Only One Left

Stage 2 – Now Selling

Completion May 2010

Fleet Drive East is a development consisting of 93 Eco friendly 3 bedroom townhouses, situated close to quality schools & large shopping precincts. The townhouses are located in the popular sea-side, north Brisbane suburb of Kippa Ring and only a 10 minute drive to the Redcliffe CBD.

Fleet Dr East comes with a 3 month rental guarantee at $325.00 per week and strong valuation reports and the townhouses are in a gated community with on-site management. This development, with all its features, definitely fits the mrd set ‘n’  forget model, making it an easy, ideal investment opportunity for mrd clients.

This week we are continuing our series on the ‘Drivers of Wealth’.  If you have missed the previous three articles they are available below and I recommend you read them first.

1. Introduction – Drivers Of Wealth

2. Leverage – The First Driver Of Wealth

3. Compounding – The Second Driver Of Wealth

This week we are focusing on the third ‘Driver of Wealth‘; Inflation.

For many, inflation is something that is met with dread.  It is an unfortunate reality that we must tolerate as we see our basic living costs rise.  The price of bread and milk, building materials, government services and just about every other cost are constantly rising and putting more demands on our financial resources.

Inflation is not something that we can change or avoid.  It is a constant reality in our lives.  We can choose to fight it or we can choose to find a way to benefit from it.

How Can You Benefit From Inflation?

If you were to deposit money in a bank or other cash deposit investment you would need to earn at least the rate of inflation, after tax to just break even.  Say, you deposited $1,000 in a bank account for one year.  At the end of that year you would still have $1,000 but the purchasing power of that $1,000 would have been reduced by inflation.  It won’t buy as much as it did one year ago.  Inflation reduces the purchasing power of your money.

If the inflation rate was 3% then you would have to earn 3% interest on your money just to break even.  That is after tax too, so you actually need to earn perhaps 4% just to stand still.  Anything less than that you are going backwards.

If you are investing your cash you are fighting inflation, it is your enemy.  For every two steps you move forward inflation knocks you back one.  It’s as though you are trying to run into a head wind and need to expend energy just to stop yourself going backwards.

What about if you are gearing to buy assets?  How will inflation affect you then?

By using loans to purchase (or control) assets you are actually making inflation a friend!

Why? Because the true value of your debt is reducing and the replacement cost of your asset is increasing.  Let me stop and say that again.

“The true value of your debt is reducing and the replacement cost of your asset is increasing”.

Let me give you an example of what I mean by that statement.

My first experience of property was in 1975 when I was just 13 years old.  My parents sold our family home in the northern Adelaide suburb of Parafield Gardens.  At the time they struggled to find a buyer who would pay $25,000 for our average 3 bedroom house. If I had been able to get a loan at that age and had been able to purchase that property and had also used interest only loans I would still owe that original $25,000. I know people who have credit card limits bigger than that.

What happened?

Even though in this example I would not have paid off any of the principle to my lender, the true value of the loan would have been reduced by time and inflation anyway! The replacement cost of that asset has also increased over that time. The gap between the value of the asset and the debt used to control that asset would have widened considerably and inflation would have provided me with a huge windfall (I say would have because I was 13 and didn’t purchase the property).

Today, the true debt on that asset would be getting close to the equivalent of twelve months rental income. It’s mind boggling to think that at some time in the future someone will pay the same to rent your property for a year as you did to purchase it today; but that’s the reality.

When you first purchase an appreciating asset, such as property, the value of the property is similar to the debt used to control it, over time the true value of the debt decreases and the replacement cost increases and the difference between the two is your profit to keep!

Inflation Is Now Your Friend, Bring It On!

In my current situation I have about $1.5 mill in loans that I used to get my name on the properties I currently control.  Assuming a 3% inflation rate the true value of that debt is being reduced by $45,000 this year as the true value of that $1.5 mill is diminished.  This reduction is close to the average wage amount, which I am gaining for doing nothing. Time and inflation are paying down my loans, so I don’t have to. I would have to work many, many more hours to try to pay that down myself from my wages but my new found friend called inflation does it all for me.

I am now running with the wind at my back and for every two steps I go forward, inflation pushes me another step forward, no longer backwards.

If there is some factor in the world that is a constant; that you have no power to change, then you need to find a way to take advantage of whatever opportunity it offers. Inflation is no different, it is a constant force in our lives so why fight it?  Find the opportunity it offers and use it to your advantage.

If you want to know more about any of these ‘Drivers of Wealth’ and how you and your family can benefit from them please let us know; we have a team of property mentors who can answer your questions for you. >>>here

Socking Away Savings For Retirement? Big Mistake!

Socking Away Savings For Retirement? Big Mistake! Do This Instead And You Could Have All The Money You Need (And Some To Spare). >>>Do This instead!

