how to increase your wealth through property
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TRANSCRIPT
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More Wealth
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Towards more WealthNet Worth
This can be you
FINANCIAL FREEDOM
Invest
Invest
Invest
PENSION Most people do this
Spend
Spend
Save SpendYears
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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
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How Much Will You Need?
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Calculating the amount needed
Assets Needed = Income x 20
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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
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Property Is The KeyWhy
WhichWhereHow
WhenWhat If
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What Makes a Good Investment?
• Returns• Risk• Gearing•Wealth Creation
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Cash2yr Term Deposit
-20
-10
0
10
20
30
19801950 1960 1970 1990 2000
After-Tax & Inflation
Source: ABS, Reserve Bank
%
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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
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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
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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
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Investment GearingBorrowing to fund an Investment
thereby increasing your return on Investment
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The Advantages of Gearing
• Magnifies the Returns• Makes Investing Affordable
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Interest = $26 371
Expenses = $5 674
The cost of a $360,000 property
$360,000 rental property
Total expenses = $32 045
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Who Pays The Cost?
Taxman25%
$8,011
YOU18%
$5,768
Total expenses = $32,045
Tenant57%
$18,265
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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
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Property Is The KeyWhy
WhichWhereHow
WhenWhat If
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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
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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
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Property Is The KeyWhy
WhichWhereHow
WhenWhat If
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Growth or YieldGrowth + Yield
CBD Inner City Suburbs Country
Yield
YieldGrowth
Growth
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Property Is The Key
WhyWhichWhereHow
WhenWhat If
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Debt
Assets
How - buy your first home
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Debt
Assets
How - buy an investment property
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Debt
Assets
How - build a portfolio of properties
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Debt
Assets
Balance Debt
How - balance the debt
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How much can I borrow?
Level of security = LVR
Level of serviceability = DSR
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Measuring LVR and DSR
Total loansTotal value
=LVR
= Loan payments 30% income + 80% rent
DSR
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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
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$160,000 $52 / wk
When you can afford to
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Spending the spare money
$31/wk = New leather lounge
$52/wk = New kitchen
$77/wk = New boat
$170/wk = New 4W Drive
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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
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Property Is The Key
WhyWhichWhereHow
WhenWhat If
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Murphy’s Law?
Too few tenants?
Too many investors?
What if?
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Fix the interest rate
Avoiding Murphy’s Law
Minimise vacancies
Keep cash on hand
Set up credit lines
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Rent Own
30%
70%
0
20
40
60
80
%
Too few tenants?Source: ABS
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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
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One more “what if”
WhyWhichWhereHow
WhenWhat If
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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