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Catherines Chat

Wholistic Financial Solutions provides a lot of essential information and updates regarding the property investment industry. Check this page for the updates.

Rent Continues to Rise

Friday, May 16, 2014

 

You can buy some shares in a company with just a few hundred dollars. And you can start a bank account with just a few cents.  How much do you need to invest in real estate?

Real estate investment requires a far greater initial outlay than other investment options.

So how much do you need?

Generally, you will need at least a 5% deposit and you should also allow 5% for stamp duty, fees and charges (unless you are a First Home Buyer which will be discussed later). So allow at least 10% of the value of the property as your required contribution.

For example to buy a house for $350,000 you will generally need 10% = $35,000.

Ouch – there are ingenious ways to raise the 10% required which will be discussed in later chapters.

You then take a mortgage to pay for the balance of the property.

For example the $350,000 house above – you have paid a 5% deposit of $17,500 and spend the rest of your funds on fees.  You will then need to borrow the remaining $332,500.  This will be a 95% LVR (Loan to Value Ratio) loan.  Not all banks are comfortable with 95% loans.

In order to be granted a mortgage loan in the first place, particularly a 95% LVR loan, you usually have to present a deposit and proof of income information to convince the lender you will meet your mortgage repayments.

More detail on types of loans and the loan application process will be provided in later chapters


The good news for most Australians is that these days you can make the repayments on many mortgages for the same price you would fork out to rent a similar property.  Some banks will take the rent you have been paying consistently as evidence that you can afford the mortgage.


The initial outlay to buy your first property will sometimes deter the nervous investor from taking the plunge into property.


The hardest part of breaking into property investment is buying your first property. As long buy a good property in a good location (issues this book will help you with in later chapters), then you can generally move onto your next purchase, and the next purchase, quite smoothly from here. This is because of the combination of two powerful factors – Equity and Leverage.

Equity = the difference between the Value of the property and what you Owe the bank 

Leverage is explained in the following chapter.


If the first property you buy is a "bargain", or there is a surge in the market, or you manage to add value (see later chapters) may see you earn equity quickly.


Equity in one property can be used as leverage for your next buy, and so on and so forth.


Breaking through the initial capital requirement barrier will be your toughest problem, but once you utilise your friends Equity & Leverage, you will be able to move forward as a real estate investor with ease.

 

Do you want to know more? Click here to watch five free webinars on - ‘Proven, Must Know, Property Investment Advice’

Brisbane takes over other Major Cities for Capital Growth

Friday, May 09, 2014

Sydney and Perth halt, Melbourne and Canberra fall, but Brisbane will be where the action is this year – RP Data

RP Data-Rismark figures for April show that Brisbane had the strongest growth of the major capitals at 1.1% in April, while Sydney property prices grew at a paltry 0.5%, and Perth only increased by 0.2%.

All capitals recorded some rise in dwelling values during April except for Melbourne, which fell 0.5% and Canberra, down by 1.1%. Some cities experienced their lowest monthly growth for nearly a year, including Sydney.

Brisbane is going to be the strongest housing market going forward from here and that is purely because the gap in pricing between Sydney and Melbourne compared to Brisbane has really widened and that was always the thing in the past that attracted people to Brisbane, according to RP Data.

This lower rate of growth, especially in Sydney and Melbourne, where property values have surged since the end of 2012, signal that these markets are moving through the peak of their growth cycle.

The growth that Sydney has seen is having an adverse impact on buyers’ ability to afford property, especially at the lower end of the price range. Affordability constraints are now entering the market.

And the lower end of the Melbourne market is also slowing as the higher prices mean that a lot of buyers aren’t in a position where they can afford to buy a property.

Investing in Property is a Great Tangible way to take Control of your Financial Security

Monday, May 05, 2014

 

When you invest in shares your money buys small piece of a company, whose board members you probably don’t know, who can use that money to make mistakes and you have no ability to control the board.

Investing in property provides far more security for investors. For one thing, your investment is ‘tangible’ you can touch it, feel it, paint it and tend to it. The fact that your investment is actual ‘bricks and mortar’ makes many people feel much safer.

Because property is tangible it is also able to be insured thus allowing investors to protect their financial security. You can insure property from fire, floods, tenant damage, rental arrears and accidental damage. Unlike stocks, property is unlikely to just disappear and if it does (such as through fire) it can be replaced using your insurance money.

Unlike investing in shares, a property investment is controlled by the investor.

The investor decides how much they pay for the property, the investor decides the rent they will charge tenants, the investor selects the tenants,  the investor decides if renovations will be made and when and how much to sell the property for.

