Wednesday, February 14, 2007

Newsletter February 2007

Property is about to lurch upwards

You may have seen recent newspaper articles about soaring rents.

The reason is the rental vacancy rate has slipped to below half the long term "norm" of 4.0% and is currently down at 1.7%. So desperate tenants are bidding up what they are prepared to pay.

Rapidly increasing rents attract the interest of investors, who consequently bid up the price of the housing stock.

This is of course in addition to the underlying long term demand for housing that follows from the one million extra inhabitants who are predicated to be living in each of Melbourne, Sydney and Brisbane over the next 15-20 years.

My personal belief is that property is about to lurch upwards in the very near future – based on those low vacancy rates.

So if you are thinking about starting – or adding to – an investment portfolio, now is the time when you will be able to see an immediate gain. And this boost in equity that you will gain will enable you to put your next investment in place quicker.

Phone Bernard Kelly TODAY if you need more background
mobile phone 0414 778 518 cell phone 61 – 414 778 518

Super is sooo restrictive

I didn’t realise until recently the limitations imposed on your superannuation. The whole system is really only designed to reduce the government’s obligation to fund the community’s pensions.

Not only do you lose complete and total control – your super is handled by a Trustee – but should you die prematurely i.e. before you achieve what the actuary had calculated what your life expectancy was to have been, the balance in your fund is effectively lost to your beneficiaries.

It actually flows into their super fund, not to them, so they can’t benefit until they themselves retire.

And then they can only access it via draw-downs against their super entitlements (whatever that might be, at that future distant date when they retire).

Superannuation is certainly not like a normal inheritance.

Property investment has so much more going for it, don’t you agree?

Retirement hopes not realistic

ABC Radio – in its AM program on 6 February 2007 – carried an item about the results of a survey conducted by international financial services group AXA.

Behavioural Scientist Dr Stephen Juan commented "People don't think as much about retirement as they should.
They're going to be spending a lot of time in retirement. Government isn't going to take care of us anymore.

"We've got to look at it ourselves, and people are starting to realise that they're going to be living not until 60, not to 80, but maybe to 90 and even 100 in the future, and so they've got to make all sorts of plans for that contingency.

"Bring in advisers to do it, professionals, the same way that you would have a personal trainer, the same way that you'd go to a professional doctor. You wouldn't try to do complicated medical procedures on your own.

"You need intelligent advice from people who know," he said.

Is your nest egg ready for retirement?

Americans are gradually coming to realise – as is happening elsewhere – that most of them won’t have enough for 15-20 years of a dignified retirement.

A report in The Times Union (published in Albany, New York) on 15 January recalled that a 2005 Merrill Lynch survey found that 76 percent of boomers say their ideal plan for retirement includes some work. Of course, many baby boomers won't have any choice – they’ll need to keep working, says the article.

A common view is that Americans will need 70 percent of their ending salary to finance retirement. It depends on such things as your personal debt load, your health, what you'll collect from government welfare and whether you plan on working.

27 percent of retirees haven't paid off their mortgages. And seniors average more than $3,500 in out-of-pocket medical costs annually, a 45 percent increase in 10 years.

The figure bandied about most often as the least you'll need to generate sufficient income for retirement is $1 million.

If you retire at age 65 and have a million dollars, and if you stick it in a savings account and get 5 percent interest, it will provide you about $70,000 a year in income. But – given historical data on inflation- you'll die at age 90, broke. The purchasing power of that $70,000 quickly withers. (The Rule of 72 is immutable whenever the decay in purchasing power is being considered. As it had been long before Pacioli first wrote about it in Summa de Arithmetica in 1494).

However that same million in inflation-protected assets – such as residential real estate – will virtually guarantee adequate resources for a dignified retirement.

Let me know if you want any help in exploring your options

Phone me – Bernard Kelly – any time.
mobile 0414 778 518 cellphone 61 - 414 778 518

Thought for the Day

Our parents used to worry about debt.

However property investors know that debt = assets.

And of course, assets = wealth.

Do you think like your parents or like an investor?

Why should we use you, Bernard?

That’s a fair question.

My answer would be – "a typical investor – say one of your neighbours - would only get involved with a real estate investment once every 18 or 24 months. I’m involved everyday. Wouldn’t that suggest that my professional expertise - in this field - is far superior to your neighbour’s?

"Who would you prefer to listen to – a professional who knows how to achieve success, or someone who just happens to live in your street?"

The Renaissance Club

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Bernard Kelly mobile 0414 778 518 cellphone 61 3 414 778 518

P.S. your greatest compliment would be a Personal Referal