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

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/

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

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

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

To have us assist you, click here

Happy Investing,

Nick Lockhart
mrd Customer Care Program… because investing is personal

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

Yes please!

Follow the link below to securely send us the information required to prepare this for you.

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

To view case studies of other mrd clients that have undertaken a financial health check with us, see below.

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

Happy Investing,

Nick Lockhart
mrd Customer Care Program… because investing is personal

The Valuer!!!

The term “Valuer” is often misleading.  Many people assume, due to the label “Valuer” that this person is going to mathematically compute a recommended retail price for a property.  Nothing of the sort!  The term “Valuer”, when dealing with a financier, refers to someone who assesses the perceived risk involved in a particular transaction.  There are many factors involved that have nothing to do with the property itself.  The biggest single factor in any assessment is the opinion of that one person named “Valuer”.  It is not uncommon for opinions between valuers to differ by 10% or more on the same property.  The property is the same, they both have access to the same documentation and historical data but they come back with two vastly different numbers.  The only variable between them is their opinion.

Included in the valuation report along with an actual dollar value is a series of risk ratings for different criteria, mostly relating to the expected future market conditions.  Even if the valuation figure comes back within close proximity of the contract price, if the valuer’s opinion of any of these other risk criteria is high then the bank can also limit or decline any finance application.  In a bank valuation the “Valuer” isn’t just valuing that property, they are also predicting the likely economic future for the locality!

I recently had an mrd client comment on the low valuation he received on his own home and how it was actually below the council’s latest CIV (Capital Improved Value). The CIV is the total market value of the land plus buildings and other improvement and is calculated every two years using a process governed by the Valuation of Land Act and carried out under the guidance and audit control of the Valuer-General. The valuations are carried out by qualified professionals who hold recognised tertiary qualifications and who have the required practical experience.

I thought it may be useful for me to share what I sent to our client in regards to this matter. Names and other personal details have been changed for privacy considerations.

Hi X

I agree that valuations are an issue. You would have seen my own experiences related in recent articles. You would also be well aware of the issues last year where two identical townhouses standing side by side returned valuations $25k apart using the same bank and the same valuer- just different people working for that valuer. It’s a “professional’s” personal opinion , based on criteria set by the banks, and the bank will rarely vary from it because of the legal implications.

My issue with all this is in the terminology used. I don’t believe that the commonly accepted meaning of “valuation” is appropriate at present.

There are clearly two distinctly different documents here.  Both are misleadingly called “Valuations”:

• The bank “Valuation” for risk minimisation
• The Council “Valuation” for the setting of rates

I personally believe (and I could be wrong) that  the bank is setting a dollar value on their perceived risk, based on the property and on the borrower.

The council value is not really relevant as it’s the councils opinion of the current market value to set rates.  It is in no way related to the bank valuation which is a valuer’s opinion of the banks future risk potential in that particular transaction.

Realistically if the council’s valuation is too high, or values drop markedly what impact does it have on the council? They just collect more rates than they should I guess.

If the bank’s valuation is too high or values fall it has a dramatic effect on the banks security and risk level. Although we see no comparison between the Australian housing market and the US (covered in recent articles), what has happened in America must have some effect on our banks in that they will be more “nervous” about their security and will therefore be more conservative with their valuations.

A bank valuation of $410k when the CIV valuation is $434k is no more a variation than we often see between different valuers and lenders. In my recent apartment purchase at Robina we saw a $72k difference between a valuation done for St George and a valuation done for  Commonwealth Bank; mine was the one that came in $72k short!

In the current “financial crisis” with all the unknowns, banks failing around the world, often taking other banks down with them, I don’t see much chance of us changing their system.

I don’t disagree with your comments, I guess I don’t see anything we can effectively do apart from trying to understand how the system works and make sure we use it to our advantage (or minimise our disadvantage) wherever we can.

Happy Investing,

Martin Bell
mrd Customer Care Program… because investing is personal

Other Links to related “Valuation Articles”

• http://www.investmentmentor.com.au/valuations.htm
• http://investmentmentor.com.au/2008/11/28/valuations-will-somebody-please-explain/
• http://investmentmentor.com.au/2008/11/28/valuations-will-somebody-please-explain/

Finance Structure & Cash Flow Health Check

Our recent offer to complete a complimentary, no obligation Finance Structure & Cash Flow Health Check has been widely taken up. If you would like us to undertake this same service on your behalf please click the link below to send us your contact details.

