You want to increase the tenant’s rent by $10 per week. The tenant agrees only if he gets a $1,500 air conditioner. Can’t justify the cost? Just do this and get an extra $32 per month net income. Plus you’ll win a loyal tenant.
What would you do if your tenant asked for a $1,500 air conditioner… and in return all you wanted to do was increase the rent by $10?
Would you say yes?
Most people would take a look at the numbers and say no. After all, an extra $10 per week is only $520 per year. So, you’d get your money back on the air conditioner in the three years.
Right? WRONG!
Here’s another way to look at it…
Instead of buying that air conditioner with cash, you buy it with a line of credit… and that line of credit costs you $8.12 per month.
In return the tenant pays an extra $10 per week… which is approximately $40 per month.
So, you make an extra $32 per month and have a very happy tenant.
And this doesn’t take into account the depreciation… plus the tax deduction you’ll get on the $8.12 per month repayment for the air conditioner.
Once factoring the tax deduction and depreciation into the equation, you could well be enjoying a boost to your cash flow of up to $45 per month!
Webinar Reveals A Treasure Chest of Lucrative Landlord Ideas
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MARK COLVIN: Is your super ripping you off?
An ABC investigation has revealed that the returns on the more than $1 trillion of savings held in the super system are scandalously low.
The ABC has gone beyond the industry research, which looks at the bigger balance funds, to analyse returns on the entire pool of money in the system. And in real terms, the money is going nowhere, barely beating the inflation rate over the past 14 years, and below inflation – going backwards, over the past 10.
The investigation also shows that combined, the generous tax breaks on super and the billions eaten away in fees, cost far more than the age pension.
Economics Correspondent Stephen Long has the story.
STEPHEN LONG: It was Paul Keating’s vision; build the savings to make workers secure in their retirement. But over the past decade or more the returns from the superannuation system have been woeful; stagnant or going backwards in real terms.
MARK RAFFERTY: It’s not just bad for peoples’ pensions it’s an absolute economic travesty
STEPHEN LONG: Dr Mike Rafferty is an economist at the University of Sydney who specialists in financial markets and retirement income.
He says that the poor returns revealed by the ABC’s research show that as a vehicle for building retirement savings, the super system is fundamentally flawed and failing.
MIKE RAFFERTY: We should start thinking about whether or not the aged pension should be the primary vehicle and start putting more money into that and have super as a second audit.
STEPHEN LONG: At the ABC we’ve analysed official data from the Australian Prudential Regulation Authority, which goes back as far as 1997 and across the entire pot of money in the superannuation system, the average yearly return to mid-2009, is just 3 per cent; that’s barely ahead of the average inflation rate over that time, which averaged 2.8 per cent. And over the past decade the returns are below inflation. The returns are a lot less than you would have got for cash in the bank and about half the return on government bonds.
Over those years the money in the super system’s almost quadrupled, but the vast bulk of the growth has come from contributions; our money going in, not the money making money.
There’s a host of factors behind those poor system-wide returns; volatile markets, with the Asian financial crisis, the tech wreck and the GFC wiping out years of double digit gains. Millions of lost or inactive super accounts being eroded by fees and the sizeable cut being chipped out of super all the way down the line.
JEFF BRESNAHAN: It’s a $1.1 trillion industry and out of that there’s about $17 billion in fees that are stripped out of it every year.
STEPHEN LONG: Jeff Bresnahan runs SuperRatings, an agency that monitors fund performance.
JEFF BRESNAHAN: Quite simply, almost $47/$48 million a day coming out of our superannuation accounts to pay suppliers for managing that money.
STEPHEN LONG: Is that justified?
JEFF BRESNAHAN: I don’t think so, no.
STEPHEN LONG: The conflict of interest in the way financial planners are paid to promote super schemes has been in the spotlight but there’s been less attention on those who get paid the biggest money, the investment managers.
JEFF BRESNAHAN: Quite clearly it’s the investment management side of it that is taking the bulk of that income; just over half, or about $9 billion a year.
STEPHEN LONG: So why do the investment managers get paid so much?
JEFF BRESNAHAN: Look it’s a good question; you’ve got to ask yourself, are there underlying costs in the investment management industry that shouldn’t be there, or are too high and one of those is obviously salaries; the salary levels in the investment management industry are incredibly high.
STEPHEN LONG: Dr Mike Rafferty.
MIKE RAFFERTY: Average wage and salary earners putting money into super are subsidising massive salaries that go to fund managers.
