Thursday, 25 September 2014


This is an article I found on the internet by Michael Yardney, a popular property commentator.
I have republished it without alteration because it is spot on. I hope you all get something out it.

·         Michael Yardney
·         Michael Yardney's Commentary, Property Investment, Where to buy investment property
·         September 25, 2014

Everyone knows that location is critical when selecting an investment property that will outperform.

But what makes a good location and why are some locations better prospects than others?

When I started investing around 40 years ago the emphasis for homebuyers was largely affordability and proximity to infrastructure.

The outer fringes of our capital cities were developed in the wake of freeway extensions on all sides and commuting from vast, newly born suburbs into the CBD became commonplace.

As far as amenities went, as long as you had a relatively easy drive to your place of employment, as well as nearby shops, healthcare services and schools, life was pretty good.
It’s different today

Nowadays the property choices Australians make are still driven by lifestyle, but how we think and function in today’s world has changed.

With more than half Australian households having only one or two people in them, more of us are:

·         Choosing to start a family later in life.

·         Enjoying the opportunity to work flexible hours and from home offices.

·         Seeking better work-life balance and prioritizing downtime before overtime.

·         Opting to live within walking distance from not only infrastructure necessary for daily living, but also cafes, restaurants and recreational facilities, as lifestyle moves to the top of the owner-occupier and tenant wish list, alongside affordability.

·         Downsizing to easily maintainable and cost effective apartments and townhouses, with smaller gardens and more efficient, compact design.
A short stroll to success

This means that “walkability” has become the new buzzword on the property investment block.

Of course proximity to amenities such as shops, parks and public transit that allows local residents to either walk or take a short train, bus or tram ride, has long underpinned property values in inner city neighborhoods throughout the developed world.

But now we are witnessing a similar trend across an increasingly cosmopolitan Australia.

In fact it is common for a considerable premium to be paid for properties that are a short walk to the beach or café strips and long term capital growth figures show that in Sydney the city’s most “walkable” suburbs have outperformed the averages by up to 20%.
Where it’s “at” – the café culture

It should come as no surprise that as our lives become busier and time is in increasingly short supply, cafés have become a kind of transition point where we meet up with friends, family and often business associates for a “catch up”.

Many city dwellers have their favored haunts, where they’re on a first name basis with the local barista and have a “regular” order.

The serving and consumption of coffee has become somewhat of a ritual and many of us fancy ourselves as coffee connoisseurs.

Given that more of us are living alone or in smaller households, it’s not surprising that the relaxed, “home away from home” vibe of inner city cafes is becoming an increasingly popular draw card for those seeking a familiar social outlet.
Lifestyle locations dominate

Yes…lifestyle has undeniably become the fundamental force in today’s residential real estate market.

Culturally, we have become a nation that enjoys strolling to the local corner eatery to catch up with friends or just enjoy some time out with a latte.

But it’s not only suburbs close to beach and bay that command premium. Proximity to schools with a good reputation is a must for many family buyers, with some purchasers prepared to pay extra to be within a particular school catchment zone so their children can either walk, bus or “train it” to school.

In fact in my experience, parents are more willing to spend half an hour or more driving to work if it means their children can safely walk to an esteemed, local school.
Australian cities have now been ranked by Walkscore

As our population grows and our major cities increase in population by an estimated 10% over the next five years the walkability of an area will be become an even more important consideration for property investors seeking locations that will outperform into the future.

Well…now you can find out how “walkable” your suburb is., which measures the number of typical consumer destinations within walking distance of a dwelling, with scores ranging from 0 (car dependent) to 100 (most walkable) has recently ranked more than 100 Australian cities and 3,000 suburbs.

And the good news is that walkable neighborhoods were recently recognized for their health and economic benefits afforded to residents by the University of Melbourne, where a ten year study found good access to local infrastructure encouraged more people to ditch the drive and adopt “health-enhancing behaviors”.

For property punters, the cultural transition that Australians are currently undergoing is important to note.

It signals an end to the suburban Mc. Mansion “fad” and demonstrates just how crucial demographic waves of change can be to planning and executing a successful, long term property portfolio.

While affordability will always be a factor in our property decisions, lifestyle is the fundamental key in our marketplace today.

Inner city, bayside apartments filled with character and complemented by flowing, commonsense floor plans, with excellent nearby lifestyle amenity have become the “new black” in residential real estate for many buyers – young and old.

This is where investors would do well to focus their property investment activity in years to come.


Thursday, 18 September 2014

Why finance is the reason you invest in property

Why finance is the reason you invest in properties –

property itself is merely a vehicle...

