Do you remember when the GST was introduced into Australia? It was July 2000. Since then, most working singles and couples could have managed to secure (at least) half a dozen well researched residential investment properties. If you did this; congratulations! No doubt, with falling interest rates and a seriously growing housing shortage… the global slowdown would be delivering you more benefits than challenges right now!

Reaction is all too common! Why wait for drastic times to push us to those “drastic measures” that the politicians keep spruiking?

Doesn’t it make more sense to conduct our financial affairs during the good times in preparation for those drastic times… that always find us sooner or later?

Now while we can’t change the past, it is unwise… perhaps irresponsible… not to learn from it!

• Wealth gives financial options… to work or not; full time or part time
• Wealth allows a family to capitalise their expenses through the leaner times, should that be necessary
• Wealth allows you the luxury to assist an aged parent or take your children travelling and broaden their horizons in life
• Put simply, wealth will allow the construction of a “force field” around your family so that when (not if) financial pressures come your way, they are found to be impotent and ineffective… as far as you and your family are concerned anyway
• Wealth allows you to take advantage of opportunities when they present

No!!! It is not drastic times that call for drastic measures; but life itself!

Sooner or later, LIFE calls for drastic measures. Therefore, until you have created your security and made provision to “pay for the rest of what your life will cost”… you should (1) have a workable plan and (2) be working that plan. So let me ask… are you?

You Have A Duty Of Care!

We get up each day and go through our routine, join the “rat race” and head to work! Why? To earn a living! Let’s not deceive ourselves… earning a living will never on its own deliver us lifestyle.

Unless you are doing something on the side; i.e. separate to your job… like kicking off your part time business, writing the songs that will form your first CD, working on securing a patent for your invention before taking it to market… or perhaps leveraging off what you already have to increase your asset base… you are derelict in your financial “duty of care”… and it is certain that lifestyle with cashflow (as opposed to debt) will never be your experience.

Yes!!! We first need to earn a living, but if that is all we are doing… if we are not simultaneously creating tomorrow’s lifestyle… we (absolutely) will be disappointed! It’s not a matter of if, rather when! Some people’s neglect catches up with them sooner, while others later. Either way, sooner or later our neglect will catch up with us. Hopefully when it does, there will still be time to do something about it.

While we have no choice but to endure pain at some time, we do have a say in which pain we will endure. Which have you decided upon?

1. The pain of discipline now, for a season
2. The pain of regret later, for the remainder of your life

Each and every day; in both the good times and bad… we should be doing something to take us a step closer to the realisation of our dreams and goals.

Don’t wait for ‘your ship to come in’. You began constructing it long ago already, piece by piece… and right beneath your feet. Truly talented musicians and sportspeople endured the pain of discipline for years and years before there ever was a hint that success was heading their way. Day in and day out, little by little… they did “something” to take them closer to their goal. Remember that it takes years to create an “overnight success”.

In an interview, one Australian Olympic swimmer said he never missed a training session. This was so that when he stepped up on the starting block he would know that he had done everything absolutely possible to be the best athlete that he could be. Whether tired or full of energy, whether the water was cold or warm or whether or not he felt like it… he did something towards his goals every day.

Constant and Unrelenting Action

Any worthwhile endeavour will require constant and unrelenting action. Taking great financial care of your family is not all they need from you… but is very, very necessary all the same. Let’s face it… the alternative is not worth considering.

Subprime, Fannie Mae, Freddie Mac, Global Credit Crisis, Recession, unemployment and so on and on! These words are not valid excuses for taking time off. Like the swimmer… rain, hail or shine… he swam. Making forward progress is sometimes quite easy and other times it’s really, really hard… but it’s always necessary.

There are times when it is prudent to conserve your financial resources while you seek out new opportunities… there are times when it is most prudent to step out and take action. For some it is now a time to consolidate. For others it is a time to move forward. Whatever choices we make on a daily basis, they ought to be carefully and responsibly considered responses to both our goals and circumstances… not a reaction to fear, uncertainty and confusion.

The important thing is to constantly do something towards your goals.

• Clearly define your goals
• Be real! If you are not prepared to fight for a goal… it isn’t really one at all
• Know your income(s) and expenditure
• Know where your money is being spent
• Identify wasteful and unnecessary leakage
• Get a financial health check
• Fine tune your cash flow structure
• Have your finances assessed to see what resources you currently have
• Learn all you can about your chosen strategy [did you catch that one?]
• Look for ways to overcome your next hurdle
• Remain focused and don’t get distracted

Remember, the financial “ship” that will keep your family afloat is being built piece by piece beneath you… and by you!

Regardless of where you are on your journey; just getting started or well on your way… discipline yourself daily to make some forward progress.

Walking the Talk

Each of the 8 members of the mrd team are doing just this. Our youngest team member’s daily activity includes learning and saving for a first deposit. Now is not the best time for him to buy, but he is doing something! Every admin person, including our part time bookkeeper has either settled an investment property with mrd or is unconditionally contracted to do so. All are looking beyond their next purchase and planning more.

Then there is Martin’s example. Martin set a goal to become a property multi-millionaire when he was 50. On a daily basis he then steadily progressed towards that end and at 58 years of age he retired (sort of like an Olympic achievement… considering how little he had in his favour at the age of 50). Today Martin works as an mrd Property Mentor on a part time basis… and by choice. He does not need the income as much as the involvement in helping others do likewise. If you have not spoken with Martin and had him tell you of his journey, maybe you should. Doing so would constitute as “doing something“… and cost you nothing.

