Tax free Wealth.....PPR upgrade strategy

Hi, good morning everyone. Morning! Morning! A little bit colder here in Queensland today. Bit rainy overnight. Hopefully everyone is well while we on the internet and people are jumping on the live, we'll just quickly do that intros. Good morning Jason Whitton is my name. Each morning around about eight o'clock, jump on the old Facebook and do a bit of a Facebook law coffee and a chat. Good morning Alison you're always. Oh, I see great to have you on the lot again and just talk about little tidbits of information, inspiration whatever it might be for asset property investors. As we go on this journey, it's a marathon not a sprint. We've gotta go the distance but we've gotta be smart and we've gotta be focused and understand you know, what the outcome is. But today a bit of a shout out from someone yesterday asked about the principal place of residence, the PPR Upgrade Strategy and it's an excellent strategy. One we should keep in mind as we move through this journey, we call property investing, creating wealth as property investors. It's one of the cornerstones, the pieces of foundational wealth that you need to make sure you get right in this activity we call property investing, property ownership. Now your principal place of residence buy large, the debt on that is a bad debt. Okay? And so we've talked about this before and in other videos making sure that when we have a our own home principal place of residence, we target to reduce the bad debt and make sure that that happens at the right sequence. It's usually after acquisition is done because our resources are all of our spare capital needs to be put towards deposits. But for the most part, most people if they have a debt reduction strategy can pay off their own home principal place of residence within 10 to 15 years if you do it right, if you follow the strategy, follow the process, understand where your money is isn't and use it well. You can reduce your debt on your home significantly and fast. Okay? So the Principal Place of Residence Strategy Upgrade is a strategy that you use for tax-free wealth. Your own home is a tax-free asset. It's one of the only assets that you can own that if you buy and sell that asset, you don't pay any tax to the government, any capital gains tax to the government. Obviously when you own it you know you pay some rights and I technically that's a tax you pay some stamp duty when you buy a new one technically after tax but a sale tax, a gain of wealth, you don't pay any tax on the gain of wealth on your own home. So part of the strategy when you create a strategy over a 15, 20, 30 year plan, let's say we think a little bit longer in Australia. It depends on how fast you can pay your home off. Gang it is smart to go in two directions with your principal place of residence for upgrade. Number one, the first part of an upgrade Principal Place of Residence Strategy is the you purchase a property in a good location now let's say it's maybe an up and coming location. You lived there for 10 years. You reduce the debt and now you have a home that has got low debt or no debt on your principal place of residence, around you that a suburb has risen in value. You know it's gone significantly well. We've got one of our coaches in Melbourne. She did just that, you know 12, 13 years ago she bought a property in a pretty interesting location. It was good. It was a good location but it wasn't like the best best, you know in 10, 12 years later, it's an amazing location because the city has just put the pressure in that the capital growth around her and instead of selling her property and moving on, she has chosen to do a significant renovation on the principal place of residence because the house was old but the location and the land was excellent. And she maximized it's what's called the highest and best use, add value renovation to that property. So we've got two choices. First part of this is your principal place of residence it's capital gains tax-free. Your debt reduces significantly or pay it off completely. You get to this point, we go right. We've still got you know, we've still got the capacity to borrow. We've still got 10 or 15 years of working left in our life. What shall we do? Shall we significantly upgrade the property wing cause it is in a good location and now the house is not the highest and best use of the land we're living on or you know what? This area that we're in, that we could afford 10 or 15 years ago is a nice area but it's certainly not a premium area and it's time for us to sell our home and go buy in a premium area. So let me just try and put some numbers in this. Let's say you purchase a house, you know 10 years ago for $400,000. Now that house now is worth $800,000 let's say and you've paid off the debt. Okay 10 years later, you take that $800,000. You sell the property and you can go purchase. Let's say a property for 1.2, 1.4. You know, don't have too significant a debt, a debt you can pay off in 10 to 15 years maximum. Now you jump in location, you jump in property quality, you jump in maybe lifestyle value, a suburb a much better location. Now in the next 10 or 15 years time that property going up in value because you've shifted into a better location, goes from 1.4 to $3 million. Now the one you, if you stayed in the 800,001 and let's say it doubled in value, it's only $1.6 million. So you know the capital gain value over the long term principal place of residence, capital gains tax-free. Grow your principal place of residence value because it is the one of the only places you will ever get a tax-free capital gains sale in your personal name. It's the only place. You can have capital gains tax free sale if you own a property in super and you can have a capital gains tax-free sale if you're structured in business and your own a workshop or an office or something, and you qualify. So if you ever want to know about that stuff, let me know. It's a little bit more interesting but that's the idea. So you know guys part of your long-term strategy if you're looking to maximize your wealth should be the principal place of residence tax-free strategy, okay. There's another part of that principal place of tax-free strategy which is some people move in and buy and own principal place of residence, live there for a year, live there for one year, get all the grants and whatever, move out and rent it out for five. You can rent that property out for six years, live in another property, a rental property not have another principal place of residence and you've still got six years to sell that property capital gains tax free. So that's seven years of growth on that property. You could trade a property like that every six or seven years. So there's a few strategies around the principal place of residence, your own home that make a lot of sense using it as a wealth base to grow your capital and shift your wealth to the next