Investing in property is a great tangible way to take control of your financial security.

Year End Strategies Newsletter

Monday, April 28, 2014

 

Please follow the below link for your copy of the Year End Strategies Newsletter:

Year End Strategies Newsletter 2014

 

Queensland Home Sales Rise

Thursday, April 24, 2014

 

According to recent data from the Housing Industry Association, Queensland home sales went through the roof in February and increased by 17.5 per cent! 

A recent RP Data report also proves Queensland property sales have been booming. Since January, more than 10,500 properties have sold in Brisbane. This means an average of 116 properties sold per day.

Western Australia also recorded strong sales growth of 9.3% per cent.

Although new home sales and building approvals were more popular in New South Wales and Western Australia before, new home sales are increasing across Australia by 4.6 per cent in February.

Detached home sales decreased by 6.9 per cent across Australia, while multi-unit sales increased by 6.8 per cent. Queensland and Western Australia recorded the top sales figures for detached homes, while Victoria came in 2nd with a 8.8 per cent increase.

The Importance of Capital Growth

Friday, April 11, 2014

‘Population growth and housing demand are the strong fundamentals that create capital growth’.

Capital growth = the difference between the value of the property and the original cost price

Capital growth is the main reason so many investors choose to invest in real estate over any other investment option.

Put simply, the supply of land is finite, as they say ‘they’ve stopped making it’, whereas the population is ever-increasing and the demand for property is growing at a faster rate than the supply.

These facts alone provide a very stable support mechanism for continued capital growth in Australia.

When I say Capital Growth is the ‘main’ reason investors choose real estate I am cognisant of the fact that some investor focus on cash flow rather than capital gain.  This strategy is viable in certain circumstances which I will explain in later chapters.  However, capital growth IS, without a doubt, the best way to maximise your wealth creation.  Take a look at the graph below.


The above graph illustrates that the property is making an $85 a week loss (also known as negative gearing which I will explain in later chapters).    $85 a week equates to a $4420 pa loss (before tax breaks considered).  However, the property has gone up by 10% (which is within Australia’s long term average of houses doubling every 7 – 10 years). 

So this Investor has lost $4,420 to make $35,000, or a Net Profit of $30,580* 

*(35,000 – 4,420)

I believe this is a far superior strategy than to invest in positive cash flow properties which may put $50 a week in your pocket but not grow in value.  However, there are horses for courses and I will explain in later chapters when, how and why – positive cash flow property can work for some investors.

To maximize your capital gains in a property, it would be best to buy at a time when the market is close to the bottom of the demand cycle.   However, the ‘bottom’ of the cycle can’t always be picked so it’s better to be in the market anyway, rather than hold back waiting for the next ‘bottom’.  This is known as ‘time IN’ the market rather than ‘timing’ the market.
Investors who are interested in making the best capital gain possible should focus on areas where house prices are likely to rise by more than the national average. Later chapters in this book will give you an idea as to what to look for to identify these areas.

Factors such as

1)      Has the property got good capital growth potential, i.e. is the current price likely to increase as demand increases in the area?

2)      Is there a ripple effect?

3)       Is the land size desirable?

4)      What is the prospect of splitting the block? 

A good strategy can be to create instant capital growth by buying a property at less than market value.  Just because a property might be listed at market value, it doesn't mean the seller won't take less for it. Sometimes an urgent sale is required for reasons such as ill health, divorce or the vendor needing to settle on another property. Decide on what you think it is worth and what you're willing to pay in order to get the best capital growth possible.


Shop around. To invest in real estate and create wealth through capital growth you must buy smart with careful consideration not to over capitalize on the investment.  The later chapters of this book will help you learn to buy smart.

Do you want to know more? Click here to watch five free webinars on - ‘Proven, Must Know, Property Investment Advice’

Australia has Record Growth Population Forecasts

Monday, April 07, 2014

 

At the same time that building starts were dropping Australia’s population was growing at the fastest rate in 200 yrs*. In fact, our population is predicted to grow by 350,000 people per annum*.

(* Australian Bureau of Statistics)

Australia is predicted to grow at a rate of 65% well above the global average, a survey by the Washington based private research body, the Population Reference Bureau. 

This puts Australia’s growth rate at second only to India.  

Why is this?

