7 mistakes families make when building wealth

November 05, 2019 7 mistakes families make when building wealth

Wealth is all about building up your asset base. 

This is something that I’d argue is vitally important for families, in particular. It’s not just about owning your own home (preferably your ‘dream home’). 

It’s about building your asset base to a point where you can start generating passive income to fund sending your kids to the right school and funding your family’s lifestyle well into retirement. 

If you’re in complete control of your finances and at a point where you have the capital and looking to build your asset base, in my mind there’s no better place to start than property. 

As clichéd as that sounds.

I know because that’s precisely the path I took. It’s also a well-trodden path to getting to a point financially where you can live life on your terms and not be at the mercy of your week-to-week bank balance. 

The other thing to point out is that buying a property and building a property portfolio comes with some great tax advantages and, importantly, can help you pay less tax. 

Sadly, though, there are a number of really simple mistakes I see families make when investing in property. 

And ones that are relatively easy to avoid. Here, a little bit of advice can go a long way and save you some serious headaches along the way. 

I’ll walk you through the top-seven mistakes first-time investors typically make 


Mistake #1

Buying a particular property based on the advice of friends and family. 

Advice from friends and family’s important for most things, don’t get me wrong, but I can’t emphasise enough how important it is to do your own research and due diligence. 

It’s about finding the right property in the right growth area at the right time. 

If you get stuck or need advice, make sure you reach out to a professional.


Mistake #2

Second, to #1, buying into the hype of a heavily marketed area, potentially overlooking surrounding suburbs with greater potential for growth over the medium to long term. 

To do that, though, you need to do your own research and due diligence to identify a ‘sleeper suburb’. 


Mistake #3

Choosing the wrong home loan. This is a big one. There are so many great rates around at the moment, you’re spoiled for choice right now. 

It’s also important to get advice around whether you should opt for a principal and interest loan or an interest-only loan, as well as understanding the full implications of both. 


Mistake #4

Not getting your head around the end-to-end cost of buying and holding property. We see this one all the time. Again, it comes down to doing all the due diligence upfront. 

A good example of this is when people buy an apartment, not fully understanding all the associated costs such as strata fees or buying in the wrong area and then struggling to attract tenants. 


Mistake #5

To add to #4, buying, say, an apartment in a location where there’s a serious oversupply. 

And there are plenty of Melbourne suburbs that are running pretty hot right now in terms of supply, given the vast amount of residential development over the past six to seven years. 


Mistake #6

Not taking full advantage of negative gearing and depreciation in terms of tax. 

Done right, these tax benefits, over time, can add a serious percentile to the price you pay upfront for the right property, particularly alongside long-term capital growth. 


Mistake #7

Not engaging a real estate agent or property manager to handle a tenancy in an investment property that you’re renting out. 

You can typically negotiate agents down on management and other associated fees over the course of a tenancy, but you save yourself serious headaches along the way. Trust me. 

As you’d expect, this type of advice is our bread and butter. 

If you are at a point of wanting to build up your asset base, feel free to give me a shout and we can bounce around some ideas. 


Disclaimer: all information contained within this article is of a general nature. It does not take into consideration your personal financial circumstances. Please consult a professional financial adviser (just like us ) when making a financial decision.

Jason Chew

I've been in the financial services industry for 10+ years and love coaching people to make the most of what they have.

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