You are Never Too Old to Start
Keywords: Wealth for Life, Ed Chan.
An excerpt from the transcript of Wealth for Life^™ presented by Ed Chan

Okay, what I'll show you now, is a client came to me and she was aged 60. Her name's Maria. Actually, two clients retired a couple of weeks ago and they had about 15 properties, Grace and Rob, I won't use their surnames. And Rob said to Kim, who's one of our accountants, client managers at work, Kim looks after him...

He had 15 properties, and he's 70 years old. And we're all here wondering, is it too late for me? And he was 70. And he said to Kim, "I only started buying my properties eight years ago." So he started buying his properties at 62, right.

And then, he had nothing. He had a little bit of superannuation at age 62, and when he got the size of his asset up by buying property, then I'll talk about that later on, how it's really not property that makes you money. What makes you money is the size of your asset, and getting the size of your asset up is what's important, all right. And I'll talk about that this afternoon.

But he was able to get the size of his asset up, so that if you've got assets that much, and at that size, and it works for you, then when it doubles, it doubles like that, all right? But if your assets are like that, and then it doubles, it doubles like that. So what Rob did was, at age 62, was to get his size of his asset up. And the only way to get the size of your asset up is to get into property. Because you can't get the size of your asset up through shares, right?

The only way you can get the size of your asset up is to borrow the money, right. You got to the bank, and three quarters of them won't lend you money on shares, and the ones that will lend you money on shares, may only do it to a 50% LVR. A very few banks may go to 80% of the LVR, but they won't lend you $2 million or $1 million.

Right, there's a restriction on how much you can borrow to invest into shares. And I'll show all that to you this afternoon. But Rob got the size of his asset up at age 62 for us, in our 40s or 50s who are thinking, oh, this is too late for me, I'll do this for my kids, well it's not.

An excerpt from the transcript of Wealth for Life^™ presented by (Disc 1, Chapter 1)

Read the Book | Watch the DVD

Why investors have only 2 years to truly maximise the opportunities available - Tony Melvin
Keywords: Investors, Tony Melvin, Maximise

Feedback from the attendees at the Brisbane Power of Choice Event ...

Feedback from the attendees at the Sydney Power of Choice Event ...

There are still seats available for the Brisbane and Melbourne seminar so don't miss out...

---

Take a look at this video where Tony explains why investors have only 2 years to truly maximise the opportunities available ...

In these new series of seminars, called the Power of Choice, you'll be shown ways to:

1. Increase your cash flow
2. Make big profits from Property Development sites (without having to build anything!)
3. Create regular monthly income from the share market (that is safe, easy and simple to implement)
4. Build a solid financial foundation over the next 2 years that can set you up for life

These things and more will be shared by Tony Melvin and our experts at the Power of Choice one-day event. more>

What happens to Property after the Stock Market Crash?
Keywords:
by Michael Yardney, director Metropole Property Investment Strategists.

The fall out from the stock market crashes around the world will affect everyone in the short term, and in lots of different ways, but the common question I’m getting asked is, “What happens to the property markets now?”

To help answer this question it is worth learning lessons from the past. In particular from the stock market crash of 1987 when a similar fall occurred on the stock market. At that time prices crashed 23% but all on the one day. At the time of writing this article, Australian stock values have dropped 24%, but they have done this over almost 3 months.

It is interesting to note that Australia’s biggest property boom occurred in the late 80’s following the stock market crash of 1987. In fact every time there has been a stock market crash in the last 50 years, Australian residential properties increased in value, but there was always a lag before this happened.

Why this crash is different from the past?

As we try and learn from the past, we should try to compare this stock market fallout with previous ones.

At the time of writing the Australian S&P index had fallen 24%. Interesting in America the S&P index had only fallen 12%. This suggests that the Australian stock market may have over reacted.

Looking back, previous major share crashes were at the end of speculative booms.

In 1987 when stocks were driven to unrealistic levels and again in the dotcom crash early this decade people were buying internet based stocks based on future potential earnings. They paid inflated prices for shares in companies that were never going to make any money.

