered after you've got some really detailed and documented financial

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Speaker 1: advice from an accountant and that you have worked out

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Speaker 1: whether it really is actually an income producing asset after all.

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Speaker 1: One way of thinking about this maybe letting the granny

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Speaker 1: flat help fund this particular dream, not the other way around.

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Speaker 1: Step six the Australian two bedroom investment unit. Now, as

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Speaker 1: I mentioned at the beginning of this podcast, it sounds

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Speaker 1: like this asset, the Australian investment property, will be your

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Speaker 1: ultimate long term wealth builder. You know, Australian property is familiar.

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Speaker 1: We can touch it, we can see it, we can

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Speaker 1: drive past it. Obviously it's a lot easier to manage

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Speaker 1: because we're nearby. We can finance, it a lot easier.

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Speaker 1: The banks obviously aren't going to go and fund a

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Speaker 1: property overseas that's not on their asset books. It's also

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Speaker 1: easier to ensure and you can have a much clearer

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Speaker 1: understanding of where all the boundaries are when it comes

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Speaker 1: to tax and you know, obviously it's going to vary

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Speaker 1: from country to country and area to area, but it

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Speaker 1: might be perhaps more reliable for those long term growth

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Speaker 1: and income opportunities. However, when it comes to buying property,

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Speaker 1: you as particularly if you're going to be boring to invest,

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Speaker 1: you need to have a really strong cash flow, you know,

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Speaker 1: and especially if interest rates start to move north again.

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Speaker 1: And this is where your retirement timeline really does matter here,

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Speaker 1: and in fact it matters comes in quite a heavy

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Speaker 1: factor here. Now, if you're planning to invest in your fifties,

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Speaker 1: the property that is this investment property, it's got to

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Speaker 1: make sure that it's affordable and that it creates a

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Speaker 1: sustainable cash flow, and you have a sustainable cash flow

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Speaker 1: to help pay it off. You're never pushing yourself into

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Speaker 1: this mortgage stress. And you know, this does actually work

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Speaker 1: for your long term wealth creation strategy for most couples,

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Speaker 1: in your situation, this goal becomes the goal number three,

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Speaker 1: perhaps after your granny flat and after you've established some

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Speaker 1: of your superinuation goals and some contributions into superannuation as well.

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Speaker 1: So it is something that's worth thinking about. It's worth

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Speaker 1: something saving up a deposit for and getting some advice

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Speaker 1: on and speaking to your bank or a mortgage broker

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Speaker 1: as to what your limits may be and how you

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Speaker 1: structure this in a way where you are paying it

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Speaker 1: off and you pay it off with it a time

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Speaker 1: frame that works for your retirement plans. So get advice,

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Speaker 1: speak to your mortgage broker, speak to the bank, and

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Speaker 1: do your research, and of course get that deposit building

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Speaker 1: up as quickly as possible. Step number seven and that

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Speaker 1: is how do we actually prioritize all of these very

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Speaker 1: exciting goals. So based on everything that you've shared with me,

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Speaker 1: this is my general advice only I guess framework to

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Speaker 1: how to prioritize this. So what I would be thinking

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Speaker 1: first is paying off your remaining mortgage could be something

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Speaker 1: incredibly helpful. You've only got thirty thousand dollars left and

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Speaker 1: becoming debt free gives you enormous cash flow power. You know,

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Speaker 1: I just mentioned about the importance of saving up a deposit.

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Speaker 1: When you redirect your previous mortgage repayments towards a savings account,

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Speaker 1: that deposit for the investment property or that money to

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Speaker 1: help build the granny flat becomes a reality, which takes

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Speaker 1: me to two. Building that granny flat first, as we mentioned,

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Speaker 1: it's an income producing asset which may help work towards

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Speaker 1: your passive income goals, which means you can start generating

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Speaker 1: rental income quickly. It increases the value of your home

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Speaker 1: very much so, and it helps fund your international and

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Speaker 1: local property goals. And if it's in Australia, which obviously

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Speaker 1: is where you're living right now, you have amazing clarity

