mrd

This week’s newsletter is jam packed, full of information. I appreciate that some people are busy leading full lives and others are in and out of the property zone… meaning some weeks these sorts of articles may not seem relevant.

If possible, I do encourage you to read each of these articles and maybe even go back to some of the others from recent weeks. I pour myself into my writings… trying to honestly and sincerely bring balance and perspective to your world. There are many voices and many influences affecting decisions you make and the future reality that awaits you. Personally, I believe the perspective you will glean from us and all we do @ mrd will in time prove to be among the most valuable!

Enjoy this newsletter and enjoy your weekend,

Nick Lockhart

It was said recently that (when the chips are down) there is ‘no greater motivator than winds of disaster blowing up your butt’.

It may be a little descriptive… yet nevertheless so true! You see, it’s not what happens to us in life that determines our future, but rather how we respond (not react) to that which happens. Of course each of us are affected in some way by circumstances, but how we respond is our own choice! We should never allow ‘circumstances’ to control us… or deter us from our focus in life!

Consider the story of Colonel (Harland) Sanders…

More…

The Reserve Bank of Australia (RBA) will meet for the first time this year, next Tuesday. While it’s difficult to know exactly what they will do with official interest rates, I expect another generous reduction to be handed out; probably 1%; but certainly at least 0.75%.

More…

There have been some significant changes to the Australian Goverments restrictions on Foreign people or companies purchasing property in Australia.  The changes make it easier for them to own property in Australia.

On 18 December 2008, the Assistant Treasurer released details of administrative changes to the Government’s foreign investment screening arrangements for acquisitions of residential real estate by foreign persons. They generally maintain the current restrictions but provide for streamlined notification and administrative arrangements.

>>> FIRB: Foreign Investment Review Board – General Policy.

THE economics of Australia’s $3.3 trillion housing market is widely misunderstood, with sensationalist claims that a housing bubble caused the global credit crisis and that Australian house prices will fall by 30 per cent to 50 per cent.

More…

Do you realize that the only time in our lives when we like to get old is when we’re kids? If you’re less than 10 years old, you’re so excited about aging that you think in fractions.

‘How old are you?’ ‘I’m four and a half!’ You’re never thirty-six and a half. You’re four and a half, going on five! That’s the key

You get into your teens, now they can’t hold you back. You jump to the next number, or even a few ahead.

‘How old are you?’ ‘I’m gonna be 16!’ You could be 13, but hey, you’re gonna be 16! And then the greatest day of your life…. You become 21. Even the words sound like a ceremony YOU BECOME 21. YESSSS!!!

But then you turn 30. Oooohh, what happened there? Makes you sound like bad milk! He TURNED; we had to throw him out. There’s no fun now, you’re Just a sour-dumpling. What’s wrong? What’s changed?

More…

Question Time  @ mrd

Julie & Peter write:

Thanks for all the interesting information over this year. We think MRD do a fantastic job….you have great commitment to your investors.
I have just watched Nicks video again and have a question about the “set and forget” strategy. No urgency to this, given the season but would appreciate your thoughts eventually..
The question is, what do you do as an investor if your portfolio is not increasing in value through a proportion of the cycle..and it can be some years bumping along the bottom..how do you then capitalize expenses if your equity becomes maxed out?
For example, we are in a position of a 60 -70 % lend on three new WA houses and we do not think the bank will increase our equity line in the near future. They have said they will not, based on their previous valuations (2007), which may be even higher than new bank valuations would now be within the current market. We have enough funds to hold for 2 years before we would have to sell one of them. We are topping them up from equity as suggested, but the see the writing on the wall and wonder if we should sell. So our situation is prompting the question.
We would love to buy more property if we could see our way past this. The thing we cannot yet understand is how people can hold 10 “windmills” at 80%?  How come the banks let them? And how does it not fall in a heap during those lean years when the wind is not blowing?
We plan to finally do our finances with you in the New Year and will go through the process you suggest. Meanwhile, any thoughts re the above much appreciated.
Thanks once again for all the clear thinking and anti-hype/media frenzy info you have sent our way, its been so helpful to our capacity to think about our situation and not become reactive.
Sincerely Julie and Peter.

Reply @ mrd:
Hi Julie-Anne and Peter,
While you are building your portfolio there will be a weekly shortfall to manage by either using your personal exertion income or your available equity.With either of these there is a risk of not having enough. Your cash flow from wages may change dramatically and unexpectantly leaving you in trouble just as the equity growth can stop periodically. The key to risk management is to not use all your resources. How close you get to the limits depends on your own comfort levels and your perception of the risk involved. Some people have strong cash flows and are impatient to build a portfolio so use all their available equity. Others are more conservative or less certain of their regular incomes and therefore build their portfolios slower. Each person finds their own limit. I call it a SANF ( Sleep at Night Factor ).

We recommend keeping 2 to 3 years shortfall up your sleeve to ride out the slow times such as we are having now. This is one of the worst global financial situations in history and personally I expect it to have worked through the system within a couple of years from when it started in mid 2007. Then we can get back to a more normal property cycle. In fact due to the reluctance of people to invest in anything over the last year there is now a pent up demand that I expect to launch us into another boom time for property prices.

To have 10 windmills at 80% is quite an achievement. Once you get to 5 or 6 the banks start wanting you to operate on lower LVR’s unless you have a strong income to back it up. Personally I would need to keep a strong Line of Credit behind me if I had 10 windmills. I know people who do this but they have good incomes from their businesses.

Depending on your personal situation banks are usually happy to lend out to 80% at least. If you are having trouble getting past 70% then I would recommend you talk to a competent broker rather than directly to the bank.

I trust my thoughts and opinions will add to your knowledge as an investor and help you to make your own investment related decisions. Should you have any uncertainty or concern it may be wise to first seek your own independent advice.
Sincerly, mrd.

>>>> For more on “Windmills” watch Nick’s Video online here.

Reply from Julie & Peter:

Thank you so much for your reply to our question, which was easy to understand and very detailed. The info you provided was very helpful to us. We are going ahead with a finance review with mrd and hope to restructure.

Shut out for so long, young people are finally able to pursue the great Australian dream.

Australia Day is always the perfect time to honour the great Australian dreams: more long holiday weekends; sun, sand and surf; and home ownership.

And this year, with the forecast for the weather as fine as for the first-time home buyer market, its likely to be an even more heartfelt celebration of all things Australian.

>>> First Home Buyers Guide.

Lower interest rates and cheaper petrol have lifted consumer confidence, a survey shows.

The Westpac-Melbourne Institute index of consumer sentiment rose by 7.5 per cent in December to 92.0 index points, from 85.5 points in November.

>>>> Consumer confidence surges 7.5%: survey.

The share of fixed-rate home loans in the mortgage market has dropped to a record low as financial markets price in another aggressive interest rate cut in early 2009.

Hefty break fees for switching from an average fixed to a standard variable home loan rose sharply this week to $19,000 as debt futures markets and economists said official rates would fall to 1965 levels by February.

>>>> Fixed rate loan share hits record low.