Monday, January 31, 2011

Property Strategies 1 February 2011

Housing has doubled every 7-10 years in capital cities
since records began
in the 1850s. And - despite what
the daily journalists are saying - I can't see any reason
why this should change.

"It had long since come to my attention that people of accomplishment rarely sat back and let things happen to them. They went out and happened to things."

-- Leonardo da Vinci


The Queensland Government is subsidising rents for families who have lost their homes in the recent floods.

Consequently rents in Brisbane have increased perhaps $50-60 per week in the past fortnight.
Brisbane rents have always been at a slight premium to other capital cities - perhaps $40 for a similar new four bedroom family home (with ensuite, air con, double garage, on its own title in a family suburb) but now the differential is really massive.
If you are an investor wanting to tuck something extra aside for 20-25 years of comfortable retirement, ACT IMMEDIATELY as when this becomes commonly known, there will be a rush for available house and land packages.
There are only so many subbies who work as independent contractors in the building industry.
If you wait until the rush is underway, your investment will take perhaps 12 months to complete,
rather than the 20 week build now available.
And of course, this additional rent will make your new investment so much more affordable.
If you have a job, often your out-of-pocket contributions can be less than $25,000 over say five years. And your financial benefit, on the basis that investments double every 7-10 years (assuming capital city values continues to increase as they have done since records began 160 years ago) will be around $450,000 when you'll really be needing it.
If you want me to help you explore your options, contact me - Bernard Kelly - TODAY!
Just hit the return button on this email or phone me 0414 778 518
I'm Bernard Kelly
Australia's Retirement Strategist®


The Australian Prudential Regulation Authority has published the returns achieved by the superannuation industry for the ten years to 30 June 2010.

APRA says that retail funds (largely managed by the major banks and wealth companies) generated an average return of just 2.5% for participants

The non-for-profit (industry) funds managed to return 3.9%.

The benchmark inflation rate over this period is reported to have been 3.1%.

Given the compulsory nature of superannuation, these results are really distressing news for everyone (except the investment managers, of course).

If you want me to help you explore your options for your retirement planning, contact me – Bernard Kelly – anytime. My email is


A report from Victoria’s Department of Human Services and the Australian Housing and Urban Research Institute (AHURI) Centre published last October attempts to place a value on an investment in residential real estate.

The report, Investment returns from rental housing in Melbourne, 1998–2009 uses an Internal Rate of Return (IRR) calculation, which measures the yield of properties based on the acquisition cost, rental income, capital growth, operating costs and disposal costs over the life of the investment.
As a starting point, the hypothetical investor in the model “holds one property, borrows 85 per cent of the purchase price, is taxed at the highest marginal tax rate and is exempt from land tax”.
The result, according to the report, shows the average IRR for houses over the years 1998-2009 is 18% pa and 15% for home units.
(As you know I’m biased in favour of residential real estate investments, so I won’t comment – BWK)


I rarely get asked for my views on the direction of interest rates – however private clients do ask me whether they should go fixed or floating.

There is really no rock solid answer – except to say that when the interest rate cycle is at one extreme or the other, you should take the view of a contrarian i.e. if rates are high, they will ultimately fall so logically you should go floating. But that’s very difficult to do, emotionally, when the journalists are warning us of Armageddon ahead.

Similarly if rates are falling, you should logically go fixed – on the premise that they will rise again eventually, past where they are at that moment.

Personally I don’t fix – for two reasons.

Firstly as rates rise and fall over time, the cost evens out over the years.

Secondly, if you fix, and you want to access the equity in an investment to enable you to expand your portfolio, you have to unwind the fixed rate loan – and pay penalty exit fees.

So as a generalisation, new investors should not fix - but once you have a portfolio established, you are less emotionally involved and so you can make better rational decisions at that time.


What are the financial questions to ask yourself when planning your retirement?

Money won’t guarantee you a comfortable retirement, but it will enable you to have more options.

