Any tips for couples investing?

What are some tips you would give to a young couple while growing their portfolio?

I’ll start with a few things. Please correct me if I’m wrong!

1) Buy in single names (avoid Joint tenants/tenants in common)
- Both can have the option to access first home buyers grant
- Asset protection
- Individual land tax thresholds
- If you really want both names to be on title, tenants in common is preferable over joint tenants

2) Cash flow
- park savings in offset of lower income earner: increased expenses for higher income earner (more tax deduction, pay less tax overall as a couple)
- if hold multiple loans, park in loan with higher interest rate

3) Loans
- It is OK to have both names on loans, helps with serviceability
- Use equity from an IP for deposit and costs for subsequent IPs
- Save cash (and avoid using it to invest) if choosing to purchase PPOR in future

4) Depreciation Schedule
- if investment property is jointly owned, ask for split schedule. This allows certain items to fall under a smaller threshold which can be depreciated more rapidly.

5) Mindset
- Set goals and write them down
- Problem solve together (2 minds is better than 1)
- Continual learning through books, forums, podcasts, seminars (don’t get sucked in), chatting with your team, taking action
- Allocate tasks based on skill set/ time

6) Your team of professionals
- Should be experienced investors themselves: Solicitor, Accountant, Broker, BA…etc.
- Don’t be afraid to change team members based on circumstances
- Good communication

 

More detail here:
Strategy: Buying Investment Properties in 1 name only https://propertychat.com.au/communi...ng-investment-properties-in-1-name-only.5888/

It is important to avoid joint loans if possible. You don't want to go on a loan for a propertyou don't own because:
- you are unnecessarily adding risk
- you are hurting your borrowing capacity

Also don't forget related party loans

Tax Tip 47: Spousal Loans as a Tax Strategy https://propertychat.com.au/community/threads/tax-tip-47-spousal-loans-as-a-tax-strategy.4452/

 

Plenty of good points here. Disagree on one though:

It's nice, but not important. They should have ample experience working WITH investors

 

I think part of the goal setting process is to determine some key fiancial indicators just like you do to a business:

- what is your targeted leverage over your life and how will it change as you age.
- what is the ratio of net income after tax that you will allocate for investments compared to personal expenditure.
- what is your targeted asset allocation across all investments.

The leverage ratio is good as a prod to buy (or not buy) within your overall goals.

For me personally I have a low allocation to cash investments (ignoring offsets) but when I reach 50 I plan to slowly correct that by allocating future investments to cash.

And don't forget that very high levels of wealth create issues associated with motivating children so you will need to consider that too.

 

Couples both obtaining FHOG is not a strategy... it is fraud...

 

We have missed the most important one, I know that no one intends to but don't get divorced.
The biggest wealth destroyer of all.

 

What @HUGH72 mentions is a very valid point. Sometimes I think it would be easier if folks have property in one name or the other, such that if a split happens, it can be an easy "you keep what's in your name and I'll keep what's in my name" situation. Doesn't always work as one person might have more equity "in their name" than the other person which leads to squabbles, but at least you wouldn't have to go thru the pain of removing names from title etc.

 

I agree with this one. Haven't really thought about it (and I hope I don't have to! Knock on wood)

 

It certainly does help - doing the wind up restructuring of finances for couples in these divorce situations, it can be a lot more simple without having joint ownership of property.

Having joint names on the loan however will in a lot of cases will still necessitate a refinance being required, but at least they do not need to go through the entire process of transferring to single name, conveyancing etc.

 

Hi Ross, I'm not 100% what this means, could you give an example of this please.

 

We learned this after our 2nd property. And have been buying in one name ever since.

Here's a tip a buyer's agent gave us. Because we are planning on starting a family in the near future:
1) Buy the high CG/high depreciation properties under the higher income earner/breadwinner's name
2) Buy high CF properties under wife's name if she's choosing to be FT mum

This makes sense in the short term, but long term when she returns to work, there is no CG properties under her belt.

 

Works well but it's also worthwhile considering avoiding Land tax as much as possible by spreading purchases in individual names across different states.
I don't personally like having all the high CG properties in my name and none in my wife's name. At some point I may need to or worse case be forced offload one of these meaning potentially much more CG Tax payable than necessary. Circumstances change over decades so it's good to have a little flexibility.

 

I am currently 100% invested in growth assets with a targeted leverage ratio.

When I turn 50 I will direct new asset purchases to conservative assets like cash so that my exposure to growth assets as a percentage starts to lower. This is how I, personally, anticipate to incorporate a defensive element into my asset allocation without selling assets.

It is part of my long term planning. During the GFC I saw a lot of investors lose money on the verge of retirement as they had no defensive assets and I do not want to be like that.

If you start investing treat yourself like a business.

 

Did they sell in the middle of the GFC due to fear or because their cashflow did not meet their needs at the time? I agree cash buffer is crucial. But if income exceeds expenses with a buffer then less need to sell?

 

With regard to buying in individual names to reduce land tax, isn't land tax only applicable on the interest you have in the property? Ie couple owns a property 50/50 as joint tenants, applicable land tax is 50/50 - effectively doubling the land tax threshold when bought as joint tenants?

 

They sold for over 100 different reasons.

I think the GFC told me that going through a bad time and holding your nerve is nearly impossible. Easy to imagine and hard to do.

The ones who were hit the hardest were the ones heavily geared.

 

Not in NSW. Buying in separate names here basically doubles the threshold

 

You cannot cover every scenario.

You have your work cut out for you getting to the land tax threshold in each state as is, unless you start in Syd and Mel

There is also no such thing as CG or CF only properties. You will come to a stop a lot quicker though if you buy all heavy NG property.

In NSW you can buy joint, just get 1 each singly, no benefit in QLD all joint is ok, or singly, whatever works for you both.

 

Changes by state or territory, ACT for example has no threshold.

 

Nice point.

Just quickly read this post about the amount of cash buffer that should be kept.

There is a general consensus:
- 6 months worth of interest only repayments kept as liquid cash or in LOC
- some also mention 5-10% of property value
- the amount will vary depending on your risk appetite and your stage in your investment journey

Cash Buffers - What do you consider a safe amount?