We all know the quickest way to create wealth is to use other people’s money, and this is exactly what finance is all about. Property happens to be one of those asset classes that can convince other people to lend you their money easily. The underlying growth of the property itself is not necessarily better than other assets such as shares, but their price stability and sustainable growth over long term have enabled us to use more of other people’s money.

Investing in anything ( not necessarily property) is about getting the best return with the lowest possible risk.  And there is always a balance of risk and return to consider before starting our on any investment activities.

But it can also increase your risk and lower your return through


if you don’t manage it properly.

Ironically, the majority of property investors spend most of their time and effort searching for the best

property deals. They will seek finance to match the deal they find. In fact, a lot of them fall in love

with the deal even when there is very little finance available to make it a viable investment.

The message is that you should start with finance in mind before

you look for any property deals.

If you know what finance options are available to you before you start looking, you’re more likely to

stick to your investment strategy and get the return that you want.

Property deals are merely the

vehicle you choose to realise the finance strategies available to you, not the other way


. Unfortunately 90% of property investors do it the other way around.

Many property investors believe that property finance is about getting the cheapest interest rate.

Interest rate is definitely not unimportant

, but for investors who have a set of finance strategies in

place, it’s normally the last thing they consider after many other components such as:

gearing ratio


terms and conditions, etc.

House prices ALWAYS go up!

Some interesting data came out of the Reserve Bank recently. They have been tracking house prices and movement back to 1950. That is even before I was born… just.

It turns out that house prices have gone up since 1950… what!

They pay people lots of money to come up with that sort of revelation.

But actually the research has been more useful than just that because what they have done to give it more relevance is to strip out inflation.

So when it says that the median house price was about $100,000 in 1950, that wasn’t what the market price was back then, it was a lot less. That is in 2014 dollars, given what money buys you today. It is an interesting way of looking at it.

So when you look at the graph above you will notice that it was fairly flat through the late 70s and early 80s spiked in the early 90s to catch up to where it should be if you drew an average line through the graph and then flattened again later in the 90s. That was when inflation was high. So for example, if inflation was 17% as it was during the 80s and the graph is flat that means that property was keeping pace with inflation, hence 17 – 19% growth. Those of us that invested then will know that was the case. I bought quite a few apartments in those days and they doubled in value in just over 3 years.

So what does all this mean for the average investor?

It means that house prices go up consistently even during periods of high inflation.

It means that property is a good investment even in bad times so long as you hang on through the tough times.

It also means that anyone investing for anything less than about 7 years is gambling with the possibility that that might have hit one of the flat periods.

We have just gone through one of those flat periods similar to the early 90s so it would be reasonable to suggest that we might see a few years of catch up growth.

But it is important to realize that these figures represent the average… and there will be properties that underperform the average and there will be some that will out preform the average. That is where Investment Property Finders can help!

Give us a call on 1300 131099 if you are considering property investment in the next 12 months.


Wednesday, 3 September 2014

Who influences your property investment decisions?

Who influences your property investment decisions?

Family, friends, the media, your next door neighbour or your hairdresser…
Everyone has an opinion about property investing. A lot of our clients that come through our doors seem to be making property investment decisions without accurate information.

There is also a lot of misinformation out there.

Take one of our clients for example. He had some general questions about positive cash-flow property. It quickly became apparent that he had been sold on a story that doesn’t address his needs and goals, but was a good and compelling story none the less.
If he went ahead he might have a property that was going to put a few dollars in his pocket each week but if it did not grow in value (or even went down in value) over the long term what had he really achieved other than to tie up his borrowing potential and expose himself and his family to risk of a change in circumstances?

And then I realised that therein lies the problem, a lot of the misinformation about property investment is based around what are quite compelling stories. But those stories leave out crucial pieces of information or don’t address the real needs of the client.
It is the compelling nature of the story that gets people hooked. And then it is hard for them to see the truth without being embarrassed.
I guess that “spin” has found its way from Government and Politics and into property investment, and that is a real shame. (Safety Cameras... Ha! they are just Cameras the rest is "spin")

Take NRAS for example; thankfully it is gone now, but when it was being promoted the marketing material said that these properties were aimed at providing affordable rental accommodation to service industry worker like Teachers, Police Officers and Ambos etc.
But the bit they glossed over was that the maximum income an NRAS tenant could earn was less than about $50,000 per annum for a single person and a bit more for married and families. The only Teachers etc. that would earn less than that income would be working very part-time. So who was it really aimed at?

