Smart Investment Starts Today

Financial Market Week in Review - 26 Feb 2010

2010-02-27T16:37:00.002+11:00

Monday - 22nd Feb 2010

Vehicle Sales - New motor vehicle sales were down in the month of January and marginally below market expectations at -3.4%. On the positive side, vehicle sales were up Year on Year compared to 2008 when we were in the midst of an economic turn down and expectations were lower.

Tuesday - 23rd Feb 2010

US Consumer Confidence - the index shocked the market. It came in at its worst levels in 10 months.

Wednesday - 24th Feb 2010

Wage Cost Index - This is a meausre of total hourly rates of pay, and was softer than expected quarter on quarter at 0.6% (expectations were for a 0.8% increase). Wage inflation also eased further below the RBA's target levels.

Thursday - 25th Feb 2010

CAPEX data - Private Business Capital Expenditure was much stronger than expected for the December Quarter. The biggest area for growth was in equipment which is still benefiting from tax incentives.

Which Online Lender Suits You The Most?

2010-02-23T13:59:00.000+11:00

First of all, let me make this clear, Almost all online lending are good in my experience, they are not “Home Brand”, they are there for business, they discount their rates and fees because they streamline the lending process through internet operation (no brokers, no branches etc), but they don’t discount their professional service and particularly efficiency. Therefore, what you choose is not which one is good or bad in general, but which one suits you the best for a particular investment. Here are some very important tips you might keep in mind:

TIP ONE - Use the lender who offers the feature you want the most

Are you short of deposit? Then you find the one who will lend you the most. However, if you have not got enough savings (normally 20% of the purchase price) and you could not afford to pay stamp duty, I will suggest you to think again. As you probably know, borrowing over 80% of the value of the property will attract Lenders’ Mortgage Insurance; the more you borrow, the more you need to pay, and it can be very expensive. Just remember you are making an investment, you must minimize all unnecessary costs which do not add value to the investment, and I might say mortgage insurance expense is absolutely one of them, and I say again, it is not cheap especially after global financial crisis.

Not all online lenders offer same products. For example, I always choose to use Line of Credit (I will explain the reasons in another article.), some lenders offer great rate for this product, but if you do your homework, you will notice one or two of them even offer 10 years interest capitalisation, what a gift for an investor!!! For another example, If you need a construction loan, you really need to check out what documents a lender requires to have for each stage of the draw down, some are fussy, others are more specialised in this area.

TIP TWO - Compare the price for LMI

If you definitely have to borrow more than 80%, read this, Lenders’ Mortgage Insurance is like any other insurance, different provider quote you different price. In Australia, I believe only 4 mortgage insurers are in the business. They were CGU, Royal & Sun Alliance, QBE and Genworth LMI. Each lender uses different mortgage insurer, so you really need to compare the cost of LMI between lenders.

TIP THREE – Watch out exit fee

Normally, a lender will charge you a fee if you discharge the mortgage within 4 years. If you use buy and hold strategy, you would not worry this at all. But if you buy off-plan and sell after its completion or you want to renovate and sell afterwards, watch out the exit fee. Some lenders charge a variable rate, the sooner you discharge the mortgage, the more you have to pay; other lenders charge a fix fee. So do your calculation, and choose carefully.

If you have any further question, feel free to email me smartinvestment@email.com

Online Lender - First Step Towards Success

2010-02-22T14:34:00.008+11:00

My experience is that finding the right mortgage lender is the very first step (yes, even before you go out for your property hunting) towards your property investment success. I am not going to examine the pros and cons of hundreds lenders and products on the market simply because it’s a waste of time. Instead, I would like you to know the answer regardless of your situation or background (just trust me now):

• Principle No.1 – Always use an Online LENDER which is an affiliate of a major bank.