I remember as a teenager a similar thing happening in the speculative mining boom which ended in the spectacular Poseidon crash. People were paying hundreds of dollars a share for mining companies that were never going to make any money.

Sure this time round some shares were a little overpriced. But in general our financial fundamentals are strong and our economy is sound. Share prices were not in a “speculative bubble” this time round, like they were in previous share crashes.

It is important to remember that our markets and particularly the share markets are driven by fear and greed. Currently the investors are exiting the market in fear of what “may” happen in America.

Investors have lost confidence in the future.

Of course there is another group of speculative investors who are exiting the markets because they borrowed against their shares and have to either sell these shares or pay for margin calls now that the value of their portfolio has dropped dramatically.

Another difference is that this time round Australia’s economy is more insulated from the United States economy. But as the USA economy does slow down it will affect our main trading partners China and Japan. This in turn may decrease the demand for some of our resource and products.

What will happen to interest rates?

The Reserve Bank has a difficult path of reining in inflation (which is still rising) and at the same time sustaining our economic growth. It does this by controlling interest rates.

There will almost certainly be one or two further interest rate increases in the coming months to bring inflation back into the RBA’s 2 to 3 per cent target range.

At the beginning of this year most economists suggested that next interest rate rise was going to occur in February. This prediction has now been down graded and maybe the next rise will occur in March

While there is a case for tightening interest rates, considering our inflation rate has jumped again in the December quarter, there is also a strong case for doing nothing at present as there has been a major downshift in global “prospects”.

Another interesting factor to watch with regard to interest rates is that the banks recently made some commercial decisions and increased interest rates claiming their costs of borrowing in overseas funds increased. Now that interest rates have dropped in America (the US Fed had lowered its interest rates by three quarters of a point from 4.25% to 3.5%) it will be interesting to see if these same banks now lower their interest rates.

What does all this mean for the property market?

It is important to remember that house prices are not as volatile as the share prices.

The property market is the only investment market where the majority of players are not investors. This means that as a home owner or a property investor, we are underpinned by the fact that 70% of properties are owned by owner/occupiers. And they don’t sell their houses just because share prices are falling or because of the problems overseas.

Having said that, it is likely that for a short time demand for homes and investments will drop. People just don’t like making important buying decisions at times of uncertainty.

The properties that outperformed over the last year or so were premium properties - homes in our more exclusive suburbs. Many of these increased in value by 30 -40% last year. These sales are closely linked to the state of our economy and to business sentiment and it is likely that high end sales will suffer this year.

All this means that if you have “money in the bank” or your line of credit ready to draw down on, the property markets will provide opportunities not seen in the last decade.

As a home owner or property investor you should be in the market for the long term - property is a long term play and Australia’s economic and property market fundamentals are still sound. This means that any slow downs in the property market will offer great opportunities for those with a long term view to buy their new home or investment property.

The fundamentals that will push our property markets forward have not changed from the beginning of the year. Let’s look at them briefly:

1. Supply and Demand –

There is still strong demand for properties from our growing population, our increasing immigration and our demographic changes. Yet there is a severe undersupply of dwellings around Australia. The ANZ Bank predicts that by 2010 we will have an undersupply of 200,000 dwellings.

Currently the cost of construction is too high to allow new development to take place and this has created a marked undersupply of dwellings.

To bring a new medium density development out of the ground today costs 25% to 30% more than the market will pay. New development will not take place until the market values move up to close to this level. Of course the fact that new apartments will cost more in the future means that the prices of existing houses and apartments will also increase.

2. Rising rents –

Rents are rising due to our very low vacancy rates. This means yields are rising for investors. This will draw new players back to property and will underpin our property markets.

3. Our economy-

Our Australian economy is basically sound and will continue to remain so, which will underpin our property markets.

In summary:

We have not seen the end of the crash – there are always aftershocks as new information surfaces. Once the fall out is over investors will put their money into the property market as they will see it as safer and less volatile than the share market.

This means that our property markets will continue to perform well in the long term.