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Speaker 1: around the legal tax and rental market. So then I

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Speaker 1: would be working on number three, and that is your

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Speaker 1: husband's superannuation. Even if you were to look at doing

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Speaker 1: say fifty or one hundred dollars per week, you know

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Speaker 1: as salary sacrificing or an after tax contribution into his super,

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Speaker 1: this really can help transform his retirement income. I have

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Speaker 1: mentioned the immediate tax savings that come from superannuation obviously

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Speaker 1: are not privy to your marginal tax rates, but for

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Speaker 1: the average Australian that's on about thirty five percent marginal

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Speaker 1: tax rate. That is a significant savings. This is so

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Speaker 1: incredibly important, particularly if l ledge remains as is and

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Speaker 1: when you go to retire further down the track, some

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Speaker 1: of that income can come back to you potentially tax free.

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Speaker 1: So please make sure you start looking at superannuation once

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Speaker 1: you start building that granny flat, and again that granny

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Speaker 1: flat income may actually end up helping fund the superannuation contributions.

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Speaker 1: Number four, considering the overseas apartment look, I would only

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Speaker 1: consider this after you've spoken with an accountant with international

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Speaker 1: tax expertise and a financial planner and if needed, a

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Speaker 1: lender in the country that you're looking to potentially buy.

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Speaker 1: Please promise me that you will make sure you fully

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Speaker 1: understand the ownership rules, the taxes, the rental laws, and

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Speaker 1: whether foreign buyers can actually borrow at all, because this

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Speaker 1: actually may be a bit of a roadblock for you

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Speaker 1: that you'll be glad you discovered sooner rather than later,

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Speaker 1: So do your research. Then finally, the Australian investment property

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Speaker 1: that comes last, So once you've built your granny flat

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Speaker 1: and it's rented out, paying you some fantastic passive income,

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Speaker 1: you've still mortgage free. Your debt levels, that is, your

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Speaker 1: investment debt levels are easy to manage, they're coming down,

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Speaker 1: or you've actually paid everything off as well, and you

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Speaker 1: can have some great confidence around what you want from

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Speaker 1: your retirement planning when you want to retire on how

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Speaker 1: much income and everything feels stable, and you've obviously built

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Speaker 1: up your husband's superannuation, it feels like both of you

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Speaker 1: are back on track. This is the time that potentially

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Speaker 1: you could look at that investment property, and that investment

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Speaker 1: property may actually supplement or even actually be part of

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Speaker 1: your overall superinnation strategy, such as a self managed super fund. Again,

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Speaker 1: this is where that advice comes in, that personal advice

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Speaker 1: that knows the nitty gritty, finer details of your situation,

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Speaker 1: who you are, what you stand for, what your risk

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Speaker 1: profile is, and knows to a much deeper level as

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Speaker 1: to what your goals are really about and who you're about.

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Speaker 1: They can design the best strategy for you. So, how

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Speaker 1: do we start saving for each of these goals? Which

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Speaker 1: is such a brilliant question. So to give you some

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Speaker 1: really practical steps to follow to help you get started,

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Speaker 1: can I number one recommend you do a budget if

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Speaker 1: you haven't done one already, this will let you see

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Speaker 1: where you're potentially wasting money that you can then use

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Speaker 1: pay the home loan faster or to help pay for

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Speaker 1: the costs of that granny flat. Number two would be

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Speaker 1: to create a dedicated property goals account, having a separate

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Speaker 1: savings account away from your normal spending account and nicknaming it,

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Speaker 1: you know, say, granny flat. This is where you have

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Speaker 1: a clearly defined place to put all extra savings to

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Speaker 1: help save up to be able to build that granny

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Speaker 1: flat and start earning that passive income. Then I would

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Speaker 1: start practicing the repayments. If you needed to borrow money

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Speaker 1: for the granny flat, which I'm going to assume here,

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Speaker 1: you might want to maybe look at doing a bit

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Speaker 1: of a dress rehearsal. So this is where you pretend

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Speaker 1: you have a loan of say two hundred thousand dollars,

