mrd

Each week I strive to provide quality and relevant FREE education for property investors… to empower them to buy real estate wisely, rather than being sold to. Our unique customer care program works for all clients… because investing is personal. Today I want to look at the good and the bad associated with “Off The Plan” purchasing.

People insistent on seeing and touching a property before contemplating a purchase may be missing out on the benefits associated with an off the plan purchase. Off the plan is simply property not yet registered with the Land Titles office; either near completion or perhaps before construction has begun. There are numerous advantages buying off the plan but you need to understand the potential pitfalls.

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A $34,000 a year shortfall across 4 investment properties  was proving a serious drag on the lifestyle of Michael and Sam. When this couple, whom I consider friends as well as valued mrd clients, telephoned to say they needed to sell a property, I suggested we first undertake an analysis of their situation. Selling an asset should be your last option… and in their case it turned out to be completely unnecessary.

Remember Michael and Sam’s story. Chances are you too will one day be faced with what I call an avoidable disaster.

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A common question being asked right now is “Would I be wise to fix my interest rates now for three years”? Are you a betting person? Fixing interest rates is gambling with your bank and there must be one winner and one loser. That is an overly simplistic view of how the world actually works, so let me offer some deeper insight so that by the end of this article you will be better equipped to answer your own fixing interest rate questions.

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This afternoon Glenn Stevens, Governor of the Reserve Bank of Australia announced a reduction in the official cash rate by 100 basis points. In layman’s terms that means a 1.0% reduction… bringing the cash rate to just 4.25%.

Commonwealth, Westpac and NAB moved quickly and cut their variable home loan rates within a few minutes of the Reserve Bank’s announcement; Commonwealth and NAB by a full 1.0% and Westpac by 0.8%. Other lenders will soon follow making official announcements.

Using the Commonwealth Bank as a typical example, the rate for a full document standard variable loan will now come down to 6.74% with the discounted rate (Professional Package) being 6.04%

Back in August, just four months ago, the Commonwealth Bank’s full document standard variable loan was 9.58%. Someone with a $350,000 mortgage has seen their monthly interest commitment drop by $828.33 over this time… with more to follow in the New Year!!!

• To read today’s statement from Glenn Stevens; RBA Governor - click here
• To read my interest rate cut prediction of last Friday- click here
• To read about “What In The World Is Going On With Property” Web Seminar (our very last for 2008) - click here
• To register for our “What In The World Is Going On With Property” Web Seminar (our very last for 2008) - click here
• To read testimonials of other web seminar attendees - click here

Happy Investing,

Nick Lockhart
mrd customer care program… because investing is personal

Before my days of property investing and involvement in this industry a property valuation meant just that; or so I thought. It didn’t take long before I began to understand that the same terminology, “Property Valuation”, can mean very different things.

Here are a few examples:

1. A probable sale price in a seller’s market
2. A probable sale price in a buyer’s market
3. The value of the land acquisition, construction of the dwelling and associated costs of bringing the product to market
4. A representation of a banks risk assessment of a property

While 1, 2 & 3 are self explanatory, let me expand on # 4.

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I believe that last months drop of 0.75% in the official cash rate was supposed to be passed on to borrowers in its entirety; that is what I think the Reserve Bank had in mind. Thus far, it has not happened and given the banks current position of posture they seem to have been let off the hook with the Federal Government hardly making mention of it.

With that in mind… along with the inevitable delay of a few months that it takes before an interest rate cut has any real positive impact on the economy I expect that when the RBA meets next Tuesday they will drop official interest rates by at least another full 1.0%. I say “at least” because if there is any indication that the banks may hold onto  anything this time around, I suspect they will go further.

The month of December is vitally important for our retail sector and this is their final opportunity for the year to give consumers the confidence to spend and support businesses and jobs alike. The Government’s $10.4b stimulus package will be released into the economy on Monday week. While this is also expected to have a positive impact on consumer spending it is likely to fall short of what the Government had hoped as many recipients of this money are expected to save it for future possible “rainy days” in 2009.

While I would not go so far as to predict a rate drop of 1.25% or even 1.5% (i.e. 125 or 150 basis points); neither would come as a shock. After Tuesday, the RBA is not scheduled to meet again until February 2009 so there may just be a bigger kick along now to carry the economy through. While the RBA can call a meeting in January 2009, or anytime they like, I suggest their first preference will be to use the December 2008 meeting and avoid the need to interrupt their Christmas break.

Even if next weeks rate cut is just a fraction of what I expect this is all good news for home owners and investors alike.

Happy Investing,

Nick Lockhart
mrd customer care program… because investing is personal

To make sense of the property market we must separate opinion from fact. Opinions will always be heard… just in greater numbers now perhaps. If you are prepared to “drill deeper” and dissect the evidence available; the facts will speak for themselves. There’s no reason for allowing the conflicting voices of opinion to keep you confused!

In the current round of Web Seminars we are offering, I highlight four key factors that are a MUST… if you expect to draw any credible conclusions.

1.    Record Population Growth
2.    Investors Have Fled The Market
3.    Home Ownership Unattractive
4.    New Construction Has Stalled Badly

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Last month there was talk that the RBA would drop official interest rates by 50 basis points or 0.5%. I believed there was justification for them dropping rates by a full 100 basis points; or 1%. I kept my opinion to myself and as history has shown, they did…

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Nick will be in Sydney this weekend and has a spot available to meet with someone in the Pyrmont area after 11:30 am (to early afternoon); before catching his plane home.

If you would like to meet with Nick to discuss any aspect of the current property market or your own financial situation, please click here or call 0424 144 103 & speak with Rod to book an appointment.

Time used unwisely and spent without thought will make you a pauper and leave you with naught, but time that’s well spent will stitch upon stitch weave memories and dreams that will make your life rich.

Time is money, as they say. But yet many whittle away the hours without thinking of the value that has been cast away with every second. This does not mean that we should work each and every hour of the day. There needs to be an investment of time in leisure, fitness, relationships, further education and at times in doing absolutely nothing. Learn to say ‘no’ to the good in order to say ‘yes’ to the best. Invest in what is best for you and your life. Take time to smell the roses at times. When you work, work with all your heart and when you play, play with all your soul.

Happy Investing,

Nick Lockhart