What Will Our Homes & Investment Properties Look Like In The Future?

As property prices continue to rise, builders, developers and governments are all looking at ways to produce homes that are stylish but still affordable. There are so many reasons Australian real estate is among the most expensive, relatively speaking, in the world. The principal reason in my opinion are the myriad of levels of government red tape and semantics around producing a block of land. I have a project in Perth that so far has taken nearly four years just to get to an outline development plan approval stage. And now we have to go through another similar series of procedures to get a subdivision approval. It will take more than six years to go through the regulatory hurdles just to create land that people can build on. In Texas, USA, the same process takes about nine months – their land prices are about half of ours. I don’t see the industry or the self-interested government bodies giving up their power and changing any time soon, so that’s good if you own property and bad if you don’t.

There are major advances being made on the construction side, which will in time mean much less expensive homes. It is now possible to fully manufacture a modular home, or even apartment complex, off-site in a factory in a matter of weeks, have it transported to site and complete construction in just a few months. The quality of the product is first class and it would take someone skilled to realize that the construction is not something conventional. The technology has been used in Melbourne to build apartment blocks of 30 storeys. In 2012, the Chinese built a 30 storey hotel in just 360 hours, check this 2.5 minute video:

The very same technology is being used right now to construct a 202 storey apartment block – city! – in a staggering 6 months – again in China.

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So while there aren’t yet significant cost savings, the massive difference is in the time it takes to complete the product and bring it to market. Or in remote locations, where it is hard to keep labour on a site, having pre-fabricated homes, solves a number of construction issues.

A good Australian example of this is my project at www.daylesfordplace.com.au – Have a look at it. This is the future of housing – and your investment properties – and it’s here right now.

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How Can You Plan Your Investment (Property) Portfolio?

Over the last few weeks we have been talking a lot about the “why” in our lives and what it is that we really want. We have also spoken about property as being the simplest and most effective vehicle to produce regular income – but really, you could choose any investment asset that suited you. Property just happens to be the favoured asset of most Australians. And we have talked a lot about having assets that will produce the income we need for the lifestyle we want.

But how do we achieve that? How do we know what we need to do? How much property do we need to have that freedom & choice?

The answer is simple – we must start with the end in mind.

That might sound a bit counterintuitive, but we can’t start on the journey unless we know which way we are headed or where we are going to end up. Otherwise we are just going to go around in circles and not end up anywhere in particular.

So your first decision is – how much income do you want to have for your lifestyle? This is income that you don’t need to exchange your time (work) for.

That number could be wildly different for each of you. For the sake of the exercise, I will assume that an income of $100,000 would provide a reasonable standard of living – your own personal number may be much higher or much less than that – only you can decide how you want your life to be. The first part of the exercise is some mathematics. No groans please – you need to be able to do some basic math to understand the what’s and why’s and wherefore’s – and if you can’t – pay someone to explain it to you!

If you decided that you wanted a $100,000 income flowing from your assets, you would need to be able to calculate what net return your assets could, would or are flowing to you. For example, most capital city residential real estate will produce around 4-5% return. For easy math, let’s just say 5%. To work out the value of the assets needed to produce a $100,000 income with a 5% return, you divide $100,000 by 5%. Your calculator will tell you that you need $2,000,000 worth of capital city residential real estate, to have a freedom & choice $100,000 lifestyle.

Easy right? That’s only about 4 houses. Everyone should be able to do that? Not so easy I know, but over time with a good plan, it can be done. The key is, this simple math also assumes that you completely own these houses – no mortgages. So, either you get very good at paying off your mortgages, or you find a way to buy, say eight properties. Then when you are ready to do so, sell down four, pay the tax and pay off the four you have left, leaving you with free and clear property earning you $100k per year. Again, easy right?

But we have to also deduct costs in running our houses – that could be 20-25% of our gross rent. That means you probably need about $2.5M free & clear property owned to get your $100,000 net income. Or if you are expanding your portfolio to later sell off and pay down debt, you would probably need to own 10 houses. The mountain becomes steeper.

The way to lower the amount of property you need to own to get that $100k income is to have property with a higher return – positive cashflow property – something north of 8% rent return. If you could own property that provided you a 10% income return, you would only need to have $1M worth of property owned free and clear to achieve your $100,000 income – the mountain is now not so steep. Or perhaps you could have a mixture of positive cashflow property at 10% and some capital city growth real estate at 5%, blend your return so your portfolio makes 7.5%? Then you need to own $1.5M worth of property to achieve your $100,000 income target – all of this of course is not including the home you live in.

