What to consider when buying a property? - Ark Sydney Seminar - 15 Spots available!

The Ark Team have analysed the key areas to consider when purchasing an investment property and how to stress less at auctions. To compliment this, they will be a hosting a special seminar on 'How to Purchase Property?' which will cover the important research you need to undertake, how to get the best loan and understanding what it will cost you.

With interest rates at a 20 years low, activity in the property market has increased significantly over the past few months. Last weekend we witnessed record clearance rates in Sydney, with over 80% of the listed auctions selling. In Brisbane, the rate was 65%, which is nearly double the clearance rate this time last year. It is important in times like these to go back to the fundamentals and basics of property and not get caught up in the emotion and media.  We are running a seminar on 'What to consider when buying a property?' and it will cover off the following; - What is the critical research you need to undertake? and how do you do it? - How do you find the right property for you?  - Should you buy a home or investment and what is the difference? - What will a property cost you? - How to stress less at an Auction? - The different tax consequences - including buying in super As an example of some of the content we will cover at the seminar, here are 5 tips on what you need to consider when buying a property; Is it a home or investment? This is the first decision you need to make. Although the purchase might initially be a home and then an investment later it is very rare you find the perfect investment and home in one. You need to understand what your preference is - are you making a lifestyle decision or a financial one? This will help you when you are analysing the property. What can you afford as opposed to what the banks will give you? Yes it is very important to get an approval from the bank about how much you can borrow but it is more important to understand what you can afford. Just because the bank will give you $1million, doesn't mean you can afford that. You need to analyse your cash flow and understand what the cost of the property will be. When calculating the cost of a home, you need to take into account the rent you might be paying. Have you done your research? When we say research, it doesn't just mean the location, amenities and property specifics. You need to make sure you complete your building and strata research to understand if there are any inherent problems in the building such as water leaks, poor strata management etc. You also need to get your solicitor to review the contracts to understand the property in real detail. What structure do you purchase it in? There are several options when purchasing a property - joint names, family trust, super and individually. Each option has pros and cons, and it is dependent on your situation. In some cases, it might be a combination of the above to get the right outcome. The issues you need to consider are tax, estate planning, asset protection and flexibility.  Are you attending Auctions? This can be a very nerve wrecking and stressful time for any purchaser. The key with auctions is to be realistic and be prepared. When you buy at an auction, you need to exchange and pay the deposit on the day of the auction if you are the successful bidder. This means you waive your cooling off period - so there is no going back. This means you need to be prepared well before the auction day. This includes having your solicitor review the contracts, have your building/strata reports completed and have you deposit ready to go. The second part is to be realistic - have your price that you are willing to go up to and if you don't get it then there will be another one. It is disappointing, but unfortunately that is the way auctions operate. Your buying strategy doesn't really matter if someone else is prepared to pay more than what you are.  We hope you can join us for the seminar on Wednesday the 14th of August from 6pm. Click here to regsiter.    Regards, The Ark Team

Craig James - the Australian economy - where 2 now?

Craig James – CBA Commsec's Economist Presented at the CBA Innovation Forum for SME’s on Monday 17 June 2013. A passionate speaker, with a sense of humour!  

The state of play 

• Business is currently quiet, and people are waiting for the election.
• Why the wait ?– the reality is that the government is run by bureaucrat’s, and  financial decisions (interest rates etc) by the reserve bank.
• Massive growth going to come from India and China – we are well placed. 
• Its not all about mining… services, education, tourism, health and infrastructure will continue to drive the economy.

Why are we glum?

•  Election
•  Bad perceived Political Leadership
• We are going through “stuff”  - changing from internet and mobile – changing way we shop – retailers are changing the way we are buying
•  High $ and Australia being expensive compared to rest of world – people are going overseas on holidays – tourism has been suffering
• People have not been lending/ borrowing as much – banking will possibly not be as profitable as in the past

In Australia we are doing ok

We are one of 11 countries with a AAA rating

5.5% unemployment

2.5% inflation

State of our State Economies

Strength of states compared by 8 indicators including retail/infrastructure/ Mining/agriculture

• Mining - WA/NT - growth
• Manufacturing/Finance/ Services - ACT NSW Vic - maintaining
• Agriculture – SA and Tasmania – going backwards 

What about NSW?

