the horizon issue 3

HORIZONTHE

NEWSLETTER

WIN AN APPLE iPOD NANO. SEE INSIDE FOR DETAILS

$42 BILLION SUPPORTPACKAGE ON THE WAY

HOUSINGAFFORDABILITYREBOUNDS

FIRST TIMEBUYERS ONTHE CHARGE

INVESTORS DRIVE RISE INMORTGAGES

INTERVIEW WITHSTEPHEN McCARTHY

ISSUE 3 I FEBRUARY 2009

McCARTHY GROUP TURNS TEN

THE HORIZON NEWSLETTER I ISSUE 3 I FEBRUARY 2009

McCARTHY GROUP CELEBRATES IT’S TENTH ANNIvERSARY!

A HEARTY ANd SINCERE “THANk YOU” TO ALL OUR LOYAL CLIENTS, BUSINESS PARTNERS ANd STAFF FOR MAkING THIS WONdERFUL MILESTONE POSSIBLE.See interview with founder and CEO Stephen McCarthy ON PAGE??.

$42 BILLION SUPPORT PACkAGE ON THE WAY

It’s great news for all of us! $42 billion of support is being loaded up to be fired into the economy, with the government giving us all back a fistful of our hard-earned tax dollars in the process.

The clear message is that we must do our bit for the country and spend it. That’s the patriotic thing to do, so we are told. Our schools and transport systems also come in for a big boost, and there’s no doubt that most Australians are pleased with this bold move.

The good news is that Australia is far better placed than many other countries to get through these testing times. Remember Iceland? They went bust. England’s in very poor shape, so too Japan. And California would be broke as well if Uncle Sam hadn’t thrown Governor Arnie Schwarzenegger a lifeline.

The bottom line is confidence, and that’s why the government wants us to spend the handouts. So the money can circulate, create demand, and save jobs. Confidence is what we need in challenging times – and this huge stimulus from the government will certainly grease the wheels and keep things moving.

If you’re short on ideas about how best to use your ‘cash back’, have you thought about putting it towards meeting any shortfall on the first year’s landlord’s contribution on a brand new investment property? It would then become “the gift that keeps on giving”.

BUILdING FAMILY ASSETS



HOUSING AFFORdABILITY REBOUNdS*

With interest rates at 45-year lows, and with all the government assistance on the table, who wouldn’t love to be a first-home buyer right now? It doesn’t seem that long ago that we were reading about how this generation was going to be locked out of the market forever! How fast things change, and we now have the most affordable housing conditions for the past 5 years.

I bet you wish that you could have had such a perfect combo of low interest rates, government grants and developer discounts when you bought your first home. Me too!And what if I told you that the average home loan repayment fell by a whopping 26% last month! That’s according to the CBA First Home Buyer Affordability Index, which showed the average home loan repayment fell by 26% to $2,056 per month.

So the good news is that first-time buyers are out there swooping on opportunities, while existing mortgage holders are seeing the benefits of the dramatic reduction in interest rates over the past few months. Taken together, this must spell ‘good news’ for the property market, particularly at the entry point and above. And it’s not over yet – we expect to see more interest rate cuts in the months ahead, so make sure you’re ready to seize this once-in-a-lifetime opportunity.

*HIA Media Release, 16 February 2009, as quoted in Matusik itp Report 11 February 2009



INvESTMENT PROPERTIES MAkE A RETURN*Welcome to investor nirvana! We all love the idea of neutrally-geared properties, and as for positive gearing – well, that’s investor heaven. The only problem was it seemed that those opportunities were all too far off the beaten track unless you got in long ago. But read on.

Cuts to official interest rates, years of flattish prices and rising rents mean investors can, in some parts of Sydney and Melbourne** now buy properties that will return about as much in rent as they cost in mortgage repayments. “There is a real possibility we will see positively geared properties emerging this year in the affordable markets of the southern capitals,” said SQM Research managing director Louis Christopher. “vacancy rates are still very tight at the affordable end of the market so rents will continue to rise in the sector in 2009, further boosting returns for investors.”

