Below is an article written by John McGrath on what could be the future of real estate ownership in Australia. It is something I have been suggesting for a long time and is only now starting to be thought about by other ‘experts’ in the industry. Buying a property as an investment as your first property purchase in the Australian market while renting the home where you live is a much easier purchase than having to try and save for a large deposit and pay down the principal and interest repayments over the duration of the loan. The tax benefits achieved from buying an investment property coupled with the additional income paid by the tenant makes owning an investment property a pleasure! See below what John McGrath has to say. We are happy to step you through the numbers in more detail should you wish to discuss this further.

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The rise of renter-investors

There is a rising number of young buyers who are choosing to purchase an investment property instead of their first home so they can get a foot in the door of the property market while continuing to live in the lifestyle locations they like. They’re dubbed ‘renter-investors’ and it’s a growing trend. In fact, one academic estimates 11 per cent of all residential properties are purchased by people who rent their own homes*.

There are two reasons for this. Firstly, we’ve known for some time that many young Australians are valuing lifestyle over the traditional dream of home ownership. They’re renting in beachside or cityside suburbs where there’s a café culture, restaurants, nightlife, entertainment, recreational facilities and fast CBD access to work. They can’t afford to buy in these locations but they don’t want to move to the outer ring where properties are cheaper. So they’re left with two options. They either rent for life or they buy for investment.

This choice means they don’t qualify for the First Home Owners Grant, which is only available to first homebuyers who have never purchased property before. But they do enjoy the significant tax benefits of negative gearing and with rental returns so strong right now they have greater ability to manage the repayments on an investment loan.

I have long advocated home ownership as a cornerstone investment in people’s financial future. However, I would rather see young Australians buying an investment property than doing nothing at all.

Property has proven itself to be one of the best asset classes for wealth generation and as long as these young buyers are sensible about their ability to pay high rents themselves as well as the repayments on their investment loans, then good luck to them.

Renting-investing is entirely do-able if you’re on a good income. Here’s the numbers, using Sydney as an example.

One of the suburbs I like for apartment buying right now is North Parramatta, where the median apartment price is $345,000.

With a 10 per cent deposit, the monthly repayment is $2087.

Rents in this area are an average $360 per week for a two-bedder and $420 per week for a three-bedder. This represents a very strong rental yield of between 5.4 and 6.3 per cent.

Say you buy an apartment for $345,000 and get the minimum rental return of $360 per week. That’s an average $1560 per month, leaving a $527 gap or an average $120 per week gap over the year.

Although this gap doesn’t take into account costs such as strata levies and council rates, this out-of-pocket expense is tax deductible – as are the strata levies, council rates and other costs too!

So, these young executives can live in a rental by the beach and close to work while still owning property to secure their future wealth. And there’s one thing I haven’t mentioned… capital gains. Their investment property will keep growing in value – in our example here, North Parramatta apartments appreciated a respectable 4.55 per cent or $15,000 in 2010. Not bad!

Source: Switzer.com.au | Written by John McGrath | Posted 11th April 2011

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Sydney Home Buyer Show (Pre-Show Guide)

Don’t miss the largest event in Australia dedicated to educating home buyers & property investors of all levels.

Buying a home or investment property is one of most important financial transactions you will ever make.
So if you’re looking to buy property but keen to make the right decisions and avoid costly mistakes – then you simply can’t afford to miss the Sydney Home Buyer Show being held at the Sydney Exhibition Centre from Saturday 31 October to Sunday 1 November.

It’s the smart way to buy property and the largest event in Australia dedicated to helping people finance, find and buy their next home or investment property. We’ll help you get on the right path to the right property with over 30 free seminars and workshops on offer each day – delivered only by impartial experts from government and industry associations that you can trust including free seminars from John Symond, Aussie; Mark Bouris, Channel 9’s The Apprentice and Effie Zahos, Channel 9’s Money for Jam.

A major exhibition will showcase over 120 leading companies with everything the home buyer or investor needs under one roof, including new and established homes, apartments, townhouses, units, builders, house & land packages, holiday houses, land estates, home loans, real estate agents, property investment advice companies and much more.

Heaps of New Products and Show Specials will also be on offer plus there’s dedicated Zones for Apartment Buyers and Property Investors.

For further information including the comprehensive educational seminar program and full exhibitor list visit: http://www.homebuyershow.com.au/home/sydney

As part of a special promotion we are pleased to offer all our Blog Readers, family and friends FREE TICKETS to the Sydney Home Buyer Show which are normally $15. Simply visit the website www.homebuyershow.com.au and quote the special promotional code FINDIP when purchasing your tickets.

Visitors to can also attend the Trading & Investing Seminars & Expo next for free – tickets are normally $15. For full details visit the Trading & Investing Seminars & Expo website: www.tradingandinvestingexpo.com.au

Event details:
Sydney Convention & Exhibition Centre
Saturday 31 October to Sunday 1 November 2009
Opening Hours: 10am to 5pm daily

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With a recent review of surveys and media articles in the press over the last 2 months, it seems that everyone agrees on one thing at the moment… Property investors are starting to come out of hiding.

