A recent economic report by Canadian bank Scotiabank, said that Australia has just taken the reins from Canada – which shifted to second position – to boast the best housing recovery performance in the first quarter of 2010.

Aparently Australia has taken the lead in the global real estate market, posting the best recovery in residential house prices among 12 developed countries.

Scotia Economics senior economist Adrienne Warren said a solid economic recovery and strengthening labour markets were supporting rising home sales and prices, despite the RBA being the first, among major developed economies, to raise interest rates.

The report notes that in Australia, inflation-adjusted average home prices were up 17.1 per cent year-over-year in the first quarter – a sharp step-up from the prior quarter’s 11.4 per cent increase.

DEPPRO managing director Paul Bennion said it was good news for  property investors, particularly those who moved to expand their  portfolio now.

“House prices rose by 10% last year and are expected to rise by the  same amount again every year over the next decade,” he said.

“The global financial crisis has taken the wind out of the sails of  developers – they are just not building houses and units at the  same rates that we saw a decade ago.

“So the HIA’s prediction of a huge shortage by 2020 is likely to come  true because developers are unlikely to catch up with demand in  that time.”

Another March release of statistics – this time from the AFG Mortgage  Index – shows that property investors are already returning in force  in capital cities, where more than one-third of home loans were for  investment purposes during February.

The AFG figures show the proportion of loans to investors was 34.1%  of all mortgages for the month – a 7% increase from six months ago.

“These figures relate to AFG, which has 2100 member brokers  across the country and a loan book of almost $60 billion – about  10% of Australian mortgages – so they are a fairly good indicator of  the state of the industry and the mood of buyers and investors,” Mr  Bennion said.

“And while the recent interest rate rises have dented the ambitions of  some first home buyers, they are not as big a deterrent for investors  because these people understand that property investment is a  long-term strategy. People realise interest rates even out over time  – you win some years and lose others. The important thing is that  your capital and rental returns continue to increase.”
Mr Bennion said it was important for investors entering the market  or expanding their portfolio to make sure they capitalised on these  returns by claiming the maximum tax depreciations allowed by the
Australian Taxation Office.

“It’s important to get a professional depreciation report done for  each property, and on an annual basis,” he said. 

*Note – with every property purchased via mrd we supply a quantity surveyors report at no cost to the client – it is a very important document.
Autumn 2010  Deppro (Quantity Surveyors) Newsletter

Civic leaders say that based on the population projections, the Gold Coast will need an extra 8000 jobs every year to keep unemployment down and the city thriving.

The Business GC Economic Development Strategy 2010 has laid out a plan to create new jobs, highlighting how the Gold Coast was no longer considered just a holiday destination … it was now a robust economy internationally recognised as a highly desirable location and a premium city in which to live, work and visit.

“The Gold Coast is expected to become Australia’s fifth-largest city within the next 20 years … the rate of growth being experienced in SEQ suggests that the region is likely to surpass Melbourne as the second-largest metropolitan area in Australia after Sydney, within the next 50 years,” said the report.

Business GC boss John Witheriff said the sheer infrastructure required for the huge population growth would generate 70 per cent of the 8000 new jobs needed annually. He said house and infrastructure construction and supplying food and entertainment would create jobs easily.

Not so easily was the remaining 30 per cent, which would require proactive moves to attract business investment and exports like film, high-performance sport and environmental and knowledge-based industries.

Mr Witheriff said they were now working with schools and universities to produce a more skilled, knowledge-based workforce that would in turn lure big companies to set up here. The city has been split into 10 key precincts to group similar businesses in the one hub.

It includes Southport as a medical, education, business and technology centre, Surfers Paradise and Broadbeach for international tourism and business and Coolangatta as a medical, tourism and transport hub.

Growth spurt demands 8000 more jobs Local Gold Coast News | goldcoast.com.au | Gold Coast, Queensland, Australia.

Ray White Surfers Paradise CEO Andrew Bell yesterday told a packed auction crowd the Gold Coast’s current construction approvals were failing to keep pace with the booming population, which would in turn drive up property prices.While it’s good news for those who already own real estate, houses will become increasingly unaffordable if more development does not hit the market soon.