If this sounds too good to be true, we have a perfect example to share with you right now.

Call us on (02) 9687 3601 or email [email protected] for information on our latest project in Melbourne. The numbers speak for themselves, and make this one of the best times that we can recall to buy investment properties in capital cities.

*www.theaustralian.news.com.au16 February 2009Market, as quoted in Matusik itp Report 11 February 2009



As we have said before, low interest rates and government grants have combined to act as a springboard for first-home buyers, with ABS figures showing that 14,154 contracts were signed in december 2008, which is over 20% up on the previous month and the best result for the past seven years! There is huge pent-up demand from aspiring home owners, and on top of the government grants, many developers are offering attractive incentives to customers.

Surging demand from this eager new set of buyers is providing strong support for property values and is placing a solid ‘floor’ at the entry level. Auction clearance rates in Sydney are

increasing rapidly, and many commentators are flagging that increases in property prices are on the cards for 2009 / 2010. The 30 June 2009 cut-off for the additional government grants will lead to a surge in demand and sales as this hungry group of buyers uses this opportunity to break into the market. Get ready for strong demand in the months ahead, with entry prices increasing as a result.

Savvy investors will have picked the entry level as the place to go, and will be joining the throngs at auction so they get into the market and can benefit from capital growth This is a fast-moving market - we all need to be alert so we don’t get left behind.

FIRST-TIME HOME BUYERS ON THE CHARGE



INvESTORS dRIvE RISE IN MORTGAGES*

Surprise, surprise, the lure of low interest rates and rising rental yields is bringing individual investors back into the market. Median house rents have increased by 9% in the past year, and 13.3% for units.

Figures released by the ABS show that individual investors increased the value of their loans by 5.8%, to almost $4.3 billion. This might be an early sign that the downward trend of 2008 is turning, with investors eager to recover some of their losses on share and super portfolios.

We’ll stay close to the numbers, but once again, indicators suggest that the tide is turning, and that savvy investors are moving into investment properties in greater numbers. When added to the demand of first-home buyers at the entry level, the outlook for property prices looks promising.

*The Australian Financial Review, Thursday 12 February 2009, p8, reported by Nick Lenaghan

RETIREES PUT THE BEx BACk ON THE SHELF

Full marks to the government for figuring out that it’s not a smart (nor fair) move to force retirees to cash in their assets to meet withdrawal targets after their portfolios have copped an absolute beating in the share market. One suspects that Canberra pensions leave bureaucrats pretty comfortable whatever the circumstances, so it’s a good sign that they’ve heard the cry of retirees on Struggle Street.

The bottom line is that the withdrawal requirements (between 4% and 14% depending on age) will be halved this financial year. This is small consolation to the grey army out there who have seen 20% to 30% wiped off their assets, but at least it’s something. A longer-term solution to the management of retirement savings is also on the cards.

We say ‘Well done’ to the government for being sensitive to the plight of self-funded retirees.

The number of Australians on the aged pension has soared to more than 2 million as the value of retirees’ income and assets has tumbled. It’s clear that there will be an ever-increasing reliance on the government to provide, which means higher taxes for those still at work as the population ages. (That means you and me).

In other words, • Baby boomers are an expanding army on the march towards retirement • More and more will have to rely on the age pension to survive• And with the benefits of Jenny Craig, Fitness First and stopping bad habits like smoking, there will be more retirees who are going to be around (and needing support) for more years than anyone planned for.

When the age pension was introduced back in 1901, the male life span was 58 years. Now it’s 68, and climbing, with women typically outliving the men it’s pretty obvious that it has never been more important to have a sound strategy to provide income in the years after work stops. After all, who wants to rely on a government pension?

For our clients who are already invested in property, good for you, as you’ve already got a great platform to build on for the future. See you at the top!

We’d love to hear your views on this to share in a future issue.

HEY BUddY, CAN YOU SPARE US A dIME?



