Wednesday, 07 April 2010
RP Data’s national research director Tim Lawless has slammed claims Australia is currently in a housing bubble.
According to Mr Lawless, a housing ‘bubble’ suggests housing values increased too rapidly and are set to experience a rapid decline, a fate not likely to come to fruition in Australia.
“Bubble is a word that has been used pretty loosely in relation to Australia’s real estate market since about 2003. Generally I would disagree with using this term,” he told Real Estate Business.
“Across Australia’s capital cities, home values have increased by just 6.2 percent per annum over the last five years – a rate of growth that is in line with wages growth which has been 6.0 per cent per annum over the same time frame.
“Rather than experience a rapid decline, my view is that home values will continue to show modest growth due to the ongoing under supply of dwellings and rapid population growth that creates demand for housing.”
Mr Lawless said despite the fact that 14,000 new homes are approved for construction each month, the rate of new dwelling approvals is much lower than what is required – approximately 17,400 new homes need to be approved each month.
“With such strong demand for new housing and an ongoing undersupply together with improving consumer and business confidence, it is reasonable to expect that the building industry will lift their game and start producing more housing stock. The strategic imperative is to deliver stock to the market that is aligned with consumer demand. That means a focus on developing affordable and well located housing stock,” Mr Lawless said.
Wednesday, April 7, 2010
Tuesday, April 6, 2010
Wow ! Property is still the flavour in Australia.
Record home prices; Consumers curb spending
Home prices; Retail trade; Building Approvals; Private sector credit
• The RP Data-Rismark Hedonic Australian Home Value Index – the largest property database in Australia – reported that home prices rose by 1.4 per cent in February to record highs, after rising by a upwardly revised 2 per cent in January. Home prices are up 12.7 per cent on a year ago – the fastest rate in 25 months.
• Aussie consumer pared back on spending, with retail sales falling by 1.4 per cent in February. Department stores, retail chains and other large retailers recorded trend growth of just 0.1 per cent in February – the weakest reading in records going back almost 16 years.
• Dwelling approvals fell by 3.3 per cent in February, with the majority of the weakness centred on a slump in private sector apartments and houses. Dwelling approvals are still up 34.2 per cent on a year ago.
• Private sector credit rose by 0.4 per cent in February. Personal and housing credit were the key drivers, but business credit fell again. In annual terms personal credit was up 1.4 per cent - a 17 month high.
What does it all mean?
• Are below normal interest rates creating a housing bubble? Clearly that is likely to be a question that will be discussed by Reserve Bank policymakers at the interest rate meeting next week. And the latest round of data has added further colour to the debate.
• Despite four rate hikes house prices are continuing to defy the global property slowdown, rising by a further 1.4 per cent in February, with the annual growth rate at a 25-month high. While on the other side of the coin the withdrawal of stimulus has resulted in a slide in retail spending and building approvals.
• The latest round of retail sales data clearly highlights the difficult landscape faced by retailers. Consumer confidence maybe buoyant, however it certainly is not translating into robust spending. The anecdotal evidence suggests that retailers are continuing to discount in an attempt to entice consumers and CommSec would expects this trend to continue over the next few months.
• Department stores and large retailers which have been more successful in the past, compared to smaller retailers (given their ability to trim prices) have this time round highlighted the weak trading environment. Trend growth for the large retailers posted at a meagre 0.1 per cent in the latest month – marking the weakest reading in almost 16 years
• The weakness in the latest retail sales result effectively suggest that retail sales has been pretty flat since the start of the year – a result that has also been evident in the release of our Commonwealth Bank Business Sales Indicator (BSI).
• Dwelling approvals have slumped for the second consecutive month, with the majority of the weakness centred on private sector apartments and homes. It is understandable that a period of consolidation is to be expected after what has been a phenomenal run over the last year and given the expiry of the first home buyer boost. Looking forward the housing sector is likely to cool over the next few months, however the sharp surge in construction loans over the past year will continue have multiplier effects through the economy – a result that has shown up in the retail sales data with furniture, home improvement retailers recording the best annual gains in more than three years.
• The healing process continues for lending, but it will be some time before growth rates are restored to normal levels. Personal lending is now starting to tick higher with the annual growth rate holding at a 17-month high, though early days still an encouraging sign on future activity.
• The latest figures on home prices indicate that a move to a more neutral interest rate setting will be on the agenda over the next few months. However given the weakness in consumer spending and building approval, the Reserve Bank should not rush the rate rise – especially given that the inflation environment remains very weak. On balance, CommSec believes that a pause in the rate hiking profile is likely to be the most likely outcome at the April meeting.
What do the figures show?
House Prices
• The RP Data-Rismark Hedonic Australian Home Value Index rose by 1.4 per cent In February after rising by a revised 2 percent in January.
• Home prices are up 12.7 per cent on a year ago from a low base. Annual growth is the fastest in 25 months.
• Over the three months to February the fastest price growth occurred in Melbourne (up 5.4 per cent) followed by Darwin (up 4.2 per cent), Sydney (up 3.8 per cent), Canberra (up 2.7 per cent Adelaide (up 3.2 per cent), Brisbane (up 1.8 per cent), and Sydney (up 1.7 per cent). Perth prices fell by 0.6 per cent while Hobart prices fell 0.1 per cent.
• In all capital cities home prices are higher than a year ago. Leading the way is Darwin (up 19.7 per cent) followed by Melbourne (up 19.3 per cent), Canberra (up 14.7 per cent), Sydney (up 12.3 per cent), Adelaide (up 9.1 per cent), Perth (up 7.5 per cent), and Brisbane (up 6.5 per cent).