Mr Bell said southeast Queensland was experiencing the worst land shortage in history — only supplying 26,000 lots annually despite demand for 45,000 lots. Similarly, he said the supply of apartments was dwindling to the point that there would be no new developments bringing new stock on to the market at Main Beach, Surfers Paradise and Broadbeach in the second half of this year and into next.Mr Bell said developers were being turned off by rising interest rates combined with it being “near impossible”  to obtain bank finance and bureaucratic red tape delaying developments.”Authorities call the current situation the “Perfect Storm” — lack of supply, difficult financing conditions, rising construction costs and high infrastructure charges resulting in land prices rising by 10 per cent,” he said.”The South East Queensland Regional Plan predicts 300,000 new arrivals for the region over the next 22 years and we will need 143,000 new dwellings to house them.”Yet broadacre undeveloped land is expected to provide only 32,000 dwellings and will run out by 2016.

“The underlying shortfall is already upon us. The southeast’s population increased by 75,000 in 2008/09, requiring 30,000 new homes, yet only 17,000 were built.”The undersupply will push up property and rent prices.The good news is that after a tough 18 months, all areas of the Gold Coast property market were recovering.”The indications are that Gold Coast real estate is rebounding strongly from the effects of the Global Financial Crisis and that 2010 will be seen as a watershed year in the history of the region’s property market, marking the beginning of the next upswing,” said Mr Bell.

>>> Perfect storm tipped for property Real Estate | goldcoast.com.au | Gold Coast, Queensland, Australia.

We have developed a system around how we build and manage a property portfolio … more. It is this system that we teach and call “Set ‘n’ Forget”… for busy people™…more. Our belief is that property investing ought to be a vehicle that will allow you to achieve your financial goals, without suffering any significant negative impact on your time or money. Some common sense and logic will need to be employed, however.

There are numerous steps, checks and balances we suggest; none are hard to understand or implement.

The forces working against investors, that seem to have the strongest hold over them are:

• Lack of understanding
• Fear & emotions

To help people through these (legitimate) concerns, we provide ongoing education; this is part of our Customer Care Program. To this end we have close to 400 property related articles available for you to read on the mrd website. Within these you should find most of what’s needed to get started and stay on track with Property Investing As A Home Based Business.

Today, I am not going to repeat myself by touching on any of the many areas that have previously been addressed; for example:

• Having the Borrowing Capacity … more
• Having the Holding Capacity
• Having the Mental Toughness Capacity
• Undertaking a Finance Structure & Cash Flow Health Check … more
• Ensuring Your Finances Are Set Up Correctly …more
• Understanding the Process of Valuations …more
• The Importance of Research … more
• Where to Buy …more
• Etc

Rather; in driving home the message that as a property investor you are in fact establishing your own home based business, today I am just going to touch on the importance of location and expose a common mistake people make when researching where their next investment purchase should be.

“Set ‘n’ Forget”… for busy people™

When we talk about the mrd “Set ‘n’ Forget”… for busy people™ system of wealth creation, we speak of that which is a core foundational principal… not just a clever slogan. It’s “Set ‘n’ Forget”…for busy people™; not “Set ‘n’ Fiddle”, “Set ‘n’ Sell” or “Set ‘n’ Tinker”. Being able to ‘forget’ about your investment… and get on with life, stacks the odds of great success in your favour. It’s unlikely that you will ever be able to ‘forget’ about your investment if you neglected “the basics” at the outset.

Supply and demand drive capital growth… now and in the future. Are the factors driving demand likely to remain? Is there a chance of oversupply? While logic says everyone wants a property portfolio that’s predictable, stable and delivers results in as trouble free a manner as is possible. Experience tells me, many people are inadvertently setting themselves up for the opposite.

Supply & Demand

Get this one down and you are much of the way there! I look for evidence of:

• A strong inflow of population (demand) to an area
• A limited supply of available land
• Strong infrastructure investment; providing amenities and employment

From time to time we are asked our opinion on the merits (or otherwise) of investing into one town or another. This normally comes about because someone heard a rumour or read somewhere that something special was going to be happening in that place. As an example, I have successfully discouraged some from investing into mining towns. At the time such an investment looked like the most sensible thing a person could do. Growing work force, housing shortage, no end in sight to the mining boom, great cashflow, etc. I would be very concerned to have the strength of my investment underpinned by the board of directors of a mining company. The current global economic slowdown makes my job of “selling” this argument so much easier than it was for me two years ago. But even if there was no slowdown, poor management, poor workplace health & safety practices, a new mine opening elsewhere or the loss of a big contract; for example to name but a few possible “interruptions to an otherwise great business”… you can see that there are many possible triggers for seeing demand drop “overnight” and a situation of undersupply becoming one of oversupply very quickly.