If small doable, daily actions become a part of your routine… what now appears as a hopeful horizon may soon become your experienced reality! That’s when you will start to hear over and over again… people telling you how “lucky” you are.

Our Customer Care Program will work for you… because investing is personal. Don’t be afraid to ask for our help… thinking it will somehow be taken as a license to sell you something. That is so far from the mrd DNA, it’s laughable. We will assist you on your journey from where you are to where you want to go. We will do so respectfully and responsibly and at all times empowering you to make your own fully informed decisions. Personally, I think you should have a chat with Martin and ask him to assist you with an mrd “Finance Structure and Cashflow Health Check”. This is Step 1; the diagnosis phase… from where changes can be made to possibly assist you to:

• Pay off your mortgage sooner
• Eliminate horrible debt faster
• Legitimately reduce the amount of tax you are paying
• Do away with unnecessary property record keeping
• Keep your accountant’s charges to a minimum
• Set real (and achievable) goals
• Define a track to run on… so you are not derailed along the way

To take advantage of this no obligation, complimentary offer from mrd you will need to complete a Borrowing Capacity Assessment form. NB: While you may not be looking to borrow money at this time, the information gathered on this form is nevertheless essential before we can conduct a “Finance Structure and Cashflow Health Check”.

• To complete the BCA form, please click here
• To send a message to Martin, along with your details to have him contact you, please click here

CONGRATULATIONS; you have now finished reading this article; what next piece of your “ship” are you now going away to construct?

Happy Investing,

Nick Lockhart

mrd customer care program… because investing is personal

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”!

My portfolio now numbers 13 properties. When interest rates were 9% plus it was of some concern. We would have remained OK for a couple of years at those high rates because the equity we have built up provided us with a buffer (safety net).

Now every 1%  rate cut puts an additional $35,000 a year in my pocket. We’ve had 4% slashed from our rates in recent months (less what the banks failed to pass on) and the season of low interest seems set to continue for some time.

I use a separate line of credit for my property expenses (i.e. rates, body corp and so on); only paying interest charges from my cashflow. Interest rates are falling and rents are rising so cashflow is looking better and better. I don’t have to work, so while the world “financial crisis” works its way through the system; affecting us all, I remain content and comfortable holding a large property portfolio.

Increasing Population + Shortage of Rental Properties
= Low Vacancy Rates = Rental Increases

OK; ’so far so good’. With cashflow under control, there’s no stress in us holding a portfolio of 13 properties. BUT, what about growth and the lenders?

Certainly, growth has been flat over recent months but prices have not dropped in most areas. An article in The Australian last month said:

“In fact, the latest RP Data-Rismark Index results show that Australian house prices declined by just 0.8 per cent in the 12 months to October this year, and increased during the most recent three months”.

They are talking about the country as a whole (the good, the bad & the ugly); whereas certain areas have outperformed others. As an investor I discriminate against much property and only accept that which I believe will perform better for me.

I have always accepted that property values travel through cycles. I have every confidence that the short supply of property will mean that the growth in prices will/must kick in again. NB: We were about 80,000 dwellings short for 2008 and the Australian Bureau of Statistics  expect around 100,000 too few to be built this year; with the undersupply continuing around those annual figures till 2018 at least.

The mrd set ‘n’ forget, for busy people TM system that Nick promotes has worked for me personally; in good times and in bad and I have no reason to believe my ongoing confidence will be met with any disappointment! Why? Because I believe the fundamental law of “supply and demand” will ensure any outcome other than that which I expect, will be nothing more than a short term aberration.

For the benefit of those who have not spoken with me, let me explain a little of my personal strategy. It revolves around drawing on equity from my portfolio. For those of us in “retirement”, that means using low-doc or no-doc loans; not easy to secure with competitive rate at the moment.

What next?

My plan; or perhaps “flukish luck” (ha, ha) when Marion and I contracted to buy our 13th investment property; included an “ulterior motive”. We bought a top floor, 3 bedroom apartment adjacent to the Robina Town Centre. We thought we may eventually like to downsize and move into this ourselves.

We are now very close to having a number of our properties revalued so as to clear the security from our owner occupier. This is to allow us to then change the security supporting some of my loans away from my own home onto some of my earlier investment properties. With our own home unencumbered (and debt free), we will sell up, pocket the lot and move into the 3 bedroom apartment.

I accept new valuations at this point in time will not be great; but that’s fine, our goal is to simply clear the security from our owner occupier so when we sell we remain in control of all the cash we receive. We will do this without having to qualify for any new loans. No need to be concerned about the availability of a low-doc or no-doc offers – we won’t need either!

I already have an offset account set up for our 3 bedroom apartment. Therefore, after selling we will have $550,000 clear (conservatively) to put into an offset account that sits against (what will be) our new principal place of residence. NB: Selling is something we encourage you rarely ever do. In this instance, it allows us to fund the retirement we want. Because it has been our principal place of residence there will be no capital gain tax. A tailored solution that works for us, even in the face of the global credit crisis!

Some may ask: “Why don’t you simply pay out the loan on your new apartment instead of keeping the debt and putting what funds you get from the sale into an offset account”?

Good question! “Because to do so would mean that I would immediately lose control of the $550,000. If I wanted to get at any of the equity created in the new unit (by paying it off), I would have to go through the exercise of making a fresh loan application; and risk being knocked back etc, etc.

My strategy to have the existing debt on the unit 100% offset still ensures we have a $ZERO (non tax deductible) interest bill, while still allowing us the freedom to draw on the $550,000 as I need it over the next “however many years”; without the need to prove serviceability! Now when you add to that the two hundred plus thousand dollars we currently have available in other lines of credit, one can begin to see that no matter how tight credit for a retiree may become, we will be pretty much set for a number of years to come.

