THANK YOU to everyone who participated!

Current cost of living pressures have people torn between two realities:

1. The need to exercise extreme caution and defer new investment borrowings because of uncertain economic conditions.
2. The need to break the poverty cycle and get out of the financial ‘rat race’ once and for all… also because of uncertain economic conditions.

If like so many these days you want to take decisive action but have been put off by adding further pressure to your cash flow then the answer may be right under your nose.

“Great opportunities arise when excellent investment prospects are surrounded by unusual circumstances that cause a situation to be misappraised.”

There is no doubt that we are living in unusual times; but that has its UPside… opportunity, opportunity, opportunity!

One message I have heard through the survey results and from speaking with people generally is that the biggest obstacle to opportunity can be summed up in two words – Cash flow!

Now you can have your cake and eat it too! Read on for details of free-standing houses and duplexes with rental returns of up to 8.85% and great capital growth potential. That’s $299 a week cash flow positive using mrd‘s advanced financing strategies!

15% Property Returns About Normal

As a rule of thumb a property that grows on average by 10% p.a. should at the time of purchase have a rental return of about 5% (total 15%).

For a property to deliver positive cash flow the rental return needs to be about 8%… meaning such a property will grow on average by roughly 7% – or take ten years to double in value (a BIG difference from seven when you factor the power of compounding).

Finding property that doubles faster has always been my goal. Yes, in the same way as some events may trigger a one-off spike in property values the impact of the global financial crisis (GFC) had a negative short-term effect. But it’s medium to longer term averages that we should be investing for (unless you are a property trader or speculator; but that’s a completely different, higher-risk strategy that we do not promote).

You Will Never Get Rich On Rent

Rents are an essential part in affording property but if chasing higher rents mean buying property with a slower long-term doubling rate it can be a very costly exercise. So in recent weeks we have worked tirelessly, taking advantage of market conditions to source and package some exceptional opportunities that will deliver on both equity and cash flow.

18% Property Returns – Limited Numbers For A Limited Time

Here is just one example of a deal mrd has negotiated just this week. The properties are positioned for capital growth and results apply to a couple who earn just $80,000 and $50,000 respectively.

3 bedroom duplexes

• $40 a week to hold or
• $50 a week cash flow positive with mrd’s advanced financing strategies

Here’s another…

Two (only) four Bedroom houses

• Located in the centre of a leading regional city
• Strong rental demand from growing mining industry workforce
• Within two kilometres from a leading university
• $84 a week cash flow positive or
• $299 a week cash flow positive with mrd‘s advanced financing strategies

We have other three and four bedroom free-standing houses that will deliver either positive or near neutral cash flow.

My point is this…

In the past it was a trade-off; equity OR cash flow… but rarely both. Today’s unusual market circumstances have opened windows of opportunity and for those who recognise the times we are in there is the potential for both; equity AND cash flow!

• To take advantage of the opportunity to hold property with little to no impact on your cash flow express your interest >>>here
• There is a process that needs to be worked through to determine whether you qualify at all and, if so, what the impact (+ or -) a property might have on your cash flow. To allow us to prepare such an assessment for you please complete an online (secure) ‘My Starting Point’ form >>>here

Happy Investing,

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

The first point I would like to get across is the mind-boggling power of compound interest. Yeh, yeh, heard that before… or have you? Really?

The Eighth Wonder Of The World

Albert Einstein was one of the most intelligent people who ever lived. When asked what he thought was the greatest of mankind’s discoveries he answered… “Compound Interest”. He referred to it as the eighth wonder of the world.

As an example of just how powerful this can be, consider the following scenario.

Suppose that back in 1492 Christopher Columbus, the explorer, wanting to invest in the ‘brave new world of the future’ deposited one penny (or cent in today’s money) into an interest-bearing account that earned 6% per annum. Assuming he, and his descendants following, withdrew the interest earned every year; his total earnings to date would be just over 31 cents – an insignificant sum of money in 2011! NB: We’re obviously pretending it was possible to remove a fraction of a penny.

Let’s look at another example.

Assuming the same one penny deposited into the same interest bearing account at 6%, but this time the interest was left untouched and allowed to compound. How much would be there today; 519 years on?

Have a guess what you think that bank account would be worth today? $500, $5,000, $50,000, $500,000, $5,000,000… or?