We promote permanently tenanted residential property because regardless of what else may be going on within the economy… everybody needs a roof over their head. Housing in a mining town does not fit that category, however, as most of the workers are only there while they have a job… and if they lose that they are gone quick smart! I call that speculating rather than investing. Great rental returns (questionable long term capital growth) but highly speculative.

“The returns were remarkable but I have continuously warned investors that mining towns are highly volatile and highly cyclical markets. When it goes bad, it goes very, very bad.” Louis Christopher – SQM Research

Horsham | Victoria | 2006

One of our Property Mentors, Doug, visited Horsham in Victoria in 2006. At the time the town was booming, local businesses were thriving and house prices were soaring. Many people were drawn into the town as they secured jobs working on a local infrastructure project; replacing the open canal irrigation with underground pipes. This was a great boost for the local economy.

As you can imagine there were many investors snapping up properties in Horsham, in an attempt to ride this “prosperity wave”. The only thing was that the pipeline project had a limited life; to the end of that year only… after which the many extra workers drawn into the town would leave again. When this happened the dynamics changed overnight and so did the ratio of supply to demand. Horsham survived due to its strong and diverse agricultural industry; nevertheless the boom ended and many investors were left holding houses that they could not find tenants for, nor sell to realise their investment back.

The Horsham situation was actually predictable in advance! There are many towns depending heavily on one particular industry, one particular infrastructure project or worse… one particular company. These towns that lack industry diversity could be accused of having their future prosperity resting on the success or failure of that single industry or company. Think about it, a board room decision could potentially wipe out your investment… as could a change in world markets or government legislation. The same could be said for towns built on other industries as well; such as fishing, shipping, motor vehicle manufacturing and so on.

The majority of mrd clients are mum and dad families with school age children. We aim to make property investing as simple and predictable for them, and us. Such speculating would put their future wealth at risk.

Ravensthorpe | West Australia

Ravensthorpe, in Western Australia, is the town that inspired this article. The local BHP Billiton nickel mine was the fuel that drove this small regional centre into a bustling mining town. A shift in the world price of Nickel saw this town virtually close down overnight. Those who rode this wave by investing into the town were dumped… and many wiped out.

BIS Shrapnel residential property analyst Angie Zigomanis said in a recent Australian Property Investor magazine article: “Most employment growth occurs during the construction phase of mines. With commodity prices down sharply, existing projects will be completed but new ones are unlikely. It might take 1000 people to build and 20 to operate it (a new mine).”

Stay focused on the big picture. In my opinion you need to build a portfolio of new (or near new) properties in areas with a growing population and a limited land supply. You want those areas to have planned infrastructure spending and a diversity of local industry. That’s the starting point… from where we “drill down” into those areas to find those properties that will best fit the mrd “Set ‘n’ Forget”… for busy people™ approach property investing (& wealth creation). The mistake many make is being too short sighted in their research; rather than considering medium to long term demographic changes or trends.

You might be scratching your head, wondering why I am connecting Property Investing with Home Based Businesses. Because it is… and if you approach it with sound judgement; applying care as you would when kicking off any business, you will give yourself the greatest chance of success.

“Nick, I would like mrd to undertake a complimentary, no obligation Financial Structure & Cash Flow Health Check for me” …more

Happy Investing,

Nick Lockhart
mrd Customer Care Program… because investing is personal

I am repeatedly asked: “Am I Better Off Investing In Houses Or Units? “Personally, I tend to invest in units (apartments), rather than houses because I am more interested in where I invest rather than what I invest in.

Did you just pick up that the real question is “where” not “what”?

Readers of Nick’s weekly newsletter would know that we place huge importance on the laws of supply and demand. Whether oil, bananas (remember Cyclone Larry in 2007 and what that did to the price of bananas?), property or anything else, supply and demand will ultimately determine all long term pricing (NB: There may be short term “blips” along the way).

I’m 100% Convinced

I am totally convinced that the areas most likely to deliver the better ongoing capital gain are those locations close to infrastructure and services; such as shops, hospitals, employment, transport and so on. An exception to this “rule” is where a property is located in an area with a WOW factor; like near the ocean or overlooking a golf course.