• NSW growing faster than in past 12 years
• Unemployment different in different parts
• Inner West 3.5
• Northwest 6%
• Centrals West 6%

Asset Classes in Australia

Property

Home process are doing ok. Sydney  and WA increasing by 4% against an average of 2%

Sharemarket

• Volume deceasing
• USA growing
• A$ profits increasing
•  Returns matter
•  Fully franked dividends – bode well for increase in shareemarket
• People and funds are sitting on a lot of cash , waiting for things to stabilize
• Interest rates low
• A$ - now 95c - expected to go to 85c

Forecast

• Aussie economy positioned well for growth on a number of levels
•  Confidence in economy will change from negative to positive (perception)
•  Agriculture – prime position to take place with
•  Growth will come from building our infrastructure
•  Increase in Services – growth of tourism and services – with a view to increased exports
• Growth of China and India – (on our doorstep) see Hans Rosling’s video on (a brilliant video of the rise of China and India). http://bsivc.blogspot.com.au/2013/06/hans-rowling-rise-of-india-and-chinas.html
• USA is coming off low base of the GFC – Ben Bernancke looking to stop the growth – will possibly increase interest rates, USA$ will increase –

The Numbers

Economy                  2- 3%

Inflation                    2- 3%

Unemployment         5- 6%

Res Property             2- 3%

Sharemarket              5,200

A$                             92 – 95c

Once the election is out of the road – nothing will be holding us back….. bottom line – we are bullish!!

Brisbane inner city market undersupplied

Posted on Friday, May 24 2013 at 3:54 PM Australian Property Investor

There’s a very limited supply of housing in Brisbane at present and auctions are increasing in popularity as sellers regain a more optimistic view of the market, according to one analyst.

James Freudigmann is the national manager of Propell Buyers’ Advocates and believes an analysis of market data from Brisbane shows some interesting trends.

For one, Freudigmann says one-third of all properties listed for sale in the Queensland capital’s inner city suburbs are under contract.

“To have over a third of properties going to auction is a sign that the market is starting to heat up,” he says. “Agents are taking them to auction to get exposure because of the shortage of supply of quality stock.”

Inner city houses within five to seven kilometres of the CBD and priced in the middle segment of the market are especially in demand with both homebuyers and investors, he says.

Some pundits are still describing the housing sector in southeast Queensland as subdued, but Freudigmann thinks they’re missing the mark. He has analysed property listings to prove his point.

Across 37 inner city markets, there are currently 218 houses listed for sale on realestate.com.au, he says. Of those, 77 are under contract already and 13 are actually units that have been incorrectly listed as houses.

A further 30 are priced in excess of $600,000, leaving only 105 houses for sale in that prime middle price segment, he says.

“With 37 suburbs in total, that means on average there are three houses under $600,000 per suburb.”

Of the 105 remaining, 37 are going to auction and another 33 are what Freudigmann describes as “secondary”, or less desirable than others given their proximity to main roads, train lines or even a history of flooding.

“This leaves only 31 houses for sale (and not going to auction) in these 37 suburbs in the inner city sub $600,000 price point.”

Investor home loans hit five-year high

AUSTRALIAN PROPERTY NEWS

Posted on Tuesday, June 11 2013 at 4:05 PM

Investors are coming back to the market place, with loans for housing finance on the rise.

CommSec reports the value of home loans taken out by investors rose by 1.1 per cent in April thanks to rising rents and falling interest rates.

“Tight rental market, state government grants for home builders, a relative lack of new homes being built and low interest rates are attracting investors,” CommSec chief economist Craig James says.

“First homebuyers are still reluctant to buy homes, preferring to rent instead. Fortunately second and subsequent homebuyers are active in buying and building homes together with investors.”

