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AssetZ Newsletter- Stay informed on current Property Markets and Trends
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Property Boom will follow year of uncertainty
AT some point this year buyers will start piling into real estate.
First-home buyers, trade-up buyers and investors will collectively decide it’s time to buy and start a fun run towards the market.
The catalyst that will spook the hibernating real estate herd will be a TV news item or newspaper coverage of research that records an upturn in values in the previous quarter.
The migration back to the market will quickly gather a momentum of its own. Media, which devoted this year to gloom stories about property, will switch their focus to “the new property boom”.
People who spent this year living in fear of the Europe crisis, the affordability crisis, the cost-of-living crisis and the what-if-home-values-collapse-like-they-did-in-the-US crisis will rapidly develop a panic urge to buy real estate. The fun run will turn into a stampede.
The what-if-the-worst-happens psyche that galvanised consumers into inaction this year will be replaced by an I-don’t-want-to-miss-the-boom mentality next year.
Sadly, most will have already missed the best opportunities to set themselves up for capital growth.
They say you make your gains in real estate when you buy, not when you sell. That means buying when markets with future potential are at the bottom of their cycles.
In most cases around Australia, that means buying this year, not next.
By the time the research companies get figures that describe the upturn, write their reports and pass the good news to the media, the upsurge will have been gathering steam for six months or more.
In other words, most pack animals will miss the chance to be bottom feeders.
If I had unlimited funds and lots of time on my hands, I’d sign pre-Christmas contracts in the following 25 key locations: Gladstone, Toowoomba, Emerald, Mackay, Brisbane, Tamworth, Gunnedah, Muswellbrook, Newcastle, Sydney, Broken Hill, Bendigo, Ballarat, Warrnambool, Portland, Adelaide, Whyalla, Port Augusta, Ardrossan, Ceduna, Albany, Bunbury, Perth, Geraldton and Kununurra.
There are plenty of other good spots, but I’ve kept the list to 25. They’re all places with affordable options and great growth prospects.
Some places stand out among the possibilities – Adelaide, for example. Sooner or later Australians will realise that we have three boom resources states, not two. South Australia is the third.
The state has multiple billion-dollar mining ventures in various stages of planning or construction, led by the $30 billion Olympic Dam expansion.
Many of the businesses winning contracts from big resources projects will be headquartered in Adelaide, taking on extra staff. Olympic Dam proponent BHP Billiton will also have a bigger corporate presence in Adelaide.
Many of the workers engaged to develop Olympic Dam, the copper mine at Ardrossan and other big ventures will live in Adelaide as fly-in-fly-out or drive-in-drive-out or float-in-float-out workers.
Whyalla and Port Augusta will also receive multi-pronged benefits from the Olympic Dam project and other resources ventures.
Brisbane and Perth, as I wrote last week, are poised to stop the slide in their markets, with growing impetus from the emerging boom in construction related to the resources sector.
There are some compelling growth economies in the regions, and it’s not all mining-related. Key regional cities in Victoria, such as Bendigo, Ballarat and Warrnambool, are beginning to thrive from business expansion, population growth and the ongoing development of infrastructure.
- The Australian December 17, 2011 12:00AM
- Terry Ryder is the founder of hotspotting.com.au
How to Build your Property portfolio and Still sleep at night
Congratulations on wanting to learn how to grow your asset base quickly and safely.
At AssetZ we want to show our clients how you build your property portfolio and still sleep comfortably at night.
This means building a multimillion dollar portfolio without having to worry about where the money is going to come from should there be a small emergency , for example the hot water service breaks down.
The key to becoming a successful property investor is being able to hold the asset over a period of time to allow it to grow in capital growth. We want to ensure all our clients are in a position where they can do this and benefit from a more secure financial future.
Where most property investors go wrong is they only purchase a property and that is it, what you need to do is purchase the property and purchase time.
This is a strategy AssetZ teaches their clients and this is the strategy that allows our clients the security of knowing they have protection on their side.
Now what do we mean when we say you need to buy time?
If a property costs you $350,000 plus$15,000 in stamp duty and fees your total costs are $365,000. Cost is $365,000 to buy the property but remember you also want to be a successful investor and buy time, we would recommend you have a minimum period of 2 years time buffer. This is 2yrs worth of the expected holding cost of the property.
Let us say the holding costs after rental income and tax rebate back is $5,000 per year, this would mean if you wanted 2 years worth of time protection you would need to have access to $10,000 ( 2x $5,000) in available funds or in a line of credit.
This is a very basic principle yet one where the majority of property investors do not follow. The amount of time you buy with each property depends on the individuals comfort level, some people may want 5 years as a buffer period, the important thing is to buy time when you purchase your property.
On average an investment property will become positive geared (income is greater that outgoings) within 3 to 5 Yrs.