Infrastructure Rules

It was Michael Matusik who recently said that “infrastructure rules”; that’s where the best capital growth is to be found.

Land in areas that I like to target is simply too valuable to use to construct houses. You will not find a new housing estate opening up anywhere close to an infrastructure hub.

As a “set ‘n’ forget” investor, I find apartments and townhouses to be a lot easier to look after; but that’s another story.

What, Where OR WHY?

By extrapolating this logic out further; we can argue that it is not a question of what should I be buying, or where should I buy; but rather WHY!

You see, it’s the outcome (a favourable result) that I am really chasing. The “what” and/or the “where” merely form part of my strategy to achieve the desired outcome.

What Is Your WHY?

In my case, I bought 13 properties to create an equity base sufficient to support my family, without the need for me to continue working. Capital growth is where my focus firmly remained and three years ago, my dream became my reality and I retired.

Billabong & Rip Curl Open Shops In Alice Springs

… and If you believe that, I have a bridge for sale in Sydney!

Please understand that when you become a property investor, you become a business owner.

Would living in Alice Springs be justification enough for opening a surf shop there?

No, of course not; that would be a very stupid business decision!

To knowingly open a business in one location when another would have resulted in more profits defies all reason. Surely you would want your business operating in the locality that gave you the best chance of success.

I was living in Adelaide when I secured my first investment property. It was in Brisbane.

Why? Because the Australian Bureau of Statistics had population projections at the time showing a 1.6% growth for Adelaide and 78% for Brisbane!

Where was my new “business” venture likely to enjoy the greater success?

To achieve my capital growth goals sooner, I wanted property in areas of limited supply (little available land) with increasing long term demand (population growth).

Why Queensland?

The National Housing Supply Council has just released a report, from which I have included the following exerpts.

By 2028, the number of households in Australia is projected to be 11.4 million – an increase of 3.1 million in the underlying demand for dwellings over the 20-year period from 2008

National Housing Supply Council State of Supply Report – Additional households by region for low, medium and high household growth scenarios, 2008–28 as at 30 June

Low growth scenario (The low household growth scenario assumes that age and sex-specific net migration rates (overseas and interstate) for each region as observed in the period 2001–06 are maintained, with total net overseas migration increasing from around 120,000 a year in 2008 to around 160,000 a year in 2028)

• NSW total – 500,000
• Victoria total – 722,000
• Queensland total – 1,090,000 (of which 825,000 are in SE Qld)
• WA total – 357,000
• SA total – 134,000
• Tasmania total – 45,000
• NT – 22,000
• ACT – 31,000

So, based on the above, where will the greatest “demand” for my business be?

Under the low growth scenario, the greatest numbers of additional dwellings would be required in south-east Queensland; 41,000 per year compared to just 15,000 per year in Sydney or 14,000 per year in Perth.

It was important for me to leave my emotions out of my decision making. I simply could not argue with the figures. Yes, people who invest in property in Adelaide, Perth and Hobart and so on are likely to make money. Based on these figures, however, it is clear that to have invested in my own hometown would have been a higher risk strategy.

I freely admit to being a lazy investor. I want the best outcomes with the least input and the least risk! I assume that you feel the same way!

This same report reveals that average rental yields are also on the way up. They are higher for units/apartments than they are for houses.

Over the past six years, rental vacancy rates have fallen. This suggests that total returns on rental housing investment have not been sufficient to ensure supply keeps pace with demand; despite significant capital gains over the same period.

Very low vacancy rates have caused rental growth to accelerate over the past two years.

The dwelling rent component of the Consumer Price Index (CPI) measures average growth across all rental housing; which was 8% over the year to June 2008

Rents on new leases have been growing even faster, suggesting that overall rental growth is set to continue.

That deals with increasing demand but what about supply? Will there be a shortage or glut?

We have previously shown the graph below, but it’s worth revisiting it.

WOW! This shows a SHORTAGE of around 100,000 dwellings this year, climbing to almost 120,000 in 2010. Significant dwelling stock shortages are anticipated to prevail until at least 2018!

Jack Of All Trades But Master Of None

None of us can be an expert in all areas. I have been an investor for more than 10 years. I have assisted numerous others with their investment needs for much of this time; still:

• I do not deal with banks; I have an expert broker to do that
• I do not prepare my own tax return; I have a great accountant for that
• I do not research my own property; I leverage off the efforts of experts (such as mrd) for that too
• I do not have the time or inclination to travel around looking for the best place to operate my “business”. I chose to surround myself with a competent, trustworthy team of professionals to work with me. It wasn’t always as easy (in my early days) as Nick & Katrina have made it today.

