mrd

On or about the 11th March this year Udo Jattke’s bank appointed receivers and took over his operations. Let me provide a little background as I understand it…

Back in 2007 Udo approached his lender to fund the Waterside project, to be built in two stages. Stages one and two first, then stages three and four sometime in the future. His bank agreed to approve the funding of this project subject to pre sales… but only if he built all four stages from the outset. He satisfied the bank’s lending conditions, securing more than the required pre sales, etc. Everything was approved and ready to commence construction right when the GFC came along. Immediately his lender withdrew funding on all projects not started; including Waterside Residential, Seashells and Townsville Waters (even though the funding for all these projects had previously been fully approved). This was pretty much the experience of all developers around the country where construction was yet to begin.

Over the past two or three years, since the GFC, most developers that owe banks money have been given a very hard time… and Udo has been no exception. He has been consistently called upon to reduce his debt… and as other properties he built have settled his bank has taken all of the settlement proceeds – leaving him struggling to find working capital.

Due to this pressure Udo has spent the past year or more negotiating with a Chinese consortium to purchase the Waterside project – as a ‘going concern’. His company, Glencorp was to undertake construction and existing purchasers would have their original contracts honoured.

But sadly, this is no longer to be!

On the 21st January 2011 I received the following update from Glencorp:

“Waterside Residential is due to settle on the 3rd June 2011. So we should have ground work starting a month after that.”

My understanding (noting I am not privy to the ins and outs of the workings of Glencorp) is that there had been some extension requests from the purchaser. Perhaps, I really don’t know, there was yet another extension request in March that triggered the bank to move in. Alternatively there may have been no further extension request and perhaps the bank just decided to move now regardless.

Whatever went on behind the scenes it is very sad to see such a decent Australian man, his business and staff all ‘put out to pasture’. This is an undeserving and tragic outcome that has seen the operations of Glencorp and Glenwood homes in the hands of the receivers being wound up. NB: If you were contracted to purchase in the Waterside or Seashell developments please look out for my separate update to you… tomorrow!

The impact that this could have on you as an investor who has purchased a Glencorp property is the company is no longer there to attend to any defects that may arise. Udo’s projects had a reputation of being very well constructed and so this is unlikely to be of any significant consequence.

On the flip side the GFC fall-out will have a very positive impact on existing Cairns property owners.

Let me explain…

• The three only major property developers that were rolling out the majority of new Cairns projects pre GFC (two public and one private company) have now all gone bust
• There has been no new construction of any significance undertaken there now in three years
• There is no new construction on the horizon
• Supply shortages will drive property prices higher
• Supply shortages will drive rents higher
• Higher rental yields will attract more investors to the market, further adding to the supply shortages

I really do see great times ahead for those who hold Cairns investment property; albeit the tragedy in Japan is likely to defer this for some months.

As I write this in April 2011 I am witnessing clear and tangible early signs of the South East Queensland property market turning!

SEQ has not yet enjoyed a ‘property boom’ in many years. There have been booms in the North Queensland, Perth, Darwin, Canberra, Melbourne and Sydney markets, but SEQ is well overdue. I have been predicting that a correction is coming… and I am now witnessing signs that it is imminent.

WARNING!

• When markets turn they turn suddenly and most people are caught unaware.
• You can hold me to this… the buyer’s market HAS bottomed-out and prices ARE soon to rise.

To discuss your goals and/or opportunities in this current market – including having your mrd property mentor prepare a fresh ‘Retire On Your Equity’ (ROYE) analysis with you simply reply to this email NOW >>>here.

Have a great week,

Nick Lockhart.
Our Customer Care Program works for you… because investing is personal!

THE outlook for Cairns’ construction industry has worsened as building approvals for new houses and units in the city fell to their lowest rate in a decade. Only 33 new houses and four new units were approved in October, dragging the city’s building approval rate to the same levels of the construction crisis that followed the introduction of the GST in 2000.

But building industry bodies in the region are looking towards the light at the end of the economic downturn, insisting the sector’s fortunes are overdue for an upswing. “The indicators are showing that we may still bounce along the bottom of the market for some time before we see improving trend lines in building approvals,” Housing Industry Association Cairns manager Peter Collins said. “But we believe there’s light at the end of the tunnel and we’d expect to see it in the second half of 2011 when there’s some return of confidence as well as pentup demand and population growth.”

Master Builders Far Northern regional manager Ron Bannah said population growth was likely to trigger a housing shortage in the region unless action was taken soon. “Demand is going to outstrip supply unless somebody starts building units soon.” But the Urban Development Institute of Australia says barriers such as red tape are preventing some developers from breaking ground on new projects. “Infrastructure projects are seen as being so beneficial to our community, and yet we’re subjected to such a bureaucratic process,” UDIA Far Northern president Adam Gowlett said. Mr Gowlett hopes a construction industry forum led by the State Government in February will reduce the bureaucratic burden of seeking building approvals.

