Ever since I was a child I have been interesting in flying, particularly to outer space – hence my decision as a nine year old to become an astronaut. Because of that and shows like Star Trek, I have always been fascinated with our planet, its place in our solar system and our Milky Way’s place in our universe. We really are just a speck of dust in the universal scheme of things. Some think that we are an experiment in some alien’s petri dish. A few believe that a higher power – call it what you will – has a lot to do with us being here on the 3rd planet from the Sun.
So when I read an article recently that clearly explained that our world was going to end, and that it would be because of our own Sun, curiosity took over and naturally I read it. Just in case you are interested in the full article, here is the link.
When I was seven, I decided I wanted to be an Astronaut, right after the moon landings. Then a few years later, I realized I could never be an Astronaut because I wasn’t an American (though in the last decade or so that has changed). So I thought I would be a fighter pilot instead. I reached Year 11 in High School and enrolled in all the classes I needed, including the double maths classes. I quickly realized that I could not cope with the x’s and y’z over z’s. I was only any good with numbers that had dollar signs in front of them. So I dropped out of the high level maths, to the mid-level maths class and so ended my fighter pilot ambitions. I toyed with the idea of being an air traffic controller but that didn’t work because I didn’t have the multi-tasking skills required. Two years after I finished high school, the Air Force changed the maths requirements – the mid level maths would have been enough for me to qualify as a pilot.
But for the sake of an administrative policy I may have had a career flying F-111 or F-18’s and maybe retired to fly Jumbo jets as a commercial pilot. And I would not have had a career that included real estate sales – new homes and established, finance broking, financial planning, property investing, renovating and finally real estate development. And I would not have written five books on real estate investing, nor spent years educating thousands of people on how to achieve wealth via property.
I continue to be fascinated with people who have achieved success in their lives, reasoning that there are always lessons to learn and inspiration to glean from studying their lives. One such person I have followed with great interest is Mr Frank Lowy.
Ever since the very first publication of the Australian Rich 200 list in 1983, Frank Lowy has appeared among its members. In recent years his net wealth is estimated as in excess of $8 Billion AUD, which is enough to place him 3rd on the list of wealthiest Australians of 2016, behind Harry Triguboff and the Pratt Family.
Most investors are aware that housing markets across most parts of the country (Perth & Darwin excepted) have been in a prolonged state of price increases. The more aware will have drilled down to what has been driving the boom and will know that in answer to the demand, developers have been building apartments in record numbers, for record prices.
What is currently causing jitters is that no one seems to know if the number of apartments that have been constructed, are under construction or approved to be constructed, will ultimately prove to be too many for the demand. If so, many fear that could lead to a downward price spiral and a protracted period of flat growth in prices.
Let’s have a look at the situation from a macro viewpoint and see if we can make sense of it.
Last week in my Radio Wealth Episode 14 podcast, I shared with you some really exciting information about a home loan product that had an interest rate potentially as low as 2%.
Yes, TWO percent.
Needless to say it has caused quite a stir and there are lots of investors out there who have been emailing in asking questions.
One in all in I say, so I am going to reproduce a few of the best questions, and the answers here so that you can get a better feel for what the product is.
Just over 20 years ago, in 1995, an “average” Australian home could be bought for about 3.8 times the average weekly earnings.
Today, that same ratio is 6.5 times average weekly earnings. So on the face of it, Australian homes today are almost twice the relative prices as they were 20 years ago – see the chart below.
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.
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?