The “crisis” will pass, however, in the meantime a clever strategy and proper financial structuring will allow us to avert any interruption our retirement plans may have otherwise suffered. Then, when things get back to normal and my property portfolio  AND RENTS double in value again we will revalue the lot, increase our credit lines and continue to enjoy our retirement (with growing asset & income base). I am a month off 59 now. When Marion & I started on this journey I was about to turn 50 and I have been self-funded now for 3 years.

7 years + 13 Properties + A Financial Crisis = Never Work Again!

I can hear the voices screaming from all around cyber space “It’s ok for you! You have a significant property portfolio”. Compared to most maybe, compared to others… I’m crawling! Guess how you get hold of a large property portfolio yourself?

Start with a small one… but START!

Now is a good time to do it. Did I say “good”? I see the current “Perfect Storm” as being a ‘once-in-a-lifetime’ opportunity. Interest rates the lowest in 45 years (and falling); with property prices very affordable AND a rental crisis that’s only going to get worse.

My message to anybody who over the past years, didn’t get started because of their “WHAT IF” questions is: This works; so get started!

If your “WHAT IFS” are still plaguing you then maybe you should do nothing but sit tight for a few years and ask me again. I suspect, however, that I will have the same answer for you then.

* Please note: I am not a financial advisor, accountant or a finance broker – I’m just a very comfortable self funded retiree. The examples and opinions above are a compilation based on my own personal experiences, both in creating a $4.5mil property portfolio, starting with only $50k equity and also in helping a large number of people achieve similar goals of million dollar property portfolios. If unsure then consult your own accountant; hopefully one with some property experience and a personal retirement plan that is working. Financial advisors, in my opinion, rarely understand or recommend property, as their commissions come from other investment products. It should be a case of “don’t believe what people say, believe what they do!”

To ask me any questions or arrange a chat regarding how my chosen retirement plan may work for you, click here

Would you like me to guide you through an mrd complimentary & no obligation “Finance Structure & Cashflow Health Check”? Then simply complete the online secure form and I’ll be in touch with you next week; click here

Happy Investing,

Martin Bell
mrd Customer Care Program… because investing is personal

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…

He became world-renowned for his famous “finger lickin’ good” Kentucky Fried Chicken and is also credited with having built one of the largest fast food corporations in the world. KFC is now served daily throughout the United States and more than eighty other countries… not bad for a retired 65 year old sent broke by the building of a new highway.

You might ask ‘What makes the story of Colonel Sanders so amazing’? One of the most remarkable aspects of his life is that when he reached the age of sixty-five years, after running a restaurant for several years, Harland Sanders found himself penniless. He retired and received his first social security payment; which was for one hundred and five dollars. That was just the beginning of his international fame and financial success story…

Born in September of 1890, Harland Sanders was the oldest of five children. Up until his premature death, his father toiled in the coal mines of Kentucky. When his father passed away, Sanders… who was just six, began caring for his younger brother and sister while his mother worked in a shirt factory to support the family. Harland tended to things at home and learned to cook the meals by his mother’s teachings. She taught him how to cook many foods, including fried chicken.

Over the next several years, Harland Sanders worked at a variety of jobs… farm hand, streetcar conductor, fireman on the railroad… and finally ended up running a service station. Once again, he used his cooking skills that were learned from his mother to provide meals for travellers who stopped at his service station. As his cooking became more famous, and his food business grew, Sanders moved into an actual restaurant nearby. His specialty was, of course, fried chicken… seasoned with his original blend of eleven herbs and spices.

In 1935… a few years later, Governor Ruby Laffoon made Sanders (who was now forty-five years old) a Kentucky Colonel; because of his delectable cooking skills.

Progress is not always for the good of everyone, and in the 1950’s, Colonel Harland Sanders was given news of plans for a new highway which was soon to be constructed. The highway would divert the majority of traffic away from the town and, with the beginning of the highway; Colonel Sanders saw his successful business coming to an end. He closed the restaurant and retired to a social security benefit of just one hundred and five dollars a month. When he received his first month’s pension, he decided that he wasn’t going to sit in a rocking chair and rely on the government. So, he convinced others to invest in his delicious fried chicken recipe, and Kentucky Fried Chicken was born.

Colonel Harland Sanders eventually retired from the business when he was eighty years old, and stricken with illness.

The negative ’stuff’ that happens in all our lives will either make us bitter… or better. In the case of a 65 year old man who had just been deprived of his livelihood… Colonel Harland Sanders got better and allowed the winds of disaster to be the catalyst to what went on to become an incredibly successful turn of events.

While we are unable to control many of the circumstances that affect our lives on a daily basis, we can control our attitudes and responses. Regardless of any global economic woes… you can chose to make this year a great success… chose not to participate in any recession; they’re optional… not mandatory! Create a workable plan… then with focus and commitment… work that plan. As mentors, we’re here to help with this.

Click here to take us up on our complimentary, no obligation offer of an mrd “Finance Structure & Cash Flow Health Check”.

Happy Investing,

Nick Lockhart

mrd customer care program… because investing is personal

Parents expect (or at least hope) their teenagers would listen to and act on their advice. When they don’t, they allow time and experience be the child’s tutor and settle the matter.

Driving to inspect a property the other day, a friend lamented: “The frustrating thing is that you warn your kids against making unwise decisions. They ignore your advice and when everything comes apart, you are left bailing them out”.