Over the next few weeks, we will spend a bit more time on planning and designing your investment portfolio, so you can do what you want to do rather than what you have to do.

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Are you doing what you have to do, or what you want to do?

I posed this question to the people who attended our Cashflow | REDEFINED event last Wednesday night in Perth. The response from most was predictable and completely understandable.

Most were doing what they had to do and wishing they could do what they wanted to do.

So what was stopping them from doing what they wanted to do? The answer is likely to be the same for them as it is for you. You still need to exchange your time for money.

By that I mean you still need to work every day, either for an employer or in your own business to earn money to pay your bills and meet any financial commitments you have. I am not saying that there is anything wrong with working, not at all. Working in a job you love is an honourable and worthy thing to do.

But for how long? Have you given any thought to how long you want to continue working? How many more years? And what will happen to your income after you stop? Could you afford to live in the same way you do now?

Consider what would happen to your finances if you lost your job or perhaps were injured and could not work. How long would you be able to last before you ran out of money? Research shows for most of us that time is less than 90 days.

To have income that still comes in, enough to pay for the lifestyle you want, whether or not you are working, is the ultimate financial goal. This is where you have the freedom and choice to do what you want to do rather than what you have to do.

Income comes from assets. And the best type of asset to produce a steady income, month in and month out, is real estate. Though not just any type of real estate. The average yield for residential property is somewhere between 4% and 5% and that is before any costs. Net yields could be as low as 3%. And if you have any borrowings, then you may not be able to collect any income at all. That means you would need to rely on capital growth to eke out a return from your investment. The last few years since the GFC have shown us that growth in values is no certainty.

The last few years since the GFC have shown us that growth in values is no certainty.

If you want to use property to create income to replace your work income, you need to find property that has a rental return in excess of 8%, ideally 10% or higher. If you can achieve this, and then reinvest your cash profits while you are still working, so you can own more positive cashflow real estate, could mean that pretty soon you will be able to do what it is you want to do, rather than what you have to do.

For a really good example of positive cashflow real estate, check this out –www.daylesfordplace.com.au – this is a project of mine that I am incredibly proud to tell you about. It is the single best development project I have ever created.

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Top ten things successful people do

Have you ever asked yourself, how can I experience success?

This is not an easy question and I am not sure there is an actual definitive correct answer.

This is because everyone’s definition of what constitutes success will be unique to themselves alone.

For one, “Success Mountain” might be having a net worth of a million dollars.

Perhaps it could be dreaming up and acting on a business idea that not only earned significant profits for you and your family, but provided society with something useful and valuable.

For another it could be, being a parent to a happy, healthy well-adjusted child, the result of a committed, long-term loving relationship.

Someone else may consider that learning to read and write as an adult after a lifetime of illiteracy the pinnacle of achievement.

Yet another may think that just getting through to the end of the week and their next pay-cheque and having all the bills paid and food on the table as significant success.

“Success is doing approximately the right thing at exactly the right time” – Richard Pratt

The truth around “Success” is that it means different things to different people.

The mistake most people make is that they try to compare someone else’s “success” with their own.….That’s a recipe for unhappiness.

If you examine your life, I bet you can find at least one thing, and likely a whole lot more things that you have been or continue to be successful at.

Take a moment and think of one.

Go on…!

The late great Jim Rohn used to say “Success is easy – just find out what failures do, and then don’t do that”.

So here are my observations of the Top Ten things that successful people do….

  1. Marry the right person – this one decision will likely determine 90% of your happiness or misery.
  2. Only work at something you enjoy – nothing more soul destroying than wasting your “one half of one second of life” doing something that you hate each day.
  3. Be grateful – every day I think of at least five things that I am grateful for, no matter what kind of day I am having. And guess what – after that exercise, I am usually having a great day.
  4. Be generous – ever heard of karma? And what goes around, comes around? It is part of the circle of life. Your giving can change the world.
  5. Take responsibility – if you spend any time blaming others for your ills, then nothing can change, because “it’s someone else fault”. You are in charge of your decisions.
  6. Persistence, persistence – so often we hear stories of those who gave up just before “success” happened. Be persistent.
  7. Commit to continuous improvement – every day I endeavour to learn at least one new thing. In the last 2 years I have done two x 12 month courses – on corporate finance & becoming a key person of influence – both things I felt would contribute to my “success”.
  8. Be Honest – do what you say you will. People will come to know whether you are a person of your word or not.
  9. Become the most positive and enthusiastic person you know – positivity and enthusiasm are infectious. Make sure you surround yourself with these types of people.
  10. Have a success plan – that is, written goals and desires. Know what you want in life financially, personally, physically and in your relationships. From this plan, stems your action.