1)      Migration:

I am no economic expert but many I have talked to have commented that the GFC has rapidly escalated the number of people wanting to migrate to Australia.  The old adage of Australia being the ‘lucky country’ has become a ‘world-wide’ slogan.  Australia was one of the only countries to escape a recessions.  Actually, oops I think Prime Minister Rudd announced a recession for only a few days.  During the GFC that crippled many countries, Australia continued to grow at a rapid rate.  In addition, a factor that strikes at the heart of many Australians is that Australia is coined to become ‘the resource hub’ of the new world.  Australia’s natural resources are in ample supply and whether we like it or not, we are a target for a continued resource boom. 

The final verse of Australia’s Anthem makes it clear that migration is a fundamental part of Australia’s mindset.

For those who’ve come across the seas
We’ve boundless plains to share;
With courage let us all combine
To Advance Australia Fair.

(Advance Australia Fair)

2)      Increasing birth rate:

 

Australia’s birth rate is on the increase for the first time since the post-war migration baby boom saw it explode in the 50’ and 60’s. 

According to (Reuters – Aug 6, 2010 (Canberra)) - Australia's birth rate has hit a 25-year high, and government has urged "have one for mum, one for dad, and one for the country".

And further increases in the birth rate could worsen the problems of an ageing population, driving new mothers out of the workforce and reducing the tax base, the nation's productivity watchdog said.

"Much of the recent increase in the fertility rate is likely to reflect the fact that over the last few decades, younger women postponed childbearing and many are now having those postponed babies," Productivity Commission author Ralph Lattimore said.

Australia's 21 million population was boosted by 285,000 births in 2007, the highest level in 25 years, and up from 261,400 births in 2005.

The population is expected to hit 31.6 million by 2050, driven to a small extent by the higher birthrate and almost 10 million new immigrants.

3)      Increasing health and longevity

Australia is well known for its healthy and active lifestyle, clean living and fresh, open air spaces.  Coupled with our reasonably good health system and we have Australian’s living longer. 

According to www.aag.asn.au/filelib/Economic_implications_of_increasing_longevity

The Life expectancy at birth has been steadily increasing.

 

Male

Female

1970-72

67.8

74.5

1980-82

71.2

79.3

2004-06

78.7

83.5

2056 Low

85

88

2056 High

93.9

96.1

 

The above facts combined are seeing our population rate continuing to escalate. Whether it’s a good thing, or a bad thing, it just is.  The good news is that it provides a fundamental support system for continuing house price rises.

Do you want to know more? Click here to watch five free webinars on - ‘Proven, Must Know, Property Investment Advice’

Australia has a Huge Undersupply of Housing

Friday, March 28, 2014

 

Latest statistics (2010) show that there is a housing shortfall of around 32% across the nation. Developers simply cannot keep up with the demand.  Why is this?

For a long time Australia has had a housing shortfall.  Put very simply we don’t have enough developers building houses to keep up with the number of Australians wanting housing.  However, the chronic shortfall we are now seeing has been greatly exacerbated by the Global Financial Crises (GFC).  The GFC saw finance approvals plummet.  Finance became very hard to get.  Finance Approval rejection rates went up by 30% and the hoops that lenders were making finance applicants jump through simply made the finance process untenable.  Many developers simply could not get finance to commence their projects so they stopped building.  And this was at a time when our population was growing at an extremely high rate.  So dropping building starts and a growing population has created a huge undersupply of housing which is only predicted to get worse.

Anyone Can Invest in Real Estate

Friday, March 21, 2014

Anyone can do it?  Are you sure?  Anyone? 

Well let’s look at some facts?

Of the 1 in 10 Australian tax payers that Invest in Property

 

 60% earn less than $50k pa,

 85% earn less than $80k pa.

 

So perhaps not anyone can do it.  But anyone, or any couple jointly, earning more than $50,000 per annum can do it. 

In comparison to other types of investment such as stocks, bonds, forex, commodities, etc Real estate investment makes a lot more sense to a lot more people.
Along with the basics of fresh air, food and water – shelter or a roof over our head, is one of the most basic human needs.
It is for these basic reasons that real estate is a simple and attractive investment.
All wealth creation strategies require discipline, commitment planning and a long term focus

As the old saying goes "you've got to be in it to win it" and you will never make any money as a real estate investor if you never actually invest in real estate.

And once you’re in it – you need to hold on tight for it’s not also a smooth road.
Along with every positive piece of press you may come across about real estate investment, there will probably be a negative article on the facing page of that newspaper.

I have often advised client’s simply to not listen to the press.  In fact, don’t even read the newspapers or watch the news.  By the time it is in the news it is too late.  BY the time the press are talking about a housing boom, it has already boomed.  By the time, they are talking about a housing slump, it has already slumped.

