3 Ways to Support Your Negatively Geared Property
So you’ve got
yourself a negatively geared property which for
arguments sake is costing you $100 per week, or $400
per month, or $5,000 per year out of your pocket.
There are a number of strategies you could employ to meet that shortfall. The first is the most obvious, which is to pay the shortfall out of your pocket. This is a great strategy if you can easily afford it.
The second strategy is to use debt to fund the shortfall, which to many people can be a risky strategy.
A third strategy is to employ a cashflow generation strategy. This strategy involves using the stock market to generate the cashflow to meet the shortfall, and hence turn your negatively geared property effectively into a neutrally geared position. After all, all you need is to generate $5,000 per year.
But what if you could generate $5,000 per week extra - that’s $250,000 per year !!! Can you believe that? We’ll it certainly is possible using strategies such as E-Minis!
We’ve just added the free E-Minis DVD to our selection of free DVDs available to order.
Check out the E-Minis page for further details.
There are a number of strategies you could employ to meet that shortfall. The first is the most obvious, which is to pay the shortfall out of your pocket. This is a great strategy if you can easily afford it.
The second strategy is to use debt to fund the shortfall, which to many people can be a risky strategy.
A third strategy is to employ a cashflow generation strategy. This strategy involves using the stock market to generate the cashflow to meet the shortfall, and hence turn your negatively geared property effectively into a neutrally geared position. After all, all you need is to generate $5,000 per year.
But what if you could generate $5,000 per week extra - that’s $250,000 per year !!! Can you believe that? We’ll it certainly is possible using strategies such as E-Minis!
We’ve just added the free E-Minis DVD to our selection of free DVDs available to order.
Check out the E-Minis page for further details.
Why Australian house prices are unlikely to fall….
Many articles in recent weeks have pointed out the
fact that the American housing market is in dire
straits. Many articles also suggest Australia will
follow suit.
We don’t believe that Australia’s housing market prices will fall, and here’s why.
Fundamentally the markets are very different.
Firstly, Australia has a shortage of housing – America has an oversupply. Where there is a demand for housing it is unlikely that prices will fall.
The following graph (courtesy ANZ) highlights the continued demand and undersupply of housing in Australia.
Only if lots of owners have to sell their houses (for whatever price they can get), will there be a drop in prices. Since over 70% of property owners in Australia live in their own houses, coupled with relatively low unemployment – it is unlikely that owners will start selling.
Secondly, mortgage lending in America is typically ‘non-recourse’ meaning that in the event the borrower defaults, the lender can take the possession of the property which was securing the mortgage, but they cannot make any claim against any other assets or income of the borrower. What does this mean? Simply, the borrower walks away from a house and the bank reclaim the house.
In Australia, the lender will go after the borrowers other assets and income to make up any shortfall there may be. Therefore the borrower is less likely just to walk away.
The following graphs (courtesy ANZ) highlight the differences between the Australian market and the American market.
So what does this mean for the average Australian property investor? Well for those who see property as a long term investment, there is no better time to buy. Interest rates are on the way down, there are still relatively few buyers in the market and prices are unlikely to fall.
To take advantage of this unique time, don’t forget to order your Free DVD
We don’t believe that Australia’s housing market prices will fall, and here’s why.
Fundamentally the markets are very different.
Firstly, Australia has a shortage of housing – America has an oversupply. Where there is a demand for housing it is unlikely that prices will fall.
The following graph (courtesy ANZ) highlights the continued demand and undersupply of housing in Australia.
Only if lots of owners have to sell their houses (for whatever price they can get), will there be a drop in prices. Since over 70% of property owners in Australia live in their own houses, coupled with relatively low unemployment – it is unlikely that owners will start selling.
Secondly, mortgage lending in America is typically ‘non-recourse’ meaning that in the event the borrower defaults, the lender can take the possession of the property which was securing the mortgage, but they cannot make any claim against any other assets or income of the borrower. What does this mean? Simply, the borrower walks away from a house and the bank reclaim the house.
In Australia, the lender will go after the borrowers other assets and income to make up any shortfall there may be. Therefore the borrower is less likely just to walk away.
The following graphs (courtesy ANZ) highlight the differences between the Australian market and the American market.
So what does this mean for the average Australian property investor? Well for those who see property as a long term investment, there is no better time to buy. Interest rates are on the way down, there are still relatively few buyers in the market and prices are unlikely to fall.
To take advantage of this unique time, don’t forget to order your Free DVD
First Home Owners Grant Boost
Today Kevin Rudd announced a boost for the First Home
Owners Grant. The government will triple the current
$7000 first home owners grant to $21,000 for new a
construction. For those purchasing an existing
property , they will receive a doubling of the
allowance to the tune of $14,000.