The number of new owner-occupier housing loans rose by 0.8 per cent in April, after a 4.8 per cent lift in March – the strongest gain in four years. The proportion of first homebuyers in the market rose from a near nine-year low of 14.2 per cent in March to 14.3 per cent in April. Fixed rate loans rose from 18.4 per cent of all loans to 20.6 per cent in April – also the highest level in five years. The average home loan across Australia stood at $301,800 in April, up 2.6 per cent on a year ago.

“The housing market is in recovery mode,” James says.

“The good news is that low interest rates and government grants are serving to boost new construction. Interestingly, it’s not the first homebuyers that are embracing the opportunities; rather they’re relying on investors to get the new houses and apartments built.”

6 gems you need to sell your home

We have recently sold our house in St Ives after having lived in the area for 20 years.... here are some gems that were given to us when we decided to sell....


1. Price Your Home Right.

Understand the market before you speak to agents. ( get info from RP data from your financial planner or mortgage broker). You get details of every sale in your area over the past 3 years, together with an assessment of the value of your house. Feel free to all or email me, and we will get you that data with pleasure (cal 02 92623333, email ikaye@bsi.com.au)

Remember price is everything. Match your price with similar house price sales in area. A quick sale is a good sale.

2.Find the right agent

The right agent can make a massive difference. Selecting
the wrong agent can be very expensive. Do your homework, get referrals, and get them to pitch on selling your home...what price they expect to get etc . Get someone who knows your area..

3. Use all channels For Marketing Your Home.
Internet, advertising, neighbourhood campaign, database plan, signage, best photography, editorial, video, floor plan, open houses, hot buyer preview and the absolute best agent working for you.

Hilary Lazarus was our agent.... She was awesome!

4. Feng Shwi your house

Buyers are looking for a home that they connect with and feel like they want to live there and this connection comes from style and creating a WOW. Do the feng shwi thing.

5. The 30 Day Rule.

Your best buyers will come along in the first 30 days. Our buyer was the first ones that saw our house!
They say "the first offer is usually the best one"

6. Just Relax.
Once you have Feng shwied, found the right agent and worked with her on a marketing campaign - chill! Relax and work closely with your agent and everything will work out just fine.

You only need one buyer to buy your home!

Ps. buy 101 ways you can improve the value of your house by Dolf deroos. Email me on
ikaye@bsi.com.au and I will send you a copy for $6.

8 Steps to FInancial Freedom

Financial freedom may mean different things to different people, but we all agree that to be truly financially free is to know that should your world crumble around you, that the last of your worries would involve money. 

Very simply, is more money coming in than going out - are you living within your means?

Step 1: Set financial goals

Any trip requires a map with directions – a start and an end point. The road to financial freedom starts with a map and it’s important to understand the journey you are undertaking and why you are doing it. 

Step 2: Get out of debt

Shit happens - if you fall off the rails one month, it doesn’t mean that you should give up. But, the best way to pre-empt such problems is by having a plan in place. Speaking to a financial adviser will also assist you if you are unsure of where to start. www.arktotalwealth.com.au



This has to be a conscious decision and one made in the planning phase. Your plan should outline the ‘bad’ debt you plan on paying off first i.e. clothing accounts, credit cards, overdrafts, etc.

Your plan should also include the order in which debt will take longer than other debt to settle, and when you will start and complete paying off each sum.

Start paying smaller amounts off first as those can be allocated at a later stage to pay off bigger debts. Pay the debts which have a higher interest rate first and whatever extra money you have left over after paying off these amounts, use towards decreasing the longer term debts you may have e.g. car or home mortgages.

Step 3: Start saving

Doing this will benefit you in the long run.  (In fact you should look at consolidating your debts with lower interest rates. see www.liquidityfinance.com.au

If you are tired of having more month than money, it’s time to re-evaluate your spending habits. Yes, we all know how easy it is to overspend one month, stop living beyond your means with the inability to pay back what was spent.

Therefore, if you have paid up all your ‘bad’ debt, then work towards paying extra on your longer term debts which have investment assets against them (Investment Properties or Portfolios).


