All About Property

Many people do not consider investing in property, because they think that it is too risky, too hard, too complicated and many other reasons. The fact is this; it is easy, it is not complicated and what’s more, anyone can do it. All you need is the right information, a good strategy and a good mentor.

So here are a few helpful suggestions for you:

1. Why are you buying?

This might sound like a stupid question, but you need to think this through, because it has a major bearing on what you buy, where you buy, what name you buy it in and a few other factors.

I’ve found that while most property investors hope to one day replace their personal exertion income with cash from their investment properties, most don’t have a strategy to achieve their goal.

2. What to buy?

First thing to do is to work out what type of property you will need for your situation. This will depend on many factors; your reason, your price-point, your purpose and length of time etc.

Do you buy new or old. House or unit or townhouse or an apartment. Commercial property or retail property or Industrial property? This does depend on many factors.

If you are not sure, please give me a call or email me and we can analyse this very quickly and I can assist you with getting the right one.

3. Where to buy?

Do not look for ‘hot spots.’ If you do you are dicing with danger for the simple reason that today’s hotspot might be tomorrows cold spot. Do your research around where you live and get to know the area. There is nothing better than being able to drive past your investment property on a regular basis, just to see how it is doing.

If it is too expensive around where you live, then look for the areas that the government has designated as Regional Centres where money for new infrastructure is being spent and it is well serviced by transport, shops and schools.

I am not a great fan of buying in regional centres. History has shown that the capital growth of city based properties does exceed regional properties and although regional might give you a better rental return, when you add in the capital gain, city based properties win every time. And if you have to sell for any reason, they sell quicker in Melbourne.

As far as deciding where to buy; this is easy. ABS figures show that Melbourne recorded the biggest population growth rate of any capital city in Australia last financial year, with its population increasing by 2.1 per cent. Why would you not invest in Melbourne, when it is going to be the largest city in the country.

4. Do not buy to negatively gear. I hear this so often that people want to buy an investment property, because they want a tax deduction. This is not a reason; it is just a very useful by-product of investing in a property and not the aim. Unless you are on a big wage it is not a reason.

That said, property does allow you many tax advantages, especially depreciation, but you do not buy it for that reason. You buy it to suit your plan for creating wealth and you choose the property accordingly.

5. What entity do you buy the property in? Your name? A Family Trust? A company? This might seem a difficult question, but once you know what the end game is, it is easy as picking up the phone and asking a good accountant and lawyer.

Or I can point you in the right direction, as I have a good team assisting me.

6. So just how many properties does it take to enable you to quit your day job and live comfortably?
This is a very interesting question and it depends vey much on what you want as an income when you quit working.

The sad fact is most people think they can retire on the pension and what they find is that they have to drop their standard of living quite considerably to manage. Is this what you want for yourself? I should think not!

From my research it appears that a minimum of around $80,000 per annum is what is required to live comfortably as long as you do have no debts to pay.

So do the maths. Let’s assume an interest rate of 3.5% paid on your savings. To achieve $80k per annum you will need $2,300,000 saved. That is after you have paid off your house. And then you have to keep pace with inflation. How does that sound? Does it make you stop and think? I hope so.

The fact is that property returns at least 3.5% per annum, so if you had three debt free properties to the value of around $1M each you would achieve that and what is great is that they keep pace with inflation. Just think about this; had you bought ten years ago you would have only paid $500,000 for each of them.

So I ask you this; would you like to start NOW! As they say; ‘better late than never.’

Till next time

Warm regards

Bertram

Things that you are never taught in school are how to save money and how to create wealth. I could go into reasons ‘Why’ but will leave that for the time being and concentrate on ‘How.’

Again I say that I am totally biased towards property as a wealth-building tool, which puts me at odds against people pushing shares as an investment. So here is my simple thinking.

Bear with me; The All Ordinaries Index is based on the aggregate market value (AMV) of a wide selection of the companies quoted on the ASX. The market value, or market capitalisation, of any company in the All Ordinaries Index portfolio is the number of shares on issue multiplied by the current price per share in that company. The AMV of the All Ordinaries Index share portfolio is simply the sum of the market values of the companies included.

One interesting point to appreciate is that if companies fail or start to fail they are taken out of the index and replaced with companies that are doing better.

Basically the losers are taken out and shot and fresh blood takes their place. That tends to reduce any ongoing losses the index might sustain when larger companies lose value.

This is one of the reasons investors should be cautious about advisors who point to a perpetually rising index as a reason for investing in the stock market. As the old song goes “It ain’t necessarily so.”

So, let us compare the ‘All Ords’ to the median price of property over 10 years. The stats I am quoting are from 2004 till 2014, which is what was available and the housing I am quoting is for Victoria, which is what I know to be the trusted state to deliver strong gains in property.

All Ordinaries:

1 December 2004 4053.10

1 December 2014 5388.60

Victorian houses:

December 2004 $381,211

December 2014 $711,999

All Ords gain over 10 years 1335.50 32.95%

Property gain over 10 years $330,788 86.77%

That is a 53.82% difference

Am I simple and biased or just aware and smart?

Why am I making these points? For the simple reason that I want to help and assist people to create wealth through property and after over 40 years in the real estate and property sector I feel that I can do this for you.

All you have to do is ask!

As I said in my previous blog post; this year I will be harping on creating wealth through property, because it saddens me to see so may people missing out on what is ‘easy money.’ It is easy when you know how and if you do not know how; all you have to do is ask by emailing bertram@bertramdaniel.com.

The question I ask is simply this; “Has Christmas lost it’s meaning?”

I happen to live across the road from the Doncaster Westfield Shopping Centre and therefore can see the comings and goings from my study window, where I do spend a bit of time. I can tell you that many weeks prior to Christmas the traffic build up was very noticeable and now today being ’Boxing Day’ it is a madhouse out there, with the stream of cars unabated since early morning and still going at midday.

So why does this bother me, you might ask and that is a fair question. Perhaps I feel that there is a strong element of people being controlled by advertising and marketing and that we have become a consumer society. So what is wrong with that, you could ask.

Well, there is no ‘right’ and ‘wrong’ or ‘good and ‘bad,’ because as Buddha said “It is what it is,” my question is simply this. “Is there a better way?”

This consumer madness costs money. Plenty of money and is this the best way to spend it! Do people stop to consider the fact that most Australians spend 110% of their income, which is why credit card debt is so high, which is mostly around 20% interest? Do people realise that 85% of Australians retire on less than $35,000 p.a.

We live in an affluent country with good incomes compared to many other places and yet people retire on a pittance and have to surely modify their lifestyle from what they were used to. And the sad part is that it does not have to be like this.

If they thought about it and considered what they were doing; spending money on ‘stuff’ instead of looking after their future, would they still be doing this?

What I do know is this; if they saved money and instead of spending 110% of their income and spent only 90% and saved 10% they would have the opportunity to invest in the steadiest property market in the country; Melbourne! (Anyone read the book ‘The Richest Man in Babylon’?)

According to the ABS only 15,000 people own more than 7 investment properties in Australia. This is crazy. Even if we tripled that figure to 45,000 it is still crazy.

The fact is that property in Victoria or more particularly Melbourne doubles every seven to ten years and has done so for the past 100 years. So why not take advantage of this?

I guess this is why it bothers me; because after over 40 years in the real estate and property business I know that it is so easy to be wealthy by investing in property and it pains me to see that so many people waste this opportunity and blow it on ‘Things’ and waste that chance to do what I help and assist people to do and that is; ‘Create Wealth through Property.’

Cheers

Bertram