I’m sure you have been following the economic news and now know that last week the Reserve Bank of Australia lowered official interest rates to a record low of 1.5%. Of course that’s not the rate at which you can borrow, which will be 2-4% higher (the banks margin) or the rate at which the bank will pay you for your savings – currently anywhere from 0% to about 3%, depending on the length of time you loan your money to the bank and how much you loan. Yes, your deposit to the bank is a loan from you to them – your deposit is actually a liability on the bank’s balance sheets and that is because it is your money and at some point you might want it back.
Let’s assume that you are either already an investor or you want to be one, having the lowest interest rates on record is a major benefit. That is simply because the cost of borrowing money is lower than it has ever been. The Government and the Reserve Bank have decided it would be a good thing if you were encouraged to borrow a bit more and then spend that money on whatever it is you want, since that has an economic multiplier as you consume goods. Yes, it is good for our economy if you are spending.
If you are a real estate investor, I am reasonably certain of two things. One, you are doing it to make money. And two, you are doing it because you want to create the best quality of life you can have in the shortest possible timespace.
To do that, you need to follow the money. And that can happen on several levels.
Most people who invest in property, buy their first piece of real estate in their home city. And to follow that, the small percentage of investors who go on to purchase multiple properties, usually also buy in their own backyard. Then they perhaps will renovate or otherwise improve the properties and settle down to wait for capital gain to add to their wealth over time. That is usually a pretty good way to build wealth over a ten to twenty year investment period. The challenge with that passive strategy is that your home city may not be the best place in the country in which to be investing at any given time. Ideally you want to be investing in to a location that is entering its upswing in the cycle, bringing immediate capital growth, which can give you an enormous advantage in building up your capital more quickly than waiting for the cycle to come to your home city.
At 7.6 million sqkm, Australia is the sixth largest nation on Earth, behind Russia (17M sqkm) and the USA, China, Canada & Brazil (all about 9M sqkm). We are about 300% the size of India with just 2% of India’s population. As a better comparison in terms of first world economies, the USA has about 20% more land mass that Australia, but 300 million more people live in that country.
I couldn’t really reconcile that – (modern) Australia and the USA were “formed” in to nations at around the same time period, with American Independence and the colonization of Australia both occurring around the late 1700’s. With about 240 years of national development, there is a wide gap in where our two nations are in terms of population. The only thing I could think of was that Australia had more arid and dry terrain in its central regions than the USA. But I don’t think that could be the whole reason.
It seems everyone has a point of view on the property market these days. And it is great that so many individuals, companies (semi-government, government & private), financiers and industry bodies can put out so much information, facts, stats, figures and opinions on the current and future state of our real estate market.
The challenge is much of it is contradictory, inflammatory and in some cases inherently biased.
Being bombarded by all sorts of conflicting information can make it very challenging for investors to sort through what is relevant and then reach a conclusion. I have found that if you have an opinion, you will by default search for and then find information that tends to back up that viewpoint.
If you are anything like most people, it is very likely that you have made mistakes in your life. And that is perfectly fine because there is nobody who is perfect. I think if you aren’t making mistakes you are probably living a very boring life because you aren’t stretching yourself in any way. But it is how you deal with mistakes that you make, that will have a huge bearing on the quality of your life.
How do you handle your mistakes?
Politics is a subject that may not be interesting to some, but it is important to all. Our elected politicians and their advisers and party administrators, decide on our behalf, how to govern our nation. They make the policies, rules and laws that directly affect our everyday lives and more importantly our futures. That means the ability we may have within the bounds of the law to create and retain a standard of living and wealth for ourselves and our families.
If you want a better life, I submit that you simply must be aware of who proposes to lead our nation and how they propose to do it.
When I first head the term “Brexit” casually mentioned, I thought someone was talking about a new breakfast cereal. I didn’t connect that it was a cute term for a “British exit” from the European Union (EU). I didn’t think that Britain would vote to leave the EU, nor it seems did British Prime Minister David Cameron who called the vote seemingly to placate rambunctious members of his back bench. In case you missed it, the result was 52% of the 70% of eligible voters who turned out, voted to leave. And Mr Cameron found himself in an untenable political position, offering his resignation.
Referendums on subjects this huge invariably get voted down – and that’s because most people just can’t deal with change, opting to stay with the status quo. Some good recent examples of that are the Scottish Independence vote, lost 45%/55% and the vote taken in 1999 here in Australia for a Republic, again lost 45%/55%.
Do you remember when you were younger, much younger, when much of your day was spent playing in an imaginary world where anything was possible?
I am reminded of this by my little three year old guru who comes up with exciting new things to see, say and do every day. I arrived home last week to find him dressed in his super hero outfit, out in the hallway looking for spiders, while waving his “magical” joss sticks around his head.
As an adult, my imagination is still as strong as ever, however when everyday life gets in the way – work, family, spouse, bills, health, responsibility, it is very easy to fall in to the practical pattern of living. In doing so, we lose that power of imagination to reflect and affect things that can happen in our lives.
For what is at the birth of our dreams if not imagination?
If you have ever spent much time with a baby, you will know that they don’t know much about routine or tradition. Or that you need to do certain things in certain ways at certain times. They know only when they are hungry, tired or wet. Everything else is a complete open slate for them to draw upon each day. It is the way they learn to experience the wonders of our world.
When did we forget to live like that?
If you always do what you have always done, you will get what you have always gotten. And if what you have always gotten does not equate to what you have always wanted, perhaps it might be time to try something different?
I always thought I was quite open minded and willing to try new things. Yet, I have recently realized that perhaps this is not so and I have been caught up in the routine of life. My routine.
I am loathe to make comment on the most lackluster political election campaign I can remember. However, there are some really interesting parallels in what is going on, or more correctly, what is not going on, in the Federal election campaign, with what is required to be successful in your financial life.
Are there any of you out there wondering why the incumbent Liberal Government and the Labor Opposition are reported to be about 50/50 in polling expectation, when just a few months ago, the Libs were 20 points in front?
Read on – I will link it up for you.