As hard as it may be to believe, the answer is indisputable – it’s pure mathematics. Try $136,064,262,621.40! Now in case you missed that let me spell it out.

One hundred and thirty six BILLION, sixty four MILLION, two hundred and sixty two THOUSAND, six hundred and twenty one DOLLARS and forty CENTS.

The Difference

In one case the interest was taken year on year (totalling 31 cents) and in the other it was left and allowed to compound. That’s interest on interest for 519 years (totalling over $136 billion).

What Has This Got To Do With The Myth Surrounding Positive Cash Flow Property?

The average growth rate of your property portfolio over the medium to long term will play a big part in determining your future wealth. For example, if Christopher Colombus had invested that same one penny (or cent) for the same 519 years, but it compounded at just 5% per annum (i.e. a 16.7% less annual return); would the final value be 16.7% less than in the example above?

Absolutely not!

In this case with a 5% compounding return, the value of that bank account today would be just $993,679,241.57. That equals just 0.73% of what the value of the bank account would have been if the one penny had compounded at 6%! Put another way; the 16.7% reduction in compounded returns wipes a massive 99.27% off the final value in 519 years.

While $993+ million may seem like a lot; the opportunity cost was $135+ billion!

You see, it is not only the gains that are compounding but the losses. In this case the loss of more than 99% came about by a return that was just 16.7% less.

You see why it is so important to consider the opportunity cost of chasing a higher rental yield in the case of investment property? Yes, on the face of it, it may seem like the smarter thing to do… but the numbers above should make it absolutely clear that it is not.

A property that grows by an average of 7% p/a compared with one that grows by an average of 10% p/a may attract $40 or $50 a week less in rent but it is also compounding at 30% less (almost double the 16.7% as in the previous example).

Now I’m not suggesting you will be around in 519 years to cash in on your property wealth, but even over a small period of time the differences are massive.

What do you suppose your opportunity cost would be for accepting $40 a week less rental income over five, 10 or 20 years from now?

Assume you invest in a property today valued at $350,000. Twenty years from now, if the average year on year growth was 7.2% (or 10 years to double) it will be worth $1,405,930.17 – NICE!

Alternatively, you invest in a different $350,000 property that averages a 10.29% growth each year (or 7 years to double).

In the latter example it would be worth $2,481,937.14.

That’s a difference of $1,076,006.97 or an additional 76.5% in the new value of the property… and this is with just ONE property and over just TWENTY years!

Just as it is with the one penny/cent invested; it will seem for some time like nothing is happening. In the early years it sometimes seems challenging for some to hold onto their properties. The negative impact on cash flow from paying interest, rates, body corporate and maintenance for what initially looks like little or no rewards drives some into making very foolish decisions. Please don’t be deceived… don’t wind up a sad statistic… payday is coming for those who wait and allow time and inflation to work for them.

The Cash Flow Balancing Challenge

Some people over extend and ‘bite off more than they can chew’; I understand that. Often, however, an investor lacks the understanding and thinks a property purchase is beyond them or that an existing property has to be sold. In many cases it is the wrong finance structure not affordability that is the problem needing to be fixed. Reckless behaviour will do you harm; avoid it. You should only ever make safe and responsible investment decisions. Equally, however, it is damaging to allow a lack of understanding to be the cause of you missing opportunity; as we saw above.

NB: We can provide a limited opportunity of higher cash flow property for sale; where capital growth is not compromised; see ‘Espresso On Southport‘ and enquire via the link below.

mrd Advanced Financing Strategies ™

Through our advanced financing strategies it is possible to greatly reduce or even eliminate the cash flow shortfall on investment property.

Were you aware that many astute investors do not pay the rates, body corporate or repairs and maintenance costs from their cash flow? Not understanding and having your finances sorted properly can cost you in so many ways; including:

1. Selling An Investment Property. This results in a huge backward step where you may not only come out of it worse than when you purchased the property but you lose the right to all future capital growth.
2. Letting Opportunity Pass. Believing the holding costs are more prohibitive than they need to be, some turn down what could have otherwise been an affordable, wise investment.
3. Investing In A Poor Performing Property. Higher rental yields generally mean less capital growth. Rents are important in affording a property, but there is so much more that needs to be considered. Stronger capital growth… compounded over time, will be worth so much more to you than a better rental income. Remember the example above where your $350,000 property over 20 years was worth 76.5% more than it would have been had you chased a higher renting property at the expense of the higher capital growth?

