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.
Since 1983 I have been fascinated with the annual BRW Rich 200 list and the people who made the list. Upon reading it for the first time, I realized that many of them made their money in property or stored their wealth in real estate. I figured if it was good enough for them, then property would be for me.
This year, for the first time, 83 year old Harry Triguboff, a Chinese born son of Russian immigrants, became the first residential developer to top the list with an estimated wealth of $10.62 Billion. Not only did Mr Triguboff top the list, but of the remaining 200, 53 have made their fortune in property, with around another 15 or so having made their money in another industry and then ploughed the wealth in to real estate.
When you invest in real estate you are no doubt hoping for strong gains in value over time. But what if you could improve your chances of making a quick gain early on – a fast improvement in value that will help propel along your wealth portfolio?
The ideal situation would be for you to be able to invest in an area that is either already growing fast or is about to do so – a property hotspot. It is not always possible to pick these suburbs with complete accuracy and timing, because the statistics we use can be three to six months out of date by the time they are collated and we can analyze them. And a hot spot that is identified using data that old, could conceivably already have started to cool down.
When we buy real estate to hold for the long term, we must factor in earning a rental income stream from the future tenant. Not only do we need that to support any borrowings we may have against the property, we also need to maximize the total return on the investment – which will include any capital gain, income from rent and any tax benefits.
It might sound trite, but my experience is that investors don’t often think overly much about the needs of their future tenant – someone who in fact will become your de-facto financial partner in the months and years to come. They tend to think about the great deal they just got, rather than how it fits in to their portfolio or strategy or if it will be desirable to a tenant.
I spent a lot of time driving around looking at property. Over the weekend, I noticed a number of large prominent “For Lease” signs on homes that fronted busy through roads.
I remember being fascinated with fire as a child. I loved scratching the red-headed match against the rough side of the box and watching it burst in to flame, producing heat and energy. I thought it was some kind of magic trick. At least until the first time I burnt my fingers. Then I knew it was real.
As I grew up I began to understand that fire was life and fire was death. It bought life to those who were cold in winter and death to those caught in its untethered path. I discovered fire was a source of power that could be either friend or deadly foe.
It is often said that the most important factor in successful real estate investing is – location, location, location. And in some respects that is correct. Though there are so many other factors that come in to what can affect real estate values – like supply and demand; unemployment; average incomes; proximity to infrastructure like transport, shops, schools, medical facilities; population growth including natural births & immigration. It can be quite a long list of elements to consider.
Most commentators ignore what I now believe to be a critical factor in the pricing and relative value of real estate. The lifeblood of building a property investment portfolio is money. That is – money you borrow to buy houses, apartments, townhouses or other income producing real estate. If there is plenty of money available at cheap prices (low interest rates) people will borrow to buy and drive prices up. If the money supply is tight and fewer people can borrow to buy, the assets prices can no longer be supported.
In the course of doing what I do, I review vast amounts of economic and investment information from all over the media – social, print & digital – in fact I invest several hours a day on this. I want to be the best investor I can be and sorting through the piles of opinion, fact and material is critical to having an understanding of what is happening in our financial world.
Late last week, I read an interesting article from one of Australia’s most respected economists, Mr Saul Eslake. In it, he says “Negative gearing can’t be equated with standard business tax practice, and is not allowed in many countries.” Mr Eslake notes that in a speech published in 2005, our current Prime Minister Malcolm Turnbull, described “negative gearing as a form of ‘tax avoidance’, one of the few open to PAYE and other ‘unincorporated’ taxpayers.”
It is very clear that the Australian real estate party is over – for now at least. Many investors are wondering where to direct their focus now, since making money in property is no longer about just buying something – anything, and hoping for the best.
Over the past decade you could pretty much just buy in your own backyard and wait, earning capital growth by default and thinking you were a smart investor. It’s going to take a lot more than that in the next decade. And it is likely you won’t be investing just in the city in which you live – there may be better investment opportunities for you elsewhere. It is also inevitable that you will be building a diversified portfolio of short & long term investments, having some oriented at capital growth and others at income. This is the next generation way of investing.