Tax Deductions Are Overrated

Allure of Tax Deductions

As we approach the end of the financial year, I wanted to touch on a common misconception…

The allure of tax deductions.

A big mistake I see a lot of people make is focusing too much on chasing tax deductions, instead of focusing on investments that will genuinely grow their wealth.

"Tax deductions are great, but they shouldn't be the primary reason for your decisions." - Chris Gray

The real game-changer is investing in opportunities that give the greatest chance of long term consistent growth, with tax deductions being a nice little bonus along the way.

When it comes to property, this couldn’t be more true. The primary goal should be to find and secure blue chip properties that deliver solid rental returns and have shown consistent capital growth over the long term.

A good accountant will take care of the deductions along the way (and provide the icing on the cake), but it’s the long-term growth that will truly build your empire.

Stay focused on the big picture.

Property Value: $1m
Time Period: 30 years

Investor A (chasing tax deductions):
5% capital growth

Investor B (focused on capital growth):
7% capital growth

Future Value of $1m Property Over 30 Years

After 30 years:

Investor A’s Property Value: $4,321,942.38
Investor B’s Property Value: $7,612,255.04

The difference in value over 30 years is $3,290,312.66!

Now factoring in the variations of tax deductions is complicated, but as a general rule, do you think tax deductions alone could overcome the $3m shortfall in increased property value over this period?

I’ll stick to blue chip property investments thanks.

The key is that although anyone can buy property, if you can find someone who can help buy a property that yields a slight advantage in capital growth over the long term, the differences become astronomical.

Like I said earlier…

Anyone can buy property.

However there’s a big difference between overpaying for a property that yields 5% capital growth over 30 years and another that is purchased based on an independent valuation that yields just a few percent more.

If someone understands what a good buyer’s agent can do and still wants to buy property for themselves, that’s great. We wish them all the best of luck in the market. They are just not the clients we can help and we don’t want to waste everyone’s time trying to change their mind.

However, if someone is not entirely sure what a good buyer’s agent can actually do, we’re here to talk and to help them understand.

If you or anyone you know is considering buying property soon, make sure you understand how the market works. Click here and book a time to chat. We’re happy to help.

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