From time to time I experience this same frustration in my role as a Property Mentor; except I don’t have to bail anyone out afterwards. I set out to steer individuals away from potential (and sometimes certain) financial peril, to a life of prosperity, possibility and options. BUT when people are not open to hearing anything that differs from that which they have already concluded… sadly, and all too often, I have no option but to stand back and watch the results of their poor decisions unfold.

IMPORTANT Reality Check!!!

As tempting as they may be, “I told you so” are unproductive and unnecessary words. That aside, I’d be lying if I said I haven’t been tempted to use them more than once.

We are currently in a global downturn and while fear and ignorance drive most people to react… my very strong suggestion is that you do not react, but rather respond! How you respond… especially during these uncertain times, will have a major bearing on your quality of life… five, ten and twenty years from now!!!

Over many years, involved with thousands of investors and would-be investors alike, I have heard just about every rational and irrational argument for why a person disagrees with the mrd set ‘n’ forget model for creating wealth.

• My repeated warning that “When (not if) America sneezes the world will catch a cold” and your need to “Do Something!”; has often been met with indifference
• My repeated warning that “superannuation would fail to deliver all it promises”; fell on deaf ears as Peter Costello offered generous tax incentives for people to put up to $1m into their super prior to 30th June 2007
• Promoting medium density property in built out areas close to infrastructure, employment and services… and explaining that the appeal for house and land out in the suburbs would soon become a thing of yesterday; was many times dismissed on the basis of the books and seminars being peddled by so called property gurus
• Suggesting that commercial, industrial, retail, holiday let and serviced apartments etc were speculative investments and best to be avoided given they were very much subject to prevailing economic conditions; was misinterpreted by some as me simply being narrow minded
• Pointing out that well researched, very selective residential property was predictable and safe; was often ignored because the out of pocket expenses were higher than alternative purchase options
• I could go on and while it’s tempting I won’t. Check out an Information Session I held in May 2006… long before the words Subprime, Credit Crunch, Freddie Mac or Fannie Mae were known to most. The warnings were clear and in hindsight I suspect you’ll agree. Check it out online [click here]

I am not saying any of this as a “I told you so”; far from it! I am addressing this because I am concerned that history is repeating itself. Many people made unwise decisions and failed to navigate through the good times. I now see many of those same people making emotive and reactionary decisions in an attempt to navigate through these tough and uncertain times. In my opinion, they are likely to live in regret… not long from now.

Not for a minute do I suggest irresponsibility when it comes to investing; either in good times or bad. For many, right now is a great time to invest… for others it is definitely not. The challenge is to understand which group you are in. Irresponsibility can be as much about not acting on opportunity as it is about acting under ignorance, fear or emotion.

Whatever you decide to do or not to do, please don’t take your advice from people’s opinions, the media or any person who does not have the runs on the board (yourself included). A great carpenter can offer great advice on your renovation but he cannot give you any worthwhile medical opinion. A great accountant can record your financial transactions from last year and prepare a tax return, but unless he has successful experience as an investor his university qualifications will be of little assistance to you when it comes to making sound investment decisions.

Neither our strategy nor message has changed over the past 18 months; it hasn’t needed to. “If it aint broke don’t fix it”!

There are many ways to make money from investing. You need to learn enough about the different asset classes to make a decision about which strategy is right for you, then learn all you can about your chosen niche.

- There are basically three asset classes; shares, property or cash.  Managed funds direct investment dollars into these same three asset classes on your behalf.

- There are various different ways to invest within each asset class.

- In my experience, cash has not historically given returns that I would be happy with.

- The stock market is far too volatile.

- My obvious choice is property; as you know.

- Within the asset class of property there are various ways to invest.  You can trade, speculate, use options, renovations and/or buy and hold.

- Our niche is buy and hold. Why?

- Safety, reliability, proven consistent performance as well as “set ‘n’ forget; for busy people”

- If you choose buy and hold… what type of property; commercial, industrial, agricultural, retail or residential?

- Our niche is residential. Why?

- Safety, reliability, proven consistent performance as well as “set ‘n’ forget; for busy people”

- If you choose residential, what type of residential?  Holiday let, serviced apartments, retirement or over 55’s villages, units, townhouses or houses?

- Our niche is permanent let residential, units, townhouses or houses. Why?

- Safety, reliability, proven consistent performance as well as “set ‘n’ forget; for busy people”

- If you choose this same niche how are you going to acquire them; second hand, new or off the plan?

- Our niche is new or near new. Completed or more commonly, off the plan. Why?

- Safety, reliability, proven consistent performance as well as “set ‘n’ forget; for busy people”

- Once you build a portfolio what are you going to do with it?  There are probably as many ways to use a property portfolio as there are ways to build it.

- Our niche is buy and hold long term – seldom sell. Why?

- Safety, reliability, proven consistent performance as well as “set ‘n’ forget; for busy people”

- NB: Each time I gave in to temptation and deviated from this niche, I lost money! So, some years back I stopped, no matter how tempting the distractions have been.

My sincere hope is that 12 months from now, when kicking off 2010, you will look back on 2009 and identify measurable progress towards your goals. Yes, it will take some guts… yes, it will take faith and yes, it may even take some swimming against the tide (of popular opinion). But what is the alternative?

Be real with where you are at now, be responsible with your decisions going forward and draw on the knowledge and experience of a team you trust, who have the “runs on the board” and who have YOUR best interests at heart.

