Page 63 - Smart Money

Chapter 3

a commercial property for a longer term, so it is kind of set and forget
for a while. The other positive to a commercial property investment is
that the tenant pays all the outgoings, such as strata fees and any over and
above costs. With a residential property, you have to pay the water supply
charges and the tenant has to pay the water usage charges. The negative
side of owning commercial property is that if you put in a tenant that you
don’t like, and they are on a five-year lease, you are stuck with them for
five years.

Business expansion can help you make more money, but you also take
on more debt. If you expand and it doesn’t work, then you could be
in trouble. On the other hand, if you expand and it does work, then
you could be a multi-millionaire. So there is good and bad to consider.
Equipment finance generally goes hand in hand with your expansion.
You are buying more equipment so you can expand your business, so if
something goes wrong with the equipment and it needs to be fixed, it can
be quite costly. But if you don’t have the equipment, you are not going to
be able to increase your cash flow.
SMSF’s are great if you haven’t got the cash up front. You can take your
deposit from your SMSF and grow your portfolio for when you retire.
The downside of using your SMSF is that the house or property you
purchase has to stay in there; you can’t cross-collateralise. It is a stand-
alone security, so once you pay it off, you can’t then use the equity you
have to buy another property. Plus, all the money you receive from the
house has to go into the SMSF, so you don’t actually get to utilise that
money or spend it to buy something else.

Buying your second home or an investment
property

Often people will say they want to buy another house for themselves and
make their current house an investment property, and that is well and
good, but they want to know whether they have to sell it. Well, that will
depend on the equity you have in it. It also depends on how much you
owe, because if you want to negatively gear it, then it might be better for

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