PROPERTY INVESTING FOR ORDINARY PEOPLE

FIRST HOME OWNERS SCHOOL

I have created a new lens for this discussion - check it out!

Building a Rental!

I read a lot! So I often come across some great ideas that are worth sharing with my fellow property investors or investors to be!

I have written a whole new lens on this topic so go to the link provided and learn how it all works!

DepreciationSchedule Basics

I have written a short article on the function of the "Strata Company". You need to understand the function of the Strata group in group housing like apartments!

Follow the link to a new lens on this subject!

Strata Company Basics

I have written a new lens on this issue and suggest you go take a look!

LANDLORD'S INSURANCE

Managing your property can be a challenge but when you have more than one it can be a nightmare.

Consider my new lens to give you some advice in this issue

WHY YOU NEED A PROPERTY MANAGEMENT AGENT

Looking at a few headlines in my local property liftout I see the following

Buy for the long term.
Crunch the numbers.
Patience pays off.
Don't Wait.

Now in the light of the current doom and gloom out there it interesting to see such headlines, or is it?
Property investing is a medium to long term strategy for most investors and is built around the well established premise that quality property is a long term winner.
For the last few months we have heard talk of property values dropping and people losing their homes. Yes that can happen - but we need to look at the facts behind these statements.

I am looking at a table listing the growth figures for all the suburbs of Perth - and the 5 year and ten year figures are amazing! The one year (2007/8) figures are not as encouraging but the vast majority are positive. Even many of the negatives are on the back of some very large positives from previous years!

Let's look at my Gosnells property - the 5 year growth figure is in the range 20-22%
the 10 year 14-16%. The rents have increased 4.5% last year.
This property doubled for us in 3 years so to have a slowdown now in growth must be viewed in the light of its history. On average properties double every 7-10 years and if you go in with that expectation anything else below that is all good!
Yes, growth rates may reduce this year but compared to what - compared to record highs!

The doom and gloom comes only when you get greedy and expect the returns to be high all the time regardless.

When looking at our prime residence - 5 year change was 18.2%! Even if the growth rate is only 2% this year - we don't intend on paniking a selling our house - we will continue paying out the mortgage and we are happy with the capital and equity growth this house has achieved in the last ten years!

As Warren Buffet has said
"Be fearful when others are being greedy and greedy when others are fearful"

Knowledge is the secret to good property investing - get the knowledge and act with your head not your emotions!

INTEREST RATES IN THE NEWS

Interest rates have dropped markedly in the last month and talk is of even greater cuts. Just what a property investor wants to hear.

The reserve rate is now at 6% and banks are dropping their loadn rates rapidly every day it seems!

Last week there was talk that maybe the reserve bank went to high in its endeavours to control inflation! Wow did I not say that months ago!

Careful long term thinking property investors are now in the right place to take action! Get to the seminars - learn learn learn - just like location location location this is the mantra for all informed investors!

Come on get out there and check it out!

Until next time
take care
John

First let's recap the situation in Australia -

AUSTRALIA TODAY.

We have a huge mining boom roaring thru many Australian states and great demand for housing in the areas of greatest growth. This has brought increased migration - both intra-state and from off shore! Increased migration means a surging population.

We have seen the shudders of an oil crises - reminders that we cannot keep using it like we have been and not have to pay - pay in direct increases in living costs (the inflation figure the news flashes at us each day) and long term pay in environmental costs.
Mortgage rates are biting into family budgets and hurting bad!

The stock market has taken an obligatory dive (look at the long term charts and you can see this was coming!) (Superannuation accounts hurting right now - but lets not forget the record highs for the last 4-5years!)

Rental vacancy rates are at record lows and rents are going skyward at amazing rates!
Yet new properties being built are decreasing in number:

Examine these ABS (Australian Bureau of Statistics) for new properties.

The March ABS figures for the states are as follows:
Northern Territory (against the trend) +8.4%
Western Australia -0.2%
Victoria -1.3%
Tasmania -2.4%
Queensland -4.2%
New South Wales -2.1%
South Australia -1.8%
Australian Capital Territory -7.6%

WHY IS THIS HAPPENING?

So what are the reasons that the rates are so poor when the conditions (population growth) signal the opposite is needed?

Excessively high interest rates!

Sure rates are increasing over all the major economies (oil price and share collapse issues) but Australia has a huge head start! 2% on the nearest rival!
As we have discussed before we Australians are being hammered by these rates despite the consequences!
So how can a similar country to us, Canada (with a resources boom like ours) get by with less than half the rate?
Bank of Canada - 3% - 22 April 2008
The Reserve Bank of Australia - 7.25%! - 4 Mar 2008

I don't know the answer mind - I am just asking!

INVESTORS ARE A LITTLE WARY!

Maybe now we can see why investors have put their investing on hold. They are not building and won't return until the rates drop and when they do then another housing boom will follow as they all dive into the market.

Excellent the boom and bust cycle kicks off again in Australia!

For the average punter this means rents will keep rising and living costs will be even greater for Australian families - we cannot control the oil price but maybe we could help out in the housing sector by being a less heavy with the interest rates!

CONCLUSION

A booming economy, world oil and gold prices going crazy, share market shuddering (again), rent thru the roof (in most Australian states), surging migration, talk of world recession, climate change! ..

What should I do? What does it all mean? The sky is falling?

Well first off - DON'T PANIC!

Long term investors know that this is part of the natural cycle of things and you need to build strategies into your investment activities to cover this.
Believe it or not there are still excellent places in Australia to build rental properties for canny investors - with the right advice and contacts this is still a great long term and medium term investment option.

People are still making money on the stock market even as we speak!
So we don't need to get all upset about that either!

FOCUS ON YOU!

21C wealth creation in such a volatile environment means you must have better strategies - and more than anything else today invest in yourself. Get the knowledge that can help you thru all this.

In the mean time learn more about
wealth intelligence and property invesment where I began
my journey.