A real estate investor has to be ready to ride out the ups and downs of the Australian economy, just like any other investor.  Rule one – BUY.  Rule two – HOLD as the housing market rises.  Rule three – HOLD as the housing market slackens.  Rule four – SIMPLY HOLD.

Sometimes residential house prices will go a sky high. At other times, prices will hit rock bottom so fast you will want to jump on the nearest bargain before the end of the day.


The fact of the matter is, real estate investment is a viable option for most of us, and once you get started -- the hardest part is usually done.


The key to becoming a successful real estate investor, no matter who you are, is making the right decisions from the outset.  This book will give you all the education and information you need to make your real estate journey a safe and enjoyable experience.


Before you buy learn how

1)      Assess the residential property market in the area, the demand and supply, the demographics, the average rental prices and vacancy rates, the infrastructure (both existing and planned) and much, much more.  The later chapters of this book will take you through all the things you need to consider in detail.

2)      Work out how to get finance, how much can you borrow, how you should structure your finance. More on this later.

3)      Decide your strategy – are you looking for positive or negative geared properties, cash flow or capital gain. 

4)      Work out whose name to buy in? Your’s? Your Partners? Joint? Or a Company, Trust or Super Fund.

5)      Understand the basic steps in the real estate purchasing transaction

6)      Learn how to do due diligence on a property

7)      And much more…..

 

It may sound overwhelming but if you work your way through this book you will know everything you need to know.  So hang in there.

So yes, anyone who is willing to learn all the basics of Investing in Real Estate can do it.

Do you want to know more? Click here to watch five free webinars on - ‘Proven, Must Know, Property Investment Advice’


Investment in Real Estate is Essential for Retirement

Monday, March 17, 2014

 What are your dreams for retirement? To live near the beach and spend your days walking, swimming, fishing?  To travel the world and see new sites?  To live near your family and be able to spoil the grandkids?  Whatever your dream – the reality is that you will need money to live on.  As a financial planner I often ask my clients ‘how much do you think you need per year to live a comfortable retirement?’ Most people will answer that they think they would need around $50,000 per annum to live comfortably in retirement. Most financial analysts will say that the average amount required at retirement to live comfortably is $500,000 per person.  And this is presuming the family home is already paid off.

 

And by comfortably, I simply mean being able to eat out one night a week, take a holiday once a year and live a basically comfortable existence.  Nothing extravagant.

 

The frightening reality is that;

 

       Currently 76% of all retirees in Australia are retiring on less than $20,000pa.  This is only marginally over what is called ‘the poverty line’.

 

       22% of people over 65 need to continue working and this will most likely increase as the Government keeps raising the retirement age.

 

       The current average superannuation payout is only $130,000 for males, and $45,000 for female (2009 figures) – well short of the $500,000 estimated to be required.

 

       People are living longer, and longer and longer.  Generations ago you were lucky if you lived till 65, now people are living well into their 90’s.

 

       Old age pension will continue to deteriorate – there are currently 5 tax payers for every retiree, by 2040 there will be 2.5. Put simply – the Government will not have the funds to keep paying pensions in 20-30 years when a very large proportion of the current generation will be ready to retire.

 

The retirement age in Australia is currently 65, and if you look at a general break down of 100 average 65 year old Australians these are the statistics.

  • 24 are dead
  • 54 are on pension or welfare
  • 16 are still working
  • 5 are financially independent
  • 1 is wealthy and financially secure


These are sobering statistics but the goods new is that you are reading this book, getting yourself educated and informed and will have the opportunity to become one of the 6 per hundred of Australian’s who are financially independent, wealthy or secure.


So Why Real Estate?

 

The following chapters will explain to you in detail why Real Estate is superior to all other forms of investment.  That’s a big call I made right there.  But trust me, I am sure by the end of this chapter you will understand why I say that. As the following chapters will explain investing in real estate contains all of the attributes of solid wealth creation such as; capital growth, low volatility, tangibility (bricks and mortar), rising rents, low vacancy rates, high barriers to entry, tax advantages, ability to add value, and the ‘Power of Leverage’.

And the facts speak for themselves.  "Bricks and Mortar" investment is the most common money-making strategy for the Richest 200 Australians according to Business Review Weekly (BRW), which each year publishes an annual list of the nation's wealthiest individuals.

 

Real estate investment can be a powerful way to start or boost your retirement fund, but you need to do your due diligence and choose the property investment option that is right for you and your financial situation.


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