Our in-house finance division is highly specialised; more than capable of assisting you with all your financing requirements. Whether you are looking to:

• Invest
• Consolidate debt
• Purchase a home or investment property
• Lease a new car
• Have a complimentary Finance Structure & Cash Flow Health Check to confirm you have the best loan structure and the best loan product available

Make contact with our finance team today!

Yes please! I want to speak with an expert and I understand your services are complimentary and without obligation!

• Any finance related enquiry >>>here
• Any property related enquiry >>>here

Happy Investing,

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

I’ve said it time and again that the residential property investment is a long-term proposition.  The property market takes about seven to 10 years to move through a full cycle – from low capital growth/high rental yield, to high growth/low yield and back again. Despite this, many property investors choose locations and property styles with little potential to survive and thrive throughout market fluctuations.

Some investors choose locations that lack the long-term underlying demand to drive capital growth, while others choose property styles that don’t reflect trends in the way people want to live. In other words, the property investment decisions that look good today may not prove so attractive in five, 10 or 20 years.  It’s essential to understand the nature of long-term economic and demographic trends, then select assets accordingly.

Interest rates rise and fall, but in the long term, dwindling oil reserves and rising petrol prices will be a key economic trend influencing the property market.  In the coming years, rising prices at the pump will make outer suburban living and commuting less feasible and less appealing. This will curtail the urban sprawl and increase demand among homebuyers for property in the middle suburbs close to public transport corridors, shops and schools. At the same time, rising property prices in the inner and middle suburbs will put home ownership beyond the reach of more Australians, or at the very least, delay it significantly.

Figures from the Bureau of Statistics tell us that the proportion of households renting from private landlords increased from 19 to 22 per cent in the 10 years to 2006 when the last census was completed. What’s more, the proportion of Australians aged 35 to 44 who were renting rose five percentage points over the same period, to sit at 32 per cent.  There’s every reason to expect that this trend will continue. Because many tenants want to maintain the trappings of an urban lifestyle, the trend away from home ownership will increase demand for rental properties within walking or short driving distance from trams, trains, shops, cafes and entertainment.  This will further boost capital growth prospects in the inner and middle suburbs.

Delaying having children is another trend set to influence the residential market well into the future. The median age for parents is growing, at 30.8 for women and 33.1 for men.  And women aged 40 to 44 said to have completed their families have an average of two children, compared with 2.8 in 1981. The shrinking family unit means that demand for low-maintenance, compact dwellings will rise, while demand for the conventional sprawling home on an outer suburban block will fall. When you look at all these trends in their entirety, it’s clear that pockets of the middle suburbs with large blocks on land close to public transport, shops and schools will provide feasible long-term opportunities for residential property investment, particularly for investors who have been priced out of the tightly held inner suburbs.

Mark Armstrong is an independent property analyst and adviser.

>>> Why it’s essential to have long-term investment views.

“Don’t Buy Property, It’s A Big Mistake” if you are just getting started as an investor!

mrd is approaching its 9th birthday and I can promise that over those past years I have met with many property owners who are suffering the consequences of mistakes made.

How mrd Came About

I founded mrd in 2002 and have worked hard to create a relaxed environment where you could comfortably and safely learn the “WHY TO” and “HOW TO” of becoming a savvy & successful property investor. When you understand the benefits of owning property and are taught how to go about it responsibly; you’ll get on board; if you have the financial ability. This Customer Care business model has been a win/win for mrd and our clients alike.

I know firsthand the challenges of balancing our time and money budgets; I’ve (we’ve) raised four kids… ahhh; and have just one left at school! We lead busy lives with many demands on our time and money and the urgent gets priority over the important. If you were tougher and put boundaries around your time to ensure the important was attended to things would be very different in five years time from what they would otherwise be.

This Is What You Want

We want to get to the “finish line” at a ripe old age, in great health, surrounded by family and friends who love us… having enjoyed the journey and “smelt the roses” along the way. We want to have had fun, adventurous and unique experiences. We want to be able to look back and reflect on the lives we’ve touched and the people we’ve blessed. We want to know that when we pass on we go to heaven and are missed by thousands. We also want to know that we have something significant to leave behind for the generations that follow. I’m not just talking about money… although that too; I’m referring to an example and a legacy.