• RP Data-Rismark calculates the median capital city house price across Australia at a record high of $548,413 with the median unit value at $450,619.
Retail trade:
• Retail trade fell by 1.4 per cent in February after a 1 per cent fall in January. In annual terms retail sales is up 3.4 per cent on a year ago – well below the long term average of 6.5 per cent.
• Sales by chain stores and other large retailers fell by 1.2 per cent in seasonally terms in February while sales by smaller retailers fell by 1.8 per cent. In annual terms sales at chain stores were up 5.3 per cent on a year ago while smaller retailers saw spending rise by just 0.3 per cent.
• Sales rose most at Furniture, floor covering and home ware store (up 1.9 per cent). In annual terms sales at furniture, floor covering and home ware stores rose by 11 per cent – the biggest annual increase in over 3 years.
• Sales fell the most at liquor retailers (down 5.1 per cent), department stores (down 3.9 per cent) and clothing and footwear retailers (down 3.9 per cent).
• Retail trade was down across all states except Tasmania (up 1.5 per cent) and Northern Territory (up 0.9 per cent). Spending fell most in NSW (down 2.5 per cent), South Australia (down 1.7 per cent), Western Australia (down 1.4 per cent), Victoria (down 0.9 per cent), ACT (down 0.8 per cent), and Queensland (down 0.8 per cent).
Building Approvals:
• New dwelling approvals fell by 3.3 per cent in February after falling 5.5 per cent in January. Dwelling approvals are now up 34.2 per cent on a year ago.
• House approvals rose by 0.7 per cent (private sector down 0.9 per cent) after rising 0.4 per cent in January. Apartment approvals fell by 12.3 per cent in February (private sector down 10.9 per cent) after sliding by 16.6 per cent in January. In annual terms apartment approvals are up 30.3 per cent on a year ago.
• Overall, the total value of building approvals (new houses, alterations and commercial) fell by 4.5 per cent in February to $5.9 billion. Commercial approvals fell by 13.0 per cent after sliding by 40.1 per cent in January. New residential approvals rose 0.5 per cent while renovations rose by 6.2 per cent.
• Over the year to January, total building approvals totalled $80.1 billion.
Private sector credit
• Private sector credit rose by 0.4 per cent in February after rising by 0.4 per cent in January. But the annual growth rate rose from 1.3 per cent to 1.6 per cent.
• Housing credit grew by 0.7 per cent in February with annual growth holding at a 17-month high of 8.5 per cent. Personal credit rose by 0.4 per cent in February after a 0.5 per cent increase in January. Personal credit is up 1.4 per cent over the past year – a 17-month high. And business credit fell for the 13th straight month, down by 0.1 per cent in February. Business credit is down 7.6 per cent on a year ago.
What is the importance of the economic data?
• The RP Data-Rismark Hedonic Australian Home Value Index is based on Australia’s biggest property database including over 280,000 sales during 2009. Unlike the ABS Index, which excludes terraces, semi-detached homes and apartments, the RP Data-Rismark Hedonic Index includes all properties.
• The monthly RP Data-Rismark Hedonic Index compares month-to-month index results. Quarterly results are measured comparing end months rather than averaging each month in the quarter. For example, the first quarter of 2009 index results compare the end of March index with the end of December index.
• The Bureau of Statistics’ Retail trade publication contains the most current readings on the performance of consumer spending. The ABS surveys 500 ‘larger businesses’ and 2,750 ‘smaller businesses’. Retail trade covers spending at a broad range of retail outlets but excludes both petrol and motor vehicle sales. A weak retail trade result may point to a slowing economy as well weighing on the share prices of listed retail stocks. But retail trade estimates can’t be assessed in isolation – it is important to look at the influences determining future trends in consumer spending, such as income, employment and confidence levels.
• The Bureau of Statistics' monthly Building Approvals release contains figures on local council approvals to build residential structures such as homes and units as well as commercial premises such as offices and shops. Approval is one of the first stages of the construction ‘pipeline’ and is thus a key leading indicator of future activity. An increase in approvals would point to stronger future activity for construction-related companies.
• Private sector credit figures are released by the Reserve Bank on the last working day of the month. Credit is separated into three categories – housing, other personal and business. Private sector credit is effectively the amount of loans outstanding in the economy. If growth in lending is strong then it suggests that credit from financial institutions is freely available, underlying demand for assets such as cars and houses is firm and that the price of credit (interest rates) is attractive.
What are the implications for interest rates and investors?
• For home-owners, the strong gains in house prices represent great news, serving to boost wealth levels and confidence. With most of the stimulus being pared back and the likelihood of further rate hikes, it is likely to dampen enthusiasm in the housing sector.
• CommSec expects that home prices will rise 5-8 per cent over 2010 and movements in prices over the last few months are consistent with those forecasts.
• The weakness in building approvals and volatility in retailers will ensure that the Reserve Bank treads warily in the rate hiking cycle.
Source Savanth Sebastian, Economist, CommSec
Home prices; Retail trade; Building Approvals; Private sector credit
• The RP Data-Rismark Hedonic Australian Home Value Index – the largest property database in Australia – reported that home prices rose by 1.4 per cent in February to record highs, after rising by a upwardly revised 2 per cent in January. Home prices are up 12.7 per cent on a year ago – the fastest rate in 25 months.
• Aussie consumer pared back on spending, with retail sales falling by 1.4 per cent in February. Department stores, retail chains and other large retailers recorded trend growth of just 0.1 per cent in February – the weakest reading in records going back almost 16 years.