As the time buffer is very much tied to the individuals comfort level AssetZ will tailor the strategy to ensure we meet the client’s needs.
Once the appropriate buffer has been determined along with the individual’s budget and risk appetite, an individual strategy is implemented that identifies the right investment property. Ongoing assistance, advice and direct one on one attention is given to each client on how to fund the holding cost of the new property without using any of their own income.
This allows you to build your property portfolio without affecting your day to day cash flow.
So remember, when you buy your next investment property do not forget to buy time with it.
If you need help with this please click here.
Buy Land
Real Estate – Long Term
Real estate is a long term investment that requires discipline, patience and a solid strategy. History shows on average property prices double in value every 7-10 years, however if you choose the right property you can easily achieve much higher growth rates.
We know this statement sounds unbelievable, and at first it is difficult to get your head around that a property you buy today for $400,000 will be worth $800,000 in 10 years. We will look at the hard data to back up this claim later this lesson.
Experienced property investors hold real estate for a minimum of 10 years, or never sell at all. Unlike shares or other investment types it is best to acquire property and keep growing your property portfolio then to sell and make quick profits.
Because property is a long term investment, time in the market is more important than timing the market. Over a 10 year period or more, your property value will probably ride out some bumps over the economic cycle and experience solid growth.
You only need to look at a graph of median house price growth over the long term to see that property values move up and down, all the while trending upwards. This is why when you ask many property investors, ‘when is the best time to buy?’ they’ll answer 20 years ago.
Why Buy Real Estate?
Property has long been a favoured way of Australians to invest because it is one of the simplest investment types to understand and if done right has very low risk.
People will always need a place to live, it is one of our most primal instincts. There will always be a demand for property and rental housing because not everyone can afford to, wants to, or is brave enough to buy a home.
Owning your own property allows you to renovate rooms or extend your home to your tastes and provides a sense of security. Your first home is also the cornerstone of any investment and is the first step to becoming a property investor.
For property investors real estate provides a regular income that will progressively grow over the years. Property also provides capital gains when your suburb or town raises in value meaning you can sell for profit or unlock equity to buy more investments.
Property Benefits
Why choose to buy property rather than other growth assets such as shares or commodities?
There are many good reasons, including:
- capital growth
- rental income
- hedge against inflation
- tax benefits
- larger borrowing capacity
- you can add value
- Financial security.
| Property Goals
Before you purchase your first home or start investing in property, you need to ask yourself: what is my goal? Do you want to:
It is important to establish what your goals are before you start because it will determine what type of property or investment suits you. Property investors who have done very well financially acquire real estate rather than buying and selling. It is a common myth you need to sell real estate to make a profit. Over time rents increase and you will find the rent more than pays for the mortgage giving you passive income. Why sell the goose who lays the golden egg? Congratulations, you have completed Lesson One: Real Estate Rewards! Please keep in mind the following points:
|
Choose Your Investment Strategy
Choosing the right property investment strategy is all about matching your goals to the right investing solution.
Some people prefer capital gains – where you use equity in your properties to buy more properties thus giving you a large portfolio. Others prefer cash flow – high rents that more then cover the holding costs of property.
(Once you have chosen your strategy to achieve the best results stick to it don’t swap and change)
AssetZ has the strategies, the research team, products and experience to point you in the right direction.
Contact AssetZ for your individual analysis at info@assetz.com.au
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Are you Procrastinating about Starting an Investment plan?
In 2010, 43% of Australian workers had less than $10,000 in retirement savings. People are claiming to have logical reasons for not having enough retirement savings. There are some that say they are still paying off personal debts with high interest rates; others say that they are dealing with mortgage or the kids are still in college. There isn’t any limit to what reasons they claim to have.
No matter how logical they may seem, it is still simply procrastination.
Procrastination kills time and time is the most critical factor in retirement planning. You can’t build wealth in just savings alone but through savings compounded over time.
Below are ways to overcome retirement planning procrastination which is relative to its causative factors?
Procrastination is caused by 3 psychological factors:
- Fear
- Disorganization
- Perfectionism
Fear
People are putting off their retirement savings plan because of fear for immediate discomfort. Our present fear often consumes us that we tend to delay dealing with the things concerning the future. We don’t realize our delays may cause scarier predicaments than our present fears.
Money coaches say that if you contribute $2,000 to your retirement savings annually for 9 consecutive years and let it compound for 41 years, you’ll get approximately the same amount if you waited 9 years to begin saving and contribute $2,000 yearly for 41 consecutive years? If you’re afraid to commit $2,000 dollars per year of your budget to retirement savings for just 9 years, how can you commit to save $2,000 per year for 41 years? The latter is definitely more terrifying.
To overcome your present fear, enhance your perception of the future pain to make the present inconveniences more bearable.