No matter what your debt is standing at, start paying yourself first. An easy way to ensure that you keep to this self-promise is by opening a savings account that you don’t have immediate access to and save monthly – even if it is $100 for now. 

Step 4: Track every cent you are spending

Place a stop order on the account into which your salary gets paid. This means that the savings amount that you have allocated will go straight into your savings account without you having access to that money. This way, while you are paying off your debt, you are saving and as the debt becomes less, you are able to save more.  

Keep track of every cent that comes and goes. Tracking your spending habits helps you understand exactly how much money comes and goes, as opposed to what you think comes and goes. There are various tools available on the web that can help you do this.

You could also keep a cash log book. This would require you to keep every slip that you get and track it against what you have budgeted. Make this a habit.

Step 5: Draw up a budget

Tracking every cent you spend works hand-in-hand with your budget. Draw up a monthly budget of your income versus your expenditure to track your budget. What you want to accomplish in the long run is to spend less than what you earn especially when debt is involved.

Once your debt is paid up, continue tracking your spending habits and budgeting as they will remain fundamental tools to manage your money.

Step 6: Before investing – do your homework

Before you invest your money in any investment that promises you an unrealistic and quick return – be wary. Good things come to those who wait. There are convincing sales people and con-artists out there. Instead, speak to a registered and accredited financial adviser regarding possible investment options and portfolios available on the market. www.arktotalwealth.com.au 

Step 7: Protect your wealth

It’s vitally important to protect the wealth you create from events that might destroy it, for example, premature death, illness, relationship breakdowns and taxes. Good estate and tax planning will help preserve your wealth and speaking to your financial adviser is key in getting insurance that protects your wealth. www.arktotalwealth.com.au 

Step 8: Set aside for retirement - Build up your Superannuation

If you are young, the last thing on your mind is retirement. However the power of compound interest lies in the secret of your youth – the younger you are the more compound interest favours you. This as opposed to an older person starting to save for retirement at an older stage in their life.

Retirement is an important aspect as you would like to be self-dependent when you retire. A realistic figure that you should be saving is 15% of your salary.

Achieving financial freedom is not rocket science; it just requires determination, focus and a little commitment.

Purchasing Property in your Super Seminar

Ark is hosting its first educational seminar for 2013.

To kickstart the year, we have decided to re-visit one of the most popular strategies from last year - Purchasing Property in your Super.

If implemented correctly for the right people, this strategy has the ability to transform your super and wealth creation. If used incorrectly, it has the ability to cripple your super balance and retirement funds.

In this seminar, we will cover off the following;

- The benefits and risks of the strategy

- The correct structure and common mistakes

- The different ways in which you can structure the loan

- How it can fit into your overall strategy

- The costs of the strategy - Upfront and Ongoing

We will allow plenty of time at the end for questions and to chat with our qualified Financial Advisors. This is one area you need to understand before you make a commitment.

When:- 

Click here to register for Wed 20th Feb @ 6pm

Click here to register for Thurs 21st Feb @12:30pm

Where:-

Level 7 , 14 Martin Place, Sydney 2000 

If you are unable to  make the seminar, just 'Click here and order your complimentary ebook on 'SMSF Essentials' and 'The Process of Purchasing Property in Super' , and we will send it to you after the seminar.

Westpac cuts two year fixed rate home loan to 4.99%

 If you want to review your loan call Danny on 02 9290 2777, or email him on danny.luu@liquidityfinance.com.au

Westpac announced it will reduce its two year fixed rate mortgage to 4.99% (with Premier Advantage Package).  The new offer represents a cut of 0.4% on the current two year fixed interest rate.  The new rate takes effect from Thursday 7 February 2013 and will be available for both new and existing customers.

This places Westpac as a market leader among the major banks and is Westpac's lowest offer on two year fixed rates since April 2009.

