How We Helped David and Vicki Smith Create a Tax-Minimising Property Empire in Just 3 Years
REPORT
About Vicki & David
When we began working with David and Vicki, they were a working-class couple in their early 50’s from Sydney’s western suburbs.
David earns $80,000 per year and was paying $18,000 per year in tax. Vicki earns $15,000 per year and was paying around $2,500 in tax.
Their family home was worth $500,000 and they had a mortgage of $370,000. They could borrow up to 90% against the value of their home (in this case $450,000) so that means they had available equity of $80,000.
First Property
We helped David and Vicki to purchase their first property for $300,000 in Melbourne.
This property has a rental income of $300 per week, and within two years of purchase had increased in value to $370,000, creating an additional $70,000 in equity.
This property gives David and Vicki a tax reduction of around $5,500 per year!
Second Property
David and Vicki’s family home had recently been revalued, and had increased in value by
$80,000.
Using this additional equity, we assisted them in purchasing a block and building a duplex on the northern end of the Gold Coast.
The duplex cost $620,000 and provided a rental return of $700 per week between the two units.
Upon completion of construction, the units were valued at $390,000 each, bringing the total value to $780,000 - an equity gain of $160,000!
This property gives David and Vicki a tax reduction of around $9,200 per year!
Third Property
One year later, with the $160,000 in equity created on the Gold Coast duplex, we assisted David and Vicki to build another duplex in Toowoomba at a total cost of $600,000.
The duplex provides a rental return of $700 per week between the two units.
Upon completion of construction, the units were valued at $350,000 each, bringing the total value to $70,000 - an equity gain of $100,000!
This property gives David and Vicki a tax reduction of around $8,000 per year!
Fourth Property
In addition to the above, we assisted David and Vicki to purchase one more unit in their self-managed super fund.
This unit in Brisbane cost $350,000 and pays for itself.
As it is held in super, so there should be no capital gains tax.
Total Property Portfolio
David and Vicki now own 6 investment properties (the duplexes are strata titled and classified as two properties). As they are now 56 years old, the current focus is on debt reduction.
As all properties are new, they have 6 sets of deprecation.
Remember from above that David was paying $18,000 per year in tax, while Vicki was paying $2,500.
With these six properties 90% in David’s name and 10% in Vicki’s name we have been able to reduce the total tax paid between them from $20,500 per year to about $5,000 per year!
Paying off their home FASTER
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The Melbourne property pays for itself and provides an additional
$30 per week in positive cashflow.
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The Gold Coast duplex pays for itself and provides an additional
$120 per week in positive cashflow.
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The Toowoomba duplex pays for itself and provides an additional
$100 per week in positive cashflow.
This gives David and Vicki an additional $1,083.33 per month to pay off their family home!
When they started at the age of 52, their family home was going to take another 23 years to pay off, by which time they would be 75.
With the extra cash-flow and additional tax benefits, the family home could be 100% paid-for by the time they are 65, which is their ideal retirement age.
Retirement Income
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By the age of David and Vicki’s retirement, their properties are expected to at least double in value.
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We expect the Melbourne house to be worth around $700,000 and still have only $300,000 debt. The rents are expected to be $800 per week, bringing in $40,000 per year.
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We expect the Gold Coast duplex to be worth around $1,400,000 and still have only $620,000 debt. The rents are expected to be $1,500 per week, bringing in $75,000 per year.
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We expect the Toowoomba duplex to be worth around $1,400,000 and still have only $600,000 debt. The rents are expected to be $1,500 per week, bringing in $75,000 per year.
If they need more than $100,000 per year to live off they can actually start to use their equity because the equity is expected to increase every few years. They will actually get richer as they get older from owning appreciating assets!
We estimate that by the time they retire, David and Vicki should have over $1,800,000 in equity in their investment properties!!!
This creates a total of $190,000 / year in rental income.
After deducting running costs of approximately $90,000, David and Vicki are estimated to have $100,000 / year to live off during their retirement!