• Dwelling approvals fell by 3.3 per cent in February, with the majority of the weakness centred on a slump in private sector apartments and houses. Dwelling approvals are still up 34.2 per cent on a year ago.
• Private sector credit rose by 0.4 per cent in February. Personal and housing credit were the key drivers, but business credit fell again. In annual terms personal credit was up 1.4 per cent - a 17 month high.
What does it all mean?
• Are below normal interest rates creating a housing bubble? Clearly that is likely to be a question that will be discussed by Reserve Bank policymakers at the interest rate meeting next week. And the latest round of data has added further colour to the debate.
• Despite four rate hikes house prices are continuing to defy the global property slowdown, rising by a further 1.4 per cent in February, with the annual growth rate at a 25-month high. While on the other side of the coin the withdrawal of stimulus has resulted in a slide in retail spending and building approvals.
• The latest round of retail sales data clearly highlights the difficult landscape faced by retailers. Consumer confidence maybe buoyant, however it certainly is not translating into robust spending. The anecdotal evidence suggests that retailers are continuing to discount in an attempt to entice consumers and CommSec would expects this trend to continue over the next few months.
• Department stores and large retailers which have been more successful in the past, compared to smaller retailers (given their ability to trim prices) have this time round highlighted the weak trading environment. Trend growth for the large retailers posted at a meagre 0.1 per cent in the latest month – marking the weakest reading in almost 16 years
• The weakness in the latest retail sales result effectively suggest that retail sales has been pretty flat since the start of the year – a result that has also been evident in the release of our Commonwealth Bank Business Sales Indicator (BSI).
• Dwelling approvals have slumped for the second consecutive month, with the majority of the weakness centred on private sector apartments and homes. It is understandable that a period of consolidation is to be expected after what has been a phenomenal run over the last year and given the expiry of the first home buyer boost. Looking forward the housing sector is likely to cool over the next few months, however the sharp surge in construction loans over the past year will continue have multiplier effects through the economy – a result that has shown up in the retail sales data with furniture, home improvement retailers recording the best annual gains in more than three years.
• The healing process continues for lending, but it will be some time before growth rates are restored to normal levels. Personal lending is now starting to tick higher with the annual growth rate holding at a 17-month high, though early days still an encouraging sign on future activity.
• The latest figures on home prices indicate that a move to a more neutral interest rate setting will be on the agenda over the next few months. However given the weakness in consumer spending and building approval, the Reserve Bank should not rush the rate rise – especially given that the inflation environment remains very weak. On balance, CommSec believes that a pause in the rate hiking profile is likely to be the most likely outcome at the April meeting.
What do the figures show?
House Prices
• The RP Data-Rismark Hedonic Australian Home Value Index rose by 1.4 per cent In February after rising by a revised 2 percent in January.
• Home prices are up 12.7 per cent on a year ago from a low base. Annual growth is the fastest in 25 months.
• Over the three months to February the fastest price growth occurred in Melbourne (up 5.4 per cent) followed by Darwin (up 4.2 per cent), Sydney (up 3.8 per cent), Canberra (up 2.7 per cent Adelaide (up 3.2 per cent), Brisbane (up 1.8 per cent), and Sydney (up 1.7 per cent). Perth prices fell by 0.6 per cent while Hobart prices fell 0.1 per cent.
• In all capital cities home prices are higher than a year ago. Leading the way is Darwin (up 19.7 per cent) followed by Melbourne (up 19.3 per cent), Canberra (up 14.7 per cent), Sydney (up 12.3 per cent), Adelaide (up 9.1 per cent), Perth (up 7.5 per cent), and Brisbane (up 6.5 per cent).
• RP Data-Rismark calculates the median capital city house price across Australia at a record high of $548,413 with the median unit value at $450,619.
Retail trade:
• Retail trade fell by 1.4 per cent in February after a 1 per cent fall in January. In annual terms retail sales is up 3.4 per cent on a year ago – well below the long term average of 6.5 per cent.
• Sales by chain stores and other large retailers fell by 1.2 per cent in seasonally terms in February while sales by smaller retailers fell by 1.8 per cent. In annual terms sales at chain stores were up 5.3 per cent on a year ago while smaller retailers saw spending rise by just 0.3 per cent.
• Sales rose most at Furniture, floor covering and home ware store (up 1.9 per cent). In annual terms sales at furniture, floor covering and home ware stores rose by 11 per cent – the biggest annual increase in over 3 years.
• Sales fell the most at liquor retailers (down 5.1 per cent), department stores (down 3.9 per cent) and clothing and footwear retailers (down 3.9 per cent).
• Retail trade was down across all states except Tasmania (up 1.5 per cent) and Northern Territory (up 0.9 per cent). Spending fell most in NSW (down 2.5 per cent), South Australia (down 1.7 per cent), Western Australia (down 1.4 per cent), Victoria (down 0.9 per cent), ACT (down 0.8 per cent), and Queensland (down 0.8 per cent).
Building Approvals:
• New dwelling approvals fell by 3.3 per cent in February after falling 5.5 per cent in January. Dwelling approvals are now up 34.2 per cent on a year ago.
• House approvals rose by 0.7 per cent (private sector down 0.9 per cent) after rising 0.4 per cent in January. Apartment approvals fell by 12.3 per cent in February (private sector down 10.9 per cent) after sliding by 16.6 per cent in January. In annual terms apartment approvals are up 30.3 per cent on a year ago.
• Overall, the total value of building approvals (new houses, alterations and commercial) fell by 4.5 per cent in February to $5.9 billion. Commercial approvals fell by 13.0 per cent after sliding by 40.1 per cent in January. New residential approvals rose 0.5 per cent while renovations rose by 6.2 per cent.
