How do you plan for your retirement? For many it's a case of sticking to Kiwisaver, or doing their own types of saving or investing shares. Ideally, you want to be able to sustain yourself past retirement age – especially if, as Jim and Judith Coe considered, there was no pension available when the time came, or it wasn't enough.
About five years ago, Jim and Judith were looking at their finances, and trying to work out how they could put their children through university education without incurring the long-term debt of a student loan. They wanted to start getting ahead on mortgage payments and free up more money to do this, and also to start saving. Enter Goodlife.
We were called Moneysmart at that point, and after an initial meeting with one of our advisers, a plan was formed.
The power of negative gearing
We assessed Jim and Judith's finances, putting all of their details together to form a portfolio of what they could do – including buying residential investment property. By harnessing the power of negative gearing, they would be able to get tax breaks and save several thousand dollars each year.
Jim initially wasn't sure about the idea, but after we took them through the process and clearly outlined how it works, they were on board and ready to go.
We introduced them to three properties that could be rented out after purchase and detailed how their money would be set up, what kind of gains could be made in the next 12 months, and how big their returns would be in rent.
After looking at them all and intelligently scrutinising them as if they were renters, not buyers, Jim and Judith settled on one under construction in Favona. They could then benefit from tax breaks while the property grew in value.
You live, you learn, you earn!
Jim said that once Goodlife introduced he and Judith to the concept of capital gains, they began looking to the future and how much they could earn through property. They wanted to attain financial independence, so worked out what they would need by the time retirement came along, and we helped them determine how to reach this goal.
Over the last five years, Jim and Judith have bought a further four residential investment properties. They have paid off the mortgage on their own home, and one daughter has just finished university without a student loan. There are still mortgages on three of their properties, but this is the next step they are looking forward to.
Even though we started out giving Jim and Judith guidance on where to go, they have now reached a point where they can identify an investment strategy independently, and will come to us for final tweaks and adjustments before going ahead. The choices are theirs to make, and we are thrilled to have seen them move so far down the path to financial independence.
Sometimes, understanding investment property is a learning curve. But once you learn to unlock the cashflow, you can set yourself up for a comfortable remainder of your life. Just look at Jim and Judith – over just five years of working together, they have reached a point where a comfortable and fruitful retirement isn't just possible, it's right around the corner!