an investment property about to welcome its first tenants

OLD v. NEW – the $100,000 DIFFERENCE


A private client recently asked “with home prices falling, shouldn’t I take advantage of lower prices?”

My response was along the lines “certainly – if you can find a suitable investment $100,000 below the price for new”

Let’s say that to attract a suitable tenant into an established house, you’ll need an investment that’s not too old, say ten years old.

It works this way – if you purchase existing housing stock, you’ll pay full stamp duty – that’s $10,000 extra.

Then the difference on the depreciation on a house ten years old compared to one off-the-plan today is probably $40,000.

Then repairs and maintenance during the next ten years could well be $50,000 for an investment already now ten years old, compared to virtually zero for an off-the-plan investment during its first ten years.

That’s the $100,000 difference.

So if I offer you an investment today for say $380,000, to be better off you’ll need to find something that will attract a suitable tenant for less than $280,000. That’s quite an ask.

And you’ll also miss out on the research and packaging – which regional market will be best over the next five years, and my introductions to an investment- aware funding strategist, to an investment-aware property solicitor, to an investment-aware property accountant, to an investment-aware insurance broker and to an investment-aware asset manager.

And now with lower interest rates, an investor on $70,000 will only need to outlay $28,800 over the next six years to be in full control of this $380,000 investment.

If you would like me to explain in more detail, contact me – Bernard Kelly – anytime on admin@retirelaughing.com

PRESERVE YOUR NEST EGG

How long will your savings last?

By Robert Brokamp of The Motley Fool

There you sit with a finite pile of savings from which you will need to take all or most of the money to support your retirement spending.

The accumulation phase of life is nearing an end.

How much of that stash can you safely take each year to ensure it lasts your lifetime? Will you take the same amount annually? Or will you just buy all the cool toys and vacations you've always really wanted, and let your slightly older self deal with the fallout a few years later?

All of these questions boil down to one over-arching theme that we've thoughtfully put into this question: How long will your money last?

The "70% to 80%" rule of thumb is based on the assumption that many of your current expenses will go away in the golden years.

For the most part, this is true. Once you kiss the boss goodbye, you'll no longer endure the following:
Work-related expenses,
Social Security taxes
Contributions to retirement plans
Mortgage payments, (if your house will be paid off)

There are two other ways your expenses might decline.

First, retirees tend to downsize – but the savings might not be there.

With no need to keep the four-bedroom house now that the kids are grown, for example, some pensioners flee the big house for the something smaller. However the cost to move into – and maintain – a new home or retirement village can still be quite expensive.

However, some require the same level of income in retirement they enjoyed while working.

How? It comes down to this: If you're not making money, you're spending money, particularly in the early retirement years.

Another big expense is health care.

A survey in the Journal of Gerontology found that 61% of couples age 70 and older and 54% of single adults spent at least 10% of their retirement savings on health care. A startling 45% of couples spent more than half of their savings to medical bills.

Medical insurance is not free (there are on-going premiums), and it doesn't cover everything (e.g., most long-term care).

The real price of leisure

So what will retirement cost you?

The best research we've come across concludes the following:

A "safe" withdrawal rate ranges between 4% to 6% of a retiree's starting portfolio.

The accuracy of that approximation depends on your age. If you're 65, then that estimate is quite accurate; if you're 25, thankfully you have many decades to improve your lot.

CONCLUSION

But the simple answer to all of this is – if you want an income of $50,000, this equates to 5% of $1,000,000. And only a portfolio of residential real estate is inflation protected.

Let us help you calculate what you can expect (and what you'll need!) when you retire.

Contact me – Bernard Kelly - anytime at admin@retirelaughing.com

SUCCESSFUL PROPERTY INVESTING

Lance Winslow writes:

Despite what you might think success is never an accident.

Oh sure, you might have some luck along the way that puts you in a nice situation for a while, but it's not long term.

Success is achieved by those who capitalize on their luck and reduce their risks or turn-around their failures and challenges.