• Over the year to January, total building approvals totalled $80.1 billion.
Private sector credit
• Private sector credit rose by 0.4 per cent in February after rising by 0.4 per cent in January. But the annual growth rate rose from 1.3 per cent to 1.6 per cent.
• Housing credit grew by 0.7 per cent in February with annual growth holding at a 17-month high of 8.5 per cent. Personal credit rose by 0.4 per cent in February after a 0.5 per cent increase in January. Personal credit is up 1.4 per cent over the past year – a 17-month high. And business credit fell for the 13th straight month, down by 0.1 per cent in February. Business credit is down 7.6 per cent on a year ago.
What is the importance of the economic data?
• The RP Data-Rismark Hedonic Australian Home Value Index is based on Australia’s biggest property database including over 280,000 sales during 2009. Unlike the ABS Index, which excludes terraces, semi-detached homes and apartments, the RP Data-Rismark Hedonic Index includes all properties.
• The monthly RP Data-Rismark Hedonic Index compares month-to-month index results. Quarterly results are measured comparing end months rather than averaging each month in the quarter. For example, the first quarter of 2009 index results compare the end of March index with the end of December index.
• The Bureau of Statistics’ Retail trade publication contains the most current readings on the performance of consumer spending. The ABS surveys 500 ‘larger businesses’ and 2,750 ‘smaller businesses’. Retail trade covers spending at a broad range of retail outlets but excludes both petrol and motor vehicle sales. A weak retail trade result may point to a slowing economy as well weighing on the share prices of listed retail stocks. But retail trade estimates can’t be assessed in isolation – it is important to look at the influences determining future trends in consumer spending, such as income, employment and confidence levels.
• The Bureau of Statistics' monthly Building Approvals release contains figures on local council approvals to build residential structures such as homes and units as well as commercial premises such as offices and shops. Approval is one of the first stages of the construction ‘pipeline’ and is thus a key leading indicator of future activity. An increase in approvals would point to stronger future activity for construction-related companies.
• Private sector credit figures are released by the Reserve Bank on the last working day of the month. Credit is separated into three categories – housing, other personal and business. Private sector credit is effectively the amount of loans outstanding in the economy. If growth in lending is strong then it suggests that credit from financial institutions is freely available, underlying demand for assets such as cars and houses is firm and that the price of credit (interest rates) is attractive.
What are the implications for interest rates and investors?
• For home-owners, the strong gains in house prices represent great news, serving to boost wealth levels and confidence. With most of the stimulus being pared back and the likelihood of further rate hikes, it is likely to dampen enthusiasm in the housing sector.
• CommSec expects that home prices will rise 5-8 per cent over 2010 and movements in prices over the last few months are consistent with those forecasts.
• The weakness in building approvals and volatility in retailers will ensure that the Reserve Bank treads warily in the rate hiking cycle.
Source Savanth Sebastian, Economist, CommSec
Tuesday, March 30, 2010
Millionaire Investors. Thanks to Jerome Adair
How to Add Millionaire Investors to Your Network
Your network is extremely important. I’m always surprised at how many struggling investors I meet who are trying to break into the real estate game without the support of experienced investors.
For some of them it’s not for lack of trying. Many of them have gone to networking events and REIA clubs and have passed out business cards, but they find that the only people willing to work with them are other novice investors.
So how do you get the experienced investors to take notice of you? How do you get into their inner circle? How do you get to the point that #1) they actually take your call when you call them and #2) they actually know who you are and will work with you?
Because when you approach an experienced investor you probably realize they are very busy, but what you might not know is that they get approached fairly regularly by new investors who want to learn real estate from them. Here’s an excerpt from an email I received yesterday:
“I am very interested in real estate. I am a new real estate wholesaler and would like to work under other investors guidance to learn all aspects of the business. I am a hard working person with a good work ethic…”
I get a couple of these emails a week. A lot of investors do. Everyone one of these people describe themselves as “hard working”, they’re a “team player”, they “learn quickly” etc… Those are important qualities, but they won’t make you stand out.
If you’re interested in expanding your network, here’s a little tip that got me got me some face time with some amazing investors.
They’ve gotta eat, right?
For an average of $10, I sat down with several amazing investors and got to pick their brains for an hour. This was when I was very first getting started and brought nothing but my enthusiasm to the table. And I brought lunch…
If you meet an investor you’d like to get to know, ask them if you can take them out to lunch. Before you invite them to lunch, I suggest you find out a little about them first and use it to stroke their ego a bit. Here’s what happened the very first time I tried this:
I was new at a networking event, and I asked a new acquaintance named Norene “Who do you know here that is doing really well?”
Norene said “Matt, the guy over there, is doing well. He’s in the middle of a $25 million land deal in Hawaii right now.”
Using this information, I approached Matt.
Me: “Hi Matt. I’m a friend of Norene’s and she was telling me that you’ve been doing pretty well in real estate.”
Matt (you’d have to know him to appreciate his answer): “I’m doing all right.”
Me: “From what I’ve heard you’re doing better than all right.” He chuckles. “I’m new here and I was wondering if I could take you out to lunch?”
I figured if anyone was going to turn me down, it would be him. But he accepted, and for a $6 sub sandwich (he chose the location) I got to pick his brain for an hour and a half. It was awesome.
I did this several more times and sat down one-on-one with multi-millionaire investors for an average of $10/hour, and new investors have done this with me since. It’s amazing what most people will do for food. If you offered to pay me good money to sit down and teach you real estate, I’d likely decline. If you offered me pizza, I would probably take you up on it. I really can’t explain why.
