Creating a passive income stream

Passive income comes in many shapes and forms. There are thousands of ways that people have created automatic streams of income, and more are being created all the time.

All sources fall into one of two types of passive income; Investing Passive Income and Business Passive Income. Out of these two primary vehicles, business and investing, an unlimited number of possibilities arise. Mastering just one area and building a portfolio of investments can help you reach your financial and lifestyle goals! This article will focus on how to build passive investment income.
A passive investment may include both a retail financial product and other managed investments where the activities do not constitute the carrying on of a business. Unlike active investors, passive investors buy a security and typically don't actively attempt to profit from short-term price fluctuations. Passive investors instead rely on their belief that in the long term the investment will be profitable.
There are many arenas of investing that can be used to generate passive income. Stocks, bonds, money markets, managed funds, rental properties and other financial investments can be used to generate income. There a wide variety of products available with differing levels of risk. It is important that before making any investment decisions, that you contact your financial advisor to analyse your current financial situation and develop an appropriate strategy. With the right strategy you could be on your way to building multiple streams of income!

Tax Benefits 
There are also number of tax benefits that relate to passive investment. A number of deductions can be claimed on your tax return such as interest paid on the loan to fund your investment.  With respect to rental properties, you can also claim repairs and maintenance of, rates and taxes, insurance, agent's fees, travel to and from the property to facilitate repairs, and buildings depreciation. Tax deductions can also be claimed as a result of negative gearing, where the costs of keeping the investment instruments exceed the income gained from it.
Owning rental properties can be a great way to put your money into something that will pay you regularly for many years. Unfortunately many people attempt to get into rental real estate they end up spending all of their time managing, maintaining, and overlooking their properties! This is not passive income. If you are working around the clock to maintain your rental properties, you may be earning money but it is requiring your time! Passive income means automation!

Building a passive income is a vital part of wealth creation and an important aspect of balancing risk. After all, wouldn't you rather that your money work for you?

For a more comprehensive analysis of your financial situation and for a strategy to build passive income please contact our head financial planner Christine Hallowes CFP on (02) 9868 3900 or email her at christine@elitefinance.com.au.
The ATO has provided comprehensive guideline on rental property deduction. For more information, please visit http://www.ato.gov.au/corporate/content.aspx?doc=/content/00282530.htm

Australian Market Outlook

Even though economists are positive on the outlook of the Australian share market for the remainder of 2011, there are still some concerning factors which have kept average returns in the red over the past 11 months. The European debt crisis, which began as concerns around Greece and its debt servicing ability seem to have spread further in the European Union, with Ireland and Portugal looking increasingly unstable. Further market instability has been seen with increasing oil prices a result of political instability in the Middle East and North Africa. These factors have kept the Australian market quiet on trade and discouraged investment over the past year. Looking forward we should see some of these issues regarding EU debt ease, although not quickly, as the global economy continues to recover post GFC. China’s economic growth has continued and this has benefitted Australia’s large resource companies as strong demand for its products continues. There may be a slight dampening of such demand as the Chinese government attempts to curb inflation on the back of fast economic growth.

The first six months of 2011 has seen the share market fall short of expectations due to events and concerns beyond our shores. Even so, our economy and the businesses that operate within it continue to grow and rebuild, albeit slowly, from the repercussions of the GFC. The forecast for the Australian economy is very strong for the next couple of years. This view is underpinned by the expectation that unemployment will continue to decline and stabilise around 4-5% as more labour resources are required. This is particularly true for the mining and resource service sectors.

Australia’s terms of trade have recently been upgraded creating an income surge which will quickly flow throughout the entire economy with workers, corporations and the government all benefiting.  Recent concerns regarding US debt have also had a negative effect on the All Ordinaries. However, recent developments suggest this too is improving with retail sales and production figures up and a trillion dollars’ worth of government spending cuts agreed upon in principle by the US government.

The mood across global markets appears to be decidedly downbeat and the reality is that 2011 was always going to be a tough year. In the short term at least it appears the australian market will continue to respond to poor global conditions and fears of another GFC.  However the outlook for the Australian economy is improving and we would expect this economic strength to be reflected in the market movements hopefully toward the end of this year and into 2012.

*The advice provided is of a general nature only. Everyone's financial situation varies so please contact a financial planner at EFS on (02) 9868 3900 for a financial plan that meets your needs.

Elite Financial Solutions ABN 32 077 847 486 provides its financial planning services as an Authorised Representative of Count. ‘Count’ and Count Wealth Accountants® are the trading names of Count Financial Limited, ABN 19 001 974 625. AFS Licence Number 227232. Principal Member of the Financial Planning Association of Australia Limited.

AUSTRALIAN SHARE MARKET OUTLOOK