If you are not actively working a plan that will set you up in the short to medium term I ask you to consider change. One of my goals is to positively impact as many lives as possible. In my early adult years I did that as the Pastor of a Church. In business I do it by attempting to help as many families as possible break free from job dependency through property.

The really important thing is to find the right balance. That is the fine line between doing nothing because you don’t know how or who to trust and racing out “having a go” before understanding what you’re really doing. Think for a moment what would happen if for whatever reason you were unable to ever work again. How would that impact on you… your family… and what about your home; would you lose it?

No Such Thing As Get Rich Quick

There’s no such thing as getting rich quickly (perhaps with a few exceptions like Justin Beiber) but if you don’t start somewhere it’ll never happen. I chose residential property as my wealth creation vehicle because it’s safe, predictable and offers better leverage than other asset classes… allowing me to speed the process.

Your life is different to mine in so many ways but where we are exactly the same is in what we want (more time and more money so we can choose what to do on a daily basis) and the time we have each week. What you do with your 168 hours each week will ultimately determine what your “finish line” looks like.

Prioritising Learning!

I can’t stress too strongly, although you might feel at times like I do; lol, the importance that you prioritise learning! I pour myself into this through my weekly newsletter, live events, webinars; DVD’s & books and so on. I want to both encourage you (the why to) and teach you (the how to) of becoming a successful property investor.

Up Coming Conferences

The conferences I am running over the next two weekends will pull together six complimentary industry professions and are put on so you can benefit. The depth of knowledge being shared is greater than anything I’ve been able to offer previously!

Here’s A Snapshot Of What You’ll Learn!

How To Set Up A Compliant Self Managed Superannuation Fund And Avoid The FIVE Most Common & Costly SMSF Mistakes.

• Turning Non Deductible Debt Into Deductible Debt
• You Qualify Now For A $90,000 Government Grant. We’ll Show You How To Get Your Hands On This.
• Research That Will Increase Your Capital Growth Potential.
• Exactly What’s Involved In Becoming A Property Investor
• How To Deal With Rising Interest Rates
• and much, much more!

The content of these conferences will be worth thousands of dollars to you. Please click the link below to check out all the details – then decide if it could help you on your journey.

• DIRECT TO CONFERENCE REGISTRATION >>>HERE
• CONFERENCE INFORMATION >>>here
• I’d Like To Get Started By LEARNING About Property Investing >>>here
• How Much Can I Borrow? >>>here
• Any Other Way mrd Can Help You >>>here

Happy Investing,

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

The institute conducted buyer and seller research last year and found 74 per cent of investors were buying property for capital gains purposes.

The next most common reasons were to fund retirement, for negative gearing purposes, as a means of deriving an income stream, or because they believed it offered a better long-term return than shares or super.

“While Queensland has had a very tough start to 2011, it’s heartening that many investors recognise the strength of our property market and the opportunities that remain for growth over the long-term,” REIQ managing director Dan Molloy says.

REIQ says 13 per cent of buyers purchased property last year for investment purposes. This is vastly different to 2003, when the proportion of investors was 40 per cent.

“Investors have most stayed on the sidelines over the past 18 months, but there are tentative signs they’re re-entering the market,” Molloy says.

“With stable rents, increasing demand and less pressure on property prices, there are plenty of opportunities currently available for investors to enter the market.”

via Australian Property Investor :: Capital growth pushes Queensland investors to snap up property.

1. Purchase Positively Geared Property:

‘Positively Geared’ means the rental income covers all the outgoing costs. Generally, to achieve a positively geared property, it will mean buying older, cheaper properties in regional areas that have less potential for capital growth.

However, owning a negatively geared property does not have to mean that the property costs you money from your cash flow as here at mrd we employ Advanced Finance Strategies to manage this. Some real estate agents will promote a property by advising potential buyers that it is positively geared but that is because they are assuming you will only need to borrow 80% of the purchase price.

At mrd we look at a property being either positive or negative based on borrowing 100% plus all your costs, using no cash of your own.

There are problems with choosing only positively geared properties:

1. Living off the rent from an investment property means you will be paying tax on the income received.
2. Regional areas are also considered to be higher risk as they can lose their main employer, (abattoirs, car manufacturers, mining etc) leaving you in a disastrous situation with no tenant and no capital growth.
   