This is a great way of getting your foot in the door of an investor’s network. It’s a great start, but here’s the problem you run into: One lunch is not going to do the trick. Even after an hour of face time, they’ll likely forget your name after a couple weeks and you’re back to square one.
Lunch is just a first step–it’s just an introduction (by the way, don’t quiz an investor about real estate strategies when you sit down with them–ask them about themselves and how they got started, and then perhaps specific deals that they’ve done. You’ll get some great info and they won’t feel you’re just out to get free real estate tutoring–you do, after all, want to form a good relationship with this person).
There are a couple more steps you should take after that to cement the relationship, including simply saying the one thing that would be music to the ears of any investor (that they basically never hear from beginning investors)…
I’m not going to go into more detail here. I’ve saved those next steps for the “The 7 Great Lies of Real Estate Investing” Guide. Visit
the 7 Lies page here to learn more.
-Jarom Adair
Real Estate Investing for Beginners
Your network is extremely important. I’m always surprised at how many struggling investors I meet who are trying to break into the real estate game without the support of experienced investors.
For some of them it’s not for lack of trying. Many of them have gone to networking events and REIA clubs and have passed out business cards, but they find that the only people willing to work with them are other novice investors.
So how do you get the experienced investors to take notice of you? How do you get into their inner circle? How do you get to the point that #1) they actually take your call when you call them and #2) they actually know who you are and will work with you?
Because when you approach an experienced investor you probably realize they are very busy, but what you might not know is that they get approached fairly regularly by new investors who want to learn real estate from them. Here’s an excerpt from an email I received yesterday:
“I am very interested in real estate. I am a new real estate wholesaler and would like to work under other investors guidance to learn all aspects of the business. I am a hard working person with a good work ethic…”
I get a couple of these emails a week. A lot of investors do. Everyone one of these people describe themselves as “hard working”, they’re a “team player”, they “learn quickly” etc… Those are important qualities, but they won’t make you stand out.
If you’re interested in expanding your network, here’s a little tip that got me got me some face time with some amazing investors.
They’ve gotta eat, right?
For an average of $10, I sat down with several amazing investors and got to pick their brains for an hour. This was when I was very first getting started and brought nothing but my enthusiasm to the table. And I brought lunch…
If you meet an investor you’d like to get to know, ask them if you can take them out to lunch. Before you invite them to lunch, I suggest you find out a little about them first and use it to stroke their ego a bit. Here’s what happened the very first time I tried this:
I was new at a networking event, and I asked a new acquaintance named Norene “Who do you know here that is doing really well?”
Norene said “Matt, the guy over there, is doing well. He’s in the middle of a $25 million land deal in Hawaii right now.”
Using this information, I approached Matt.
Me: “Hi Matt. I’m a friend of Norene’s and she was telling me that you’ve been doing pretty well in real estate.”
Matt (you’d have to know him to appreciate his answer): “I’m doing all right.”
Me: “From what I’ve heard you’re doing better than all right.” He chuckles. “I’m new here and I was wondering if I could take you out to lunch?”
I figured if anyone was going to turn me down, it would be him. But he accepted, and for a $6 sub sandwich (he chose the location) I got to pick his brain for an hour and a half. It was awesome.
I did this several more times and sat down one-on-one with multi-millionaire investors for an average of $10/hour, and new investors have done this with me since. It’s amazing what most people will do for food. If you offered to pay me good money to sit down and teach you real estate, I’d likely decline. If you offered me pizza, I would probably take you up on it. I really can’t explain why.
This is a great way of getting your foot in the door of an investor’s network. It’s a great start, but here’s the problem you run into: One lunch is not going to do the trick. Even after an hour of face time, they’ll likely forget your name after a couple weeks and you’re back to square one.
Lunch is just a first step–it’s just an introduction (by the way, don’t quiz an investor about real estate strategies when you sit down with them–ask them about themselves and how they got started, and then perhaps specific deals that they’ve done. You’ll get some great info and they won’t feel you’re just out to get free real estate tutoring–you do, after all, want to form a good relationship with this person).
There are a couple more steps you should take after that to cement the relationship, including simply saying the one thing that would be music to the ears of any investor (that they basically never hear from beginning investors)…
I’m not going to go into more detail here. I’ve saved those next steps for the “The 7 Great Lies of Real Estate Investing” Guide. Visit
the 7 Lies page here to learn more.
-Jarom Adair
Real Estate Investing for Beginners
Sunday, March 28, 2010
A thought to contemplate
" In a day, when you don't come across any problems, you can be sure that you are travelling in a wrong path"
......................Swami Vivekananda
......................Swami Vivekananda
Sunday, March 14, 2010
What does “Filthy Stinking Rich” really mean ? ? ?
“Filthy Stinking Rich” — A Moral Lesson
Here’s a quick exercise for you.
Finish this phrase: “Rich people are______________.”
How did you complete this phrase? Are your answers mostly positive or negative? Did you think of words like successful, accomplished, and disciplined? Or did you come up negative words like greedy, snotty, or ruthless?
Whether you admire or despise the wealthy, how you feel about money and the people who have it will determine–more than the knowledge in your head or the situation you grew up under–whether you will be financially successful or not. You cannot be wealthy if you feel wealth is bad. If you have negative associations with money you will repel it rather than attract it.
This concept is nothing new, but the ramifications are huge.
I hope you want to become wealthy. More than that, I hope you want to be filthy stinking rich.
I’ll tell you why in a moment.