Well, this is great news! It will sure kick start some first time buyers into the market.
Once again the number one law of economics - supply and demand. This increase will certainly increase demand, and supply is still short. This combination will undoubtedly start to push property prices up, particularly when combined with the recent drop of 1% in the RBA official interest rate.
As Warren Buffett once said, "We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful."
Well, this is great news! It will sure kick start some first time buyers into the market.
Once again the number one law of economics - supply and demand. This increase will certainly increase demand, and supply is still short. This combination will undoubtedly start to push property prices up, particularly when combined with the recent drop of 1% in the RBA official interest rate.
As Warren Buffett once said, "We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful."
It's Never Too Late To Start Investing
A thought that often reoccurs to me is that I wish
we’d started investing years ago. I think to myself,
if only I’d bought this or if only I’d bought that
then instead of that car, or this gadget.
The important thing to remember when these thoughts come to mind is that it’s never too late to start investing now!
Sure, it would have been great to have bought back when, but we can’t change the past.
We can, however, change the future. That’s only if we take action and take responsibility for our own lives and actions.
So remember, there’s no better time to start investing than today! Get out there and take action!
The important thing to remember when these thoughts come to mind is that it’s never too late to start investing now!
Sure, it would have been great to have bought back when, but we can’t change the past.
We can, however, change the future. That’s only if we take action and take responsibility for our own lives and actions.
So remember, there’s no better time to start investing than today! Get out there and take action!
Melbourne Property Expo - 10, 11, 12 October
Just a heads up on the upcoming Melbourne Property
Expo on Friday 10th , Saturday 11th and Sunday 12th
of October.
Whether you are thinking about investing in property to build wealth, looking for a weekend or holiday home, or simply want to move house, you'll find all the answers at Melbourne's largest property expo this year:
At this year’s Melbourne expo, you will be able to:
* Discover the latest residential, coastal and resort developments.
* Talk to property professionals in property about buying, renovating and selling property.
* Get the latest insights on interstate and local property and growth areas.
* How to start or grow your property portfolio.
* Speak to industry experts from financing to conveyancing and all property related services.
More information can be found here.
Whether you are thinking about investing in property to build wealth, looking for a weekend or holiday home, or simply want to move house, you'll find all the answers at Melbourne's largest property expo this year:
At this year’s Melbourne expo, you will be able to:
* Discover the latest residential, coastal and resort developments.
* Talk to property professionals in property about buying, renovating and selling property.
* Get the latest insights on interstate and local property and growth areas.
* How to start or grow your property portfolio.
* Speak to industry experts from financing to conveyancing and all property related services.
More information can be found here.
ANZ's Property Outlook is Great!
In ANZ’s Property Outlook this week, they suggest
that property prices in Australia will not fall.
In fact rental vacancies in Melbourne have fallen to their lowest levels in 25 years and ANZ expect that to continue as future housing demand continues to outstrip the supply.
So what does that mean for investors? Well banks will continue to lend money against property as they believe it’s still a strong investment. As we’ve mentioned before if banks will lend money against it, it’s likely to be a s good investment.
After the past couple of weeks on the Stock Market, property investment certainly looks great - after all we all need somewhere to live!
If you want a copy of the ANZ Property Outlook, be sure to submit your details on our Order page.
In fact rental vacancies in Melbourne have fallen to their lowest levels in 25 years and ANZ expect that to continue as future housing demand continues to outstrip the supply.
So what does that mean for investors? Well banks will continue to lend money against property as they believe it’s still a strong investment. As we’ve mentioned before if banks will lend money against it, it’s likely to be a s good investment.
After the past couple of weeks on the Stock Market, property investment certainly looks great - after all we all need somewhere to live!
If you want a copy of the ANZ Property Outlook, be sure to submit your details on our Order page.
Interest Rate isn't Everything!
14/09/08 09:51 Filed in: Investing
Interest Rates are not the only thing you should look
at when selecting a loan. We’re currently on a 6.95%
fixed interest rate until May 2010. One of the
restrictions on that product is that we can only make
extra repayments of $10k per year.
I did some very thorough analysis comparing our current home loan to a Line of Credit loan at 8.58% (a very large spreadsheet showing one row per day for the next 20 years!). What I found was that it was possible to pay off my current loan 15 years earlier.
Why would this be I asked myself? Surely a lower interest rate is better? The way the LOC works is that your salary & rent go directly into the loan and reducing the balance for the month - so interest is calculated on the lower balance. You use a credit card for all your monthly expenses and then your credit card gets paid directly from the LOC at the end of the month. If after all your expenses, say you have $500 left over at the end of the month, then that $500 is taken off the principal of the loan. Of course the more you have left over, the faster you pay down the loan.