   There are numerous examples we could give; Ballarat in regional Victoria is just one. Ballarat offered investors (whose focus was on rental return rather than capital growth) “cashflow positive” property. However, in the early 1990′s 9,000 Ballarat jobs were lost as the Kennett government closed schools, cut passenger rail services and slashed hospital budgets. Victorian Regional Development Minister, Jacinta Allan, in February 2008 said that “Kennett’s slash-and-burn policies ripped the heart out of communities in country Victoria”.

   Between November 2008 and June 2009 over 500 jobs were lost as a direct result of Ballarat’s struggling manufacturing industry; and in July 2009, another 200 jobs were lost as Lihir Gold quits Ballarat.

3. To have a good income, after tax, this strategy requires a large number of properties; perhaps 60-80 or more. This number can be a big, big job to look after (definitely not set ‘n’ forget… for busy people™).
4. Often people following this strategy will try to pay off the loans using principle and interest. This means they are paying around 30% more per month than an interest only loan, and that will greatly impede their accumulation of more property.

2. Buy, Renovate and Sell:

This means purchasing a property at the best possible price, renovating the property, then putting it back on the market hoping, that after all your costs, you are going to make a profit.

There are problems with this strategy:

1. When you sell the property it may become subject to Capital Gains Tax (CGT); in some instances even if it was your principal place of residence.
2. You need to buy and sell just at the right time – this is trading, not investing and timing is critical to realising a profit.
3. There is an enormous risk of the ‘unknown’. Unexpected problems with roofing, plumbing, electrical, weather and delays etc can cause cost ‘blow outs’.
4. You are paying interest on a non income producing property (i.e. untenanted).

For most, this may all seem too much like ‘hard work’, however, there are those who find this process exhilarating and rewarding.

3. Buy For Growth and Hold Long Term:

This is the chosen strategy of the team @ mrd.

With this strategy and subject to your affordability, you purchase properties in areas that have good potential for capital growth. You purchase new or near-new properties for maximum tax effectiveness and minimum maintenance; sticking to property that is median price for the area. The rental income and available tax deductions are important to help you hold on to the property. The goal (or objective), however, is capital growth.

The advantages of this strategy are:

1. It’s a low risk strategy.
2. Because you never sell the property you never pay Capital Gains Tax.
3. Being the most tax effective strategy you greatly reduce your ATO tax liability; thus increasing your retirement income.
4. Over time capital growth will increase your equity pool. There are many ways to use this equity to fund your lifestyle and living expenses, some of which are tax-free. What strategies are available and best suited to you at any time will depend on both your situation and what loans a lender may offer at that time.
5. Your property portfolio should double in value approximately on average every seven (or perhaps 10) years. It should be noted that growth is not seen in a straight line; rather it is usually the last two years of a real estate cycle when most growth occurs.
6. Four or five median priced properties should give you between $1.5m and $2m in property value. After a real estate doubling cycle you would have that much again, but in equity. This number of properties held is considered very manageable, even for a busy person.

However, there are also problems with this strategy:

1. This strategy takes time.
   1. Where a person’s income allows them to borrow the money to secure their four or five median priced investment properties in as many years, it will generally take them seven to 10 years to reach financial independence.
   2. Someone on an average income may take seven to 10 years just to secure their portfolio of four or five properties. In such cases it could take that person another seven to 10 years to reach financial independence. Most would consider this still to be a better option than other low risk strategies; such as Superannuation e.g.
2. Capital growth is essential to the success of this strategy. Fortunately, Australia has some great areas historically proven for long-term capital growth.
3. It requires a mindset that you are comfortable with debt; that is the good kind that we call “Productive Debt“.

Before choosing the strategy that is right for you, you will need to undertake research so as to be “fully informed”. The next steps are (1) to develop a workable plan and (2) stay focused on and work that plan; avoiding the many distractions along the way.

Our Property Mentors are here to support you at every step along the way. By you initially completing a “My Starting Point” form we can then assist you to create a personalised, realistic, responsible and workable plan. This no obligation, complimentary offer could be the very catalyst for you in realising your goals and dreams.

