PRODUCT NEWSLETTER 1 April 2009

FUNNY PHOTO

You can see why I don't introduce my private clients to this builder.

And he can anticipate that the local building inspectors will be keeping a close eye on the gradients in his driveways - out from the garage and down across the nature strip - for many years to come.

However, property being what is it, this one too can be expected to double in value every 7-10 years, (assuming of course that the statistics continue on as they have for the past 150 years). Which I expect that they will.

But feel free to contact me - Bernard Kelly - anytime if you think that a portfolio of investment properties will be able to help you towards achieving 20-25 years of a dignified retirement.

My email is admin@retirelaughing.com


GOOD NEWS FOR INVESTORS (1)

The first report from the National Housing Supply Council, released by Housing Minister Tanya Plibersek on 11 March, makes for attractive reading by property investors.

The authors said, in part, “We’ve estimated a significant and growing shortfall in housing, which in the absence of a very significant industry response, and/or very significant response from government, will actually lead to a deterioration of the housing supply situation in Australia, and a deterioration of affordability.”

If you would like me to help you explore your options how best to use this situation to your own advantage, feel free to contact me – Bernard Kelly – anytime. My email is admin@retirelaughing.com


GOOD NEWS FOR INVESTORS (2)


ANZ Bank has released its 2009 Property Outlook.

In part, it says that prices for established homes may drop only a further 2% before rebounding in the second half of this year.

Their view is based on the irrefutable fact that there is a growing shortage of housing. We need 180,000 new homes each year, but this year we are only building 120,000.

Consequently the shortage is now predicted to be around 250,000 dwellings by mid 2010.

In “industry speak”, Australia will then be “12 months short” meaning that if demand totally evaporated, it would still take 12 months to clear the backlog.

But of course, demand can never totally evaporate, so rents will remain strong for the foreseeable future.

This is very good news for investors.


GOOD NEWS FOR INVESTORS (3)

Writing in the Sydney Morning Herald 16 March 2009, Michael Pascoe looked at what house prices did in the “recession we had to have” in 1991.

Back then, full-time unemployment fell by 7%, but house actually prices actually increased by 2% - driven by the halving of interest rates (down from 17% in 1989 to 8.75% in 1993).

Pascoe also added that there is a natural floor to price drops for established homes, as – unlike the US – mortgages are full-recourse to the borrower. So borrowers don’t walk away en masse, with the result that mortgagee auctions are comparatively infrequent.

If you would like me to help you explore your options for 20-25 years of dignified retirement, contact me – Bernard Kelly – anytime. Just hit the reply button on this email.


KERRY O’BRIEN REPORTS


Kerry O’Brien – of ABC Television’s 7.30 Report – did a piece on Monday evening 9 March about the housing market.

The story was entitled “GLOOM AT THE TOP, BOOM AT THE BOTTOM”.

But t is always so in a recession. The mortgages on those mansions on the Gold Coast, in Mosman, Toorak or Peppermint Grove can only be sustained while their wealthy owners have an income.

However the average house in an average suburb will never drop by the same percent, even in a very severe recession. The reason is that there is never the same community-wide desperate need to sell. (But remember of course, part of my strategy is Never Sell.)

This “boom at the bottom” is one of the reasons why I favour investment properties up towards, but just under, the median value.

If you would like me to give you further reasons why I favour modestly priced, brand new family homes in an established suburb, just hit the reply button to this email, or contact me - Bernard Kelly – anytime.

My email is admin@retirelaughing.com mobile 0414 778 518



WHY NEW ESTATES ARE EXPENSIVE

Regular readers will have realised that very few of the product that I share with my private clients are in projects being developed by major firms.

The reason is that the same product in a new estate will cost more. Much, much more. And the rental return will not be comparatively higher to compensate.

An example of additional costings faced by the major players are the “development contributions” levied by local municipalities.

One that caught my eye recently was the $34,000 “development contribution” for each allotment being created in the North Kellyville land release in north west Sydney.

These levies are being charged by the Baulkham Hills Council.

Of course, these “contributions” are additional to the cost of the roads, underground cabling for the street lights, the landscaping and the State development taxes which are all paid for – ultimately – by the purchaser.

And for the developer to recoup such outlays, he needs to sell you a bigger, more expensive house.

In comparison, the land in an established suburb is cheaper, and there is no need to build a “Mac-Mansion” to attract the ideal tenant.

Feel free to comment. Just email me – admin@retirelaughing.com


WHAT YOU CAN DEPRECIATE


While the physical structure of an investment property will be depreciated at the rate of 2.5% over 40 years, the plant and equipment contained within a property are depreciated on various scales – but generally within 5-10 years.

Some of these items include: hot water service, cooktops, microwaves, ceiling fans, oven, vinyl, dishwasher, carpet, rangehood, blinds, smoke alarms, exhaust fans, air conditioner, curtains, light shades and security systems.

It’s vital that your accountant includes these non-cash expenses when completing your tax returns (to ensure that you maximise your tax credits).

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