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Dear |
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 An invisble entrepreneur - We have heard that we should not "work in our business", rather we should "work on our business". What about "working out of our business"? In their insightful book, The Invisbile Entrepreneur, the authors Louise Woodbury and William De Ora challenged entrepreneurs to take three months off. When you return to your business after three months and find that it is carrying on without you and is continuing to bring in the income and its value is growing - you have a business that is an investment paying dividends - you are working outside of your business : you are an Invisible Entepreneur. If your business cannot operate without you, you may have created a job for yourself.
Compare this with property investing. We can mostly agree that property investing is not a job we created for ourselves. Property investing is a business : it has customers (tenants), rental income, property expenses, taxes and growth. And is an investment. Once the structure is set up : due diligence, acqusition, loan accounts and property manager appointed - the investor can be invisible. The investor can be free to do other things while the property works.
Doing it safely - Investors want to be safe. Review the following :
- the Buy Rules - buy prime, where tenants who pay well want to live, buy scarcity.
- the Affordable Rules - how much per week can you put aside to hold a rental property? Is it $100 per week. Double that amount to $200 per week, to see if you can still afford it - for contingencies such as vacancies, lower rents and higher mortgage interest . Use this affordability to find the property.
- the Buffer Rules - have you created a buffer account or a bank facility that is a working capital for you to draw on if needed as cash drawings to service the property. The bank facility could be created from existing equity. In the preceeding point, for example, you determine a prudent cash flow of $200 per week to hold the property . If you have $10,000 in a buffer , you created a 50 weeks ( approximately one year) safety period : ( $10,000 divide $200 per week). With $30,000 in the buffer account, you have approximately 3 years buffer : where rents may decrease and interest may rise or your usual income became unpredictable - you still have the resource to hold it for three years for reasonable and better conditions to return.
Sincerely - Your team at Astute.
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| Article features:
$19 million city sale
Stock highlights |
Our property market : Housing finance. New dwellings. Confidence.
1. Housing finance :
In April, the Reserve Bank dropped the cash rate another 25 basis point to 3%. In recent weeks, fixed home loan rates have risen, suggesting we may be at the bottom of the current rate-easing cycle. The major banks are set to lift fixed rates by 40 basis points this week putting the cause to rise in wholesale rates which have climbed sharply since March - a sign that the financial markets are more confident that the global recession will not turn into a depression. The Commonwealth Bank's ( Australia's largest mortgage lender) fixed rate stands at 5.39% and is set to raise interest on fixed rates loans by 20 to 45 basis points.
Financing volumes from the chart below show :
- First home buyers finance increased to 20%, quite obviously from the first home buyers' boost provided by the government.
- Existing ( second or subsequent) owner occupiers finance were steady at around 50% January 2009.
- Investors were waiting for interest to plateau and did 30% of the activities.
2. New Dwellings:
We continue with an undersupply status. Our underlying demand is 180,000 new dwellings per year. New approvals in December 2008 was under 150,000.
3. Confidence :
The "Time to buy a dwelling index" indicates that since the weight of the global crisis in September 2008, confidence are returning and indeed exceeded the 2006 peak.
Temporary Investment allowance for business. Business have another opportunity to reduce tax and invest now to be ready for growth when the global financial crunch abates. The government announced a once off tax deduction equal to 30% of the cost of eligible equipment and motor vehicles. This is in addition to the standard depreciation claimed on the assets. The main points are :
- new assets
- cost price in excess of $1,000 for companies with turnover of under $2million a year, otherwise minimum $10,000 cost for big business
- eligible capital equipment
- acquired or ordered between 13 December 2008 and 30 June 2009
- installed and ready for use by 30 June 2010
Please check the Tax Office website.
$19 million city sale. Mining magnate Clive Palmer has purchased 380 Queen Street for $19 million. The 10 - storey office tower on a site of approx 916sm has approx 4,400sm of prime commercial and retail space. It is 85% leased with net income of $2.2million. There is a development approval to add a further 3,500sm of office space at the rear.
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Stock Highlights :
 Easy entry price under $300,000. Positive cash flow. 6% p.a rent guarantee for 2 years ( net : no property management fees) : Cairns One Apartments (Cairns inner city). Completed. Tax claims for 2008/2009.
- Off-the-plan strategy .
 Plan to have a prime property in 2011 in the CBD waterfront : SOLEIL. Vendor finance for 2 years at 5.25% p.a or rental guarantee for 2 years at 6% p.a.
- CBD direct waterfront.
 Positive cash flow , tax deductions for 2008/2009.
- EVOLUTION Apartments. Capital growth potential.
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Property Investments for Financial Security.
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