TRAGEdIES OF FIRE ANd FLOOdSAs the thoughts, prayers and help of Australians and people across the world go out to those who have suffered such devastating losses in recent weeks, there is a sombre reminder to all of us that these events do happen, that it could happen to us, and if it does, we need to be prepared. I am reminded of last year’s reports on the extent to which Australians were under-insured, whether it be home and contents insurance, disability cover, income protection or death cover.

While the sheer scale of the recent disasters will thankfully ensure that the victims will receive special support and relief, we should take note of what can happen and review our insurances to ensure that we could recover in the event of sudden accidental loss.

In tough times people do cut back on items like insurance to create cash flow savings. In our view this is not a wise thing to do, and we all need to ensure that we are well protected in the event of unexpected calamity.



WE TALk TO FOUNdER, CEO ANd OWNER OF McCARTHY GROUP, AS THE COMPANY CELEBRATES ITS TENTH ANNIvERSARY.

THE vISION“I owe everything to Frank Flowers. He was my mentor, and over 20 years ago, he taught me the lessons of how to achieve financial freedom through property. I had always thought that if I simply worked hard enough, for long enough, that I would end up successful. But I was wrong. I ended up simply walking away from my 18 hours a day, 7 days a week catering business, and I think the only person who made anything out of it over all the years was the landlord who rented me the space!

Frank showed me how the banks can help you to acquire assets, and how tenants and the taxman pay most of the holding costs. With increasing rentals, and the miracle of compounding capital growth, time just does the rest. The process can then be repeated, many times over, until you reach your goal.

In many ways, I see myself as having the responsibility to pass on this knowledge to as many people as I can reach. I have taught our staff, and they in turn show our clients how financial independence can be achieved through property. We then make it easy for our clients, and provide a lot of support along the way.”

AN INTERvIEW WITH STEPHEN McCARTHY



“We started in Parramatta, going door-to-door, offering mortgage alternatives to homeowners. There were six of us back then, and straight away we battled to keep up with demand. It seemed like everyone wanted to save money on their mortgage, and on tax. We added to the offer so that equity in their existing homes could be used as the deposit on investment properties. At that time no one could really explain the investment property proposition properly. It was all ‘gobbledygook’. We decided to make it simple, to de-mystify it, and make it understandable and accessible to everyday working Australians, and help them to get into it.

Rising property prices in Sydney led us to look further afield, and together with our clients, we had the opportunity to strike ‘Gold’ firstly in Noosa, and then the Gold Coast. We developed the tagline “Just add Water”,

because the yields in cities with strong lifestyle appeal, solid economic activity and affordable property prices made for a winning formula. We even had a sand-covered floor in our meeting room so that no one could ever miss the link to appealing property locations! That was probably a little weird at the time, but it gave us all a very clear focus.

We moved to new investment locations when the price / yield equation caught up with us. We prided ourselves on finding future ‘hotspots’ and getting in early so our clients could really benefit from the growth. We went to Cairns, Townsville, Perth, Mackay, darwin, and more recently, to Melbourne. Our target property has always been an attractive, almost executive level home with quality finishes, but one that is right in the mainstream band of affordability where families need an attractive yet affordable home to rent.”

THE EARLY YEARS



OUR CLIENTS

We exist to help our clients discover how investment property can enable them to achieve financial independence. There is huge satisfaction in helping others to unlock the secrets for themselves. We thrive on case studies and testimonials of client success.

Right from the start we put ourselves in the client’s shoes and developed concepts that would make it easier to understand. We simplified everything. In addition, we got rid of much of the hassle and frustration that puts people off investing in properties.

Our mantra is “Building Family Assets”, and the beauty of it is that typically a couple of properties are needed to achieve financial independence. This means that if we do it right, and if our clients are satisfied with the process and the results, then they will keep coming back to us for more. And, in recent years, their children have started to invest as well, which makes this so fulfilling and exciting. It’s becoming generational, as the kids learn from the parents, and make their own moves as soon as they can.