location. The next opportunity if that's what you wanna do. Now for some of us we might have children and you know commitments and all that sort of stuff, the right school. I wanna be in that location whatever, you know moving you couldn't even comprehend it. So then potentially you would be better suited in that upgrade strategy which is the renovation strategy, add value, maximize the value at a point where it makes sense to with your principal place of residence. Okay? Hopefully that makes sense today gang as you go. And yeah, Alison here she said, I don't have a principal place of residence but I only wanna buy investment properties which is perfectly fine. Alison you know for some people, the PPR is not part of the strategy and that's okay. There's nothing wrong with that Alison but potentially we could tweak that strategy, potentially we could get you to live in one for six months and then we call that your principal place of residence for the next six years. And if we needed to do up like a trading boost to boost your capital, we could sell one tax-free and then upgrade to another one. There's a couple of ways to do the strategy. So it's not always the only way but that is one of the ways you can continue to grow your wealth tax-free as a property investor. Remember this gang you've only got certain amount of resources and everyone else is always trying to take those resources from you, right? The government, the banks, like everyone's trying to say, oh give me your money. You know trying to take the cash. Your job is to keep as much of that money as possible. The gross to net difference, you earn $100 and you put you know $700 in your pocket. That $300 that's gone missing. That's been taken by others. We need to get more of that back. Okay. The more we get the better off we're gonna get the longterm gang. And it's you know real wealth is about you know the compounding effect of $1, you know over the next 30 years, saving $1 extra everywhere rather than you know one big hail Mary decision to make the wealth all in one guy like that's gambling. Having a clear strategy about in 10 years time, I'm going to upgrade my principal place of residence capital gains tax free and double the exit value in 15 or 20 years time after that. That's strategy that's real wealth. That's planning. That's smart. And it's totally doable by everyone as you go. Oh yeah. Anthony, good question about demolishing and building. It's a little bit of a technical one that Anthony and it's certainly one that you'd have to chat to a good accountant about but certainly what can happen mate is that you can sell that property to another entity that you own, a company or a trust and then build those two properties and keep them for the future for investment. There's a few ways to make that work Anthony, which is quite clever so. Made a good question. That's one that many people do actually. So I might, if you need a good account and let me know but yeah you usually sell them to an entity, your own entity, which is a company or a trust to keep them for investment purposes moving forward. And especially if you do it at the end Anthony, if you do it when you're a bit older coming close to within sort of five or eight years of retirement, there's a very different, there's a very different opportunity to roll quite a lump sum of that gain potentially into your super. Now I'm not a financial planner. I'm not giving any advice here but I know this is a strategy that you could talk to your financial planner about or you could ask me about the right planner to talk to about this strategy. You can roll over a significant amount of money if you're super in a certain position, tax-free for income tax-free and capital gains tax-free, future gains in your super. So you know there's some good conversations. This is all strategy gang. This is all strategy as your go so and it takes time to let this strategy mature. It's certainly not something that's gonna sort of all play out in 12 months. These strategies are good chunky wealth strategies that you have to have a bit of runway a few years in advance locked away to make sure you get there. Chuck Kilz asked about a good accountant and financial planner might all have got an excellent financial planner in Melbourne. Send me a DM. His name is Andy Fenton. He is amazing. He is awesome. I can connect you with him. I don't have an accountant contact in Melbourne, for you might but I've got them in Sydney, Brisbane and the Gold Coast, if you don't mind. So I DM me Chuck Kilz and I'll hook you up with the details might. Oh good. All right gang hopefully that makes sense today. Thanks for the shout out. Whoever did that one yesterday about the PPR Upgrade Strategy. I'm always happy to dive a little bit deeper in our morning coffee chats about explaining some of this stuff in a little bit more detail. Obviously this is strategy but implementation down to the nuts and bolts tactical, guys you gotta have the right people to help you execute this stuff. Okay don't try and do this by yourself because there's a lot of moving parts to get right The idea is a big idea. We call it a clouds idea and to get it right you've gotta get down into the dirt and make sure everything's lined up, all the nuts and bolts are sorted. You know your coach, your financial planner and your accountant should be part of this type of strategy conversation. Okay? You'll property coach. If it's property, listen I've said this a million times accountants and financial planners, aren't property experts. You need a property coach to lead you with these types of decisions but the execution, the implementation of the nuts and bolts of the strategy, a good accountant and a good financial planner who are pro property, who believe in property, who support property who don't wanna then confuse you is vitally important. So there you got, I know again that's it. Coffee and a chat done. It is what's day Thursday, I think it's Thursday. I'm a little bit disorientated but have a great Thursday. Join me again tomorrow, Friday coffee and a chat. If you haven't already. Another little shameless plug about my podcast. It got launched on Tuesday, the first episode. So if you haven't already, download my podcast called The Wealth Faculty and have a listen. It's the kickoff of me interviewing many many people about you know, what is true wealth to you or them and learning about the people that you're gonna need in your team for the future to create, you know significant, sustainable longterm wealth and health for your property portfolio. All right gang that's it for me signing off for another coffee and a chat. Thanks for dialing in everybody and have a great Friday. Wednesday, is it Wednesday or is it Thursday. It is Wednesday. You're right. Anyway oh good. See I told you all these aren't Thursday. Anyway join me tomorrow. Whatever day it is. All right gang. Take care and see you tomorrow. Thanks for joining. Bye bye.