So the first question we have to ask is what scared them away, especially with interest rates so low and rents continuing to increase. The answer is the Government. How? …The introduction of the Boosted First Home Buyers Grants. These boosted grants have caused a flurry of home and apartment purchases by first time property owners. Many have been renting and with the opportunity to switch to ownership without a large difference in monthly outlay, due to interest rates currently being so low, the step from tenant to home owner has been a fairly simple one…especially when the Government has been so generous with their First Home Buyer handouts. These boosted grants have caused too much competition in the current market and property investors are waiting until fewer home buyers are competing with them.

The boosted grants were meant to have ended on the 30 June 2009, however the Government took it upon themself to extend it to the end of December 2009, with a reduction in the increase from the end of September 2009. The slowdown in home buyers is expected and the increase in property investors will most likely occur.

Mortgage Choice recently ran a survey that found 3 out of 4 Australians that are planning to buy an investment property in the next 2 years were waiting for the FHOB to expire. Mortgage Choice claims that many of their clients that are looking at purchasing an investment property now are doing their homework and determining how much they can borrow, so when 2010 arrives, they will be ready to act.

Other results from the survey included:

• 37% of property investors rated their level of confidence in their states housing market as “high”, 57% rated it “moderate”, 6% low and 1% very low. Queensland respondents were most confident about their state’s housing market, followed closely by Victoria.
• 75% of respondents saw property investment as a better than investing in the share market
• 49% were looking to own two to three properties
• 47% said they were intending to keep it for 10 years or longer while 41% were planning on five to ten years

When purchasing their investment property, the features respondents considered most important in order of preference were:

• price;
• locality – convenience to amenities and transport;
• number and/or size of rooms;
• locality – prestige;
• features – such as driveway access, garage, swimming pool, backyard, fireplace and so on;
• aesthetic appeal;
• age of the property; and
• green/environmental aspects or initiatives.

There are a lot of positive factors at investors’ fingertips – historically low interest rates alongside historically low rental vacancy rates, greater demand than supply, a number of extensive infrastructure programs around the country, increasing rents, healthy migration levels and relatively stable housing prices… so I tend to agree with the outcome of the survey… it will be interesting to see what happens over the next 6-12 months.

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Australia Housing Outlook 2009 (ANZ Summary)

The outlook for the global economy has stabilised however the recovery is expected to be slow. The Australian economy has fared one of the best of the global economies and has thus far avoided a technical recession, although I believe the pain is still very real here. Economic growth in 2009 is likely to be slow; however the ongoing government stimulus along with the improving Chinese demand will help stimulate the economy moving forward. It is important to note that the report does not mention that Australia’s economy would continue to fall… they are expecting growth, albeit very small for the 2009 year.

The Australia housing market has performed significantly better than other developed economies around the world. According to Residex it has softened by 1.2% to the month of May 2009, while RP Data suggests that there has been no change to house prices. After interest rate cuts and government assistance with the first home buyers boosted grants, there are even signs of price movement upwards.

ANZ suggest that the Australian housing market will be tested over the medium term on a number of factors. These include:

• Housing Affordability to test record highs because of government stimulus at both federal and state level as well as low interest rates, which may even be cut further. The market will be tested by home ‘upgraders’ (those that are buying their 2nd or 3rd property) and property investors.
• Population growth is at its highest levels in 4 decades. This high population growth is creating a high demand on dwellings which has consequently been proved by very low vacancy rates.
• Housing Supply – There has been a slow down in the development of new housing due to a subdued market, financing difficulties, and higher development costs
• Labour market – the uncertainty of the labour market and where unemployment may fall to is leading some market commentators to think that there may be a lack of confidence in the housing market as home buyers don’t wish to commit to large mortgages when they have uncertainty in their employment, thus reducing demand on housing and housing prices. ANZ state this is probably a second-order influence on housing market outcomes.

ANZ state, “We expect dwelling prices to edge higher for much of the remainder of 2009 with upside risk presenting from intensification of strong fundamentals, a shift in price expectations and a restoration in market confidence.

ANZ Market Balance - June 2009

ANZ Rental Vacancy Rate June 2009

ANZ Affordability June 2009

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Last night I spent the evening with John Symond. What an amazing story!

John starts off by telling us that he went to 11 different schools and 2 universities. His education was not about learning what was taught in the class room but about learning to change….something we all seem to fear doing. He spent his childhood either at school or working for his parents in their fruit shops. He never went on holidays. John and his 6 siblings had a very simple upbringing.

After school, John studied law and went on to set up his own consultancy firm specialising in property and finance. He had about 10 staff and was living the good life. A joint venture with the State bank of South Australia was what John thought was going to propel him to the next stage of his business career. At this time John was happily married with 2 kids and he couldn’t ask for anything more.

By the early 90’s, the joint venture had collapsed and John was left with nothing. He was left with massive debt and the stress of business crept over into his family life which ultimately ended in a divorce with his wife.

With millions of dollars in debt and a strong will to not call himself bankrupt, John made it his mission to create Australia’s largest non-bank lender… and so Aussie Home Loans was born.

