So interest rates are down. I wanted to provide a comparison between what it might have cost you to own a $410k asset back in August 2008 verses owning one now.

August 2008 :

- Interest Rate : 8.94%
- Purchase price : $410,000
- Rental Expenses : $5,603
- Income : $75,000
- Rent : $18,277
- Interest : $37,486
- Tax Credit : $10,721
- Out of pocket : $14,090

March 2009 :

- Interest Rate : 5.04%
- Purchase price : $410,000
- Rental Expenses : $5,603
- Income : $75,000
- Rent : $18,277
- Interest : $21,333
- Tax Credit : $5,570
- Out of pocket : $2,888

So in August 2008, it would have cost you $271 per week out of your pocket to own a $410k asset. In March 2009, it only costs you $56 per week out of pocket.

I’m sure many of you spend close to that on lunches and coffees at work !!

The real question is “What is costing you to not own an investment property?”

Order your free Property Investing DVD now and learn how it’s done.

According to the Real Estate Institute of Australia (REIV), the Melbourne and Sydney property markets have been the worst performers over the past 5 years.

The growth rate in Melbourne was 3 percent which outperformed Sydney and Perth, where prices actually dropped between 3 and 4 percent. Property in the mining areas of Australia are likely to lose appeal, as RIO Tinto scales back production as demand for resources softens.

A Residex spokesman said the Melbourne market would be supported by a strong demand for rental properties due to the increasing number of overseas arrivals.

History tells us that after a share market downturn, the Melbourne and Sydney property markets tend to surge. In the 2 years following the 1987 crash, the Melbourne median price grew by 40% from $100,000 to $140,000. Sydney’s median increased by 42% from $130,000 to $185,000. Similarly after the terror attacks of 2001, the share market crashed and investors looked again to property for increased stability.

As we head into 2009 with falling interest rates, lower vacancy rates and rising rental returns, investors will put the 2008 share market crash behind them once again and head for the safer eastern cities of Melbourne and Sydney.

Get ahead of the pack now by ordering your FREE PROPERTY INVESTING DVD now and learn how you can safely invest in Residential Property!

According to BIS Shrapnel’s leading economist, Rachael Logie, Australia’s biggest threat to the economy was gloomy sentiment among consumers and businesses.

A BIS report, released today, suggests that Reserve Bank’s interest rate cuts combined with the Government’s stimulus package will be sufficient to to stop Australia following the developed world into recession.

Logie continued to say, that conditions now existed for a lift in consumer confidence - interest rates were tumbling, petrol prices at a near four year low and the Government’s stimulus package.

Kevin Rudd said yesterday he did not want recipients to hold back when they got the money. “Go out and spend the money,” the Prime Minister said.

For those savvy investors, who have finance available to them, 2009 looks like a great year for increased yields, due to both short supply of investment property and lower interest rates.

Don’t forget to order your Free Property Investing DVD now!

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.

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

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."

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, whether it be property investing or share market investing! Get out there and take action!

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.

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 investing 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 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!

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.

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 began our investing after our first child was born. We thought the best thing to do would be consult a Financial Adviser.

It so happened our Mortgage Broker had recently become a Financial Advising company too, so we got them to prepare a plan for $500.

After reviewing the plan, we discovered he was 'advising' us to switch Superannuation providers as well as swicth Income Protection providers. He stood to make over $6k of commissions based upon these recommendations, not to mention the ongoing commissions.

Worst of all, there was no basis for the recommendations, no reasons as to why we should switch. So I made a couple of phone calls and ended up reporting the adviser to the relevant people.

Onto Adviser #2. A recommendation from a friend put us intouch with an adviser that offered fee for service. Infact, any rebates he received over his fee would be rebated to us. We thought that you couldn't be fairer than that.

Everything was going well, we got advice on setting up a small investment for our daughter - a managed fund. We got our Super contributions on track, and reassesed our insurances.

When I got a pay rise at work, we approached the FA and asked what to do with this spare cash. He told us to wait 6 months until our appointment! He said we'd used up our quota of time and would have to wait.

We were appalled.

But we learnt the most valuable lesson - my wife and I are the only people that are and will be responsible for the success of our financial future.

Consequently, we and our Financial Adviser went our separate ways.

It all started 2 years ago I suppose, when our first child was born. Before that we didn't really have a defined focus on our future. By having kids, you become focussed real quick! You realise that in 10 years time, you'll still be a parent and your first born will be 10 years old going to school 5 days a week.

In 15 years time, you'll still be a parent, and your first born will 15 years old, still be at school and will be costing you heaps.

In 18 years time, you'll still be a parent and your first born may still be at school going onto University....ouch those fees!

So we're currently 2 years into our investing journey and we thought we'd blog about it. Maybe something here will be found useful by someone out there.

We'll be blogging about our experiences over the past 24 months including our dealings with Financial Advisers, Property Sourcing Agencies, Real Estate Agents amongst others in Melbourne, Australia.

So, stay tuned for the first instalment!