Friday, April 29, 2011

Property Strategies 1 May 2011


"Nobody can go back and start a new beginning, but anyone can start today and make a new ending."

-- Maria Robinson


One of the problems with the superannuation regime is market risk.

Although the stock market is up right now, recent history shows that there is no guarantee for the future - will it continue to grow, stay up, or decline?

Most of us are exposed to this market risk through our super – especially if we use financial planners (whose incomes are generated by having their clients invest in super).

My analysis is that market investments have their place in most people's portfolios but the problem arises when they are used as the primary instrument to generate retirement income.

What happens when the market is down for an extended period and you are taking capital – as a retirement income - from your portfolio?

You obviously end up in an unfortunate situation where you are withdrawing out a much larger percentage than you intended to before the market downturn, from which you can never recover.

Which is one of the reasons why I suggest having some property investments. They are a diversification away from market risk.

If you would like me to help you reduce your exposure to market risk, contact me – Bernard Kelly – anytime. My email is (or just hit your return button, and I’ll phone you back)


There are 150,000 new homes built in Australia each year, and one third go to investors.
That’s around 4,000 each month being purchased by investors for their long term financial security.

Note - the reason why you don’t see such strong figures in the press is that investment properties aren’t generally sold by suburban real estate agents, who report their transactions (substantially only to home owners) to the Real Estate Institute.

Let me know if you want me – Bernard Kelly – to explain how easy it is to tuck an investment property aside for your long term financial security.

My mobile is 0414 778 518 and email


While the banks are willing to become business partners with property investors – so that you both can achieve something you couldn’t do without the other – their support is not unconditional.

Take “bank valuations” as an example.

Novice property investors – and journalists – often expect a bank valuation to mirror the market price, while in fact a bank valuation is an internal control tool and only reflects what a bank can reasonably expect to recoup should it have to repossess and sell in say two years’ time.
So naturally it’s less than market price.

Banks can also apply conservative valuations should – for example – they want to move away from the total amount that they lend for housing. As happens from time to time.

In a similar vein, the valuation put on a property by an insurance company is above the market price.

In this case it reflects what the insurance company would reasonably expect to pay out should the property – for example – be destroyed by lightning in say two years’ time, plus what they add to cover the removal of the debris.

As you can see, “valuations” are tools the big corporates use for their own purposes. They only loosely relate to the market price.


House prices across Australia rose 4.7% during 2010, says property research firm RP Data.

Their research shows that there were 212 suburbs around the country with a median house price of $1 million-plus in the December quarter 2010.

This contrasts to 157 suburbs with this median price at the end of 2009, and only 77 in 2005.

Which suggests that house prices continue to increase over time, despite what the daily journalists would have us believe.


It’s instructive to consider the impact of fees on your retirement savings.

For example, if you save $1 000 a month for 40 years and earn an average real return of 5% you will have about $1.5 million.

This is made up of $480,000 of contributions and $1.1m of investment returns.

If your super fund charges only 1% the $1.5m will be reduced to $1.1m - a loss of $400 000! If you’re paying 2% the $1.5 million will be reduced to around $900,000.

In comparison, the costs to manage a property investment come in around 1%.

However when house prices “double every seven to ten years” the growth rate is 9%.

And of course if you had been investing in residential property investments with this return over 40 years, you would now be seriously wealthy.

Fortunately, it’s not too late to start. Even investing in real estate – using the very successful strategy that I share with my private clients – will make a major difference to your ability to enjoy 20-25 years of comfortable retirement.

If you would like me to help you explore your options, contact me – Bernard Kelly – anytime. My mobile is 0414 778 518


There are quite a number of well researched property investment strategies that offer successful outcomes, and you can get a taste of them when you attend those high adrenaline seminars such as - "We'll teach you ten strategies in three days".

However the presenters at those seminars don't make their money from property investments - no. They make their money from having 200 hopefuls pay to attend, and then sell them books, DVDs and then up-sell into "private exclusive joint venture participations".

Success with property investing comes from concentrating on just one strategy (that you are comfortable with) and refining it continuously.

My strategy works exceptionally well for novice, time-poor investors, who need to substantially enhance their wealth over the next ten years.

If this is you, fell free to contact me (Bernard Kelly) anytime. My mobile is 0414 778 518 or email me


Earn money while someone pays off your mortgage - that's the life of a landlord!
Owning a rental property can be a 'dream come true' if you follow these tips for successfully managing your investment.

1. Wear your business hat
Treat the management of your property as a business not a hobby. Start with a business plan and organise your operations professionally, with separate bank accounts and a bookkeeping system. Surround yourself with people that can help you make the right decisions like a good accountant and property manager.

2. Screen your tenant
You might be anxious to get a paying tenant into your property but don't be tempted to race ahead without first checking their credentials. Follow up on referees, past property managers and all the details provided by the applicant. Be familiar with your state's laws regarding leases and ensure that you use an appropriate lease form for your state.

3. Prepare for repairs
Attempting to save money by skimping on repairs and maintenance will only end up costing you more and risking legal liability in the long run. Conducting repairs quickly and keeping the property in good condition will improve the value of your asset and keep your tenants happy (and paying!).

4. Rainy day funds
Although you hope your property will always be rented, you need to be financially prepared for a worst case scenario of months with no tenant paying rent. Before closing on a property ensure you have done a cash flow analysis to show you can cover mortgage repayments for this or other unforseen problems like interest rate rises, the need for major repairs or an unexpected drop in your income. Whether it's 'cash in bank' or a line of credit on your home loan (contact your mortgage broker for more information), you need to know you have sufficient funds to manage these situations.

5. Know your tax
Find an accountant who understands property and can structure your business affairs to maximise your personal tax situation. Be familiar with what is tax-effective and what is not. A depreciation schedule for example can save you thousands of dollars in tax, by enabling you to depreciate items and claim a tax deduction against your taxable income.

6. Take immediate action
Don't delay taking action when tenants don't pay rent or continually slip behind - you want to send a strong message that you have a business to run. Make sure you follow the step-by-step eviction process required under Tenancy Law.

7. Manage your risk
As outlined in the article opposite, landlord protection insurance is an important part of successfully managing your investment.

Acknowledgements: Greg Carroll, MTA Finance Group, Brisbane


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Bernard Kelly mobile 0414 778 518
Australia’s Retirement Strategist®

“expect to reap an extra $449,999* when you’ll really be needing it”.
PS As I don’t spend my advertising budget on traditional media, I’m able to pay you $5000 for successful referrals

About Bernard Kelly:
Bernard Kelly BEcon MBA CRPC Australia’s Retirement Strategist®, is a highly sought-after advisor, retirement authority, thought-leader, author and radio commentator because he makes the complicated and mundane topics of investing and retirement fun! Bernard has over 20 years’ experience providing families with financial thought. He is the author of Live Your Dreams in Retirement, Property Investing for Couples, Goolwa by Breakfast and Raising Decent Kids into Substantial Wealth and publishes a fortnightly newsletter that reaches thousands of subscribers worldwide.
19 Prospect Street, Box Hill 3128 Australia. Tel 61-3-9899 8577 mobile 0414 778 518


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