More Info…

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

Yes please; I would appreciate a complimentary Financial Health Check

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

• Bad drivers don’t know they are bad drivers
• Pigs don’t know that pigs stink
• And you don’t know what you don’t know about finance structure

The following “Horror Finance Stories” took their victims by as much surprise as the person who had someone pull out in front of their car and cause an accident.

At least when you get behind the wheel of a car you are (mostly) in control. Sure there are other drivers on the road and then there’s things we rely upon – like brakes etc. When it comes to arranging and structuring your finances; you will become a passenger and your broker/banker a taxi driver.

Assuming your broker/banker properly understands the mrd Advanced Finance Strategies we promote, is akin to assuming a taxi driver will always take you to your destination by the shortest route… safely!

You would have probably noticed of late that we have been offering readers and clients alike a no obligation, complimentary “Finance Structure & Cash Flow Health Check”. Many have responded and taken up this Customer Care initiative and as such, we are exposing more and more “crash victims”.

Good people unwittingly letting unskilled drivers take control of their financial vehicle.

CASE 1 – BARRY:

Barry is nearing the settlement of an investment property sourced through mrd. He chose not to use an mrd preferred broker (one familiar with the mrd Advanced Finance Strategies), preferring to use his local credit union. This is completely understandable as he had a long term relationship with his credit union. Barry was comfortable with their service, found them to be friendly and conveniently located near his home.

While friendliness and customer care are essential, there’s so much more to correct finance structure than familiarity and a warm smile.

Barry took up our “financial health check” offer; which was fortunate for him as he was quickly headed for a wreck! His local credit union had initially not allowed any funds for settlement costs, such as stamp duty and legal fees. If we had not intervened he would have arrived at settlement about $12,000 short; that is with just enough funds to cover the property purchase only. This could have resulted in him being charged penalty interest while he madly rushed around trying to find the extra funds required.

It doesn’t end there; the credit union was also…

In the process of mixing private credit card debt with Barry’s home loan

Refinancing an existing loan back to themselves; i.e. replacing an existing loan with an identical loan. This added no benefit to the client but would have incurred another round of establishment fees etc… payable to the credit union

With Barry’s permission, we sent the credit union instructions (in “chapter and verse”) as to how to set the loans up… and they still got it wrong.

Someone from this office then had to educate the loans officer just to ensure Barry was given the correct finance structure!

It didn’t end there…

Round 2! The credit union then planned to mix investment debt and business debt in with his private home debt… and continued insisting on (unnecessarily) rewriting their home loan with an identical loan.

Throwing petrol onto the fire… they had cross collateralised their home and the investment property. With a pending settlement on his doorstep, Barry had no time to lose.

The instructions back to the credit union were simple:

Leave the existing loans as they were and create a single new loan to take to settlement that would have been sufficient to settle leaving about $4,000 in the buffer for their next year’s expenses.  Once the year is passed and the break fees reduced they will be looking to finance away from their local credit union; this time accepting our friendly suggestion that they use one of our preferred brokers.

This story had a happy ending, thanks to Doug… and a potential crash victim was saved!

CASE 2 – MARK:

Mark also chose to use a broker he was familiar with; someone who had an ongoing relationship with his place of employment and offered a bonus interest rate discount, due to this relationship. As it turned out, the discounted rates were similar to the big banks rates anyway.

Much to Mark’s disadvantage the broker encouraged Mark to take out fixed rates; some as high as 8.78% for 3 years.  mrd, knowing the dangers of fixed rates discouraged Mark from using them… but we failed in our attempts to overcome his brokers persuasion. The odds are really against you winning with the use of fixed rates; 87% of the time according to statistics. The benefit of fixed rates for the broker of course is that they are locking in their commission for 3 years as it is too expensive for most clients to escape from.

The total cost of cutting this victim out of the wreckage (moving him from a fixed to a variable rate) is in excess of $50,000! This was a very expensive crash!

This broker advised Mark that he had the borrowing capacity for two investment properties. So, armed with that professional advice, Mark proceeded to unconditional status on two properties. Some months on, interest rates have dropped rapidly… yet Mark is left paying more than $20,000 a year interest above what he would be paying had he accepted our guidance up front. He can swap from his fixed loans to variable… but it will cost him in excess of $50,000 up front to do so.

The fight continues! We have no happy ending here just yet… Doug is busy trying to cut this victim free from a mangled wreck.

CASE 3 – LAURIE:

When Laurie approached mrd he was trying to refinance an existing (non mrd) investment purchase and was looking for additional funding to buy another through us.