Happy Investing,

Doug Wroe.

mrd Customer Care Program… because investing is personal

Only a handful of tickets remain to hear Nick Lockhart speak about the “new mega” trend that’s going to cause a surge in real estate prices.

Tickets are complimentary and you’re invited as our guest.

Click here >>> investmentmentor.com.au/slipstream – to register for your ticket now.

Raceview Terraces, selling at just $324,900 and with an expected rental return of $320/wk, are an affordable quality development presenting an ideal opportunity in a capital growth area.

Labelled ‘hot and happening’ by those in the know, the city of Ipswich in Brisbane’s west is set to grow almost three times faster than the rest of Queensland in the coming years. Ipswich is one of the key urban growth fronts identified by the State Governments South East Queensland Regional Plan. The predictions for Ipswich in terms of development and population growth are nothing short of staggering. Its population is expected to grow by 9000 people per year for the next decade to more than double in less than 20 years.

The housing market is heating up again in Ipswich with new figures revealing a near 50 per cent rise in properties sold in the June quarter compared with last year.

The Suburb of Raceview is located on the east of Ipswich city, less than ten minutes drive from the Ipswich CBD close to the Cunningham Highway and Brisbane Road, which provide direct access to Brisbane.

Raceview Terraces, located in Briggs Road, Raceview, are poised as an ideal residential property investment due to the continued growth in the population of Queensland, and Ipswich in particular, which will drive demand beyond supply.

This quality development consists of 26 three bedroom townhouses, architectural designed with residents in mind. The accessible location will cater for students, teachers, nurses and skilled tradesman who work in Ipswich, or the semi professional resident who can easily commute to Brisbane via the nearby train links or upgraded highway.

Click here for more information >>> http://investmentmentor.com.au/featured-property/raceview-terraces-2/

There, mired to his waist in black muck, was a terrified boy, screaming and struggling to free himself. Farmer Fleming saved the lad from what could have been a slow and terrifying death.

The next day, a fancy carriage pulled up to the Scotsman’s sparse surroundings. An elegantly dressed nobleman stepped out and introduced himself as the father of the boy Farmer Fleming had saved.

“I want to repay you,” said the nobleman. “You saved my son’s life.”

“No, I can’t accept payment for what I did,” the Scottish farmer replied, waving off the offer.

At that moment, the farmer’s own son came to the door of the family hovel.

“Is that your son?” the nobleman asked.

“Yes,” the farmer replied proudly.

“I’ll make you a deal.”

“Let me take him and give him a good education. If the lad is anything like his father, he’ll grow to a man you can be proud of.”

And that he did. In time, Farmer Fleming’s son graduated from St. Mary’s Hospital Medical School in London, and went on to become known throughout the world as the noted Sir Alexander Fleming, the discoverer of Penicillin.

Years afterward, the nobleman’s son was stricken with pneumonia. What saved him? Penicillin.

The name of the nobleman? Lord Randolph Churchill. His son’s name? Sir Winston Churchill.

Someone once said: What goes around comes around.

Work like you don’t need the money.

Love like you’ve never been hurt.

Dance like nobody’s watching.

Labelled ‘hot and happening’ by those in the know, the city of Ipswich in Brisbane’s west is set to grow almost three times faster than the rest of Queensland in the coming years. Ipswich is one of the key urban growth fronts identified by the State Governments South East Queensland Regional Plan. The predictions for Ipswich in terms of development and population growth are nothing short of staggering. Its population is expected to grow by 9000 people per year for the next decade to more than double in less than 20 years.

THE housing market is heating up again in Ipswich with new figures revealing a near 50 per cent rise in properties sold in the June quarter compared with last year.

The Suburb of Raceview is located on the east of Ipswich city, less than ten minutes drive from the Ipswich CBD close to the Cunningham Highway and Brisbane Road, which provide direct access to Brisbane.

Raceview Terraces, located in Briggs Road, Raceview, are poised as an ideal residential property investment due to the continued growth in the population of Queensland, and Ipswich in particular, which will drive demand beyond supply.

This quality development consists of 26 three bedroom townhouses, architectural designed with residents in mind. The accessible location will cater for students, teachers, nurses and skilled tradesman who work in Ipswich, or the semi professional resident who can easily commute to Brisbane via the nearby train links or upgraded highway.

Raceview Terraces, selling at just $324,900 and with an expected rental return of $320/wk, are an affordable quality development presenting an ideal opportunity in a capital growth area.

Mt Warren Park is an attractive alternative to inner city living for astute investor’s and first home buyers.  It is in the Beenleigh area which also includes the suburbs of Beenleigh, Yatala, Ormeau, Windaroo, Bahrs Scrub, Holmview, Eagleby and Edens Landing.