Effective Thursday 7 February 2013, the fixed rates will be as follows:

Term	Current Rate (Stand Alone)  % p.a.	New Rate  (Stand Alone) % p.a.	New Rate  (Premier Advantage Package)  % p.a.	Change %
1 year	5.69	5.69	5.49	-
2 year	5.59	5.19	4.99	- 0.40%
3 year	5.59	5.59	5.39	-
4 year	5.89	5.89	5.69	-
5 year	5.89	5.89	5.69	-
6 year (IPL only)	7.00	7.00	6.80	-
7 year	7.50	7.50	7.30	-
9 year (IPL only)	7.50	7.50	7.30	-
10 year	7.50	7.50	7.30	-
12 year (IPL only)	7.60	7.60	7.40	-

Note:  Fixed Rate SMSF Investment Property Loans have changed by the same amount, and remain at
a premium of 0.35% above the standard carded fixed rates.

The comparison table below shows Westpac as the market leader with the lowest fixed rates amongst the majors for 2 and 5 year fixed loan terms:

Lender	1 year fixed rate (packaged)	2 year fixed rate (packaged)	3 year fixed rate (packaged)	4 year fixed rate (packaged)	5 year fixed rate (packaged)
Westpac	5.49	4.99	5.39	5.69	5.69
CBA	5.19	5.29	5.29	5.64	5.69
ANZ	5.34	5.34	5.39	5.84	5.84
NAB	5.24	5.34	5.29	5.64	5.84

Property vs Shares over 10 Years

Summarised from SMH

Bricks and mortar might be the popular choice for investors, but how does it stack up in the long term? John Collett discovers which asset classes gave more bang for your buck in the past 10 years.

•          Residential real estate is a much-loved investment and everyone seems to know someone who has doubled their money playing property.
•         Shares have their legions of fans,
•          while others prefer the security of cash.

But to settle the question of where has been best to invest over the long term, Money asked AMP Capital Investors and SuperRatings to supply the 10-year returns for six asset classes, plus superannuation.

The results will disappoint the bricks-and-mortar brigade, because they show Australian shares win hands down. Not only have domestic shares outpaced overseas shares, they have done much better than residential real estate.

1.             Australian shares produced an average annual return of 9.1 per cent over the past 10 years to Dec 31, 2012.

2.            Superannuation and Australian bonds were the next best performers, returning 6.4 per cent.

3.             Bricks and mortar even struggled to keep up with the 5.4 per cent return on cash. Australian residential property produced a return of only 5.3 per cent.

4.             Property price performance is even worse than it seems, because all returns given in the accompanying table (above, right) are ''total'' returns. Estimates of the gross rental yield coming from rents have been added to the growth in house and unit prices. With shares, the dividends are included in the returns so the asset classes are compared like-for-like.

On a growth rate of 5.3% on property, (assume a  marginal tax rate of 39% and a 5% gross rental yield) your post tax IRR is 19.03%
(if you want my detailed workings , please contact me and I will gladly send this to you!

Timing is a factor

But the start and end points used to measure performance are crucial to the outcome. The chief economist at AMP Capital Investors, Shane Oliver, points out that 10 years ago was a low point for shares with the end of the ''tech wreck'', and the start of the strong period of returns that ran until late 2007 with the onset of the global financial crisis (GFC),  and the 9.1 per cent 10-year return on Australian shares has been lifted by shares returning more than 20 per cent in 2012.

Just as the 10-year return on shares starts from a low point, a decade ago growth in property prices was peaking. Oliver says the poor 10-year return on houses and units is influenced by the price boom between the mid-1990s and 2003. But since then, particularly in the key market of Sydney, prices have been treading water, he says.

Advantage of Real Estate -
it is tangible and investors can touch  and feel it, Harder to sell than other assets… which is why it is safer to leverage agaijnst!

 You can buy a $500k investment with $100k deposit and borrow the rest. Just make sure you can afford the possible “negative gearing” – would not do this with shares because of margin calls etc. 

It would be interesting to do a comparison of $100k invested in shares with Divs reinvested and $100k invested in a $500k property with rents offsetting mortgages and taking into account negative gearing tax benefits!!

I will ask my gurus to prepare...

Let me know if you are interested in the comparison!!