STEPHEN LONG: The highly salaried stock pickers don’t get a flat base fee and a bonus for doing well as you might expect
JEFF BRESNAHAN: They get a percentage of the superannuation fund assets, irrespective of performance.
STEPHEN LONG: So the bigger the pot, the more they get.
JEFF BRESNAHAN: No-one’s willing to push the boundaries and say we need to change the way the investment managers are paid.
STEPHEN LONG: At Australia’s biggest super fund, they’ve cut the fees they were paying by sacking most of the investment managers. Mark Delaney is the fund’s chief investment officer.
MARK DELANEY: Stock picking is what people call in investment terms a zero sum game; that is for every winner there’s a loser.
STEPHEN LONG: Australian Super found that one manager it hired would sell a stock and another one would buy it, with no net gain for the fund portfolio.
MARK DELANEY: So what we are doing is we’re paying out fees for something which isn’t achieving any outcome.
STEPHEN LONG: Now half the money this fund allocates to Australian share investment is passively managed; it merely tracks the broad share market index and the returns are just as good, with fewer fees.
Fees are one super-sized issue; another, the massive tax breaks to encourage people to put money into super, which overwhelmingly benefit the wealthy.
ALEX DUNNIN: Well the cost of superannuation tax concessions in total in Australia is about $26 billion; that’s almost as much as the cost of the aged pension itself.
STEPHEN LONG: Alex Dunnin is research director at Rainmaker, a specialist information company that analyses superannuation.
ALEX DUNNIN: It brings up the question; who gets the most benefit from those tax concessions? Well that’s really saying who gets the most benefits from paying less tax? Well people who pay a lot of tax now, meaning people who earn a lot of money.
MIKE RAFFERTY: You know, I have to ask the question; why would we spend more on the fees and charges and subsidies to super, than it cost to run our current pension system?
The review of the super system chaired by former ASIC commissioner Jeremy Cooper addresses some of these questions, but not all.
MARK COLVIN: Stephen Long.
ABC Radio http://www.abc.net.au/pm/content/2010/s2973486.htm
Cove 35 – Tranquil Waterfront Living
$ POA – Speak with your Property Mentor
The concept for this unique development was to create a contemporary address with a sense of place, panache and function, the epitome of modern Gold Coast living.
Architecturally designed, this exclusive collection of contemporary one bedroom apartments represent a rare opportunity to live in one of the Gold Coasts emerging neighbourhoods, where convenience meets modern architecture – a perfect blend of location & lifestyle.
More…
YOUR FINAL CHANCE TO LISTEN IN!
If you own property in Cairns, have contemplated investing there or you are interested in knowing what different property markets are doing, you need to register and be part of tonight’s webinar: “Cairns On The Move”.
The Global Financial Crisis (GFC) hit the Cairns market exceptionally hard in recent years. The collapse of many construction companies including the 25 associated companies of CMC not only added to the unemployment levels but it forced urgent property sales at low prices in an effort to pay out banks and creditors.
There are two stories to be told about the Cairns market. One is of the difficulty the market has been through… and why. The other is what is now expected in the short to medium term… and why.
Recently, one of Cairn’s leading developers came and presented a PowerPoint presentation to the team @ mrd. I was so impressed with what he presented that I asked him to repeat it on an mrd webinar.
In this webinar to be held TONIGHT, Tuesday 6th July @ 7:30pm EST & repeated again @ 9:30pm EST, Udo from Glencorp will give you all the up to date facts on the past, the present and the future of the Cairns market (the good, the bad and the ugly). He will present (real) facts… looking at population growth, rising employment, capital growth, tourism, diversity of industry… and how all these factors combined are presenting an opportunity for investors to take advantage of an up-and-coming market.
So again, whether you already own property in Cairns or if you have been watching the area, you need to sit in on this webinar. Don’t assume you have the facts and won’t learn anything new… you will!
The time is NOW!
Click this link to register for the 7:30pm (AEST) webinar: https://www2.gotomeeting.com/register/253634667
OR this link to register for the 9:30pm (AEST) | (7:30pm AWST) webinar: https://www2.gotomeeting.com/register/422932890
Happy investing,
Nick Lockhart
mrd Customer Care Program… because investing is personal
QUEENSLAND had a massive spike in employment growth in April galvanising Premier Anna Bligh’s hopes of meeting her 100,000 jobs target.