Beenleigh is 34km south of Brisbane and is strategically placed in the Brisbane Gold Coast Growth corridor, which has recently become part of the Logan City Council. So far the move for Beenleigh from the Gold Coast City Council to Logan City Council has proven to have a positive impact on property prices, development and infrastructure spending. The area is undergoing incredible growth across all sectors with impressive retail, industrial, residential, infrastructure and planned commercial facilities enriching the area.

There is a strong trend for young families to enter the area due to locality and affordability and this is reflected through 23% of residents in the area being 0-14 years old and the average household size being 2.7 people per dwelling. The area is primarily made up of couple families with children at 44.7% who have a median family income of $1,100 per week. The majority of dwellings are defined as single detached houses at 85% with only 13% of residential property considered as unit, apartment and townhouse stock. The majority of homes are either fully owned or in the process of being purchased at 61.5%.

There is also a growing rental market within the Beenleigh Area at 31.5% and this increasing demand creates opportunities for investors.

The area has high schools and primary schools, within a few minutes walk, both public and private. The Beenleigh Mall consisting of Coles and other specialty shops within a five minute walk and a medical centre and Logan Hospital within a few minutes drive.

The suburb of Bracken Ridge takes its name from the ‘bracken fern’ that grew extensively in the area before development begun.  The area is part of Brisbane City Council – Brisbane being the capital city of Queensland and the fastest growing capital city of Australia with population and economic growth well above the Australian average.The population of Brisbane City is estimated to have reached one million in December 2006 and with its current annual growth rate of 2.0%, the population of Brisbane City itself is projected to increase to 1.4 million, while the population of metropolitan Brisbane is projected to reach 2.4 million over the next 20 years

Brisbane is a very liveable modern city in a riverside setting with many splendid attractions on offer. Recreational boardwalks, picnic & play areas, national parks, weekend markets, botanical gardens, an array of nightclubs & dining plus fantastic shopping and a world class casino are all a part of this vibrant city…

Bracken Ridge is a suburb just 16 kms to the north of the Brisbane CBD.  The area has more school age children and more people who own or are on their way to owning their home, than the Brisbane average. The suburb is situated between two railway lines and the stations of Bald Hills – Caboolture line and Deagon – Shorncliffe line. Bracken Ridge lies just west of the ‘Gateway’ motorway leading north to the Sunshine Coast & South to the Gold Coast.  Just 3 ½ kms to the east there is the fishing and boating fun of Moreton Bay and Brisbane Domestic / International Airport is a 12 minute drive to the south east along the M1 motorway.

This ‘Bracken Central Townhouses Development’ is a smart choice when you are considering residential investment in such a proven capital growth city such as Brisbane. These brand new 3 bedroom, 2 bathroom + powder room, two level townhouses have a bus stop right out the front, are within walking distance of schools & the TAFE and are conveniently located within walking distance to the Bracken Ridge Plaza where you will find a Coles supermarket, a post office and a variety of retail shops. A short bus ride away are the major shopping centres of Westfield Strathpine and Centro Taigum, with their big name supermarkets, various department & variety stores, cinemas, fashion, sports & jewelery shops, plus a food court and lots of specialty retail outlets.

Bracken Central has it all and with completion of construction due by the end of this month followed by settlement in mid May, these last 3 remaining townhouses are sure to be snapped up quickly by smart investors!

Act Now To Secure Your Investment!

Do you need more information? Would you like a complimentary no obligation Cash Flow Analysis report prepared for you? Did you want to download our Property Research Report? If so, please see the following:

• Call mrd during normal business hours on (07) 5580 8888
• Complimentary Cash Flow Analysis request >>>more

Happy Investing,

Andrew Lockhart
mrd Customer Care Program… because investing is personal

“The Most Powerful Force In The Universe Is Compound Interest” Albert Einstein

Compounding simply means multiplying; instead of adding.

When building wealth by increasing the number of assets that you control there are two basic strategies; Addition and Multiplication. Using Addition will obviously add to your wealth but it is Multiplication that will truly accelerate that growth. Let me explain further what Albert meant when he uttered the quote above.

Doing It The Addition Way

Saving the money required to purchase an asset would result in you adding to your portfolio the equivalent value of the asset. Repeating this process and saving enough to purchase another similar asset is what I call doing it the hard way!

Let’s face it, very few people have the disposable income to save that much anyway.

Borrowing against an initial asset when looking to secure subsequent ones will fast track wealth creation. Not doing so will probably restrict the average person to securing just one or two assets, of any significance.

If you have no significant assets (such as property) when starting out, saving may be your only option to get started. Aside from those who use someone else’s equity (such as a parent), most of us are forced to save for that first deposit.

While it is common to start out this way, you probably don’t want to maintain such an approach as doing so will limit the size of your asset base to considerably less than it potentially could have been.