• Quit putting your retirement plans into the “too-hard” basket; or retirement living may be just that… “too hard”!
• Don’t put your head in the sand and do nothing; you will get run over
• Remember, if you are not pressing forward; by default you are slipping backwards; there is no standing still

Of course I passionately believe we @ mrd are best positioned to help you; for many reasons including:

• Investing is personal
• Our Customer Care Program is unique and will work for you; as it does for people from different situations, incomes, commitments and so on
• Our system is low risk and designed to help you reach your destination without “crashing” along the way
• Our efforts are underpinned by solid research
• We teach you the how to and why to; but leave you to buy… not us to sell

So if in the midst of financial turmoil, negative media and confusion you are wondering what actions will best serve your medium to long term interests; I challenge you to test us. Why not take us up on our offer for a no obligation, complimentary “Financial Structure & Cashflow Health Check” [click here]?

Pigs don’t know that pigs stink and you don’t know what you don’t know. When it comes to your family’s financial future, don’t be like a teenager who knows it all and refuses to listen to the right people. Learn to navigate through 2009 and beyond… and prosper.

Happy Investing,

Nick Lockhart

mrd customer care program… because investing is personal

New home sales fell nationally by 1.1 per cent in November after a 3.1 per cent rise the month before but in Queensland they dropped 10.1 per cent.

Sales fell as the economic downturn and tighter access of credit took hold, the HIA survey shows.

>>> New house sales plummet in Queensland by 10pc | The Courier-Mail.

I’d like to share with you two of the slides I use in my presentations around the country. These slides emphasise two of the messages I echo… and 2008 has confirmed their validity. They are:

1. “You Need To Do Something”
2. “38 Years Of Economic & Social History: 1974 To 2008″ and property proved itself to be resilient… regardless!

In your household, I hope history continues to repeat itself ONLY IF your are making significant and measurable financial progress… each year that passes.

2008 Has Confirmed The Validity Of These Two Messages (from Nick’s Infomation Session presentation)

1. ”You Need To Do Something”. The uncertainty of the financial health system in the USA is one HUGE reason to do something and

2. ”38 Years Of Economic & Social History: 1974 To 2008″. There will always be a calamity or drama giving rise to “64,000 reasons” why the present is not a good time to be investing in property. My response was (and is) that there will always be a headline or “reason” for inactivity and procrastination; as there have been for 34 years.

The notes below (cut ‘n pasted from my PowerPoint presentation) highlight some of the bigger reason why you may have thought you would have been better off avoiding property since 1974; during which time the median price of a home in Brisbane grew to become 41 times what it was in 1974!

You Need To Do Something

• 75 Million baby boomers  will start to retire in the US in the next few years (cease paying taxes and become dependant on social security and medicare)
  
• $10US Trillion current debt carried by the US Social Security Department. That’s -$10,000,000,000,000 (ahead of all the babyboomers retiring)
  
• $62US Trillion current debt carried by the US Medicare Department. That’s -$62,000,000,000,000  (ahead of all the babyboomers retiring)
  
• $31US Trillion Estimate of the value of all the stocks in the world in the year 2000 (after 2008 it may be a lot less now)
  

With an alarming debt already about to grow significantly as babyboomers exodus cease being taxpaying workers and become social security and medicare dependant… only a fool would not have an individual plan to reach financial independence!

38 Years Of Economic & Social History: 1974 To 2008

• 1974 World Oil Reserves “Running Out”; Prices through the Roof
  
• 1979 Oil Shortage Produces Petrol Rationing & Spiralling Prices
  
• 1982 Discovery of AIDS
  
• 1983 Tax Deductions on Property Depreciation Abolished
  
• 1985 Capital Gains Tax Introduced
  
• 1985 Average Home Loan Rates Hit a Whopping 13%
  
• 1987 Stock Market Collapse
  
• 1988 Pilot Strike – Hawke sacked them
  
• 1989 Interest Rates Hit 17%
  
• 1990 Collapse of the Pyramid Building Society (Geelong)
  
• 1991 1st Gulf War
  
• 1991 Australia Enters Two Year Recession
  
• 1992 Collapse of the State Bank of South Australia
  
• 1992 Interest Rates Fall To 7% 
  
• 1998 Asian economic melt down
  
• 2000 Introduction of GST then 5 Interest Rate Rises
  
• 2001 New Era of War & Terrorism 
• 2002 SARS health epidemic
• 2002 2nd Gulf War
  
• 2002 Bali Bombing
  
• 2004 Tsunami
  
• 2008 Sub prime credit crisis
  
• 2008 12 Interest Rate Rises in a row since 2002
  

In the 34 years between 1974 & 2008, despite interest rate highs & lows, times when inflation is high or low, times when unemployment was high or there were labour shortages. In times of great uncertainty & fear residential real estate (unlike any other type of investment) has insulated itself against any and all external conditions that at the time seemed a threat!

Click here to view Nick’s entire “You Can Live WITHOUT Your Income” Information Session presentation online; recorded  in May 2007; BEFORE we knew what subprime was

2008 was a tumultuous year; but it was also a year that confirmed that exact message mrd has been warnings of for a number of years. We have made some bold predictions over recent years and a number of them are starting to come to pass. Here’s a few others that I would like to remind you of…

• The Official Cash Rate will be down to 4% (or less) by April 2009
• The trend away from the traditional quarter acre block in suburbia and towards higher density apartment & townhouse living close to infrastructure, lifestyle, employment and services will continue to take hold… and those who sell books and seminars teaching why you should only buy house & land and not apartments & townhouses will see their credibility weakened
• The property market in Australia will definitely survive the troubles that Steve Keen and various others have predicted. The notion that your home will drop in value by 40% was and is ludicrous. It will not happen
• The property market will see growth in the early part of 2009 and by the middle of the year I believe we will see strong growth coming back (albeit in some areas more than others)

If you missed being a part of Nick’s Web Seminar “What In The World Is Going On With Property” click here to view online

Our stock market was overheated (and over rated) for far too long. Banks in the USA were giving money away like drunken sailors. I have been a rather lonely voice warning people against the stock market, saying that interest rates would come down and our property market would surge again. I admit that the events of 2008 put the brakes big time on our property market resurging by mid year… but I still believe that the credit crisis has only managed to slow that growth (for about a year) and it will resurge again; in areas subject to the forces of supply and demand.

