What are good and bad debts?

Good debt generates income, grows with time and is tax effective. Bad debt doesn’t generate income, depreciates with time. Somehow, family home, is considered a bad debt because it doesn’t generate income and is not tax effective.

The goal is to pay down your bad debt and leverage your good debt to produce income and wealth.

What is tax effectiveness?

Tax effectiveness can be broken down into:

• expenses to manage your investment
• depreciation
• less tax when selling

Property ultimately delivers something meaningful to the community i.e. shelter. As long as the right property is selected, there’s always a demand from renters and future buyers.

Is your rental yield at least 4%?

Let’s say, you receive $24,440 each year in rent. You pay $21,000 each year in property-related expenses, and the property is worth $800,000. Your net rental yield is equal to ($24,440 – $21,000) ÷ $800,000 ÷ X 100 = 0.43% i.e (Annual rent – costs of owning your property) ÷ The value of the property X 100.

Target rental yield: 4% | Target annual capital growth: 6-10% | Target vacancy rate: 1-3%

What type of assets can you go for once your reach 50%-75% wealthscore?

We are talking about multi income investment e.g. a duplex which is effectively you buy a one block and then split it into 2 homes. Or a dual income investment where you can buy a 5 bedroom house and then split it into a 2 bedroom home and 3 bedroom home. Or a quad-pack where you can have 4 income coming out of the one investment e.g. the house Yau is renting out right now to short term leaser.