Let me explain this in more details. Nationally, the big banks now control more than 85 per cent of the home loan market - a position which they've recently consolidated through acquisitions (Westpac's purchase of St George, the Commonwealth's buying of Bankwest) and through the effects of the global financial crisis. What it means is that, firstly, it is close to inevitable that your home loan will be through a big bank in one way or the other; secondly, if you are attracted by a non-bank lender which offers you lower introductory rate, you are likely to be caught up by either various follow-up fees or aggressive increase in interest rate after its initial introductory rate expires. So my principle means that, firstly, you are “safe” as you are still in the 85% region; secondly, you will get much cheaper wholesale rate as you are not any more an “individual customer” to the bank. Ok, now who are the subsidiaries? Let me explain this, nearly every big bank has its wholesale subsidiary company which offers very competitive lending rate in order for them to compete with other non-bank lenders in the niche market and eventually squiz them out. The table below listed some big banks and their whole sale subsidiaries:

Name of the big bank - Name of its subsidiary - Website of its subsidiary
ANZ Onedirect http://www.onedirect.com.au/
CBA Homepath http://www.homepath.com.au/
ING Myrate http://www.myrate.com.au/
NAB Homeside http://www.hsl.com.au/
BMC Quickdirect http://www.quickdirect.com.au/

The matter of fact is that the rates from some of those subsidiary companies are so competitive that they cannot afford to accept any new customers (i.e. Homepath and Onedirect). But fortunately, the others are still in business. Just check their website, you will find the rates they offer will be about 0.5% lower than the lowest rate you can get from their parent companies. Do not overlook this 0.5% difference, this means you will pay $1,500 p.a. less in interest alone over a $300,000 mortgage (not to mention other fees and charges) than you would have if you go straight to a big bank at its outset or through a broker. Just note that in a typical property transaction, it will involve stamp duty (about 3.5% of your purchase), legal and other fees on settlement both ways (about 1% of your purchase), property management fee (about 7% of rental income) when you rent your property out, agent fees (about 2.5% of sale price) when you sell your property, and maybe mortgage insurance (about 2% of your mortgage), if you do not try to minimize all these fees, these fees will eventually minimise your net profit in the end.

Some may argue that they do not have much experience when it comes to deal with online lenders. I have or had mortgage with all above-mentioned online lenders except Homeside, and my experience is that, firstly, you will get same quality of customer service from these internet lenders except that you receive the service over the phone or via email; secondly, you need to prepare exactly the same kind of personal financial documents as you otherwise would.

In conclusion, if you want to, one day, become a sophisticated property investor, the very first step is to start use an ONLINE LENDER which you trust. If you are a beginner in property investment and have any question, please feel free to email me: smartinvestment@email.com.

Property Investment - A Derivative Of Your Income

2010-02-21T18:57:00.011+11:00

A typical successful property investment story usually derives from one of two scenarios.

Scenario One, a mid-aged woman gifted with huge equity from her residential home adopted a sound property investment strategy, took mortgages against her home, bought a handful of properties a couple of years ago and now becomes a millionaire.

Scenario two, a young builder or a close friend of a builder started his property portfolio with purchasing a crappy house on a big block of land, he either renovated it or knock-down and rebuild it, then sold for a big profit and do it again, again and again.

Can you become a successful property investor if you are neither inherited with a big debt-free home nor too old to become a builder. My short answer to you is YES, YOU CAN. But you need to start taking advantage of your income TODAY.

Do you realise that your household income is a derivative to an investment property? Do you know that you can make multiple times of profit to your income if you make the right property investment decision. Never thought this before? I explain this further. a typical lender will lend you up to 4.5 times of your household income, this means if your household income is $100,000, the lender probably will not hesitate to lend you about 450,000. Say in the end, you bought a $500,000 house, and after 2 years, your house value has gone up by 15%. Here is the SECRET, it is your house's value that went up by 15%, that is $500,000x15%=$75,000, which is 75% pay rise of your household income. This is called DERIVATIVE. Your investment property is the underlying asset, and your income is the derivative; a small movement in the property value can cause a large difference in the value of the income.

However, this formula also means that if you made the bad investment, the loss could be multiple times of your household income as well. So how to make smart investment today in property market, I will provide some critical tips in the next couple of articles. If you are a beginner in property investment and have any question, please feel free to email me: smartinvestment@email.com.

Smart Investment Starts Today

2010-02-21T17:01:00.002+11:00

Welcome to Smart Investment Starts Today.

This site provides tips and shares experiences for youngsters and mums&dads in order to assist them in making decision to start their investment TODAY.

If you have questions not covered in Smart Investment Starts Today, please feel free to email your question to smartinvestment@email.com