OUR PROdUCTS ANd SERvICES

Through staying close to our clients’ needs, we have developed our offer to cover virtually every activity involved in the investment property process, from the initial sourcing of projects, through construction and finance, all the way through to property management and expert services in legal, financial and tax matters. We are a one-stop solution, and take all the hassle out of what can be a frustrating and confusing process.We also introduced a great paperwork management system that makes organising everything a breeze, and which our clients simply love. We try to make it easy every step of the way, and deliver an end-to-end solution that makes investing in property a rewarding experience.”

OUR STAFF

“My mission is to keep our staff motivated and happy. If they are happy, our clients will be happy too. Many of our staff have become investors in their own right, and they have empathy for what clients will experience. They ‘walk the talk’, they sell and support a concept and product they believe in, and that has worked for them in their own lives.I am proud of how many of our staff have such long service. They are loyal, and dedicated, and I have great support staff who help me to do my job. I love it when they take responsibility for making things happen. I am not a micro manager – they have full scope to use their initiative, take responsibility and solve the challenges that come their way.”



BIGGEST HIGHLIGHT

“Without a doubt our biggest highlight was our celebration dinner at Star City in Sydney in december 2007, where over 500 of our staff and customers joined for an evening to celebrate the results that taking positive action had achieved. I’ll never forget that atmosphere of collective success that filled the room – it was without doubt totally inspiring!”

THE FUTURE

“We want to get better and better at what we do. We want to expand further into commercial properties, support our clients in the transition to self-managed super funds, and refine our procedures to make the whole process seamless and hassle-free. I love what I am doing. It brings me huge satisfaction, and I wouldn’t be doing anything else. Our staff love it too. It’s a tough business, and it tests us. But we love it, and the change that we see in our clients’ lives makes it all worthwhile.”

As told to Graham Hardy, Supplier, investor and friend.

HERE’S HOW. We’d love to hear your views on the investment property market or any other subject that you feel would be of interest and relevance to Horizon readers.

Simply email your contribution to [email protected] and we’ll send a colourful 16GB iPod Nano valued at $199 to the sender of the best entry. We’ll also publish the story in the next edition of Horizon.

If you have friends or relatives who you feel would benefit from an obligation-free review of their future financial circumstances, please feel free to forward them a copy of this e-newsletter, or email us at [email protected] or call (02) 9687 3601.


WIN AN APPLE IPOd NANO


LOWEST INTEREST RATE IN 45 YEARS TO kICk START INvESTOR ACTIvITY

The 1% rate cut, delivered by the Reserve Bank of Australia on 3 February and passed on fully by the major banks, will lure investors back into the property market, according to an expert. Craig James, chief equities economist with CommSec, said the unprecedented rate cuts over the past five months translate to a massive improvement in cash flow for those who own a property, making property an attractive investment option. “Since September, interest rate repayments on a $300,000 mortgage have fallen by over $8,800 a year, effectively representing a 15% pay increase for someone on the average wage. In after-tax terms, the boost is even greater, equivalent to an 18.5% lift in disposable income,” he said. The overall improvement in yields is also becoming appealing. The latest data from the Australian Bureau of Statistics showed rents rising by 8% over the past year - the fastest pace in 19 years. “Investors will lessen weight on cash investments in the coming months, moving more funds into the share market and property market. High returns on property investments are more compelling than cash,” said James. In addition to the rising rental returns, property values are also expected to improve amid continuing drop in building approvals. dwelling approvals fell by 2.9% in december. In annual terms, the value of building approvals fell by 38.3% in december - the weakest reading in 18 years, according to CommSec. “Unless more housing stock comes onto the market, a major lift in the demand for new homes could merely serve to boost prices,” said James.

SOURCE: Mortgage Business Bulletins

I N T E R E S T R A T E S

the horizon issue 3

Documents

good news

government grants

government assistance

average home loan repayment

home buyer affordability

mccarthy group turns

wayits great news

property market