Via Cairns Post Dec 2nd 2010

Let me cut straight to the point: “Buy Into Negativity At Your Own Peril”. Self employed most of my working life, rarely has there been a time void of negative press and negative opinions. It’s not what happens that determines your future but your attitude to what happens.

What Are You Hearing?

Please read to this article in its entirety and allow me to challenge and expose the “conventional wisdom” that has influenced our society during the global financial crisis (GFC), deadly bush fires, drought and now devastating floods of the past three years.

Add to that claims that unemployment would bust through 10% as our economy fell into depression with property values losing 40%; like it was all a done deal! Well these didn’t happen, the economy is doing well, property values have strengthened and unemployment is falling sharply. Next were the claims (late last year) by so-called-experts that interest rates would rise in February; again broadcast as an almost given and incorrect!

Back before Christmas I caught up with a mate who is a respected and successful financial adviser. We both agreed that there was a greater chance that the next rate movement would be down rather than up. Guess what, six or seven weeks later and that view is gaining traction. At the time of the last interest rate rise I believed the Reserve Bank (RBA) got it wrong (as in the last two rises in early 2008).

Those who make decisions in reaction to the ever-changing opinion of others are doomed to a life of mediocrity! Why? Because throughout history “the masses” have messed up when it comes to financial security. Sadly this is a fact.

Any Dead Fish Can Swim Downstream

Any dead fish can swim downstream but it takes right knowledge, guts and determination to swim against the tide of popular thinking and opinion.

Laws Are Laws

Read more…

CAIRNS looks ready to make a strong comeback in its economy and property market.

Buy in the correct ownership split. Many married couples automatically buy in a 50/50 split. This is fine if your taxable incomes are similar but if they are not you could be losing a lot of money to the tax office.

Marion and I started buying in a 90/10 split because my income was $42k and hers was $18k. Later we ran our own business and income split so property purchases then were made at 50/50. It is important and can save you thousands of dollars a year.

Read more…

Talk of Recession has been a fantastic opportunity for investors who are ready to move quickly.

You would have seen the great deals that one of our highly respected developers in Cairns put to us recently. He was desperate to clear his remaining current completed stock before his lender would fund his next  projects.

Read more…

THE OFFER

How it has come about

The developer has recently released to market those last remaining units that were not made available for sale at the time the project commenced.

The developer behind these properties is one that mrd has worked with in the past. We are confident that the location, build quality and finish will make for an exceptional long term investment.

Banks in general are nervous about the general economy. As such, some are reducing their most recent valuations within this project… from what they were previously valuing them at.

These new bank valuations, in our opinion, do not reflect the state of real market as much as they expose the banks very strong attempts to mitigate their risk… by ensuring that purchasers who borrow 80% (of the valuation) will chip in more than just 20% (of the purchase price).

We have used our relationship and track record as leverage to negotiate with this developer to have him agree to absorb the difference between the market value and recent bank valuations.

This developer has been told by his lender that he must clear ALL his remaining completed stock before they will agree to funding the construction of his newer projects.

This change of attitude from his lender; who had previously said “YES” to his funding request – before the global credit crisis – has incentivised/motivated the vendor to make this limited, attractive offer on those last remaining completed stock items.

Therefore, we are excited to be able to offer a small number of investors, a brand new property at 2005/2006 prices, PLUS a few other sweeteners/incentives as well.

Read more…

One of the secrets of property investing is not to buy into up-market or highly expensive developments. Medium priced projects offer much greater potential for stable tenancies and percentage capital gains.

Our stocklist includes some fine examples in Queensland, Brisbane and the Gold Coast.

We believe the Gold Coast has exceptional potential and still looks cheap, but some clients find the Gold Coast a little above budget, so we have spent time sourcing some wonderful opportunities further north.

We have unearthed some fantastic opportunities in Northern Queensland – Cairns, Townsville and Hervey Bay – all with affordable prices, generous rental yields and the potential for serious capital growth.

2 Year Rental Guarantee @ 5%

These house and land packages are set in amongst a growing and developing area of residential community suburbs for young families and established Cairns residents. Located on the southern corridor of the Cairns Local Government area, the suburbs Edmonton and White Rock are the largest suburbs in Cairns with a mixture of commercial, residential and recreational amenities. Also available are packages in the very popular Smithfield suburb in the northern suburbs of Cairns.

These quality 4 bedroom/2 bathroom house and land packages are amongst a portfolio of multi award winning homes designed to reflect the environment with their emphasis on an abundance of space and light, maximizing ventilation and the frequent use of courtyard and patios to create a sense of freedom and serene comfort. The builder’s specifications are to design a “tenant‐ready” house and land with no hidden costs for the astute property investor. Read more…