What NRAS really was, is social housing. The Government wanted to get out of providing housing to those that can’t afford it. The cost to them in unpaid rent and damaged properties was overwhelming their budget. So to pay $10,000 pa to get someone else to take on the problem was a bargain.
I am not saying that every NRAS property was a disaster. There are some very nice people renting NRAS properties but we have been told by some of the Property Managers that there is a higher than average number of NRAS properties that are significantly in arrears with their (discounted) rent and similarly large number that have been badly damaged. These were brand new houses, and unfortunately a lot were in areas that will not experience much growth over the long term. Particularly given the high numbers of NRASs that were built in some suburbs. So they could be hard to sell in the future and by the time you repair the damage will be over capitalised if they are not already.

But on the other side of these transactions were very high commissions paid to the sales agents in a lot of cases as encouragement to “sell the story”. It is a bit like I heard that Malaysian Airlines were paying Travel Agents double commission if they could get people to fly with them. Is that the right way to sell a product or to fix a problem?
This is just a couple of example of the misinformation that is guiding people into making poor investment decisions.


What we do is look at your circumstances and your needs and goals.
Then we establish a budget of what you should spend on a property in both total price and a net cost per week.
We then locate properties that fit into that total price budget and do some extrapolations as to what growth should be achievable from that property given the history of the area and what upcoming economic factors we know about that might affect the future.
We then compare that to the net cost to determine whether it is a worthwhile investment. Sounds simple when you put it like that!
What we wish for is that all property investors were able to get more accurate and reliable information before making a property decision?
So email me your questions and I will do my best to get back to everyone.
All the very best to you...

Graeme Clark

Wednesday, 6 August 2014

Leverage makes a huge difference to the Growth of a Super Fund…

I am often asked, “What are the advantages of buying property in Super?”

We are all different and while there are actually many reason and I have listed some of the more common ones at the end of this document for me I think that the most significant is


Let me give you an example of the significant difference leverage makes to a super fund growth.

Let’s assume your Super Fund has $120,000 in it, and it earns 8% each year after expenses.
(NOTE: That is hard to do nowadays…)

Ignoring fees, MERs and other expenses it will grow at $9,600p.a. plus yours and your employer’s contributions.


You use that $120,000 to buy a property for $400,000, borrowing $300,000. You would use $100,000 from the fund as deposit and the $20,000 to cover Stamp duty and other costs (approx. only).

That property only has to increase in value by 2.4% pa to get the same $9,600.

Which do you think is more likely 8% every year from your existing investment or 2.4% from a well located property?

History has shown that properties average above 7% in growth over the long term so if that continues then your fund would have an average growth of at least $28,000. Some well-located properties will exceed this (over the long term).

But there is more…

The property would be cash-flow positive from day one:

Mortgage on $300k @ 5% = $15,000 (may increase in the future but unlikely for a couple of years)

Rent on $400k @ 4.5% = $18,000 (rent will increase over time)

So growth of $28,000 + (18,000 –15,000) + Tax Deductions for depreciation = over $31,000 per annum + your and your employers contributions.

Your Super Fund growth would be in excess of $31,000 per year (on average) compared to $9,600 under the existing scheme.

The excess of funds can be used to reduce the principle of the loan so you should be able to pay off the loan in about 12-15 years or less. Then the rent and growth are positive cash-flow into the fund.

Then after retirement the growth and rent from the property are CGT and Tax free.

Because property is a less volatile asset this strategy is a “set and forget” strategy.

Other reasons are:

       You might want a more stable asset in your Super

       You might not have enough equity for the deposit the Bank requires as an ordinary investment (10% for most lenders).

       You might have existing properties already and the Bank won’t lend you anymore money.

       You might want to minimise CGT on the growth of the property.

       You might not want to have any more properties affecting your personal cash-flow.

       And there is another very big reason… Property continues to grow in value even after you have retired and ceased contributions. It may even be possible that the growth alone exceeds your income requirements in retirement.

For more information about Property investment within Super consult your Accountant, Financial Planner or give us a call 1300 13 10 99


Tuesday, 8 July 2014

Is Property Investment like Monopoly or Snakes and Ladders nowadays?

I remember when property investment was easy…

Buy a house in the street you live in and put a tenant in to help pay the mortgage.

Then sometime in the next few years the rent would have increased to the point where it was paying the mortgage so the property was paying for itself.

Over time the property increased in value so you were creating wealth without it costing you any money.

That was called negative gearing and it worked.

But now we have Property Marketers and it seems that they are all Australia’s #1 property educator, and it has all got a little bit more complicated.

The big thing nowadays is Positive Cash-flow, whether that be through NRAS or buying “Smart” or buying in an area where rents have gone through the roof due to lack of supply eg. mining areas.

So does all this new complication actually work? Do we have better investment opportunities today?

The truth is, with interest rate where they are at present it is not too hard for a property to be positive cash-flow but where will that property be in 10 years in value and what will be the current interest rates then?

Well, I was having lunch the other day with a couple of clients that have each bought a number of properties with my help over the last 10 years.