Purchasing an asset in an entity that does not allow you to later borrow against that increased value of the first asset means you may be limiting your options to an addition strategy. I believe this to be the case with superannuation, however, please check with your accountant as my understanding of purchasing in superannuation is limited.

Doing It The Multiplication Way

This is possible once your initial asset(s) has grown in value enough to offer the additional equity necessary to purchase subsequent asset(s). This method (of leveraging as it is called) is what I call doing it the easy way!

Once your initial asset has seen sufficient growth in value, you can draw the necessary deposit from there to secure another asset.

So now you have two assets, which in turn continue to grow in value and provide deposits for two more. Then you have four! Those four assets grow in value and provide deposits for four more. Then you have eight! You can see the pattern. It is a bit like a snowball. It takes some time and effort to get it rolling down the hill but it will pick up speed and increase in size to a point you couldn’t stop it even if you wanted to.

Let’s Compare The Results Assuming Five Purchasing Cycles

Addition:

1 + 1 + 1 + 1 + 1 = 5 Assets.

This relies on you being able to save enough deposit for each purchase.

Multiplication:

1 X 2 = 2

2 X 2 =4

4 X 2 =8

8 X 2 = 16 Assets.

This doesn’t rely on you being able to save enough deposit for the next purchase (perhaps just the first).

The difference is 11 Assets. That could potentially be worth millions of dollars.

You may have also noticed that the greatest increase is in the later doubling cycles. This highlights the need to get your name on the first asset and start the purchasing cycles as soon as possible. We all have a finite time available to us to invest, some shorter than others. If we delay starting to invest so that we only have 4 purchasing cycles instead of 5 the difference in the end result is dramatic.

Every day that you delay shortens your available investment window. It doesn’t take it off the first cycle, it takes it off the last one!!

As we all have this finite investment time window, increasing the number of cycles within that time window can be very beneficial also. If you were to invest in an asset that provided a low Return ON Equity then it would take you longer to build a deposit to buy your next asset. The length of the cycles would be longer, therefore you would have fewer cycles in your available time window.

For example let’s assume you have a time window of 15 years available to you. If your chosen asset grew enough to provide a deposit for another in five years then you would have three purchasing cycles available to you. If you chose an asset that performed the same growth in three years then you would have five purchasing cycles available to you – with the corresponding dramatic effect on the end result.

In the example above, three purchasing cycles equates to four assets being held however five purchasing cycles equates to 16 assets being held!

As you can see, both the time window available to you and the length of the purchasing cycle are crucial and will make a dramatic difference to where you and your family are when you move into your retirement.

Please note that we are not discussing asset doubling cycles, we are discussing how long it takes an asset to increase in value enough to be able to provide a deposit for another.

There Are Ways That You Can Shorten The Length Of These Cycles

Purchase an asset that grows quickly and predictably

Obviously if you are able to choose an asset that grew quickly and predictably you would have enough for your next deposit sooner. The problem is that we cannot see into the future and so cannot predict with certainty which assets will perform like this.

mrd puts a lot of time, money and effort into filtering potential properties to isolate those that we believe will grow quicker and more reliably. We look at history, examine the forces that have created growth and then project that forward in our search for areas and properties that we expect to do well considering future demographic needs.

Choose an asset class that only needs a small deposit to control

As mentioned in last week’s article “Leverage – The First Driver Of Wealth” there are assets that allow you to use a 100 to 1 gearing ratio. With assets such as these you only need a small deposit and it would not take much growth before you had enough equity for another. The issue here would be volatility and Return OF Equity as a small move against you would wipe out your savings and perhaps more.

The ideal asset for this purpose would be one that needed a small deposit but was also relatively stable. It is no secret that I am referring to residential property.

Use finance methods that make the best use of gearing

By using a median priced residential property asset it is possible to lend up to 95% of its value requiring just a 5% deposit, plus purchase and lending costs.  With such an asset it may be possible to secure funding with a very small deposit. This strategy enables you to use as little of your own equity as possible and thus assist you to add your next asset purchase (and grow your portfolio value) that much sooner!

Higher gearing allows you to compound faster

By now I expect you will have a greater affinity with Albert Einstein when he made the remark I opened with… ” The power of compounding to greatly enhance your end result is clearly evident.”

By using a combination of leverage and compounding you can achieve great results.

Next week we will look at the effect of inflation and how this third driver of wealth will add to these first two to create a tsunami of wealth and open up many more choices for you in the future. Be sure to look out for the next newsletter.

Socking Away Savings For Retirement? Big Mistake!

Socking Away Savings For Retirement? Big Mistake! Do This Instead And You Could Have All The Money You Need (And Some To Spare).

>>>Do This instead!

Happy Investing,

Nick Lockhart
mrd Customer Care Program… because investing is personal