Disorganization
Organizational skills such as careful planning and budgeting are needed in retirement planning. In short, retirement planning is a very complicated thing to deal with. People often deal with complicated tasks in delay or avoidance, so they always end up procrastinating in their retirement savings plan.
The best way to solve this problem is to take small incremental steps in eliminating the clutter from your finances. Create a money log where you can jot down all the comings and goings of your money. This is a good way to organize your finances because this will show you your total monthly income and expenses where you can base your budget on.
The best way to be able to control your expenses completely is to make a budget. Budgeting will significantly reduce your risk for overspending and increase your chances of saving.
Perfectionism
Perfectionism is characterized by: an attitude of avoiding doing something unless it can be done perfectly and; by a great need to finish a current task before starting doing another. In relation to retirement planning, perfectionism makes people procrastinate because they’re still either figuring out the perfect way to do something or they are still busy perfecting their current lifestyles, they can’t seem to start preparing for their future.
If you are a perfectionist, start your retirement savings plan by setting your savings in auto-pilot. Arrange a percentage of your finances to be automatically pulled into your savings account. This technique will save you the effort and you can focus all your attention in perfecting your current task while your savings increase automatically.
If you follow the steps above you will be able to stop procrastination in your retirement planning. Time is the secret to wealth building so don’t delay anymore and start saving now.
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Building your Property Empire
My mission here is to help people who are motivated to help them selves by providing you with some insights into property investing and passive income generation. I currently work and educate my clients on how to grow and manage their property portfolio, if you would like to see what I can do for you please check out our website at Assetz.com.au . I have been a property investor for the last 5 years and have become very passionate about educating others on how to do what 96% of Australians don’t do, that is to be financially free. I am also a huge believer in leveraging your time to have money work for you and not you work for money.
Now let us get started on why I like property and why I think every one should be in the business of property investing. The first thing to realise is when you do buy an investment property you are becoming a business owner and you need to treat it like one. Like any smart business purchase you need to make sure the actual numbers stack up to what your actual business plan is. For example it is pointless to buy in a cash flow positive regional town ship that is receiving minimal capital growth if you are after growing your asset base. You would be better served to purchase in a proven area of capital growth and learn how to manage the shortfall each week on the property cost. I have found from my clients once you can treat it like a business it will prevent you from making emotional decisions that may not match your business plan. Instead you need to crunch the numbers and the historical data to make sure it ticks all your boxes, you DO NOT need to have been to the area before you purchase, I have purchased in areas I have never been to or planned on going to. If the numbers all stack up and match your criteria then that is all that matters. We are lucky we live in the hi tech age and can walk down a street anywhere in the country with Google Street view, the days of driving around and wasting your time are over. 
Ok, so I hope by now you realise property is a business and needs to be treated as such. Why do so many of the wealthiest people alive prefer property as the vehicle to financial independance? Put simply the leverage you can gain on property is second to none. For example if you had $100 000 to invest in either shares or property it would look like this. 100k deposit in property could be used to buy a property worth around 660000 if we work on a 80%LVR and 5% for stamp duty and fees etc. You would then be controlling an asset worth $660000 and returning a compound growth of 7% pa. The first year you would receive $46200 in capital growth!! This would then mean your asset is now worth $706200 and grows at 7%pa the next year which is $49434 so as each year passes the asset grows faster and faster.Now I have used the average of 7%pa as this is around the average growth rate in Australia, some years it will be higher or lower then this.
Now if we had the same amount of cash to invest in Shares it would look like this. 100k invested means you control 100k shares( I have done no margin lending as I have also only gone to 85%LVR on the property). Share market moves up 7% and you would earn 7000 in capital growth, not bad but 39200 behind property. Unfortunately the banks do not allow you to borrow the same on the shares as they do on property, I like this for two reasons. Firstly it shows the banks have confidence in our housing market if they are willing to lend high LVRs ( Loan to value ratios) and allows me to control a larger asset base which i receive all the capital growth benefit. I hope this makes it clear why I like property but this is not to say this is the only type of investing I do. To generate large sums of income I also use some other income generating tools, more about them later. If you can not wait check it on my next page Who am I.
What my goal here is to educate you on Property Investing for FREE, I want to make sure you can learn everything I know about Property investing that has enabled me control my multi million dollar portfolio, I don’t say that to impress you but to show you that anyone can achieve what they want to. No one was born knowing how to invest in property or how to manage your properties.I want to show you how to build and manage your property portfolio to enable you to have the life that you want and no doubt deserve.
Your first step is to sign up for my Build your own Property Empire training. This is totally free and no obligation at all, I know you will gain alot of knowledge from these letters and if you put what you learn into practice you will also build your multi million dollar property business. Thanks for spending your valuable time reading this and I look forward to staying in touch with you.
If you can not wait to learn more and would like to start building your empire now then email me at paulreid@assetz.com.au
Happy Investing
Paul Reid.