PROPERTY STRATEGIES
Many investors look to property to increase their wealth. If this sounds like you, please come and speak to us about the strategy and loans to suit your investment goals.
While we can’t find you the perfect property, we can help to ensure your Property Strategy fits in with your overall Plan and that your loan is properly structured, ensuring you can maximise your investment opportunities.
Borrowing to Invest (Leveraging Your Money)
What is leverage? A simple definition is just “doing more with less.”
For example, you can keep your money in the bank and earn next to no interest or you can invest your money wisely and get a much better return. That’s leverage.
If you use Good debt to buy assets that create money for you then that’s also leveraging your money. And if you can use other people’s money in the first place that’s super charging leverage.
Margin Lending can then be simply defined as leveraging your money
Margin Lending (or Gearing)
Margin lending lets you borrow money against your existing investment portfolio to invest in additional approved securities such as shares and managed funds. Through this borrowing you are effectively ‘leveraging’ the value of your investments.
By borrowing against your existing assets, you can take advantage of investment opportunities when they’re available. Often you can borrow up to 70% of the value of your existing assets.
Margin lending is suitable for those who want to increase investment assets outside of superannuation, diversify their asset base and effectively manage the cost of borrowing.
You must have adequate cash or existing shares to use as security for the loan. Only certain shares can be used as a security and the amount that can be borrowed will vary for different shares.
Borrowing to invest can be an extremely powerful tool when used wisely.
Benefits of margin lending include:
- An increase in the size of your investments
- The flexibility to diversify your portfolio
- The potential for increased returns
- Potential tax breaks (interest on borrowed funds is generally tax deductible provided the funds are invested in Australian assets for income-producing purposes)
- The ability to invest at the time you want to rather than having to wait until you have saved enough money.
A word of warning: gaining a tax benefit should not be your core focus. So before commencing a Gearing Strategy we will work with you so you fully understand the Strategy and that it is appropriate for you.
Like any investment, margin lending involves some investment risk. Losses will be magnified due to the greater amount invested should returns become negative.
We will work with you to manage your margin loan, maximise the benefits and minimise potential risks, like:
- Margin calls as a result of market volatility and/or high gearing levels
- Interest rate increases resulting in increases in borrowing costs; and
- Changes in tax laws that can impact the effectiveness of your tax deductions (in consultation with our accountant).
Ideally margin lending should be implemented as a long-term investment strategy to overcome any market volatility and enable the averaging effects to work.