mrd

Last week the Reserve Bank of Australia (RBA) made the decision at it’s monthly board meeting to leave the official cash rate on hold. That means no adjustment to interest rates this month.

But Did The RBA Get It Wrong?

It will be interesting to watch what they do with interest rates in the months ahead. Their actions will be an indication of whether this months decision to leave rates on hold was the right one or not.

At the beginning of 2008 the RBA put interest rates up twice. At the time the opposition argued that the decision to do so was wrong and a reaction to Kevin Rudd & Wayne Swan talking up inflation; citing it as the # 1 enemy to go after. What they failed to recognise was that the negative economic impact coming out of the USA had already begun to work its way through the system and here in Australia the economic slowdown was just about to bite.

The numerous interest rate cuts later in the year is clear evidence that monetary policy in the early part of 2008 was wrong.

Read more…

The following graph shows the history of interest rate movements in Australia from March 2001 to March 2009. The official cash rate currently stands at 3.25 per cent, which is a 45 year low.

Some people are simply confused right now. They have heard so many mixed messages in the past 18 months that they are unsure if now is a good time to step out and invest… or hold back and minimise their commitments.

If that’s you, don’t stay confused. It’s only when we have the right information that we can make fully informed decisions.

• Keep asking questions
• “Lash out” and have us prepare a Finance Structure & Cash Flow Health Check (there’s no cost anyway)
• Explore your retirement possibilities; not based on what you have done to date but what is possible in the next 7 to 10 years

To have us assist you, click here

Happy Investing,

Nick Lockhart
mrd Customer Care Program… because investing is personal

Prevention is better than cure. A complimentary, no obligation Finance Structure & Cash Flow Health Check may:

• Save you (literally) tens of thousands of dollars
• See the mortgage on your home cleared quicker
• Open up opportunities that would otherwise have passed you by

Yes please!

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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.

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As part of mrd‘s Customer Care Program and our ongoing commitment to you… we are making available the following special offer to anyone who has ever settled an investment property through mrd.

We have the software to prepare a complete financial analysis of the investment properties you have purchased through mrd to reveal what  the shortfall or surplus is each week; that is… what is it costing you to hold the property or how much is being put back into your pocket each week?

The changes in interest rates have changed most peoples cash flow situation significantly.  Many are now positively geared.

We will also give you an indication of what we believe your property is currently worth.

In order to complete this accurately for you we will need you to supply the following information:

• Taxable incomes before deductions allowed by your properties (this would be your gross taxable from your wages income or business distribution, after any salary sacrificing but before any property deductions.)
• Ownership percentages
• Loan amounts used for each property and the interest rates
• Property Purchase Cost
• Estimate of Current Value
• Body Corporate
• Rates
• Weekly rental
• Depreciation estimates (these are available from your depreciation schedule)

If you are an existing mrd property purchaser and would like to take advantage of our offer to prepare for you an up to date “Cash Flow Analysis Report” on your existing investment property; please click here.

Happy Investing,

Nick Lockhart
mrd Customer Care Program… because investing is personal

Friday February 13, 2009, 3:27 pm

SYDNEY (AFP) – Australia’s parliament narrowly passed a 42 billion dollar (28 billion US) stimulus package Friday in a bid to stave off recession in the face of the global economic crisis.

The parliamentary approval leaves the government free to immediately implement its spending plans, with Prime Minister Kevin Rudd stressing the need for swift action throughout protracted negotiations during the bill’s passage.

Rudd was jubilant after parliament backed the plan, saying the package was in the national interest and would help Australia’s centre-left Labor government fight the global economic recession.

“The most irresponsible thing to do today, with the worst global economic recession since the 1930s staring us in the face, would be to do nothing,” he told parliament.

The package includes spending of 28.8 billion Australian dollars on schools, housing and roads over four years, tax breaks for small businesses and cash handouts of 12.7 billion dollars to eligible workers, farmers and students.

Rudd said the Treasury estimated the plan would boost economic growth by 0.5 percentage points in 2008-09 and 0.75-1.0 points in 2009-10, supporting up to 90,000 jobs.

“Without parliament’s support for this plan, growth would be slower and unemployment would be higher,” he%2

>>>>  Finance, Business and Company News – Yahoo!7.

Over the past 8 years or so speaking with all types of people on the subject of investing in property, many, generally new to investing, ask me the “what if” questions. My broad base of experience has meant my answers have generally put their minds at ease. Two questions, however, that I lacked a good solid answer for were:

1. How good will your portfolio be if we have another world war?
2. How good will your portfolio be if we have a worldwide recession or depression?

Well, with regards to Q 1, I still have no concrete answer for, and hopefully never will. With respect to Q 2, however, I can now (i.e. only now) say from experience… “It’s all ok”!

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In this example we have used Endeavor Gardens at Deception Bay  showing how you can lower your holding costs, by capitalising your expenses.

Non Capitalised Example:

Weekly holding cost is $32.

Link to full non-capitalised report: Click Here PDF (24kb)

No weekly cost – positive cashflow, $75 per week.

Link to full capitalised report: Click Here PDF (24kb)

At the peak of the interest rate cycle the standard variable of the big 4 banks was 9.57%. Assuming you took up the offer of a professional package with the banks and qualified for the full 0.7% discount your interest rate would have been 8.87%. For a peak rate, that isn’t too bad considering long term history. I recall buying my first home in 1994 when the rates had come down to a low 10.5%. They then dropped to 9.5% and I was dancing with joy at how much money I was saving and how cheap interest rates were.

How times have changed.

To demonstrate how the changes in interest rates affect your holding costs I will use the properties at Endeavour Gardens as an example…

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

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

Consider the story of Colonel (Harland) Sanders…

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