So here are a few primers:
1. What will be your sources of income in retirement? These typically are superannuation, the government pension, personal investment and post-retirement employment and/or a profitable hobby.
2. How much will I need? While you may be carefully putting away funds for your retirement, the real challenge is to know what your retirement income needs may be, long before you even retire. Generally the aim has been to achieve up to 75% of your final income.
3. Will I need to work in retirement? Working after retirement age may be a financial necessity or (increasingly) it may simply be for self-enjoyment. If you want to work then why not! Particularly if you can transit into an encore career.
4. How long will I need to provide for in my retirement years? You may need to accumulate funds to provide for twenty or thirty years. That's a long time not working. If your family have longevity on their side consider that you too may live thirty or more years in retirement.
5. Where will I retire to? This is more about lifestyle but financially you need to provide for the answer. Will the place be warm to stave off any arthritic pains? Will you be nearer family?
6. Will I need to downsize my home? While this may appear to free up some capital remember that smaller housing may be more popular where you want to live and prices similar to your bigger home. There may not be all that much left in the pot to invest.
7. Do I want to travel when I retire? In the early stages of your retirement this might be a popular activity, after all you want to make the most of the time you still feel like travelling. There may come a time where ill-health will prevent this. You need to allow for your travel goals when planning your retirement.
Acknowledgments: Lyn Bell,


By Bruce Cameron writing in Personal Finance 17 January 2011
Most retirement fund members will not be able to maintain their standard of living once they retire.

A shocking 81 percent of retirement fund members will retire with a pension that will in no way be sufficient for them to sustain their pre-retirement lifestyle. In fact, most fund members face penury.

Currently, only about 12 percent of retirement fund members enter retirement reasonably financially secure.

These are the shock results of the latest research by retirement fund services provider Alexander Forbes. They mean that most people face:
* Slashing their standard of living at some point in retirement; and/or
* Staying employed, either in their current job or they face the difficult prospect of finding a post-retirement job.

The Alexander Forbes research is based on about 700 000 retirement fund members on its database.

The research excludes the millions of people who are not members of retirement funds and will have to rely on the government welfare to sustain them after the age of 60.

John Anderson, the head of institutional strategy at Alexander Forbes, says the sad part of the research is that it shows that most retirement fund members start off well when they begin working, but, as they get older, they increasingly fall off the secure retirement bus.
A major reason for the crisis is that fund members do not preserve their accumulated retirement savings when they change jobs.
Other reasons include low contribution rates, inappropriate investment portfolios, the inappropriate switching of investments, poorly performing investments, high costs, and the significant difference between actual total income and deemed pensionable salary. (Only part of your total income is used to calculate the contributions to your retirement fund. In most cases, things such as a travel allowance and an annual bonus are not taken into consideration.)

Anderson says the crisis is compounded at and into retirement.

For example, pensioners often withdraw large lump sums at retirement and use them for non-pension-funding purposes; pensioners often withdraw excessive amounts as a monthly pension in their initial years of retirement, resulting in a shortfall later; often, insufficient consideration is given to the effects of inflation in retirement; and in some cases insufficient allowance is made for a spouse’s pension.

All these factors contribute to a large portion of pensioners or their spouses not having a sustainable pension for life. In many cases, they only realise this many years into retirement, when the problem is very difficult to rectify.


You can now buy my manual “37 case studies of Profitable Hobbies for immediate application” at
At $19.75, it’s excellent value if you think you’ll be needing an additional source of income at some stage.


My new blog is at
I intend to use it for current news – as part of my social network tools

Go to

Until next time

I’m Bernard Kelly

About Bernard Kelly:
Bernard Kelly BEcon MBA CRPC Australia’s Retirement Strategist®, is a highly sought-after property 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

PS “expect to reap an extra $449,999* when you’ll really be needing it”.

PPS my marketing budget allows for $5,000 for each successful lead. I spend it on Google adwords, trade shows, workplace seminars – and for personal referrals from you. Phone me anytime with the names of family, friends and colleagues.