Bobcat Operator Or Train Driver

Maybe your property investing experience has been as challenging as it would be to operate a bobcat on the side of a steep, rocky hill. I liken the mrd Customer Care Program to a railway line on flat ground. One is difficult, challenging and risky – the other is pretty much a ‘no-brainer’; you just have to decide to get started and complete your journey.

So, whether you are yet to get started on your investment journey or you have become derailed somewhere along the way; mrd is here to help. Your best starting point is to have us prepare a complimentary, no obligation Finance Structure & Cash Flow Health Check. more…

Happy Investing,

Martin Bell
mrd Customer Care Program… because investing is personal

STOP PRESS! See also: Investing: Units vs Houses – Depreciation Differences

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.

As it turns out, 2008 was not a year where inflation was our major concern. In fact, before the year was out the global slowdown put an end to inflation as global demand for goods and services fell away and prices began collapsing.

Nick’s Opinion

Personally I think:

• Our economy still lacks the overall business and consumer confidence needed to see things turn around
• Banks are still being very difficult to deal with when it comes to businesses wanting to borrow money etc
• That the next round of federal government handouts (the stimulus package) will not have as potent a short term impact as expected or needed
• Unemployment continues to be the worrying issue and unless small business gets some relief the negative employment trend will not be arrested

It’s just an opinion and I may be wrong, but for reasons including those above, I expect we will see further cuts to interest rates. I also see justification for the extent of further rate cuts to go further than most economists are currently predicting.

The question: “Did the Reserve Bank get it wrong in March when they left interest rates on hold” draws a divided response; and only time will tell.

The RBA’s decision to leave interest rates on hold this month was either (1) A positive vote of confidence in the Australian economy, or (2) A mistake… that will be corrected in the months to come.

Outlook For Property Investors

Current conditions are actually ideal for investors… regardless of whether or not the RBA moves on rates further.

• Property can be purchased at fantastic prices; most, if not all, developers could be classed as “motivated vendors” right now
• Interest rates are the lowest they have been in our lifetime
• Australia is in the midst of a massive housing shortfall

For anyone with a job, the current climate should be as easy as it is likely to ever get… when it comes to creating wealth! Don’t let this open door close before you act!

Happy Investing,

Nick Lockhart
mrd Customer Care Program… because investing is personal

Finance Structure & Cash Flow Health Check

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 and open up opportunities that would otherwise have passed you by.

Yes please! Follow the link below to securely send us the information we need to complete this on your behalf:

https://www.investmentmentor.com.au/bca.php

Case studies of other mrd clients that have undertaken a financial health check:

http://investmentmentor.com.au/2009/02/20/property-investor-crash-victims/

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

Now things could happen over the next few days to change that. For example, the Federal Government announcement concerning the next round of stimulus to be announced. Factors such as this cannot be properly considered at the time I am writing this.

Initial evidence suggests the Federal Government’s cash handouts in December ‘08 fell short of having the desired effect. It needs to be noted, however, that official reporting on Christmas spending last month has not yet been released.

Assuming the cash rate will move down by another 1.25% (to 3%) by early March… I see two options before the RBA when they meet next Tuesday:

1. Move rates down by just 0.5% in February while waiting for official figures to indicate exactly how much impact the 1st stimulus package had on Christmas spending. This option would also allow the RBA time to digest the detail of the 2nd stimulus package and assess its likely impact. NB: 2nd stimulus package will be announced soon… possibly this week end.
2. Move rates down by a full 1.0% in February and not risk losing another month whereby the economy could be further stimulated. If they take this option and risk “over cutting” rates next Tuesday they can then put the brakes on a little and do less the following month.

Of course there could be any number of other options and the net effect is that the next two months could see the official cash rate fall below 3%; that is certainly not out of the question.

Personally I suspect the RBA will view their responsibility of overseeing monetary policy with much caution next week and attempt to make a significant contribution to boosting both business and consumer confidence quickly.