John spoke about doing business when times were tough. Back in 1992 Interest rates were up at 18%. Banks were making huge profits and he saw an opportunity. And this he says is what we should all take away from tonight… the fact than when the economy is doing it tough, opportunities are created… it’s just a matter of seeing them and more importantly acting on them.

Johns interest rate tips for the night were that there was too big a gap between fixed and variable rates so he was more inclined to stick with variable. He also stated he has never been a huge fan of fixed interest rates and mentioned not so long ago people were locking themselves into 8% + fixed rates for 5 years… and thus were now paying 2% about market rates. He thinks that the economy may get worse before it gets better and that interest rates should remain fairly stable or even possible drop. Another point he made was that everyone always talks about the high unemployment of say 8-10%… but more importantly we will still have 90% employed. He states though that the problem is not the issue of unemployment but it is the lack of confidence within the market and the fact that people are worried about their job security. This lack of job security leads to many saving rather than spending just encase they lose their job.

So there you have it – straight from Aussie John himself… a fascinating person who has definitely had many ups and downs in both his personal and business life and many lessons can be learnt from this.

For those that are interested in learning more about John Symond, I suggest you go buy his book “Aussie John: John Symond” . The book is all about how John Symond lost everything, built Aussie Home Loans, took on the banks – and won! It is the story of John Symond’s life, from his happy childhood in Brisbane and Sydney’s west and his financial failure after the 1987 crash, to his emergence as one of Australia’s inspiring businessmen. Bit more than this, this book is a manual for how to succeed in business.

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The Find Investment Property team is currently exhibiting at the Home Buyers Show in Brisbane. Its been a fantastic event as many attendees have discovered who we are and they have all asked many questions. We will provide you with some more information about the event at a later date. For some they were able to get cheap tickets by using our special promotional code so if you intend to visit either the Sydney or Melbourne Home Buyers Shows, please check back with us to find out what our special promotion code is to get cheap tickets.

Thank you to those that visited us at thoe property expo and we look forward to seeing you on our main site: www.findinvestmentproperty.com.au

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Home Buyers Show Brisbane

Brisbane Property Expo on 13th and 14th June 2009 at the Brisbane Exhibition Centre. Perfect for property investors and home buyers.

Find Investment Property is excited to announce that we will be participating at the upcoming Home Buyer Show at the Brisbane Exhibition Centre on Saturday 13 and Sunday 13 June. It is the only major event in Australia dedicated to helping people actually buy or sell a new or established home or apartment whether as a primary residence or investment property.

The dream of home ownership is alive and well in Australia, and with interest rates at record lows, property prices cooling, substantial Government grants still available and a strong rental market, home buyers and property investors are returning to the market in large numbers.

Now more than ever, home buyers and investors need to do their research, understand market conditions, and have access to all the right independent advice from reliable sources to make informed buying decisions to enable them to get on the right path to the right property.

The Home Buyer Show will provide first, second and third time property buyers with all the information they need to help discover the smart way to finance, find and buy a home or investment property – direct from the experts.

Some of the major show highlights include:

• Free seminars from Australia’s leading property and finance experts in government and industry associations
• Master Builders Zone – Master Builders members, Queensland’s leading building services companies, will be showcasing a wide range of new homes, display villages and house & land packages.
• Property Investor Zone (sponsored by Find Investment Property)- educating property investors of all levels including all the latest investment properties for sale on the market today with loads of experts on hand to provide independent, impartial advice.
• Apartment Living Zone – showcasing some of the latest apartment, unit and townhouse developments in SE Queensland

As part of a special promotion, we are pleased to offer all of our clients, partners and friends unlimited $5 tickets to the Home Buyer Show which are normally $15. Simply visit the website www.homebuyershow.com.au and when purchasing tickets quote the special promotional code FIP.

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The Commonwealth Bank and Westpac Bank both upped their fixed-rate mortgage rates today due to higher funding costs.

CBA’s four-year fixed rate home loans rose 20 basis points, while their five-year home loan increased by 45 basis points.

Westpac has raised its one-year fixed mortgage 20 basis points and its two-year fixed rate mortgage has risen 30 basis points.

There is much speculation that interest rates offered by the banks could be as low as they will go, even if the RBA decides to futher reduce official cash rates to all time lows.

Only time will tell, but many ‘experts’ are torn between fixing rates now or waiting to see what the banks may offer over the coming months.

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CBA has passed on only 0.1% of the .25% RBA cut. It has almost certianly set the precedence that other banks will now not need to pass on the full rate cut. It will be interesting to see what ANZ, NAB and Westpac / St George decide to do.

CBA claims that although the drop is small, they are offering very good cash deposit interest rates at the moment which has seen an influx of cash depsoits to their bank, thus menaing their funding of interest payements has become more expensive.

So much for Banks working inline with the government to help the average Australian…. this days after banks stated they would work with those that lost their jobs to help defer payement on home loans to assist those while they seek for new employment. 800,000 people in Australia are predicted to loose their jobs.

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