If you look at some of the most successful folks in the world, you will realize that they often came from nothing.

Many were orphans and didn't even have a pot to use for their bathroom needs. But how can this be, how is it that someone can have such bad luck and turn all that around and become successful?

Simple, because success is never an accident, many of these people because they worked hard, they had no choice, it became a habit and they just never stopped once they achieved a comfortable lifestyle.

Working hard, working smart, making lots of friends and never giving up were just part of who they are.

These same elements of success are available to everyone, even if so many people choose not to accept these principles.

After all, we have free choice, free will and we live in a free society.

You are allowed to succeed beyond your wildest dreams or fail, but it is your choice.

Success is no accident, no one I know is successful over the long-haul without working to attain it.

No one should feel guilty for being successful, just like no one should make excuses for choosing not to be successful.

The fact is that it is up to you, so please consider this.

If you have innovative thoughts and unique perspectives, come think with Lance; http://www.WorldThinkTank.net/.

Bernard Kelly http://www.retirelaughing.com/

ONLINE GUIDE TO OWNERS CORPORATIONS

The government of Victoria has published a 52 page guide to Owners Corporations.

If you are an investor in a high rise building, you should download and keep this book for reference.

While the Guide relates specifically to Victorian legislation (the Owners Corporation Act 2006) the content is widely applicable.

Owners corporations, which manage the building and common property of shared properties, serve up to a quarter of all residential housing in the state of Victoria and manage significant financial assets on behalf of owners.

If you own a unit, apartment or townhouse, you need to know about the laws that affect the management of your property.

Owners corporations now have more legal responsibilities for matters including financial management, record keeping, dealing with complaints and meeting procedures.

You should read this Guide if you own, manage or live in a property that has an owners corporation.

It is FREE to download. Go to http://www.consumer.vic.gov.au/

Bernard Kelly http://www.retirelaughing.com/

INVESTMENTS TO AVOID

Occasionally I’m told “Those south west suburbs of Brisbane are so far away. I’d prefer to buy an investment locally – so that I can inspect it at any time”.

That’s fine by me – if a prospective clients wishes me to help, I bring my years of professional expertise into play, and do my utmost to achieve an outstanding result for them. But if they want to do it on their own, I’m not upset (except when they ring me a few years later and say “we really should have listened to you.”)

Over the years I have learned that a genuine investment decision is based on an analysis of the numbers – nothing else. There is no place for emotion in any form of serious investing.

And the fact is - once you've acquired an investment, very rarely do you ever visit it again.

My focus is on helping my private clients retire with more. And in my years of experience, there is nothing that can compare to the benefits of investment properties for late career couples who have inadequate retirement funding.

The formula is: who is the Ideal Tenant? what do they want to live in? how much can an typical investor afford?

These questions guide us to the Product.

Then we ask: where should the Product be located?

The answer combines 1) a growth corridor 2) where rents are higher 3) where land tax is lower 4) close to a major cluster of jobs.

The Conclusion - an off-the-plan four bedroom home in the south west suburbs of Brisbane is the ideal investment property for you.

Other forms of property investment – and other locations - carry hidden problems that investors should best avoid.

In particular, I would mention that we do not normally share with private clients investments that are

· Existing housing stock
· Inner city apartments (either high rise or low rise)
· Serviced offices or serviced apartments
· Student accommodation
· Cluster housing and/or gated communities
· Defence Force housing
· Locations distant from a capital city
· Factories or commercial office space
· Postcodes that the banks dislike
· Locations dominated by one industry e.g. mining, tourism
· Suburbs not adjacent to a major economic zone

as each of the above “opportunities” carries hidden problems which slow the accumulation investment program, and consequently are not as attractive as a brand new stand-alone family home in an established suburb in a growth corridor adjacent to a major and diversified economic zone (i.e. where the jobs are).

Let me know if you disagree. Simply hit the reply button on this email.

Or email me – Bernard Kelly – admin@retirelaughing.com