In the meantime we won’t see a continuation of the mini boom conditions that occurred in many east coast capitals last year. And this is good for our markets – growth rates of over 20%, as was seen in many affluent suburbs last year, is unsustainable.

As a property investor or home owner take a long term view and remember the big picture. Australia’s fundamentals are sound and the price of well located property has doubled every 7-10 years since 1920.

Give it a few years and the stock market crash of 2008 will be a distant memory.

About the Author:

Michael Yardney is Director of Metropole – Property Investment Strategists, and a leading property commentator and publisher of Property Investment Update. Subscribe for free at www.PropertyUpdate.com.au

He is also author of How to Grow a Multi Million Dollar Property - in your spare time and co author of All You Need to Know About Buying and Selling Your Home

Click here to view Michael's books, DVDs and upcoming events

The Key to Booming a Business
Keywords: Business, Tony Melvin

I have often been asked, “How do you do so much, you must be exhausted?” The question is prompted by the fact that over the past 2 ½ years I have written 3 books, run 2 companies, delivered close to 100 seminars and during that time my wife and I had our first child.

Is it because I have more hours than the average person? I only wish!

The key to doing a lot is to know firstly, what it is that YOU are responsible for. The second thing to know is what others around you are responsible for.

This seems rather obvious and a little too simple for an answer to the above question. Nevertheless it is the key to success. When it comes to organisation, a lot of people are left in the dark as to what others in the business are truly responsible for.

The Dominos of Confusion

Here’s an all too common scenario: A new staff member doesn’t know who is responsible for what and will tend to ask anyone “How to I get my pay organised?” or “How do I login to my computer?” such questions, if then not known by the person being questioned, results in another being asked. If that person doesn’t know then all 3 people will go and ask a 4^th person and you get your domino effect. Lack of knowledge about who is responsible for what leads to more confusion being spread around the organisation – the result is little or no work being done.

Time Vampires

Another way this concept rings true is your time vampire. The person doesn’t know (or doesn’t care) who is responsible for what, all they know is that if they come to you – you’ll fix it. This might include such things like major strategic decisions (your actual job, lets say) and extends to questions like, “ Hey have you seen my pencil – you know the yellow one with the pink fluffy bit on the end?” This person is sucking your valuable time away with such a question. Why? Because it has nothing to do with your job – it is not part of your responsibility.

Therefore the key to doing a lot and achieving a lot is to know what YOU are responsible for and doing that no matter what. And when your staff or those around you try to get you to do their job, by all means help but once you’ve done that, make sure you get them trained on their role in the organisation and where it fits in with everything else. By doing so you’ll reduce a lot of confusion and increase productivity.

It’s a simple tip but well worth knowing. Hope it helps.

All the best,

Tony Melvin

Tony Melvin is a Director of Chan & Naylor Australia, which was recognised as the fastest growing accounting firm in Australia by BRW Magazine. He is also the author of 3 best selling books.

Take the Free Business Analysis and get more help with your business.

The First Step to Becoming a Property Developer
Keywords: Property Developer, Carly Crutchfield, CCorp
by Carly Crutchfield Property Developer and director of CCorp

One of the most frequent questions that I get asked is “How do I start…how do I become a property developer?”

So I thought I would dispel some of the myths and tell you EXACTLY how to start.

First of all, you need to understand that property development is possibly one of the most misunderstood investment strategies out there. There seems to be a general consensus that property development is something that only the “big boys” or “serious players” can get involved in or that you need millions of dollars before you can ever start.

That just is not true. In fact the first development I ever did, I used absolutely none of my own money. I thought outside the box, got creative and entrepreneurial and used my knowledge of negotiating to structure a great deal.

That is the fantastic and consistent thing about property development, there are no rules and the sky is the limit. You are only limited by your knowledge of what is possible, your ability to think creatively and structure smart opportunities that benefit all involved.

I have also heard of people going to University for 4 – 8 years to study property development. In most cases this seems to qualify people to work for someone else in property development, but still not become a property developer!

