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February 2008
In this Issue
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It's never too late to be who you might have been. George Eliot Welcome message from Damian Collins 
Hello , On behalf of the Momentum Wealth team I am excited to present to you the first edition of Property Wealth News for the year. We take great pride in sharing our property and finance expertise with you and look forward to providing you with all of the latest news in today's property market. In this issue, we discuss the latest interest rate rise and the recent stock-market crash; we look at what drives the demand for property; and, we give you some excellent tips on how to find the right tenant. Plus make sure you read a great success story from one of our buyers' agents. Remember, if you would like to speak to one of our consultants, they are always happy to take your calls and answer any questions you may have. And as always, I look forward to hearing your feedback.
Damian Collins
Investor Alert with Damian Collins - Safe as Houses
With the recent turmoil in the stock-market, wiping big dollars off share portfolios and super funds, many investors feeling a little bruised are starting to take another look at the merits of property as a solid investment option. Investing in shares has always been and will continue to be one of my investment tools. But when it comes to creating wealth, I am particularly fond of property and believe it should be strongly considered as part of every investor's long term portfolio. This is why:
I do own shares but the vast majority of my investments are in property for the reasons outlined above. For information on our comprehensive property investment education program, please click here or call Joe on 1-800-000-159.
Property Acquisitions with Emma Everett - Key drivers of demand
Emma, a successful investor in her own right, is one of our Acquisitions Specialists. She has extensive experience working with investors and developers in acquiring residential and commercial properties; and development sites. As an investor seeking maximum rental and capital growth, you need to invest in property which is high in demand, yet also has limited supply. In this month's newsletter we'll look at the factors which drive demand. When assessing property for potential investment, it is essential to pay attention to demographic and social changes that influence where people want to live and what kind of property they want to live in. An example of social change is the lifestyle preferences of today's Australians. Collectively we tend to view ourselves as more sophisticated than we did a couple of decades ago. The "cafe culture" is proving to be popular, as is the attraction to reside in locations near water. Investors would benefit from capitalising on these preferences by investing in property near cafe strips, close to rivers, beaches or harbours, and in inner city locations rather than rural locations. Another factor which is responsible for driving demand is demographic trends. Many baby boomers have the view that the prosperity they have worked hard to create is for spending on lifestyle. As a result, many are trading their large suburban homes for smaller lifestyle-oriented properties located close to the ocean or near café strips. "Generation X-ers", are also attracted to lifestyle - generally they are delaying marriage and family to allow themselves to achieve their goals and single person households are also on the rise. These demographic phenomena point to smaller, lifestyle-oriented dwellings as being in high demand in the coming years. A rise in professional, dual income households with no children or fewer children later in life heralds an emerging group with money to spend on ensuring that they live close to good amenities, including transport, schools and the workplace. However, close proximity to transport and the workplace will become less important as the trend to work from home and spend less time at the office continues to grow. When considering factors which drive demand, investors should ideally look for properties that appeal to both owner-occupiers and tenants. Bear in mind that these days, many of the features of a property that are valued by owner-occupiers are also sought by tenants. Bedroom size, a usable kitchen, storage, car parking, and other such features are just as highly valued by today's tenants who will pay good rents for these features. For more information on how Momentum Wealth can help you find a great investment property, you can contact Emma on 1-800-000-159.
Financing with Chris Christou - Using Credit: Subsidy 3 - The Taxpayers
Chris has enjoyed over 7 years experience as a Real Estate Agent. He is a successful investor himself and has extensive knowledge in all aspects of buying, selling, managing, financing and investing in real estate. In last year's newsletters we explored three ways in which credit is subsidised. In this issue we'll look at the last subsidy - the taxpayers. Successful investors know that capital gains are the way to true wealth. Firstly you do not pay the tax until you sell the asset. No sale, no tax. The capital gains tax system reflects the fact that investors must be rewarded for risk, not punished by excessive taxation. Capital gains taxes for individuals are taxed at only half the rate for assets held for greater than twelve months. Successful investors know that there is a tremendous tax advantage for borrowing for investment. They know the tax disparity that exists between the taxation of interest deductions and capital gains. They know interest is deductible at full taxable rates while capital gains are taxed at only half the taxable rates if the asset is held for twelve months or more. I cannot stress enough how important this is to wealth creation. For example let's assume we purchase a property that costs us $400,000 after all settlement costs and stamp duty. Assume we are able to borrow the entire amount because we have sufficient equity in our home. Let's assume we get rent of 5% net yield after expenses (rates etc). This would equal a net yield of approximately $20,000. Our interest expense is 10% (i.e. $40,000) paid interest only. I will ignore non-cash deductions (depreciation) for the purpose of this illustration. Let's assume that just after twelve months and one day we sell the property and we net $420,000 after sales fees and settlement costs. On a pre-tax basis, what has been the change in our net worth? It has been zero. We made a gain on the sale of the property of $20,000 but our interest costs exceeded our net rent by $20,000, resulting in no net gain on a pre-tax basis. However the tax treatment of interest expenses and capital gains results in a different change in our net worth on an after tax basis. I will assume for this example we are in the top tax bracket of 46.5% (45% plus 1.5% Medicare Levy). If we make a loss on our rental activities we are able to deduct the $20,000 net operating loss against our other income. By deducting $20,000 against our other income we are able to get a refund from the ATO of $9,300, meaning our after tax operating loss is $10,700. We are also required to pay tax on the capital gain. Because we held the asset for greater that twelve months we only include half the gain in our income. We therefore include a total of $10,000 in our income. On the top rate of 46.5%, our tax payable is $4,650. While on a pre-tax basis there was no net gain or loss, the ability to deduct borrowing expenses at full tax rates while only paying capital gains tax on half the gains highlights the tremendous benefits available to those who borrow for capital investment. The taxpayers help subsidise your activities. With all the tremendous subsidies available to borrowers it is surprising that more people do not use finance to invest. Fortunately for those who want to use finance to create wealth few people understand the game, leaving the huge subsidies to those people that do. For more information on how Momentum Wealth can assist you with your loan needs, contact Chris on 1-800-000-159 Finance Broking Services are provided by Momentum Wealth Finance Pty Ltd, WA Finance Brokers Licence 3170.