On a closing note I would like to remind you of the two of the Irrefutable Laws Of Abundance:

1. If you don’t control money; the lack of it will control you
2. Your thought seeds of today are little more than the undeveloped photos in your future scrap book

Have a wonderfully blessed Christmas. We look forward to assisting you to make 2009 your year of financial prosperity!

Merry Christmas,

Nick Lockhart
mrd customer care program… because investing is personal

NB: If you missed out on participating in one these Web Seminars you can now watch it online; click here.

The Global Credit Crisis & Property Investors

As property investors the good that has come out of the recent global turmoil has been a massive reduction in interest rates. I am now so very close to being cashflow positive across my property portfolio… and interest rates are still falling and likely to stay very low for years to come!

The downside for property investors is that lenders have tightened their lending criteria making it harder to secure funding that it was previously, in some instances. With interest rates falling, however, serviceability has been made that much easier creating opportunity for many who previously could not secure funding to now qualify.

The Global Credit Crisis & Property Developers

The impacted on developers has been massive. Companies large and small have all been affected. Many developers have gone broke or just closed up shop, others have shelved projects indefinitely and are waiting until they see evidence of investors returning to the market. Others have soldiered on but have had many new funding hoops to jump through put in front of them.

Banks have been scared to lend to each other, so regardless of whether you are an individual looking to borrow money to buy a property or a developer looking for the funding necessary to complete a project… 2008 has seen a real tightening of lender willingness.

Waterside Residential:

We have received the following update from the developer…

16th December 2008
UJ/jat

Waterside Residential Pty Ltd
ABN: 65 092 231 000

Mr Nick Lockhart
mrd Realty
Suite 4, Gallery Vie
226 Varsity Parade
Varsity Lakes QLD 4227

Dear Nick,

Re: Commencement of Waterside Residential Development – Cairns

Just a short note to keep you informed of the progress of this development.

Currently in this market it has become extremely difficult to obtain development finance. We are currently working with our financial institution to secure adequate funds to commence this project. The banks have indicated their support but at a later stage. We anticipate to hold further talks re this matter with the bank in early February/March 09 where we will have a clearer picture of a starting date.

We will keep you informed as to our progress early in the New Year.

Yours sincerely,

UDO JATTKE
Managing Director

In layman’s terms… Udo had been promised funding and expected to commence this project earlier this year. His lendersubsequently moved the goal posts and said that they would now not release any funding to commence this new project until after he had completed and sold out on some others that he had in the pipe line. Most of these are now sold and Stage 1 of Clifton Views is due to settle in late January, meaning in February or March next Udo will go back and renegotiate the terms of the funding he needs to commence Waterside.

In short, this project has been held up and we hope to have a more concrete update to you in the early part on next year.

Please see the latest mrd Cairns Region Property Report by clicking here and the PRD Nationwide Property Watch: Cairns Market Overview by clicking here

Special Incentive from UDO:

Udo has come up with a special offering to enable him to quickly sell off the last few completed apartments his banks are insisting he sells before releasing new funding to him. This offer is open to anybody interested in purchasing one of the below listed properties or to anybody wanting to transfer from a Waterside Residential purchase onto one of the below listed properties:

1. Cash deposit refund of 10% will be returned to the investors (for those transferring from a “Waterside Residential” contracted purchase)
2. The deposit on new contracts will be only $1,000.00
3. Any extral legal fees incurred up to the value of $1,000 will be paid for, on receipt of invoices from clients solicitors by way of a reimbursement at settlement (for those transferring from a “Waterside Residential” contracted purchase)
4. Management letting fees waived for 12 mths (conditional upon Glencorp Property Management being given the management rights)

The Following 6 ONLY Properties Are Being Offered With Bonus Incentives

City Park (2 only) – Expected settlements in mid February 2009

• 12 mths management letting fee waived (Glencorp Property Management only), plus
• 12 mths rental guarantee ($360 pw)

Clifton Waters (4 only) – completed and ready to settle in 30 to 60 days

• 2 bedroom – price reduced from $325,000 to just $295,000
• 3 bedroom – a rebate letter of $20,000 to be paid at settlement will be attached to the contract but not part of the contract making price $309,000

From all the team @ mrd, we wish you and your family the very best for Christmas and we look forward to partnering with you on your wealth creation journey in 2009.

Merry Christmas,

The mrd Team

mrd Customer Care Program works for you… because investing is personal

NB: If you missed out on participating in one these Web Seminars you can now watch it online; click here.

The Global Credit Crisis & Property Investors

As property investors the good that has come out of the recent global turmoil has been a massive reduction in interest rates. I am now so very close to being cashflow positive across my property portfolio… and interest rates are still falling and likely to stay very low for years to come!

The downside for property investors is that lenders have tightened their lending criteria making it harder to secure funding that it was previously, in some instances. With interest rates falling, however, serviceability has been made that much easier creating opportunity for many who previously could not secure funding to now qualify.