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Speaker 1: work out what the repayments would look like at say

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Speaker 1: an interest rate of say seven percent at the moment

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Speaker 1: to be conservative. You can actually see what those repayments

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Speaker 1: look like and whether you can still actually service them

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Speaker 1: without any stress. If you do find it stressful, that's

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Speaker 1: your sign that perhaps you need to build up a

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Speaker 1: bigger deposit, or maybe look at borrowing less money so

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Speaker 1: that when you do build that granny flat you're not

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Speaker 1: over extending yourself. But this is a great practice and

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Speaker 1: something I would also recommend for when you buy that

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Speaker 1: investment property as well. The next thing is to automate

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Speaker 1: as much as you possibly can. When you've looked at

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Speaker 1: your budget and you look at what you can save,

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Speaker 1: try and set up a regular savings plan, whether it

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Speaker 1: be fortnightly, monthly or even weekly. I recommend trying and

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Speaker 1: doing this so that it comes out a couple of

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Speaker 1: days after you get paid, so you're prioritizing paying for

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Speaker 1: yourself first. And then of course emergency money. You haven't

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Speaker 1: mentioned this in your DM to me, but if you

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Speaker 1: don't have emergency money, can you please make sure you

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Speaker 1: build that emergency money up sooner rather than later. Cannot

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Speaker 1: afford to be investing confidently without having a safety net

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Speaker 1: behind you. This is a non negotiable. And then of

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Speaker 1: course speak to your bank about your borrowing power when

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Speaker 1: you understand the details of your financial situation, which comes

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Speaker 1: from speaking with a good quality mortgage broker or your bank.

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Speaker 1: You have so much understanding and clarity around what your

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Speaker 1: responsibilities are. You know what your personal debts are and

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Speaker 1: how to keep them minimized as much as possible, how

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Speaker 1: to make sure that your credit score is nice and healthy,

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Speaker 1: how to actually build those consistent healthy savings habits, and

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Speaker 1: why thinking about having a stable employment where possible can

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Speaker 1: actually also help improve your borrowing power. You know, the

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Speaker 1: cleaner and clearer your financial picture is, the more options

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Speaker 1: you will have, and also you'll be able to see

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Speaker 1: better opportunities far more efficiently than when things are a

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Speaker 1: little bit up in there and a little bit messy.

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Speaker 1: So as we wrap up today's episode, let me just

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Speaker 1: say this. You have some really exciting goals ahead of you.

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Speaker 1: A granny flat, an overseas lifestyle property, an investment property

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Speaker 1: here in Australia, and you're only thirty thousand dollars from

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Speaker 1: being mortgage free. Like that is a remarkable position to be.

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Speaker 1: And I can say this, a lot of people would

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Speaker 1: be very jealous of your thirty thousand dollars mortgage. But

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Speaker 1: I need you to remember this. You don't need to

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Speaker 1: do everything at once. You just need to put the

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Speaker 1: goals in the right order that are right for you.

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Speaker 1: You want to focus on strengthening your financial foundation as

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Speaker 1: a priority and making sure that each investment that you

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Speaker 1: make is actually working for you, has its job and

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Speaker 1: it will actually help fund the next goal of yours.

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Speaker 1: Your future is not determined by the start date, but

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Speaker 1: actually how intentionally you move forward from this very moment

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Speaker 1: as you get started. Now, if this episode helped you,

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Speaker 1: can you please do me a huge favor and share

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Speaker 1: it with someone who is juggling some really big goals

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Speaker 1: at the moment and really does need some clarity in

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Speaker 1: their financial life as well. And if you have a

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Speaker 1: question for yourself on start here, I have popped my

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Speaker 1: email address and of course my Instagram account, so you

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Speaker 1: can reach out to me at any stage. Al Right, everyone,

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Speaker 1: thank you so much for listening. If you could leave

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Speaker 1: me a rating and review, I would greatly appreciate it,

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Speaker 1: and I'll see you on Monday morning at five am

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Speaker 1: on Sugar Mama's FIREPLA