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April 2008
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Many a false step is made by standing still. Fortune Cookie Welcome message from Damian Collins 
Hello , On behalf of the Momentum Wealth team I am excited to present to you the April edition of Property Wealth News. This month we give you a convenient rundown of what you need to know when investing with a Self-Managed Super Fund; we discuss the recent rate announcement from the RBA; and, as always, we provide a multitude of hints and tips to assist you with your property investing. Also, see our new section, The Lighter Side of Wealth Building, for some amusing tenant complaints. Remember, if you would like to speak to one of our consultants about how to improve your current situation or accelerate your investment plans, they are always happy to help and answer any questions you may have. Happy investing.
Damian Collins
9 things you need to know about investing with a SMSF
Due to recent legislative changes, it is now possible to effectively purchase geared property in a superannuation fund using instalment warrants. Many people are interested in this strategy using their own self managed superfund. We thought it would be useful to provide some information on self managed superfunds. Next month we will explain how a superfund can effectively borrow to purchase investment property using instalment warrants. 1. Firstly, what is a self-managed super fund? Put simply, a Self-Managed Superannuation Fund (SMSF) is a Super Fund that you manage yourself. It can consist of 1 to 4 members, who do not need to be related, and all of the members are trustees of the fund. Therefore you can establish a fund with your partner, family, friends or a mixture. In most circumstances it is usually close family members who are members of the fund. 2. How much is required to start a SMSF? There is no legal minimum required currently (although rumours suggest the Government may impose a minimum $200,000 limit). However with the costs involved it is usually not economically efficient unless you have substantial funds. Estimates of the minimum funds required range from $100,000 to $500,000. 3. What are some of the advantages of investing in a SMSF? A SMSF is a good option if you prefer to have complete control over your super assets and want to decide where and when to invest (within legislative constraints). You can structure your retirement funds to suit your own personal circumstances. A SMSF also provides good asset protection as assets are generally protected from bankruptcy and other legal claims (as does superannuation in general). 4. Can you buy an investment property through a self-managed super fund? Yes, you can use your accumulated super along with your weekly/fortnightly contributions to purchase an investment property. There are some conditions however (see further points). 5. Can you put an existing investment property into the fund? No. Whether you're planning to sell a property to the fund or transfer it as a personal super contribution, it will be caught by regulations preventing super funds from acquiring assets from fund members. You are allowed to transfer shares, managed funds and your business premises, but not an investment property or your home. 6. Can your super fund borrow money to buy property? Superannuation funds cannot borrow to invest. However as noted under recent legislative changes, investment property can be purchased using instalment warrants. We will cover this next month. 7. Can you buy a property in partnership with the fund? Yes, if the purchase is structured correctly. For example, you could buy an investment property as tenants in common with the split of ownership recorded on the title deed. Alternatively, a unit trust may be another suitable structure. However the asset cannot have any borrowings against it, which restricts investment. 8. Can you rent a property to yourself or your children? No, you cannot rent a property from your super fund nor can a related party (such as a child). 9. How much does it cost to set up a SMSF? Although prices vary dramatically, you should be able to set up a SMSF for less than $1000 and it could be as low as $400. However there are also annual accounting and auditing fees which, depending on the complexity, range from $1,500 to $5,000 per annum. Momentum and its affiliated entities are not Solicitors, Accountants or Financial Planners. While all information is provided in good faith, you should seek your own independent legal, accounting and financial advice in relation to setting up an SMSF.
Rate announcement triggers a collective sigh of relief The Reserve Bank of Australia (RBA) has left official interest rates on hold this month, showing signs that previous rate rises may be starting to slow the Australian economy and reduce inflationary pressures. The announcement was a relief for borrowers around the country who are already coming to terms with back to back increases in the official cash rate and further independent increases from many banks. In his statement Governor of Monetary Policy, Mr Stevens, said: "Recent information provides tentative evidence that growth in domestic demand is moderating. Business and consumer sentiment have softened in the early part of 2008, and credit demand has slowed somewhat." According to a key confidence tester, the Westpac-Melbourne Institute survey, the chances of an interest rate fall have moved closer with the news that Australian consumer confidence continues to fall in synch with business confidence. WA leading the way in population growth Latest figures from the Australian Bureau of Statistics (ABS) show Australia's population increased by 1.5 per cent for the year ending September 2007 - taking the estimated resident population of Australia to 21,097,100 (an increase of 318,500). Nationally, Western Australia recorded the fastest population growth at 2.4 per cent, followed by Queensland and the Northern Territory at 2.2 per cent. Victoria and the Australian Capital Territory both recorded population growth the same as the national average of 1.5 per cent. New South Wales and South Australia had a growth rate of 1 per cent followed by Tasmania on 0.8 per cent. Rents could go up 50% over 4 years According to the latest quarterly report on rents by Australian Property Monitors, rents in most capital cities could increase 50% over the next four years. Median asking rents have already risen at double-digit rates over the past 12 months. This is a clear indication that strong migration levels are outpacing residential construction, while renters are being discouraged from moving into home ownership by rising mortgage interest rates.