But first realize that if you’ve been telling yourself “I’d like to have enough to live on and do what I want, but I don’t need more than that” then you’re missing the point. The point of becoming wealthy isn’t so that you can gorge yourself on expensive things, live fat and happy, and tell the rest of the world to go to hell.
If you’ve seen “Batman Begins” you’d seen how Bruce Wayne’s father, Dr. Thomas Wayne, had left Wayne Enterprises in the hands of “more interested” individuals so that he could volunteer at the hospital. I’m sure he, speaking as if he were a real person, touched the lives of hundreds of people through his simple service.
But more than just the services he provided I’m sure that, because of the billions of dollars he had from business, he was able to provide needed medical equipment to the hospital, allow people to get surgeries that they couldn’t afford, and a lot of good was done because he had the resources to back up his volunteer work. Good people can do so much more good in the world if they have money.
Somewhere along the line many people developed the idea that being poor is holy, and that if you live in poverty amongst the poor you can do the greatest good.
I think that’s ridiculous.
I think scratching to make a living keeps people from serving others, and living paycheck to paycheck is so time consuming that it keeps people from reaching their full potential. If you can barely help yourself, it’s going to be hard to really help someone else.
“Playing little” doesn’t do anything to help the world. If that’s your game, you’re going to need a whole lot more ambition than that to make it in the real estate investing business. Only those who want to do big things with their lives are going to have the drive and vision to make it in real estate.
Get it in your head that you are going to be very wealthy, because it’s the wealthy that have the time and resources to really make a difference in the world. Even Mother Theresa, sworn to poverty, could not have accomplished a fraction of what she did without the financial backing of wealthy donors. She raised millions in her lifetime, and hard-working individuals had to earn enough money to take care of themselves first and then earn more money so they could give it away.
That is why I hope you want to be wealthy.
By the way, why do people use the term “filthy stinking rich?” Answer: Jealousy.
Here’s a quick exercise for you.
Finish this phrase: “Rich people are______________.”
How did you complete this phrase? Are your answers mostly positive or negative? Did you think of words like successful, accomplished, and disciplined? Or did you come up negative words like greedy, snotty, or ruthless?
Whether you admire or despise the wealthy, how you feel about money and the people who have it will determine–more than the knowledge in your head or the situation you grew up under–whether you will be financially successful or not. You cannot be wealthy if you feel wealth is bad. If you have negative associations with money you will repel it rather than attract it.
This concept is nothing new, but the ramifications are huge.
I hope you want to become wealthy. More than that, I hope you want to be filthy stinking rich.
I’ll tell you why in a moment.
But first realize that if you’ve been telling yourself “I’d like to have enough to live on and do what I want, but I don’t need more than that” then you’re missing the point. The point of becoming wealthy isn’t so that you can gorge yourself on expensive things, live fat and happy, and tell the rest of the world to go to hell.
If you’ve seen “Batman Begins” you’d seen how Bruce Wayne’s father, Dr. Thomas Wayne, had left Wayne Enterprises in the hands of “more interested” individuals so that he could volunteer at the hospital. I’m sure he, speaking as if he were a real person, touched the lives of hundreds of people through his simple service.
But more than just the services he provided I’m sure that, because of the billions of dollars he had from business, he was able to provide needed medical equipment to the hospital, allow people to get surgeries that they couldn’t afford, and a lot of good was done because he had the resources to back up his volunteer work. Good people can do so much more good in the world if they have money.
Somewhere along the line many people developed the idea that being poor is holy, and that if you live in poverty amongst the poor you can do the greatest good.
I think that’s ridiculous.
I think scratching to make a living keeps people from serving others, and living paycheck to paycheck is so time consuming that it keeps people from reaching their full potential. If you can barely help yourself, it’s going to be hard to really help someone else.
“Playing little” doesn’t do anything to help the world. If that’s your game, you’re going to need a whole lot more ambition than that to make it in the real estate investing business. Only those who want to do big things with their lives are going to have the drive and vision to make it in real estate.
Get it in your head that you are going to be very wealthy, because it’s the wealthy that have the time and resources to really make a difference in the world. Even Mother Theresa, sworn to poverty, could not have accomplished a fraction of what she did without the financial backing of wealthy donors. She raised millions in her lifetime, and hard-working individuals had to earn enough money to take care of themselves first and then earn more money so they could give it away.
That is why I hope you want to be wealthy.
By the way, why do people use the term “filthy stinking rich?” Answer: Jealousy.
Thursday, March 4, 2010
How will the new Interest Rate regime work ???
Interest rates: Another step to ‘normality’
Reserve Bank Board meeting
• The Reserve Bank has lifted the cash rate from 3.75 per cent to 4.00 per cent. If banks fully pass on the rate hike then repayments on an average $300,000 loan would lift by just over $47 a month.
• The Reserve Bank has given no guidance on future rate decisions other than highlighting the fact that borrowing rates should “be closer to average”. Overall, that suggests rates have another 35-70 basis points to go.
What does it all mean?
• It’s important not to over-analyse the latest interest rate decision. The Reserve Bank has lifted the cash rate for the simple reason is that it is still too low for an economy that is getting back to normal. And if the economy continues to improve, then we can expect the Reserve Bank to lift rates further.
• Certainly the rate decision will be ‘live’ for the next few months. The Reserve Bank doesn’t want people to assume that it has tunnel vision – that is, it is fixated on some specific interest rate goal. But the Reserve Bank Governor has provided good broad guidance, noting that interest rates are around 50-100 basis points away from ‘normal’. CommSec has consistently noted that the cash rate will be between 4.50-5.00 per cent late in 2010 and there has been nothing of late to sway us from that view.