However, education is one of the most important ingredients to get started in property development. You need to understand how property development works, what it is, how they are structured financially, how the profits and cash-flow work and how the legal aspects are structured.

These are all quite straightforward and easy to understand, but without this knowledge property development can seem like an unreachable goal or an unplayable game.

In fact property development is a game that can be played by anyone willing to learn how it works and get involved. And if you do get involved, you will soon discover that property development can help fast track your personal wealth and personal property portfolio faster than you ever thought possible.

The power of property development lies in the fact that you become an ACTIVE property investor rather than a PASSIVE property investor. There is nothing wrong with being a passive investor, but you are effect to the market. As an active investor you are taking control and becoming cause over the market, your own profits and future.

So, what is the first step to becoming a property developer? Answer: Education. You need to learn the basics of how it works. Once you have the basic education you need to start looking for deals that you can get involved in that have a profit margin of at least 20%, however you really want to push the profit margins to 30 or 40% to make a deal really worthwhile.

And once you find a deal it is all about how you structure it. Development is not about construction; it is about finding the deal and putting it together. It’s about using as little of your own money to generate the biggest return on investment as a whole.

Some strategies and tools that developers use to do this include vendor finance, joint ventures, property options, and more.

By using these strategies you can get involved in property using none of your own money, you can own a house debt free in just 12 months, you can create a cash flow for yourself and much more.

Sound like something you would like to do? Then take the first step, get educated.

See Carly LIVE at the Power of Choice Events with Tony Melvin

Sublime Sub-prime - Part 3 of 3
Keywords: Tony Melvin, Sub Prime.

By Tony Melvin, founder and Author

In this final part to this 3 part series we answer the question: Why did this happen? (so we can learn from it)

Having looked at the possible repercussions of the sub prime crash and how the investor can proof themselves (see part 1 and part 2) let’s look at why this happened.

Doing my own research I’ve discovered that there is no definite answer to this question. There are plenty of theories but there’s no definite reason.

To explain the global financial market in the most simplest way - lending institutions pool funds together, loan them out to investors and then sell the “loans” so that they can repeat the cycle.

Sub prime loans were once easy to sell as a collective fund. Slowly however they became harder to sell. The key point here is to realize that this happened slowly.

Although the market appeared to suddenly crash this was not the case. Early warning signs appeared in 2007. In fact I read an article in a finance broking industry magazine that talked about a possible sub prime crash in as early as 2007.

It’s safe to assume then that for those in the know, it was imminent that the financial markets were heading for disaster.

So why did it happen, or should I say, why was it allowed to happen?

Rising interest rates are a sign of a poorly managed economy. And the US has been very poorly managed in recent years pouring more money into war than almost any other endeavour. It is no surprise that they are in such financial turmoil.

But while I have my own theories on why this has happened (and they make for good party talk) it serves no real purpose discussing them unless you can do something about it.

It short the investor can learn a lesson from the sub prime crash by realizing this one fact: You are the only one who will look after your best interests in the long run.

Keep well informed and seek professional advice from a range of experts (not commission sales people but from people who have actually done it or are doing it) and then make your own decisions.

The one thing you can count on is change and the only way to keep up is to keep on learning.

As the world gets smaller with the internet and information is more easily obtainable the investor now has a wealth of resources available, more than ever before.

Money has become the benchmark we use to rate a person’s success. But this is a very fickle measuring system. It is possible to lease a fancy car and as you drive it around people think “success”. But now that loans are harder to get and many are being “called-in” those with apparent success are being exposed as people with little or no real wealth. This lesson is a little late and provides no consolation for the Mums and Dads who work hard and are finding it difficult to meet the interest repayments on their home.

However it is a valuable lesson.

Let’s summarise the lessons from the sub prime market:

1. Separate fact from fiction and realise that media tend to sensationalise the “bad news”.
2. Statistics show that less than 5% are truly wealthy so be prepared to go against the majority.
3. Work out your own investing goals.
4. Decide on your own strategy to achieve those goals.
5. Learn the strategy from someone who has done it.
6. Remember it is a game and it should be fun – if you get serious there’s something wrong!