The Global Credit Crisis & Property Developers

The impacted on developers has been massive. Companies large and small have all been affected. Many developers have gone broke or just closed up shop, others have shelved projects indefinitely and are waiting until they see evidence of investors returning to the market. Others have soldiered on but have had many new funding hoops to jump through put in front of them.

Banks have been scared to lend to each other, so regardless of whether you are an individual looking to borrow money to buy a property or a developer looking for the funding necessary to complete a project… 2008 has seen a real tightening of lender willingness.

Seashells @ Clifton

We have received the following update from the developer…

16th December 2008
UJ/jat

Glenwood Homes

Mr Nick Lockhart
mrd Realty
Suite 4, Gallery Vie
226 Varsity Parade
Varsity Lakes QLD 4227

Dear Nick,

Re: Commencement of Seashells Development – Cairns

Just a short note to keep you informed of the progress of this development.

Currently in this market it has become extremely difficult to obtain development finance. We are currently working with our financial institution to secure adequate funds to commence this project. The banks have indicated their support but at a later stage. We anticipate to hold further talks re this matter with the bank in early February/March 09 where we will have a clearer picture of a starting date.

We will keep you informed as to our progress early in the New Year.

Yours sincerely,

UDO JATTKE
Managing Director

What Does This Mean?

In layman’s terms… Udo had been promised funding and commenced earthworks earlier this year. His lender subsequently moved the goal posts and said that they would now not release the funding for this project until after he had completed and sold out on some others that he had in the pipe line. Most of these are now sold and Stage 1 of Clifton Views is due to settle in late January, meaning in February or March next Udo will go back and renegotiate the terms of the funding he needs to commence Seashells @ Clifton.

In short, this project has been held up and we hope to have a more concrete update to you in the early part on next year. NB: In today’s final newsletter for 2008 my feature article is on the topic of “Off the Plan” purchasing… in it I analyse the cost benefits of delays.

Please see the latest mrd Cairns Regional Report  by clicking here and the PRD Nationwide Property Watch: Cairns Market Overview by clicking here

From all the team @ mrd, we wish you and your family the very best for Christmas and we look forward to partnering with you on your wealth creation journey in 2009.

Merry Christmas,

The mrd Team

mrd Customer Care Program works for you… because investing is personal

In the current round of Web Seminars we are offering, I highlight four key factors that are a MUST… if you expect to draw any credible conclusions.

1.    Record Population Growth
2.    Investors Have Fled The Market
3.    Home Ownership Unattractive
4.    New Construction Has Stalled Badly

1. RECORD POPULATION GROWTH

Australia is currently experiencing the fastest population growth in 200 years. Our population is predicted to grow by 350,000 this year for the first time in over 200 years. That represents approximately the combined total population of Geelong, Cairns & Bunbury; or the whole of Canberra.

The 1850’s Gold Rush years, Post World War 1 (1919 onwards) and post World War 2 (1946 onwards) saw our 3 previous population explosions. Today we see a similar pattern emerging; i.e. rapid and prolonged growth, too few workers and pro-immigration government policies.

Record population growth means a significantly stronger demand for new housing! Given our record numbers of new migrants will generally rent for a season, demand for rental properties will continue to strengthen.

2. INVESTORS HAVE FLED THE MARKET

Rising interest rates in recent years have squeezed rental yields making property look unaffordable. Add to the mix a booming stock market (averaged over 20% per year between 2004 and 2007) and one can see why property has not been the preferred investment vehicle of recent years.

Since becoming familiar with the term “subprime”, seeing the global credit crisis unfold… and hearing of property values in the US & UK falling by 30 & 40%, many would-be-investors have opted to stay on “strike”. It’s fair to say that since the highs of mid 2004 only the ‘brave’ have continued to invest in property.

Investor demand accounts for about 50% of all new housing starts and about 70% of unit starts. Therefore, that investors have fled the market means significant negative impact on the supply of new housing and increased demand on existing rental accommodation.

3. HOME OWNERSHIP HAS BEEN UNATTRACTIVE

As with investors. the housing affordability barrier, rising interest rates (& general living costs) and of course the US initiated subprime crisis has left many would-be home owners lacking the confidence to purchase.

Scared, priced out of the market, unable to secure funding or unable to service a loan? regardless of the reason why new home ownership has been unattractive; the result has been that many renters in recent years have simply continued to rent. This has placed further pressure on existing rental housing stock

4. NEW CONSTRUCTION HAS STALLED BADLY

Since 2005 the absolute number of completed residential properties has fallen and they are forecast to continue falling in 2009. The US subprime crisis cemented this downward trend in demand for new properties. Add to that, in recent years we have seen the high profile bankruptcy of some large developers along with massive financial pressure on many smaller developers. The cost of finance has skyrocketed for developers… i.e. if they can find a lender who will back them. Understandably, developers are very nervous… many have simply shelved their new projects until such time as they see clear evidence that investors have returned to the market.

Developers going broke, developers shelving projects and/or developers unable to secure funding means new construction has stalled badly and as a result greatly reduced the supply of new property further adding to pressures on existing housing stocks.