At this time our economy is quite fragile and to ‘play it safe’ would seem the most responsible course of action the RBA could take. Managing inflation is no longer of primary concern. Even so, inflation has been taken care of anyway. Falling commodity and labour prices has rectified any inflation problems we were considered to have a year ago… adding to the argument for lowering interest rates.

Have you heard it said that “in every adversity lies the seeds of a bigger and better opportunity”?

This is not just a string of nice words, but a profound truth. The bigger the adversity, the bigger the opportunity. Assuming we understand that influences of “supply & demand” and “herd mentality” on values (even though in the short term aberrations may occur); we will be better positioned to SEE the bigger and better opportunities available now.

• I believe there are more pessimists than optimists; it’s easier to be negative just as it’s easier to grow weeds than flowers
• When it comes to matters of finances, more people are more influenced by their emotions than facts
• If “everyone else” is doing it… so will we
• In Australia we have a growing demand for housing continuing, with a very limited supply
• Confidence is at an all time low; albeit without justification in many instances
• Some developers have gone out of business, others have put the brakes on until they see the property market pick up… many of the rest would still construct if they could find a bank to lend to them
• If the source of this supply problem was fixed overnight, it would take years before the solution worked through the system resulting in sufficient numbers of additional completed housing
• Those who hold property today can look forward to the benefits of significant capital gain… resulting from the next up-cycle
• Up-cycles follow seasons where housing is considered affordable
• With interest rates quickly falling (and to levels most Australians have never seen in their lifetime) and rents being forced up by the growing demand (with lack of supply for years to come) housing will soon be considered VERY affordable

The numbers look really good now and are only going to get better. This gives me confidence that broadly appealing residential property, in sought after locations… will, over the next few years, grow significantly in value. The doomsayers and their followers will have about as much credibility as a cult leader and his key disciples.

My Suggestion:

Assuming you have had an analysis run on your personal situation and understand the associated costs and responsibilities of both buying and holding real estate… now is a fantastic time to buy – i.e. for those who subscribe to the mrd buy/hold strategy (if you’re a property speculator, trader and/or renovator – “good luck & may the force be with you” – ha, ha)

My property portfolio is just about always adding to my wealth. Either my property values are increasing; and adding to the amount of equity I have to work with… or the rents are increasing; and adding to my income base. Remembering that to acquire more property we must demonstrate to our lender sufficient equity and income… I am always winning with real estate.

Safety In Numbers:

People feel safer in numbers; that’s why the herd mentality is so prevalent… but recent history has shown that if you followed what was popular you may have lost half your super or shares etc. I believe real opportunity (like risk) comes from our knowledge (or lack thereof) and our willingness to “swim against the tide” of popular opinion.

Interest Rates & Holding Costs:

Currently the CBA offers the lowest professional package interest rate; just 6.04%. If I am right and rates come down by another 1.25% (or more) over the next 5 weeks… and even if it were not all passed on, we would be looking at being able to borrow for about 5%!

That means the total interest bill on a property that cost $400,000 (assuming you borrowed 100%) would be more than covered by a weekly rent of $385. Now I know that there are council rates, body corporate and rental management fees etc to come from this… but so too there are tax deductions and the strong likelihood of more rent than $385 a week. Watch how, when the numbers change so much in such little time, even the herd will see the opportunity! And when they do… we will have our next up-cycle.

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

RESIDENTIAL property values on the Gold Coast are set to benefit from a booming population and strong demand for housing, according to research from PRDnationwide.

The research, compiled by Lynda Campbell of PRDnationwide’s Gold Coast office, shows the city needs 129 new dwellings a week to cope with the present population growth of 3.6 per cent — 2.1 per cent higher than Australia’s national growth rate.

Ms Campbell said while the actual population figure was down from previous years, this was a direct result of recent local government boundary reforms rather than a declining population.

“Population figures have dropped below 500,000, but when you consider that Beenleigh and its surrounds no longer form part of the Gold Coast, the population growth is still significantly high,” she said.

The report states that building approvals for houses and apartments on the Gold Coast have dropped dramatically in the 12 months to June, 2008.

“Building approvals aren’t keeping up with the residential demand resulting from the Gold Coast’s burgeoning population,”said Ms Campbell. “The last year has seen approval of 735 fewer houses and apartments across the region.

“Combined with current record low interest rates, this drop in supply and continual increase in demand should have a positive impact on property.”

>>> Gold Coast needs 129 new homes a week: report – Realestate News – Gold Coast, QLD, Australia.