These 6 points apply in any economic environment – booms and busts.

And remember what Warren Buffet said:

"We simply attempt to be fearful when others are greedy
and to be greedy when others are fearful”

Author & Founder

books by Tony Melvin

Sublime Subprime - Part 2 of 3
Keywords: Tony Melvin, Sub Prime.
By Tony Melvin, founder and Author

To refresh your memory, part 1 of the Sublime Sub Prime Series isolated the 3 most important questions regarding the financial catastrophe in the USA. These are:

1. What are the possible repercussions of the sub prime crash?
2. What can the investor do to proof themselves for any future repercussions?
3. Why did this happen? (so we can learn from it)

While part 1 answered question 1 above, this second article will focus on question 2 – “What can you as an investor do to proof yourself from any future repercussions?”

The last article ended with a quote from the worlds’ most successful investor, Warren Buffet who said:

“We simply attempt to be fearful when others are greedy and to be greedy when others are fearful”

This should give you a hint of the answer to “what should you do?” The first step is to not get fearful!

Right now a lot of people are concerned and worried about what is going to happen. And the media fuel this fear based on the false idea that it helps them sell more newspapers or get more ratings. As part of the first step, what you should do is take a look at what is really happening, as an investor. Here are a few things you can get the facts on:

1. Are property prices rising?
2. Are properties still selling?
3. Is the population growing or shrinking?
4. Are wages increasing or reducing?
5. Do people still want to live in a property????

If you read the book How to Achieve Wealth for Life you’ll know that the value of any investment is driven by Supply & Demand. To get an idea of what is likely to happen over the next few years simply look at the current trends of supply and demand. All the questions above relate to supply and demand.

Australia, unlike the USA, has a strong economy. It also has a growing population and strong immigration with people coming from all walks of life to live here. And in the places where people want to live and need to live because of work, we are not building enough dwellings. This means there is demand and little supply. This will increases prices over time.

But as mentioned in the first article, don’t take my word on it. Get the facts yourself and do your own research on questions 1 to 5.

Understanding the dance between supply and demand sets the investor apart from the masses who act on fear and greed alone. Another important factor which puts the investor into the realm of our friend Warren Buffet is having and following a strategy.

Your investment strategy is the key to riding the ups and downs of the economic cycle. The definition of the word strategy is: a systemic plan of action. And I would add to that definition “that gets one closer to their goal.” So a strategy is a systemic plan of action that gets one closer to their goal. Systematic means carried out in a methodical and organized manner or a step-by-step approach and the success of your strategy depends on how well you follow and do each step of your strategy.

In our book How to Achieve Wealth for Life we explain a buy and hold property strategy that enables you to build your property portfolio over time using your equity. This is a different strategy to property development as covered in our recent seminar tour with Carly Crutchfield (who’ll be visiting Perth and Newcastle next month, for more details click here). There are thousands of strategies you can follow, the key is to decide which one suits you, taking into account your available time, experience and personality. Once you find which strategy suits you, then do all you can to learn about the strategy and follow it.

This is the answer to our initial question at the beginning of this article - What can the investor do to proof themselves for any future repercussions? The answer is: follow your strategy. If you don’t have one, then you better deicide on one quick regardless of any current economic turmoil, for investing without a clearly defined strategy is like driving a car with no destination in mind. If you find that your strategy is harder to follow now because of tight economic constrains or inability to get finance, this is where you need to start thinking outside of the square. How can you get it to work? Don’t use it as an excuse to stop, rather use your challenges as a means to improve yourself and your strategy.

I hope this article has given you some insight. I’d be pleased to hear your feedback and feel free to ask any questions. Please email news@knowledgecentre.net.au or simply reply to the newsletter email.

The next and final chapter in this Sublime Sub Prime series will answer the question: Why did this happen? I consider this one the most important question of all!

Until next time – don’t get distracted, just follow your strategy and get closer to your goal.

Author & Founder

books by Tony Melvin