• The one point that should always be kept in mind when rates are rising is that just a third of the population is in the process of paying off home loans. Another third are renting and the remaining third of families own their homes. The home-buying population wouldn’t be shocked by the rate decision – many of the longer-term mortgagees would be well in front in their repayments. Renters would be unfussed by the rates decision with anecdotes that some landlords are offering incentives at present such as the first month free. And home-owners would be cheering the lift in interest rates with a view to higher term deposit rates.
• When the Reserve Bank is contemplating monetary conditions in the economy, it isn’t just thinking about the cash rate and interest rates applied by lenders. It also has to keep in mind the Aussie dollar. The Aussie dollar remains strong, hovering near US90 cents and at 25-year highs against the British pound. The high Aussie may be good news for travellers, but it is keeping the pressure on exporters and tourism-dependent regions.
Interest rate decision and past cycles
• The Reserve Bank Board has lifted the cash rate by 25 basis points to 4.00 per cent – the first rate hike since December last year. In October 2009 cash rates stood at a 49-year low of 3.00 per cent. After quarter percent rate hikes in October, November and December the cash rate stood at 3.75 per cent. Rates were left unchanged in February before today’s decision to lift rates again.
• In the last rate cutting cycle the cash rate fell to lows of 4.25 percent in December 2001. In the two previous rate cutting cycles, the cash rate fell to lows of 4.75 per cent. So rates are still historically low.
• If banks pass on the latest rate hike in full, the average bank variable housing rate would lift to 6.90 per cent. Still, it’s important to note that the mortgage rate has averaged 7.60 per cent over the past 5 years and 7.25 per cent over the past decade. Mortgage rates are still low – up to 70 basis points below longer-term averages.
• The Reserve Bank hasn’t given specific guidance, other than noting that further rate hikes lie ahead: “Interest rates to most borrowers nonetheless remain lower than average. The Board judges that with growth likely to be close to trend and inflation close to target over the coming year, it is appropriate for interest rates to be closer to average. Today’s decision is a further step in that process.”
What are the implications of today’s decision?
• The Reserve Bank is taking its time in lifting rates to more ‘normal’ levels. It knows that it has time on its side. Other major central banks haven’t started lifting rates yet and global jitters still remain. Meanwhile, at home inflationary pressures continue to ease. Add in the continued strength of the Aussie dollar and it’s clear that the Reserve Bank hasn’t got a defined month-by-month plan to lift rates.
• While consumers are confident, they remain cautious about spending. And with interest rates up again, that hesitancy to spend will continue. Larger retailers are better able to withstand this period of consumer conservatism as there are limits to how far and how long smaller retailers can cut margins.
• Competition for domestic funds is expected to remain intense, representing attractive opportunities for savers.
• Ignore any stories about borrowers under pressure as a result of the latest rate hike. The number of borrowers experiencing stress as a result of the latest rate hike would be extremely small. Most borrowers, as well as most lenders, have assumed substantial rate hikes into their planning and budgeting decisions.
Source Craig James, Chief Economist, CommSec
Reserve Bank Board meeting
• The Reserve Bank has lifted the cash rate from 3.75 per cent to 4.00 per cent. If banks fully pass on the rate hike then repayments on an average $300,000 loan would lift by just over $47 a month.
• The Reserve Bank has given no guidance on future rate decisions other than highlighting the fact that borrowing rates should “be closer to average”. Overall, that suggests rates have another 35-70 basis points to go.
What does it all mean?
• It’s important not to over-analyse the latest interest rate decision. The Reserve Bank has lifted the cash rate for the simple reason is that it is still too low for an economy that is getting back to normal. And if the economy continues to improve, then we can expect the Reserve Bank to lift rates further.
• Certainly the rate decision will be ‘live’ for the next few months. The Reserve Bank doesn’t want people to assume that it has tunnel vision – that is, it is fixated on some specific interest rate goal. But the Reserve Bank Governor has provided good broad guidance, noting that interest rates are around 50-100 basis points away from ‘normal’. CommSec has consistently noted that the cash rate will be between 4.50-5.00 per cent late in 2010 and there has been nothing of late to sway us from that view.
• The one point that should always be kept in mind when rates are rising is that just a third of the population is in the process of paying off home loans. Another third are renting and the remaining third of families own their homes. The home-buying population wouldn’t be shocked by the rate decision – many of the longer-term mortgagees would be well in front in their repayments. Renters would be unfussed by the rates decision with anecdotes that some landlords are offering incentives at present such as the first month free. And home-owners would be cheering the lift in interest rates with a view to higher term deposit rates.
• When the Reserve Bank is contemplating monetary conditions in the economy, it isn’t just thinking about the cash rate and interest rates applied by lenders. It also has to keep in mind the Aussie dollar. The Aussie dollar remains strong, hovering near US90 cents and at 25-year highs against the British pound. The high Aussie may be good news for travellers, but it is keeping the pressure on exporters and tourism-dependent regions.
Interest rate decision and past cycles
• The Reserve Bank Board has lifted the cash rate by 25 basis points to 4.00 per cent – the first rate hike since December last year. In October 2009 cash rates stood at a 49-year low of 3.00 per cent. After quarter percent rate hikes in October, November and December the cash rate stood at 3.75 per cent. Rates were left unchanged in February before today’s decision to lift rates again.
• In the last rate cutting cycle the cash rate fell to lows of 4.25 percent in December 2001. In the two previous rate cutting cycles, the cash rate fell to lows of 4.75 per cent. So rates are still historically low.