When Laurie financed his 1st investment property, he fell victim to a type of loan referred to as a “cash flow mortgage”.  These loans capitalise part of the interest back into the loan, reducing the initial cashflow requirements. The loans rely on continued capital growth.  After a few years people with these types of loans have to start paying the full interest rate. The early years of capitalised interest means they are now paying full interest and off a higher base. Obviously, this can place a heavy burden on some. Capital growth is predictable long term but less predictable short term.

NB: The overall interest rate associated with these types of loans is higher than you can find elsewhere… so “buyer beware”!

To assist with cash flow, Laurie had converted his existing investment property to student accommodation… but this made it undesirable in the sight of lenders. Struggling to find a way forward and build wealth for his family and wanting to please his wife who had her heart set on finishing the renovations on their home… Laurie asked for an mrd Finance Structure & Cash Flow Health Check

Next step… Doug and the mrd preferred broker go to work…

The broker worked tirelessly to find a lender who would accept the (student accommodation) property; eventually succeeding to refinance this loan with a mainstream lender. Laurie’s new loan came with a greatly reduced interest rate and a provision of funds so that he and his wife can complete their home renovations.

• Their expenses are now much lower than before
• They can breathe easy
• His wife is happy that the renovations are again on the radar
• With the added value these renovations will add to their home, Laurie will soon qualify to consider his next investment property; should that remain his goal
• With the lesson learned from this experience, Laurie has now converted his property back to a “normal” residential house

Thanks Doug… another crash victim has been saved!

CASE 4 – CRAIG:

Craig had been a student of various investment strategies for some time. Having taken some steps of his own, he secured a few cheap, older properties. Initially coming to us curious as to what the mrd Advanced Finance Strategies may reveal, one of our preferred brokers worked with Craig and put forward a proposal to deliver the objectives Craig was looking for:- Remove the cash flow strain associated with supporting his property portfolio from his family, so as to allow him to continue to build wealth for his family… without having to live like a pauper.

In reviewing his situation, Doug identified huge opportunities that Craig was not taking advantage of.  We put together a proposal that allowed Craig:

• The ability to meet his initial objectives
• Add more than $1 million dollars worth of property to his portfolio

While Craig was yet another victim of a poor finance structure… the greater loss was an opportunity cost.  Assuming that the $1 million additional value to his property portfolio doubles over 7 years (historical average), their wealth will now increase by an average of more than $142,000 per year each year for the next 7 years*!

* NB: A property that doubles in value over seven years, will probably experience five years of little and no growth, followed by two years of phenomenal growth; that is growth is normally not linear.

Craig is already better off… but the real gains are still ahead of him. This all came about without costing Craig a single dollar:

• mrd undertook this as a part of our Customer Care Program
• The new properties will settle without the need of a cash injection
• The mrd Advanced Financing Strategies have positioned Craig such that he will soon hold an extra million dollars worth of property in his portfolio for less money than it cost him before the $1 million was added

This was a massive wealth creation opportunity that only came to Craig’s attention because he responded to our offer of a no obligation, complimentary Finance Structure and Cash Flow Health Check.

Well done Doug! Not only have we saved another crash victim, you topped up his fuel tank allowing his (property) vehicle to take him further!

CASE 5 – Peter:

Peter had never had any dealings with mrd. He was referred to us when he was wanting to sell a property.  This one was a sad case of injustice… Peter was not just a victim of poor finance structure… but of ruthless financiers and predatory marketers!

Peter and his wife live in country NSW (probably under water right now). To us they are typical of hard working, honest (‘as the day is long’) country people; the backbone of this wonderful country!

Peter had developed a skill-set over his working life… but that skill-set did not include knowledge about property investing or finance.

His goal was to build a retirement fund through property investment, to provide an income for his family that did not rely on government assistance. To achieve this, Peter needed the support of someone who would supply the knowledge and experience that he lacked.

Guess What?

Rather than finding support from someone who cared… Peter ran into some of the rogues that are prevalent in the real estate and finance industries. Would you believe me if I told you that Peter “fell for” a group whose guidance served their own interests; rather than Peter’s?

Of course you do… they’re everywhere unfortunately!

Peter settled on a property that was sold to him at an inflated price. I can say that because mrd was actually offered these very same properties when they were first released to the market by the developer. We turned them down; based on price only!

The property was fantastic and in a great location… just not good value! To have lost a bit to an overpriced property would not have been so bad. It would not have caused him to crash… rather slow him down a little (property is very forgiving if you just wait).