David Polkinghorne, a successful property investor in his own right, is one of our Acquisitions Specialists. He has extensive experience in acquisitions and renovating properties for profit. Being able to determine a property's market value is a useful skill when it comes to investing in property. Astute investors always keep a careful eye on property values in the areas in which they are interested in. This way, they can avoid paying too much for a property and can always be in a position to distinguish a bargain. So what is market value? In general terms the market value of a good or service is the price at which a willing (but not anxious) buyer will pay to a willing (but not anxious) seller for that good or service. For products which are plentiful, transacted often and are largely the same as each other, determining market value is relatively easy. But property is typically not like this. Each property tends to have features that make it unique in the market - its location, size, age, etc. Even two properties side by side on the same street will be valued differently if they differ in size or age. To make things even trickier, property is typically not transacted very frequently, making it hard to compare a property you are interested in to a similar one that has sold recently. Fortunately there are a number of information sources available to make your estimates of market value as accurate as possible. It's also a good idea to drive through the neighbourhoods you are interested in and check with real estate agents the prices that recently-sold properties fetched. There are many situations in which a property can be bought at an under-market price and if you are able to get a good estimate of market value, you will be able to identify the bargain buys. For more information on how Momentum Wealth can help you find and evaluate a great investment property, you can contact David on 1-800-000-159
Rodolfo is one of our finance & mortgage specialists in Victoria. He has many years experience in the finance industry and is passionate about helping people build wealth through property investment. For many people, the idea of generating wealth through property is appealing, but finance is a stumbling block that many people cannot get over. If conventional finance is an issue preventing you from building your property portfolio, then you need to understand there is a number of alternative property financing strategies available to you. Most people are afraid of debt. That is because the average person only uses what we call horrible debt and tolerable debt. Horrible debt is borrowing to purchase items that depreciate in value. These are items such as cars, furniture, TV's etc. Worse still, this type of debt is usually not tax deductible. Horrible debt should be avoided as much as possible. Tolerable debt is borrowing for items that increase in value, but the debt is not tax deductible. This is usually a primary residence. While paying non-deductible interest is bad for your wealth creation strategy, at least the asset (if it's well selected) may increase in value. The trouble is that most people never move past horrible debt and tolerable debt. Successful investors tend to use productive debt. This is debt that is used to purchase appreciating assets and the debt on the payments is fully tax deductible. Once you understand how advanced property financing strategies can be used to explode your property wealth, your fear of debt will reduce significantly. Most people think that the banks are the only source of property financing. The banks represent just one way you can get money to invest in property. There is a whole world of finance apart from the banks. Most people think that you need a significant amount of cash deposit (around 20% or more) in order to buy property. If you have a solid income and clean credit history, there are a number of ways you can buy property even if you have little or no cash. For more information on how Momentum Wealth can assist you with your loan needs, contact Rodolfo on 1-800-000-159 Finance Broking Services are provided by Momentum Wealth Finance Pty Ltd, WA Finance Brokers Licence 3170.
Don't get carried away with improvements
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. Once you have purchased an investment property and have found a good set of tenants to occupy it, it is important to ensure you look after your property and make the necessary repairs required. However, there is a distinction between repairs and improvements. Do not over-capitalise on the property and make improvements that may not be necessary because each additional dollar you spend must give you a return. For more information on how Momentum Wealth can assist you with your Property Management needs, contact Verity on 1-800-000-159
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.
Passionate about property? WE WANT YOU!
Due to the continued growth and expansion of Momentum Wealth, we currently have vacancies for: To find out more please contact General Manager, Jennifer Wakeman on 1-800-000-159 or jenniferw@momentumwealth.com.au
Many of us would consider loyalty to be an important trait to look for in a person. But being loyal to a single bank can cause severe problems for investors as a client of Sudha, one of our finance & mortgage specialists, recently discovered. The client, a successful property investor and developer, had numerous loans with a particular bank which were secured against a large property portfolio. The client was chasing some more finance from his bank to invest in an opportunity he had found but was told that the bank was not willing to lend him any more money. This is a common occurrence as every bank has a certain limit that they are willing to lend to a single borrower. Plus it didn't help that most of the client's existing loans were cross-collateralised. After reviewing the tangled web of loans and the client's income details, Sudha found there was no reason the client couldn't obtain finance. She organised for the client's properties to be revalued and with a bit of work was able to free up enough equity to allow the client to potentially borrow another $7 million with other lenders. Needless to say the client was extremely happy and learned a useful lesson about the risk or having all your eggs (loans) in one basket (with one bank). Sudha is one our mortgage & finance specialists in Perth. She is adept at handling the diverse situations and circumstances often encountered by property investors and developers. If you would like to speak with Sudha about your own situation, call 1800-000-159 today.
The Lighter Side of Wealth Building Here are some amusing tenant complaints we found on the internet...fortunately we don't have these types of tenants in our clients' properties! Dear Landlord, the toilet in the second bathroom is blocked and we cannot bathe the children in there until it is cleared. Dear Landlord, because I realise that some landlords can be rather particular about this kind of thing, I am hereby requesting your permission to remove my drawers in the kitchen. Dear Landlord, I want to complain about the neighbour's dog. It barks all hours of the day and night. It leaves little "gifts" in front of our door. I might still get used to the noise, but I find the poo hard to swallow. Dear Landlord, will you please fix our cracked sidewalk? Yesterday my wife tripped on it and fell pregnant. Dear Landlord, the woman next door entertains men at all hours of the day. They get quite loud sometimes. Please do something before my husband decides to go over there himself.
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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 
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