How to increase your wealth through property

More Wealth

Towards more WealthNet Worth

This can be you

FINANCIAL FREEDOM

Invest

Invest

Invest

PENSION Most people do this

Spend

Spend

Save SpendYears

How Many Couples Actually Retire Wealthy?

Source: ABS

> 200

20

40

60

%

20 - 30 30 - 50 50+

83.1%less than $30,000

Income ($,000)

4.7%more than$50,000

11.2%$30,000 to

$50,000

How Much Will You Need?

Calculating the amount needed

Assets Needed = Income x 20

What are the options?

Financial advisorFinancial advisor

Managed fundsManaged funds

CashtrustCashtrust

Equitytrust

Equitytrust

Propertytrust

Propertytrust

SharesSharesCashCash PropertyProperty

Pay someone elsePay someone else Do it yourselfDo it yourself

Banker Broker AgentBanker Broker Agent

SharesSharesCashCash PropertyProperty

Property Is The KeyWhy

WhichWhereHow

WhenWhat If

What Makes a Good Investment?

• Returns• Risk• Gearing•Wealth Creation

Cash2yr Term Deposit

-20

-10

0

10

20

30

19801950 1960 1970 1990 2000

After-Tax & Inflation

Source: ABS, Reserve Bank

%

Shares Vs Property

Consider $1,000 invested in 1960• Sydney unit now worth $100,000• Westfield shares now worth $109,000,000• Centralian shares by 1962 worth $0

Shares – Which One & When To?

All Ords Index1980 – 265 of 1,029 listed companies1990 – 124 of original 265 remained2000 – 109 of original 265 remained

2000 – 2 of the original top 10 remained

Annual Returns Over 20 Years

Net Return

Net yield

Net growth

14.0%

6.2%

7.8%

Property

11.5%

4.5%

7.0%

Shares

Source: REIA, BIS Shrapnel, Residex

Investment GearingBorrowing to fund an Investment

thereby increasing your return on Investment

The Advantages of Gearing

• Magnifies the Returns• Makes Investing Affordable

Interest = $26 371

Expenses = $5 674

The cost of a $360,000 property

$360,000 rental property

Total expenses = $32 045

17

Who Pays The Cost?

Taxman25%

$8,011

YOU18%

$5,768

Total expenses = $32,045

Tenant57%

$18,265

18

Gearing and wealth creation

Cash Property

Super

$0

$600

$36,000

Shares

$20,000

$400

$350,000

$200,000

$100,000

$5,768 per year

Property Is The KeyWhy

WhichWhereHow

WhenWhat If

20

Median-priced residential property

Number of

Properties

0

10

20

30

40

1 2 3 7 6 5 4 1 0 9 8

$100,000 $500,000$200,000 $300,000 $400,000

Pits Palace

Median Value = $180,000

21

Median-priced residential property

Number of

Properties

0

10

20

30

40

1 2 3 7 6 5 4 1 0 9 8

$300,000 $700,000$400,000 $500,000 $600,000

Pits Palace

Median Value = $380,000

Property Is The KeyWhy

WhichWhereHow

WhenWhat If

23

Growth or YieldGrowth + Yield

CBD Inner City Suburbs Country

Yield

YieldGrowth

Growth

24

Property Is The Key

WhyWhichWhereHow

WhenWhat If

25

Debt

Assets

How - buy your first home

26

Debt

Assets

How - buy an investment property

27

Debt

Assets

How - build a portfolio of properties

28

Debt

Assets

Balance Debt

How - balance the debt

29

How much can I borrow?

Level of security = LVR

Level of serviceability = DSR

30

Measuring LVR and DSR

Total loansTotal value

=LVR

= Loan payments 30% income + 80% rent

DSR

31

When is the best time?

Rising Real Estate Values

Rising Interest Rates

Falling Share Prices

Falling Commodities

Falling Reserves

Tighter Money

Falling Real Estate Values

Falling Interest Rates

Rising Share Prices

Rising Commodities

Rising Reserves

Easier Money

32

$160,000 $52 / wk

When you can afford to

33

Spending the spare money

$31/wk = New leather lounge

$52/wk = New kitchen

$77/wk = New boat

$170/wk = New 4W Drive

34

Investing the spare money

$20/wk = Lounge

$52/wk = Kitchen

$77/wk = Boat

$170/wk= 4W Drive

= 1 Townhouse

= 1 small house

= 1 big house

= 3 houses

35

Property Is The Key

WhyWhichWhereHow

WhenWhat If

36

Murphy’s Law?

Too few tenants?

Too many investors?

What if?

37

Fix the interest rate

Avoiding Murphy’s Law

Minimise vacancies

Keep cash on hand

Set up credit lines

38

Rent Own

30%

70%

0

20

40

60

80

%

Too few tenants?Source: ABS

39

Investors

6.5%

Rent Own 1

30%

63.5%

0

20

40

60

80

%

Source: ABS

1%

+2

Too many investors?

+1

5%

+

.5%

+3

40

One more “what if”

WhyWhichWhereHow

WhenWhat If

What If You Don’t?Net Worth

This can be you

FINANCIAL FREEDOM

Invest

Invest

Invest

PENSION Most people do this

Spend

Spend

Save SpendYears