If you can answer “YES” to the following then mrd can help you:

• You are currently employed.
• You have equity in an existing property or access to someone else’s equity, e.g. a relative.
• Alternatively, if you have no equity you have a cash deposit.
• You are serious about setting a plan for your future to ensure better lifestyle choices in the medium term… and ultimately a secure and comfortable retirement.

I would like to speak with an mrd property mentor about creating a personalised, realistic, responsible and workable plan to help me achieve my goals/dreams >>> here

Complete the “My Starting Point” form >>>here

Happy Investing,

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

Hi Nick and everybody at MRD,

I just found your site and is very interesting. I been an investor for over 40 years and still learning especially from sites like this one. You have a great deal of good logical information. I live in the USA and been doing mostly what you been saying. Property values are down right now but the cash flow keeps on coming in:) I retired at 42 now 63 thanks to my investments, just wish I would of paid more attention to capital growth instead of cash flow. Going to look at focusing on strong growth area’s as you suggested, makes a lot of sense. If I lived in your area, you would become my new best friend.

Jim P.
P.S. keep up the good work.

Worth Reading…

• “Capital Growth Is King” >>>here
• “The Long Term Impact Of Negative Vs Positive Geared Property” >>>here

mrd Search Engine

The search engine on our web site is powered by Google. Just type in any topic you like (E.G. Valuations, Capital Growth, Negative Gearing, etc) and watch how quickly it will find relevant articles for you to research from. For those wanting to learn how to safely and responsibly utilise productive debt to leverage into well researched residential real estate – in areas of limited supply – where demand is growing – for the purpose of creating sustainable long-term wealth… the mrd web site is for you! Packed with so much quality educational information (Videos & Webinars as well as hundreds & hundreds of written articles)…you will never find the time to get through all of it!

Happy Investing,

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

Recent figures from RPData inspired me to hit the keyboard again.

The capital growth figures for last year (median prices up to November 2009) show that Australia wide units showed better growth over the 12 months than houses.

Yes that’s right… in 2009, based on median prices, houses with the big land content did not grow in value as much as units with minimal land content.

It was close nationally, houses grew 9.9% last year and units 11.9%. In Brisbane units grew at double the rate of houses, in Darwin nearly 3 times the rate of houses, Sydney and Adelaide were the only cities where the growth on units and houses were similar.

Is this surprising? Not to me as I have said over and over again its not the property that grows in value it’s the position.

Generally to get really close to the CBD, the shops, the hospitals, the transport, the river or beach the land is so expensive you don’t get houses you get townhouses or units. We believe, as do many others , that to get capital growth long term you need to be close to all the infrastructure and houses generally don’t achieve that (Lily Rise 800mt from the new Coomera Town Centre is one exception).

Some people get hung up on land content or look at a house to be “better” than a townhouse or unit . Better how? In my experience the position of a house generally means slower growth, its harder to look after and for people who don’t like body corporate fees associated with units etc – you end up paying for the same things in houses. Body corporate fees include building insurance, a sinking fund for future maintenance etc – all costs you will eventually incur with houses anyway.

I recently had discussions with a friend over property types and I think often people miss the point. Bottom line is, as Nick says often, you don’t want a property you want an outcome. You want to use a strategy that has minimal risk, with minimal effect on your current lifestyle, and gives you access to the funds you need to retire comfortably (whatever that means to you) when the time comes.

I have over the past few years bought houses, units and townhouses. In most circumstances (never say never) I would not consider a house again. I am looking for an outcome (after 10 years I have pretty much achieved that) and I will consider whatever provides it for me with minimal risk and minimal effort from me (I am very lazy….ask my wife).

Our Complimentary, No Obligation Offer

Are you just starting out or someway advanced on your property investment journey? Perhaps you don’t yet have the knowledge to even get started. Wherever you are right now (let’s call it “Point A”), moving to “Point B” (the realisation of your dreams and goals) will require right action and probably the responsible use of debt (the right kind of debt).

Our property mentors, who are all investors themselves (doers, not theorists) are committed to supporting you in the pursuit of your financial goals. With the support of our propriety software and an mrd property mentor running many “what if” scenarios we can help you to take much of the guess work out of your planning and decision making.

To explore the possible alternatives available to you… or to seek help to develop your own tailored investment plan; just ask! Our offer of support is both complimentary and without obligation; that’s an unconditional promise!

YES PLEASE!