DISSECTING THE EVIDENCE

• FACT: We are experiencing the greatest housing shortage in 200 years
• FACT: Because of the new Federal Government’s immigration policy, we are experiencing the strongest population growth in 200 years
• FACT: Since about mid 2004, broadly speaking investors have fled the market
• FACT: Since about mid 2004, broadly speaking home ownership has remained unattractive and renters have continued renting
• FACT: Since about mid 2004 the construction of new dwellings has stalled badly
• FACT: In mid 2004, national rental vacancy levels were about 3.5%. This level is considered a balanced market. Rental vacancy levels have dropped to below 1.5% now and are expected to continue to drop to historical lows of between 0.5% and 1% in 2009. These levels represent a stressed market
• FACT: When the demand for rental housing grows at a faster pace than supply, increased demand can be offset by diminishing vacancy levels
• FACT: When vacancy levels reach just 1% it is said that we have NO VACANCY, as the 1% represents the few days between tenants moving and carpets being cleaned etc… prior to a new tenant moving in
• FACT: Therefore, once vacancy levels fall to 1%… there is no room left to offset increasing demand by diminishing vacancy levels
• FACT: When demand increases and supply decreases and vacancy levels are already stressed; i.e. no vacancy… market forces mean rents have to go up… and significantly where population growth is significant
• FACT: Interest rates are the lowest they have been in years and are expected to reach (near) record lows by mid 2009

Now you have the FACTS, rather than simply “opinions”; may I suggest you draw your own conclusions as to what might happen with Australian property in mid to late 2009?

• With the cost of renting about to soar and the cost of ownership dropping significantly (i.e. rental incomes up and interest charges down), what do you expect the market will do?
• With stock market volatility and uncertainty and interest earned on cash deposited dropping away, what do you expect the market will do?
• With serious increases to the first home owners grant, what do you expect this group to do?
• Given rental properties vacated by first home owners will not produce a glut… because vacancy levels are at an all time low (stressed market) and the population is growing by the size of Canberra each year, what do you think the market will do?

Can I go out on a limb and tell you what I think; I may be wrong, but I don’t think I am?

1. I expect rents to soar in 2009
2. I expect interest rates to continue to drop next month and in 2009
3. I expect confidence to come back to the market, drawing back owners and renters alike
4. Given there is a lag of a few years from when developers decide to build again and new stock being ready to live in… I see no relief for the poor tenant for at least a few years
5. I also believe that the combination of all that I have just outlined will result in the next property price surge

So, in summary…

Those who have been building a property portfolio as their preferred vehicle for funding their retirements (NB: assuming they bought the right residential property in the right areas) are soon going to experience the property investors trifecta:

1. Rising incomes (rents)
2. Falling costs (interest)
3. Increasing equity (values)

I would love to address the subject “We are not the USA” and compare the FACTS relating to how we are different and why what happened there will not happen here; but I will save that for another day.

May I invite you to register your interest for either our next FREE Web Seminar this Wednesday evening… or if you let us know what other time(s) best work for you, we will run them according to demand CLICK HERE.

Happy Investing,

Nick Lockhart
mrd customer care program… because investing is personal

Over the past two weeks of this series, I have focused on offering a fuller understanding of a very misunderstood four-letter word. This four-letter word… DEBT, can engender quite negative emotions in us all.

‘English is a crazy language’… say many with a native language other than English. Let’s look at another four-letter English word… LOVE. In English we have just the one word, love, but the Greek language, which has had a huge influence on English has four words… all translated love!

1. Agape: dutiful and selfless love… the God-kind of love
2. Phileo: brotherly love… the type shared with family and friends. It refers to friendship or affection
3. Eros: selfish love… e.g. conditional, controlling love and lust
4. Storge: Tender, loving affection and nurture. Familial (or family) love… so much more than just the words, ‘I love you!’

Instinctively, we know that when one person says ‘I love my wife’ and another says ‘I love pizza’… that they are each referring to different types of love! Well debt is much the same.

What is your natural response to the suggestion that ‘you should have your borrowing capacity assessed to see how much a bank may loan you towards an investment property purchase?’

MANY WOULD ANSWER: ‘No way, we have enough debt and don’t want any more!’

More what? We definitely don’t want more Horrible Debt; and we already have sufficient Tolerable Debt… So what is this referring to?

It refers to PRODUCTIVE DEBT… the type of debt that Katrina & I personally want more of… in fact, as much as we can convince the banks to loan us!

Productive Debt works for us! It enables us to harness the power of leverage… and utilise the untapped wealth in our homes.

Two weeks ago we looked at HORRIBLE DEBT… consumer or credit card type debt. Horrible debt offers no tax relief and is used to finance things that go down in value.

Last week we focused on TOLERABLE DEBT. This is typically the type of debt we use to finance our family home. We receive no tax relief for these borrowings… but at least we have taken out the loan to fund something that appreciates (goes up in value).

Let’s try and avoid Horrible Debt wherever possible; Moderate Tolerable Debt (with the view of clearing it sooner rather than later)… and just as importantly, let’s Change Our Attitude Towards Productive Debt. Rather than seeing it as something negative, to be feared… start to see it as a tool that we can use to build our wealth.

We would find it near impossible to paint a room without a brush or roller. There would really be no point attempting to change a punctured tyre without a jack and a wheel brace! In exactly the same way… there is no way I could have created the wealth I have from property… unless PRODUCTIVE DEBT was first embraced as my ‘tool of trade’. So PRODUCTIVE DEBT is our key to unlocking wealth from property investment….it’s the kind of debt that helps you sleep at night!

Happy Investing,

Nick Lockhart

NB: As always, I must reiterate that my comments about productive debt are general in nature. Responsibility & care must be applied to any type of borrowings – one size does not fit all and before anybody takes on new commitments they need to be sure they do so with full understanding of the implications of doing so. To this end at mrd we will always work with a prospective client to disclose the necessary facts and ensure the information to make a fully informed decision is carefully explained.