• If banks pass on the latest rate hike in full, the average bank variable housing rate would lift to 6.90 per cent. Still, it’s important to note that the mortgage rate has averaged 7.60 per cent over the past 5 years and 7.25 per cent over the past decade. Mortgage rates are still low – up to 70 basis points below longer-term averages.
• The Reserve Bank hasn’t given specific guidance, other than noting that further rate hikes lie ahead: “Interest rates to most borrowers nonetheless remain lower than average. The Board judges that with growth likely to be close to trend and inflation close to target over the coming year, it is appropriate for interest rates to be closer to average. Today’s decision is a further step in that process.”
What are the implications of today’s decision?
• The Reserve Bank is taking its time in lifting rates to more ‘normal’ levels. It knows that it has time on its side. Other major central banks haven’t started lifting rates yet and global jitters still remain. Meanwhile, at home inflationary pressures continue to ease. Add in the continued strength of the Aussie dollar and it’s clear that the Reserve Bank hasn’t got a defined month-by-month plan to lift rates.
• While consumers are confident, they remain cautious about spending. And with interest rates up again, that hesitancy to spend will continue. Larger retailers are better able to withstand this period of consumer conservatism as there are limits to how far and how long smaller retailers can cut margins.
• Competition for domestic funds is expected to remain intense, representing attractive opportunities for savers.
• Ignore any stories about borrowers under pressure as a result of the latest rate hike. The number of borrowers experiencing stress as a result of the latest rate hike would be extremely small. Most borrowers, as well as most lenders, have assumed substantial rate hikes into their planning and budgeting decisions.
Source Craig James, Chief Economist, CommSec
Tuesday, March 2, 2010
The billion dollar baby
Wednesday, 03 March 2010
ONE BILLION DOLLARS.
Yes that is $1,000,000,000…
The Australian property market continues to defy the odds, posting stellar auction clearance results over the weekend.
According to statistics from RP Data, Melbourne posted an auction clearance rate of 82.7 per cent.
Perhaps more impressive however, was the fact that the city managed to clear more than $1 billion in total sales over the weekend.
The most expensive property sold was a three bedroom home in Melbourne’s Toorak, which sold under the hammer for a cool $4.7 million. Ordinary two bed units, stock built in the 50’s, 60’s and 70’s, in the inner East and Bayside defied belief and sold at around $9,000 pqsm, a price usually reserved for off-the-plan acquisitions.
Sydney, Adelaide and Perth all managed to post above average record clearance results as well.
In Sydney, 77.6 per cent of properties were cleared over the weekend, while 68.3 per cent and 66.7 per cent were cleared in Adelaide and Perth respectively.
Overall, the national weighted clearance rate across Australia was 77 per cent.
RP Data’s national research director Tim lawless said the clearance rate was very strong, suggesting there are still plenty of buyers in the market.
“To provide some relativity, at the same time last year the clearance rate was 63 per cent across 1,335 auctions,” Mr Lawless told The Adviser.
“The important thing about auctions clearance rates is that they provide arguably the most timely barometer of real estate market sentiment available. A strong clearance rate suggests vendor and buyer expectations are reasonably in balance. Vendor price expectations are being met by buyers and buyers are active enough to provide a competitive bidding environment.
“For the time being it looks like auction markets and clearance rates are set to continue to their strong performance.
Based on the RP Data – Rismark Hedonic Home Value indices, values are continuing to climb with a 2.4 per cent gain in national home values over the three months ending January.”
According to Mr Lawless, vendors are continuing to place a large number of properties on the market, with the number of new listings hitting the market currently higher than at any time last year.
At the same time, the total amount of stock available for sale is actually lower than the same time last year, suggesting that buyers are continuing to outweigh sellers.
ONE BILLION DOLLARS.
Yes that is $1,000,000,000…
The Australian property market continues to defy the odds, posting stellar auction clearance results over the weekend.
According to statistics from RP Data, Melbourne posted an auction clearance rate of 82.7 per cent.
Perhaps more impressive however, was the fact that the city managed to clear more than $1 billion in total sales over the weekend.
The most expensive property sold was a three bedroom home in Melbourne’s Toorak, which sold under the hammer for a cool $4.7 million. Ordinary two bed units, stock built in the 50’s, 60’s and 70’s, in the inner East and Bayside defied belief and sold at around $9,000 pqsm, a price usually reserved for off-the-plan acquisitions.
Sydney, Adelaide and Perth all managed to post above average record clearance results as well.
In Sydney, 77.6 per cent of properties were cleared over the weekend, while 68.3 per cent and 66.7 per cent were cleared in Adelaide and Perth respectively.
Overall, the national weighted clearance rate across Australia was 77 per cent.
RP Data’s national research director Tim lawless said the clearance rate was very strong, suggesting there are still plenty of buyers in the market.
“To provide some relativity, at the same time last year the clearance rate was 63 per cent across 1,335 auctions,” Mr Lawless told The Adviser.
“The important thing about auctions clearance rates is that they provide arguably the most timely barometer of real estate market sentiment available. A strong clearance rate suggests vendor and buyer expectations are reasonably in balance. Vendor price expectations are being met by buyers and buyers are active enough to provide a competitive bidding environment.
“For the time being it looks like auction markets and clearance rates are set to continue to their strong performance.
Based on the RP Data – Rismark Hedonic Home Value indices, values are continuing to climb with a 2.4 per cent gain in national home values over the three months ending January.”
According to Mr Lawless, vendors are continuing to place a large number of properties on the market, with the number of new listings hitting the market currently higher than at any time last year.
At the same time, the total amount of stock available for sale is actually lower than the same time last year, suggesting that buyers are continuing to outweigh sellers.
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