I would like an mrd property mentor to make contact with me to assist me in creating a plan for my financial future >>>more

I would like mrd to assess my borrowing capacity >>>more

I just want to know if it’s possible to reduce the amount my mortgage is currently costing me >>>more

Happy Investing,

Martin Bell
mrd Customer Care Program… because investing is personal

Many have read my earlier contributions to the housing affordability debate; which are at odds with the populist view that ‘Australian housing is very expensive by international standards’.  Christopher Joye is the managing director of Rismark and the arguments he puts forward  in his article ‘Is Australian Housing Expensive’ are quite compelling, in my opinion.

• Australia has a very high rate of home ownership internationally (around 70 per cent at the time of the 2006 Census). How so if housing is so expensive?
• Another indicator that our housing is not internationally expensive – we also have amongst the lowest mortgage default rates in the world with just 0.66 per cent of the five million borrowers with a loan, materially behind on their repayments. This is just 10% of the US figure and 25% of the UK data!
• Based on the RBA’s preferred benchmark, housing affordability is no worse than it has been on average over the last 28 years.

mrd’s Property Selection Bias

Clients and subscribers alike would notice that it is the exception to the rule, that we recommend house and land; our featured property of the past few weeks, Lily Rise, is one such exception.

The issue is not so much what to buy as it is where to buy (or invest). Freestanding houses are generally located in areas remote to essential infrastructure such as transportation, shops, hospitals, employment and so on. New subdivisions developed on the fringe of capital cities mean (busy) residents must spend more time stuck in traffic burning fuel. Looking forward, with an understanding of changing demographics, I believe these areas are likely to experience a slower rate of capital growth. Regional towns where the population base is small are also likely to produce slower capital gain, in my opinion.

NB: Investing is personal and one size doesn’t fit all. My comments are to support a broad-brush philosophy, not offer advice to any individual. There are times when investing further away from an infrastructure hub may best serve your particular situation; as property mentors our job is to thoroughly explore all options and their impact for you.

Attractive rental returns may initially seem enticing, however, based on my 10 years experience the success I have enjoyed from my property portfolio has been a “capital growth story”, I was never going to get rich on rents.

Christopher Joye Commented

After reading Christopher Joye’s comment it should become apparent as to why I was so interested:

The supply that is coming online is also a poor substitute for existing homes because it does not have the same ‘amenity’ value (think location, schools, hospitals, transport etc). This creates additional risks for investors since the high cost and poor location of new supply means that it has questionable demand prospects, which is one reason why the finance available for development has dried-up.

So when you see us recommending units in places such as Robina Town Centre it is because the infrastructure (new rail line, new hospitals, new shops, highway extensions etc; in fact over $7,000,000,000 worth – that’s seven billion dollars) has meant demand has pushed land prices to a point where units and townhouses are the only viable options. You simply cannot buy house and land and remain in the “centre of the bullseye”.

Lily Rise Is The Exception

I mentioned Lily Rise as an exception. WHY? Because these are house and land, but just 800 metres from the “bullseye” of Coomera Town Centre. The state government is pushing for this Town Centre to complete within four years, reportedly creating 20,000 new construction jobs. Lily Rise is, therefore, one case where it is possible for you to buy as the town centre is developing, in an area which is expected to boom with a population of 83,000 by 2016 and 100,000 by 2026.

To again quote what I once heard Michael Matusik say at a conference:

If you want capital growth, remember this, infrastructure rules, you go where the infrastructure is going.

Our Complimentary, No Obligation Offer

Would you like to join the many others who each week take advantage of our complimentary no obligation offers? Perhaps you would like to speak with an mrd property mentor about your property investment journey or request a cashflow analysis on Lily Rise. Alternatively you may want us to arrange to have your borrowing capacity assessed with the view of having our help in developing your own tailored investment plan.

Whatever your situation, question or need… we are committed to ethically, responsibly and respectfully supporting you in the pursuit of your financial goals. Our Customer Care Program recognises that investing is personal. It is our point of difference and your peace of mind.

YES PLEASE!

• I would like a property mentor to make contact with me >>>more
• I would like mrd to have my borrowing capacity assessed >>>more
• I would like a complimentary cash flow analysis prepared for me on the Lily Rise project >>>more

Happy Investing,

Martin Bell,
mrd Customer Care Program… because investing is personal

Read: Is Australian Housing Expensive
Read and View: Steve Bracks and Bob Carr discuss population growth

About this time last year many Australians were at the height of hysteria and panic. Fuelled by pessimistic and often irresponsible journalism, it looked to many as though the global economy would slip into the abyss and take Australia with it.