It’s not so hard really.

Dream Large.

Craig Turnbull

CEO Hillsfar

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Successful people are those that make the best choices

I am assuming if you are reading this that you are someone who knows that there is more to life than the blind existence that most people live – what I call the “rat corridor of life”. Getting up in the morning after being rudely awakened by an annoying alarm, hugging the spouse and yelling at the kids before racing off to work in the car to crawl along the freeway to a job you hate, with people you don’t really like, praying for five o’clock to arrive so you can inch back down the freeway at fifteen kilometres per hour to collapse on the couch in front of the tube, only to wake up in the morning and do it all over.

Maybe you are smiling now at the thought of this, maybe you are feeling a little uncomfortable or maybe you are even horrified, recognising elements of your own life. Well the good news is that you can change any part of your life at any time you choose. You design your life. You set the alarm. You choose your partner. You decide whether or not to have a family. You choose what kind of car you drive – or even whether to get the bus or the train. You accept or reject the job offer and you always retain the power to leave a job you don’t like. You elect what kind of TV to buy and you are also in charge of the remote, so you decide what kind of information gets fed into your brain.

Every day you make choices that will affect your life. Your success will depend on the cumulative effect of all of the decisions you make, meaning that success or failure usually won’t happen overnight. It will be the result of a series of choices you make and actions you take. They will add up over time to give you a result that you either are happy with or not. You can make a living or design a life – your choice. Whatever happens in your life, ultimately the responsibility is yours. You might be tempted to fall back on some of the old reasons or excuses for not achieving financial success like “I don’t earn enough” or “I haven’t got any money” or “my credit is awful” or “the economy is going bad” or “I’ll just wait until the real estate market comes down.” There are so many ways to talk yourself out of a fortune. You only need one reason to succeed – and that is your own.

Your “why?” That is the thing that will get you up early and keep you up late. The goal, the desire, the dream – something that really excites you and gives you something to aim for. Yet, without a sense of urgency, desire loses its value. It is completely possible to desire something though take no action toward it because there is no imperative – or timeline by which you will be, do or have your desire. You know the old saying “one day I’ll………” whatever it is. Though deep down you know that one day never comes and all you are expressing is a wish. And unless you have fairy godmother or keep a leprechaun in your back garden, your wishes are not likely to come true.

Successful people all have well defined goals and dreams. They have a crystal clear view of what their lives will be like and hold this view as if it were already real.

Next week I am going to share with you the top ten things you can do to be successful in your life. It will surprise you how easy it really is. In the meantime, successful people all need a steady incoming cashflow – check details for the special event below.

Dream Large.

Craig Turnbull

CEO, Hillsfar

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What Would You Do With Your Life If You Had a Year To Live?

It’s an interesting question. Most of us haven’t considered it because we don’t really know how much time we have left, and those that do have usually received the news from medical professionals. What makes the question really interesting is that one day, the question will be true – except you may not even know it. So what would you do?

You might remember Crazy John Ilhan, who at age 43, with a reported net worth of $300 million, dropped dead while walking on the beach early one morning. He had recently stopped smoking and taken up exercise. His wife and family were not even aware that John had a health issue until the police showed up at the family home bearing the news. Life is short.

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What will your life be like in 2014…and beyond?

It’s been a while now since I’ve connected with you, mainly because I have been very focused on creating several new really exciting property developments, which I personally have underway.

I’ve also been quietly working on my new book (my 5th!) and preparing to launch my new investment company, Hillsfar

I’ve been watching property markets around the country, with interest – and it seems most of them are heading just one way – up. As you know, over the years, I have done my share of property education, willing to share knowledge with those who wanted it and were willing to act. And after 30 years of successful real estate investing, here is what I am certain of – there are NO secrets in property. Everything you want to know can be found in a book, a course or online.

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