how to increase your wealth through property
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TRANSCRIPT
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