If you are self employed and pay your own tax and super then that money can be offsetting the balance on your home loan, and then when you need to pay them, you redraw from the home loan.
You do have to be very disciplined for a Line of Credit type loan though. If you spend what you earn then you’ll still have your loan in 50 years time! However if you are good at managing your money, you’d be amazed at the savings that can be made!
As a bonus, the current lender won’t be charging us any break costs since they can lend the money out to someone else at 1.5% more!
I did some very thorough analysis comparing our current home loan to a Line of Credit loan at 8.58% (a very large spreadsheet showing one row per day for the next 20 years!). What I found was that it was possible to pay off my current loan 15 years earlier.
Why would this be I asked myself? Surely a lower interest rate is better? The way the LOC works is that your salary & rent go directly into the loan and reducing the balance for the month - so interest is calculated on the lower balance. You use a credit card for all your monthly expenses and then your credit card gets paid directly from the LOC at the end of the month. If after all your expenses, say you have $500 left over at the end of the month, then that $500 is taken off the principal of the loan. Of course the more you have left over, the faster you pay down the loan.
If you are self employed and pay your own tax and super then that money can be offsetting the balance on your home loan, and then when you need to pay them, you redraw from the home loan.
You do have to be very disciplined for a Line of Credit type loan though. If you spend what you earn then you’ll still have your loan in 50 years time! However if you are good at managing your money, you’d be amazed at the savings that can be made!
As a bonus, the current lender won’t be charging us any break costs since they can lend the money out to someone else at 1.5% more!
Revalue at the Peak of the Cycle
Some experts are suggesting we're going to have a
slump in prices in residential property. Some are
suggesting it's already happened.
One thing is for sure, we're currently at the top of the cycle. So now would be a good time to revalue and properties you own and pull out the equity ready for the next purchase.
If the market does turn, it will only get harder to access any equity you have sitting there.
You can get your house revalued by the bank and access the equity without having to re-finance (unless you change banks).
For example, if your house is worth $600k, and your mortgage is $400k, most banks will lend you up to 90% of the value of your home which in this case would be $540k. Since you already owe $400k, the difference $140k ($540k - $400k) can be borrowed and put into a Line of Credit (LOC) or taken as an Equity Loan for when you may need it. You may choose to use this as a deposit on an Investment Property or for Shares, or simply as an emergency buffer.
Now is a great time to look an re-valuing, you never know it might just give you that start you need to begin your investing.
One thing is for sure, we're currently at the top of the cycle. So now would be a good time to revalue and properties you own and pull out the equity ready for the next purchase.
If the market does turn, it will only get harder to access any equity you have sitting there.
You can get your house revalued by the bank and access the equity without having to re-finance (unless you change banks).
For example, if your house is worth $600k, and your mortgage is $400k, most banks will lend you up to 90% of the value of your home which in this case would be $540k. Since you already owe $400k, the difference $140k ($540k - $400k) can be borrowed and put into a Line of Credit (LOC) or taken as an Equity Loan for when you may need it. You may choose to use this as a deposit on an Investment Property or for Shares, or simply as an emergency buffer.
Now is a great time to look an re-valuing, you never know it might just give you that start you need to begin your investing.
Who do you trust?
02/07/08 22:59 Filed in: Financial
Advisers | Investing
We are time poor. In fact with 2 kids we are very
time poor. We felt whilst we'd read all there was to
read about how to pick an ideal property, we didn't
have the time to do it.
So we looked at some Property Advisers/Buyers Advocates.
We wanted something that matched the following criteria,
* located within 12kms of Melbourne CBD
* 2 bedroom unit
* located in a block of less than 12 units
* close to public transport
Some Buyer's Advocates wanted 4% of the property value, some wanted a fixed fee. We felt the fixed fee approach was a much fairer option - that way they'd be unlikely to sway us into the more expensive ones.
We found a property advisory firm who were very good. They took us out to the property which was currently being rennovated. We plugged the numbers into the PIA Software and we were happy with the results. We ended up purchasing that unit.
Mistake #1 - we bought a renovated property and paid the premium - where we should have bought one that needed renovating and manufactured the capital growth!
We've since learnt from another advisory firm that they charge a fee for finding existing properties that are on the open market, and charge nothing when it's an off the plan property.
These people make their cut from the developers so it's in their interest to on sell to any unsuspecting property investor! Therefore it's wise to select a Buyers Advocate or Property Advisor that has a fixed fee and only recommends properties that are on the open market.
So we looked at some Property Advisers/Buyers Advocates.