Get your finances in order the easy way!
Just complete the form and one of our expert mortgage consultants will start comparing your loan options straight away - free of charge and with no obligation! For a limited time if you apply for a new loan, arrange pre-approval or refinance with Momentum Wealth, you'll receive a Set of 10 Property Masters Audio CDs to help you build your property fortune. Visit FreeLoanReview.com.au for more details.
Property Management with Verity Hodge - 3 Steps to Placing the right Tenant
Verity, our Property Manager is dedicated to helping landlords achieve a steady income, whilst minimising fuss and maximising the value of their investments. She is a successful property investor herself and demands a high standard from all tenants to help ensure our clients' investments are always well maintained. Placing the right ad is only the first step towards getting the right tenant. With the right advertising comes suitable prospective tenants, then the next step is to qualify which are most suitable for your property. When a prospective tenant calls, there is an art which will enable you to master finding the right tenant. This involves following 3 simple steps:
Current News - Market Commentary
Another rate rise Having weighed both the international and domestic information available, the Board concluded that a tighter monetary policy setting was needed now. Governor of the RBA, Mr Glenn Stevens, said the board took careful note of recent events abroad and developments in financial markets as the fall-out from defaults in the US sub-prime mortgage continued to impact, as well as the global economic outlook amid fears of a recession in the US. "The world economy is slowing and it now appears likely that global growth will be below trend in 2008," he said. "In Australia, we have seen financial intermediaries pass on higher costs to their customers over the past couple of months. There has also been some tightening of lending standards to risky borrowers, a process which may yet have further to go." In future meetings, the Board will continue to evaluate whether the stance of policy will be sufficiently restrictive to return inflation to the 2-3 per cent target. A healthy property market Perth's small increase takes the annual growth in the WA capital to 1.1%, which is far from the wholesale downturn predicted by many experts. The Perth market is clearly showing signs of resilience, which is not surprising considering the strength of the economy and population growth. Rents continue to go up Improving yields and accelerating population growth will keep upward pressure on house prices in the future. Last year Australia's population grew by over 300,000 people, the largest growth in absolute numbers ever recorded. We expect solid rental growth in 2008.
News at Momentum Wealth - Our Growing Team
Nicky Viney and Sudha Narthakumar have joined our Perth Team, and Marcus Stacey has joined our Queensland team. All three Consultants have a wealth of experience in finance as well as property investment. If you would like assistance with your finance and investment needs then contact Momentum today on 1800-000-159.
The client resided overseas but worked in Australia 3 months in the year, potentially raising some issues in obtaining finance. Rebecca called on one of our in-house finance specialists who was able to source finance through an Australian bank despite the client being a non-resident. With finance approved, Rebecca sourced a great residential property within a 10km radius of Perth with all the right fundamentals for solid capital growth. It was secured at a great price - around $20,000 off the asking price. Upon acquisition of the property, the client was referred to our Property Wealth Management service. The property was already tenanted which gave the client the added benefit of no vacancy period. The property is receiving a good yield and will be regularly reviewed to ensure market rents are received. The great part about this was that the majority of this deal was completed while the client was still overseas! In a few months time, Rebecca will assist the client in sourcing another property to grow his portfolio and create wealth through property. If you would like to find out more on the no-fuss way Rebecca can assist you in sourcing a great investment property, please call us today on 1-800-000-159.
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Here at Momentum Wealth, we're always trying to make life easier and more rewarding for our clients. That is why we recently launched 
The new year has seen more additions to our team with the appointment of three Finance Specialists.
One of our Perth Buyers' Agents Rebecca Clow was referred by a client to a gentleman who wanted to invest in the Perth property market but didn't know where to start. |
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