Lehmann Brothers, a large US investment bank had just collapsed, stock markets were plunging and the numerous ‘prophets of doom’ were being interviewed on primetime TV, scaring Australians into believing that their homes were about to plummet in value by 40%.

It now seems that the Rudd Government’s fiscal stimulus package was an overreaction. Certainly the Reserve Bank of Australia (RBA) began their massive monetary stimulus by slashing interest rates to 50 year record lows.

In amongst all this, we did our best to remain sober in our assessment of the economy and the property market. What we said then is still on the record now, via blogs and recorded webinars. In a nutshell we said that there were great buying opportunities for those that were informed and felt they could tough out the negatives. We said that Australia’s house prices would stall and perhaps soften due to a lack of household and investor confidence… but they would not fall by anywhere near 40% (except perhaps those executive homes at the top-end where demand is limited). We said that by mid to end 2009 we would see the market actually take off again and that 2010 would be a great year for those who hold an investment property portfolio. Might I add that we picked every interest rate cut ahead of time (with the exception of suggesting the RBA would go one more .25% down, which they didn’t).

I say all this not to ‘blow my own trumpet’ but rather to reinforce the seriousness with which we take what we do. We are not merely selling real estate but rather mentoring people to safely and responsibly navigate a wealth creation journey towards the realisation of whatever it is that is important to them and their family.

Unexpected Bumps

There have been some unexpected speed bumps along the way. I was not expecting the rental market to be so affected by the Rudd government’s boost to the first home owners scheme. I did not see rents softening as much as they have and I did not see the prolonged rental vacancies that have occurred; albeit just for a minority of our clients.

Looking Forward Over A Year

In the series of webinars (web seminars) that I held; not sure if it was the November ’08 or the August ’09 ones (link to ’09 recording below), I said that it is a great thing to follow a trend but it is a great thing to lead one. What do I mean by that?

There are those who over this past year have been actively adding to their property portfolios as well as those imminently about to. I believe that in Queensland we are now coming out of the back of a prolonged period of little or no growth… and catch up is just around the corner. I see 2010 as a very good year and would encourage those who pass our three point safety checklist to seriously consider acting sooner rather than later. There is still some already completed stock around and there are some deals that we have secured (due to developers being pressured by their lenders), but there is not that much. As far as new stock coming online there is a lot less available than what the groundswell of demand will require; this WILL push prices higher.

Prices Are Going To Go Up

Given prices are going to go up we have three choices:

1. Secure at today’s price and own the capital gain
2. Wait until we see the market take off, pay more and carry additional debt equal to that capital gain
3. Do nothing (as 95% of Australians will)

Action Requirements

Anyone wanting to take (careful, considered and responsible) action to ensure they have more financial choices in the future, needs to right now consider three things:

1. Do I have the Borrowing Capacity in the first place?
2. Do I have the capacity to hold onto the property going forward? Will there be an initial cost to hold the property… and if so, how long will that take to turn around so that the income from the property is more for me than the total cost of holding it?
3. Do I have the mental toughness capacity? Will I be able to sleep at night… or are there so many unanswered questions in my mind right now that I am just really not sure?

Our Complimentary, No Obligation Offer

Every week our team of Property Mentors are engaging with readers of my newsletter, from all around the country, who are having these questions (above) and many others answered. An mrd Property mentor is not a salesperson, we don’t have any. They are investors, finance broking specialists and all-round nice people who have a heart for others.

I invite you to take me up on my complimentary and no obligation offers to speak with an mrd property mentor about the questions you have. Perhaps you would like us to arrange to have your borrowing capacity assessed with the view of having our help in developing your own tailored investment plan.

Whatever your situation, question or need… we are committed to ethically, responsibly and respectfully supporting you in the pursuit of your financial goals. Our Customer Care Program recognises that investing is personal. It is our point of difference and your peace of mind.

YES PLEASE!

• I would like a property mentor to make contact with me >>>more
• I would like mrd to have my borrowing capacity assessed >>>more

Happy Investing,

Nick Lockhart,
mrd Customer Care Program… because investing is personal