We wanted something that matched the following criteria,
* located within 12kms of Melbourne CBD
* 2 bedroom unit
* located in a block of less than 12 units
* close to public transport
Some Buyer's Advocates wanted 4% of the property value, some wanted a fixed fee. We felt the fixed fee approach was a much fairer option - that way they'd be unlikely to sway us into the more expensive ones.
We found a property advisory firm who were very good. They took us out to the property which was currently being rennovated. We plugged the numbers into the PIA Software and we were happy with the results. We ended up purchasing that unit.
Mistake #1 - we bought a renovated property and paid the premium - where we should have bought one that needed renovating and manufactured the capital growth!
We've since learnt from another advisory firm that they charge a fee for finding existing properties that are on the open market, and charge nothing when it's an off the plan property.
These people make their cut from the developers so it's in their interest to on sell to any unsuspecting property investor! Therefore it's wise to select a Buyers Advocate or Property Advisor that has a fixed fee and only recommends properties that are on the open market.
Never Stop Learning
22/06/08 08:08 Filed in: Education
I can't remember how or why it happened, but a I got
chatting to a colleague at work about Property
Investing. He ended up lending me the following books
* More Wealth - Jan Somers
* $1,000,000 in Property in One Year - Steve McKnight
* From Broke to Millionaire in just 7 Years - Peter Spann
Since then over the past 12 months I've read,
* How to achieve wealth for life - Tony Melvin and Ed Chan
* How to Grow a Multi-Million Dollar Property Portfolio - in your spare time! - Michael Yardney
* Secrets of Property Millionaires - Exposed! - Dale Beaumont
* Streets Ahead - How to Make Money from Residential Property - Monique Wakelin and Richard Wakelin
* The Smart Borrower's Handbook - Stuart Wemyss
* How to legally reduce your tax - Ed Chan & Tony Naylor
* How you could biuld a $10M property portfolio in 10 years - Peter Spann
* How To Give Your Kids $1 Million Each! - Ashley Ormond
Plus attended many seminars, watched many free DVDs and subscribed to several email newsletters. The best free DVD was this one - very simple, very easy to understand.
I regularly browse the Somersoft forums for keeping up to date with what's happening, and have found a few friends/colleagues that are happy to discuss their journey.
It can be hard finding similarly like minded people to talk to when it comes to investing. There will be those that negatively comment upon your strategy since it doesn't fit their mindset. There will be those that don't understand, and are happy having their employer continue to pay their Super.
One thing you find after reading the amount of books we have, is that there's only a handful of ways you can invest in property. You'll soon discover what's right for you, what makes sense and what you feel comfortable with.
But that's not a reason to stop learning. Situations change, interest rates change, loan products change. You have to keep a watchful eye on your surroundings to stay one step ahead. Always have an exit strategy.....what if this happens, what if that happens. Have a pre-determined plan of what you'll do under those situations - then you'll be prepared for anything.
Never stop learning.....
* More Wealth - Jan Somers
* $1,000,000 in Property in One Year - Steve McKnight
* From Broke to Millionaire in just 7 Years - Peter Spann
Since then over the past 12 months I've read,
* How to achieve wealth for life - Tony Melvin and Ed Chan
* How to Grow a Multi-Million Dollar Property Portfolio - in your spare time! - Michael Yardney
* Secrets of Property Millionaires - Exposed! - Dale Beaumont
* Streets Ahead - How to Make Money from Residential Property - Monique Wakelin and Richard Wakelin
* The Smart Borrower's Handbook - Stuart Wemyss
* How to legally reduce your tax - Ed Chan & Tony Naylor
* How you could biuld a $10M property portfolio in 10 years - Peter Spann
* How To Give Your Kids $1 Million Each! - Ashley Ormond
Plus attended many seminars, watched many free DVDs and subscribed to several email newsletters. The best free DVD was this one - very simple, very easy to understand.
I regularly browse the Somersoft forums for keeping up to date with what's happening, and have found a few friends/colleagues that are happy to discuss their journey.
It can be hard finding similarly like minded people to talk to when it comes to investing. There will be those that negatively comment upon your strategy since it doesn't fit their mindset. There will be those that don't understand, and are happy having their employer continue to pay their Super.
One thing you find after reading the amount of books we have, is that there's only a handful of ways you can invest in property. You'll soon discover what's right for you, what makes sense and what you feel comfortable with.
But that's not a reason to stop learning. Situations change, interest rates change, loan products change. You have to keep a watchful eye on your surroundings to stay one step ahead. Always have an exit strategy.....what if this happens, what if that happens. Have a pre-determined plan of what you'll do under those situations - then you'll be prepared for anything.
Never stop learning.....