His real crash came from the finance arrangements.  The marketers and the finance company combined to get every cent they could out of Peter; whose existing loan was with the CBA.  It would have been very simple to finance the investment property also through CBA on a good interest rate… allowing Peter to achieve his goals. This is exactly what should have happened! That wasn’t good enough for these vultures (sorry, I have no idea how to be gracious in these unjustifiable situations!).

They refinanced his own home; which was of itself completely unnecessary… and tied the two properties together with high interest rates and heavy break fees.

Peter was a goner the moment he signed the paperwork!!!!

It was only a matter of time before Peter got into trouble with the loans.  Anyone with a conscience would have tried to help these “Aussie battlers”… but instead they all lined up to make sure they got their commissions and fees out of Peter.  The final straw was them taking over the property and evicting the tenant to ensure Peter could not recover. Not only was his investment property in danger but also his own home. The vultures were circling.

It was at this time that mrd became aware of his plight. Along with our experienced brokers and Peter’s solicitors, Doug and I worked tirelessly trying to rescue Peter’s investment property (i.e. help him to hang onto it)… but he was too far down the legal path for it to be saved. The best we could do is counter the remaining blows being thrown at Peter and ensure he salvaged whatever he could from the wreckage.

We were able to minimise his losses and ensure he kept his home; something he very nearly lost also! We were also able to assist Peter in lodging a formal complaint with the regulatory authority about the finance company involved.

In this case, Peter lost the investment property and was (temporarily) derailed from his financial goals… but his home was saved… and he is still alive to have another go at a later time. Had Peter come to us earlier and requested a complimentary Finance Structure and Cash Flow Health Check, we would have been able to identify the issues involved and intercept them before the crash. This was not to be!

Peter’s was a story with “as happy an ending as was possible”; in the 11th hour… thanks again Doug!

If you have not had personal dealings with mrd… you would be forgiven for thinking we are “just another mob out of Queensland flogging any old property to whatever sucker comes along”. I challenge you to test us. We know we’re different, but you never will know until you experience the mrd difference. I am so proud of the wonderful and dedicated team that I lead. If you suspect that mrd may be able to add some value to your wealth creation journey, then click here to request a no-obligation, complimentary “Finance Structure & Cash Flow Health Check” for yourself.

Happy Investing,

Nick Lockhart
mrd Customer Care Program… because investing is personal

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

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

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

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

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

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

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

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

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

Non Capitalised Example:

Weekly holding cost is $32.

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

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

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

How times have changed.

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

When rates peaked, the property would have cost you about $210 a week to hold after tax, based on a 30% tax rate. For the majority of people that is a significant amount to find each week. Holding a property such as this was difficult and fewer people were able or willing to get involved and wait for the capital growth to repay their holding costs.

With more advanced financing strategies such as the capitalising of most property expenses you may have been able to bring the holding costs down to a little over $100 a week. Even at these higher rates it was still a very good investment as the expected capital growth would have dwarfed the holding costs but few people would have been able to see that.

What is the holding cost now?

That initial $210 a week to hold after tax has dropped to a tiny $32 a week.

Using the mrd advanced financing strategies the property actually becomes cash flow positive by $75 a week.

The Hidden Bonus is that not only is the property now not dependent on a contribution from your hard earned wages but it is actually paying you back, contributing to your weekly savings, helping you pay down your own home loan and creating wealth for you through capital growth.

What is rarely understood is that by using these same mrd advanced finance strategies it may be possible to have the tax man contribute to paying off your home loan by changing home mortgage debt into tax deductible investment debt.  For more information about how this may work for you please ask one of our team.

You can now have a property that pays you every week. In addition, it generates huge equity pools for future investments or lifestyle choices. As an example, if this Endeavour Gardens property grows by an average of 9% a year (8 year doubling cycle) then in that 8 years it will average $805 a week in equity growth for very little time and effort.

This complies with our “set ‘n’ forget” for busy people ™ strategy.

It is only a matter of time before the masses realise what a bargain this property is.

My question to you is… are you going to be ahead of the herd or following in its wake?

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.

You can make one of two choices:

• Take us up on our offer for a no obligation, complimentary “Financial Structure & Cashflow Health Check” click here to email us.
  
• Find out what your Borrowing Capacity is now that rates have dropped so quickly. Click here to submit your form today.

Regards,

Doug Wroe
mrd customer care program… because investing is personal