While in raw terms Queensland created 6500 jobs in April, a revision of employment numbers by the Australian Bureau of Statistics showed in the past year the state created 38,000 jobs, compared with only 21,000 in the year to March.” . . . If we keep creating jobs at around 6500 a month, then we are well on track and we will meet the 100,000 job target,” Ms Bligh said.
On the downside, there are still 12,000 more unemployed people than this time last year and the jobless rate appears to have levelled out at 5.5 per cent in trend terms.The more volatile seasonally adjusted figures showed the Queensland jobless rate jumped from 5.5 per cent to 5.6 per cent in April and nationally was steady at 5.3 per cent. Australia has also cracked the 11 million people employed level for the first time.”After a tough start, we’ve created jobs for Queenslanders for nine straight months now,” Ms Bligh said. “Queensland was the biggest jobs-generating state in the country – more than one third of the 18,300 jobs created Australia-wide last month were created right here in Queensland.”
Ms Bligh also softened her opposition to the Federal Government’s planned mining tax, claiming it could ultimately create jobs.”If we get this package right, then not only will we see new mines opening, we will see new investment from this tax package back into Queensland into infrastructure that’s needed, particularly in regional Queensland,” she said.
Nationally, employment rose by 33,700 in April, well ahead of forecasts.But Peter Gleeson, from recruitment company Chandler Macleod, said employers were not yet ready to risk putting on highly paid staff to full-time and instead continued to use contractors.The figures came as Australia’s low paid aged-care workers started a $1.5 billion wage push.The workers union, the LHMU, lodged its claim this week. Under new workplace laws, low paid workers can negotiate pay through sector-wide bargaining with employers. LHMU assistant secretary Michael De Brunni said employers were behind the push but only if the Federal Government increased its residential aged-care subsidy. Pay rates in the sector were as low as $15.92 an hour and the claim is for an increase of between $7 and $10 an hour.
via Queensland industry creates jobs | Courier Mail.
LEARNING to live with the whirr from an electric train has financial benefits, with home price growth strong in suburbs close to the city’s railway lines.
As the city battles to meet demand for its buses, demand for property within easy access of the train is leading to faster price growth in suburbs near stations.In the past 12 months median prices in these corridors have outstripped other areas by 2.6 per cent.They recorded a median house price increase of 10.3 per cent in the year ending December 2009 – up from $535,000 to $590,000.
Congestion issues are also expected to help drive demand for inner-city units, with one agent warning of a looming undersupply for luxury accommodation.Colliers analyst Ben Langfield said potential luxury projects were being reconfigured into cheaper, smaller apartments. He warned there could be a shortage of new luxury stock within the next 12 months.
PRDnationwide research analyst Josh Brown said congestion was creating demand in suburbs close to stations.”Suburbs with a train station have experienced a 16.3 per cent growth in demand from the half-year ending December,” Mr Brown said.He said suburbs not serviced by rail recorded growth in demand of 13.4 per cent. When looking at actual sales over the time, station suburbs had capital growth of 9.7 per cent – 0.3 per cent higher than those with no station.
via Home prices growth is strong near railway lines | Courier Mail.
Here at mrd we have always had the belief that being close to all the infrastructure means more capital growth. The term “Transit Orientated Developments” is now being used and the projects we have listed at Robina, Varsity and Nerang all qualify.
Rising interest rates have failed to quell buoyant house prices but tempered the number of mortgage approvals, which have fallen sharply.
Residential property prices rose by 4.2 per cent across capital cities in the March quarter and by an average 12.5 per cent in the year to March 31, the RP Data – Rismark Hedonic Home Value index, released on Friday, showed.”The lively capital growth observed in the major cities runs against the grain of relatively anaemic housing finance flows,” Rismark chief executive Christopher Joye said in a statement.”This implies that underlying demand and supply-side fundamental are driving Australia’s housing rebound, as opposed to simply credit.”
Mr Joye said the housing market remained resilient despite recent rate rises by the Reserve Bank of Australia RBA.
via Rate rises fail to quell house prices – Yahoo!7 Finance News. April 30, 2010, 5:51 pm
Conventional wisdom says you need to save for your retirement. And that usually means socking away as much money as you can in your bank account… or… perhaps a managed fund.
In my opinion, that is a mistake. A big mistake. Here’s why:
http://investmentmentor.com.au/events/personalised-retirement-options-plan/
I’ve just posted a new webpage that explains why it’s a mistake, and what to do about it.
http://investmentmentor.com.au/events/personalised-retirement-options-plan/
Warmly,
Nick Lockhart