One of them said that he had met a person that was a Property Manager for NRAS properties. She manages about 200 properties for her employer.

For those that don’t know NRAS stands for National Rental Affordability Scheme so it stands to reason that the tenants are getting lower (more affordable) rent. Well that is the intention of NRAS.

You would think that those tenants would appreciate the benefit they are getting but according to this Property Manager the tenants don’t appreciate it at all and many are significantly in arrears with their rent and many of the properties have been substantially damaged… some have been trashed. These were brand new properties in the last few years.

About 3 or 4 years ago I had told both of these clients that I didn’t think NRAS properties would turn out to be good investments, so you can imagine how my credibility rose after those comments from the Property Manager.
But it goes further than that…
A couple of years ago an Accountant that I was working with at the time had suggested to me that according to his research, mining towns were a great investment with house prices rising quickly and rent going through the roof. These were properties that were substantially Positively Geared. Rents for example in Moranbah Qld had recently risen to $2000 per week.

My advice to him and to our mutual clients was that the situation was both unsustainable and likely to attract too much attention from Builders wanting to cash in.  That attention would create an over-supply of properties and hence cause a catastrophe of price collapse.

Well I saw the other day that rents in Moranbah were down to about $300 per week for a house that depending when in the boom you bought it, you might have paid between $500,000 and $1m to buy.

The going price for such a house today is under $400,000 if you can find a buyer.

So what does all this tell us?

And more importantly what lessons can we learn from this experience?

Property investment can be easy but just as easily it can be quite complicated. We all feel we know property because we have all grown up with it. We have all played Monopoly and we think it is that simple. Throw the dice, land on a property, buy it and collect the rent.

I would say that from my experience property investment today is more like Snakes and Ladders.
Property is a great investment vehicle with many advantages over other investments but wherever there is a great opportunity there are even greater opportunists.
There are some good property investments out there that will help you grow your wealth but there are also some Snakes that if you land on one will take you back to start all over again.
My final word on this subject is "Be careful what you buy and who you get advice from..."
Graeme Clark
1300 131099




Monday, 21 April 2014

Life expectancy is one of my pet subjects and I read an interesting article the other day about medical advances to watch in 2014.

They include making body parts in a 3D printer and in the fight against cancer, cancer immunotherapy, where our body’s immune system is taught to fight the cancer without chemotherapy. Read the full article here, it’s very interesting…read more

I am fascinated not only by how dramatically our life expectancy is changing, but how far behind our collective thinking is to this. We are going to live a lot longer than any other generation.

Every generation lives longer than the previous but in the past that has been by just a few years. But now we are looking at medical advances that will have us living 20 -30 years longer.

It is one thing to live longer but that brings in a huge problem that everyone seems to be ignoring… Our money needs to last longer, too! Or we will simply run out of money and the current pension scheme won’t be able to handle it.

Many of us will live into our 90s and some well beyond that. So how can we build up enough reserves for these decades in retirement?

If Joe Hockey gets his way and we retire at 70 and we live beyond 90 with a modest income of $50,000 that means we need to have more than $1,000,000 in savings or super. Make that retire at 65 and live to 95 and it becomes $1.5M… and if you would like more than $50,000 a year to live on, well it becomes a very big number indeed.

How can we make the money last that long?

The importance and significance of these questions is amplified when you consider that our entire retirement system is built on a superannuation system that pretty much stops growing in value the day we retire and start drawing on it.

Even more interesting is the fact that high profile researchers openly talk about the possibility of a 20 year bear share market where our life savings would not grow at all for that time.

It’s not all bad news though… If you plan to LIVE more than 10 years then it’s not too late. We can still do something about it!

Some of our clients were over 60 when they started.

We all need to consider “Future Proofing” our retirement plan and to do that we need to take more control over it.

Our next few seminars will be about just that:

How to Future Proof your financial future?

What you will learn:

  1. How much money do you need?
  2. Why is property totally different to shares when it comes to your retirement income?
  3. Investing in property inside and outside of Super.
  4. What is the difference between a normal super account and SMSF?
  5. Who should consider an SMSF?
  6. How to set up your own SMSF?
  7. What are your responsibilities?
  8. What are the risks?
  9. Why invest in property in a SMSF?
  10. Case Studies

There will be a FREE Information Bulletin (hand out) available at the end of the seminar “Why use your SUPERANNUATION to buy and INVESTMENT PROPETY”.

This seminar should give you the knowledge you need to decide whether a property in a SMSF is right for you.

These seminars are 1hour 45 minutes (incl Q&A) and based in our Adelaide office boardroom.

Call 1300 131099 if you would like to attend.

For more information about property investment go to: