SYDNEY PROPERTY INVESTING

Welcome!

Dear intrepid property investor,

You can achieve your property investing goals without this website. However it will take you much longer; especially if you are embarking on your journey to financial freedom from scratch! Keep coming back to visit this website as doing so may give you energy to go out there and do something positive to take control of and energise your journey into your future.

Your financial destiny is in your hands. You shall need knowledge if you are to succeed. Knowledge comes with experience, but before we practice we must study the theory, so as to minimise mistakes in real life. Property investing is one of those things that sounds simple, but there are a great many pitfalls to watch out for and as they say the devil is in the detail.

These days business has become centred on volume. Volume and economy of scale. These factors favour large (massive) enterprises such as corporations like Westfield and General Property Trust. These players from the big end of town make hundreds of millions of dollars per year, yet if that sounds impressive it is ironic that percentage wise their profits are perhaps 10% of their revenue after expenses. And believe it or not, thats doing pretty well. Take BMW the car maker. They are a luxury brand, yet because the market for cars is now volume driven, BMW who used to make 30% profit margin on each car, now make 3% profit on each car sold. How can they survive like this? Well, because nowdays, you guessed it, they sell 10 times as many cars, ie the volume has increased. Thats alright for the large guys, because they have decades if not hundreds of years of experience in their particular business and are experts. But what about you? Your business is property investing and your experience may be zero. If that is the case then yoiu are likely to have a few bad years in the beginning and if you were to emulate the big end high volumje business model, that combined with a year of AVERAGE deals would wipe you out for good. Therefor as an individual, you will find it necessary to avoid the high volume model and go for a value add approach, which means single renovations, unit-block renovations and later on medium sized property developments on vacant land.

Have you ever considered buying a whole block of units? Not bad income right? Efficient use of land huh? A mate just called me for advice on how to purchase a 8 unit apartment building. This is his first property purchase and is keen to dip a big toe in and test the waters. I mentioned he might find it too hot trying to collect the rents from the 8 tennants, while trying to simultaneously renovate the building AND keep the thing financially viable. The tennants had many years practice at being tennants, while he had zero experience as a property owner, much less a land lord. The first year would surely be a memorable one for all the wrong reasons, especially the overall effort required to keep it afloat. Actually the previous owner had had a difficult time trying to get the tennants to pay their rents and decided to sell up at a cheap price. My mate is reasonong that the building is worth as much as several suburban houses, and therefore will give more income, negative gearing and appreciation. Volume and size can be a real migrain for small property investors. It is preferable in this scenario to instead focus on large capital appreciation of smaller assets. Its better to make 50% net profit on a $200 000 property, than say a 6% net profit on a $1.65 Million unit block. The net result is the same $100 000 net profit in each case; yet the larger deal carries more risk.

Are you in the property investing BUSINESS or just an expensive hobby?

One thing that looks good on paper but hardly ever delivers in real world experience is the property manager. That is: you cannot leave the business of managing a property entirely to an agent. You will have to both keep an eye on the agent and also do some work yourself. No one has your best interest at heart as much as you. Even those whom enter into a fiduciary arrangement with you will not care for your interests the way you will. Managing property or properties can be a full time job. Therefore that manager - maybe you - ought to be paid for your time as the manager, even if your not officially on the payroll. In other words, your properties should be producing enough income and capital gain to justify not only your paying the mortgage, council rates, water, repairs and upkeep etc AND include compensation for your time and sweat spent managing the property itself. If this is not being realised you should get out of your properties and into some that will meet this criteria - otherwise its just an exersise in futility.

For example I know someone who bought a two bedroom unit in Cottosloe beach, Perth back in 2004. They paid $196 000. They proceeded to renovat at a money cost of $10 000 and a time cost 3 weeks away from other industry and of 5 weeks rent loss from the empty unit since settlement. She sold in 2007, for $310 000. During the 3.5 years of ownership, the first tennant stoped paying rent and absconded overnight 3 months before their tennancy was up, and the second trashed the unit, holes in the walls never cleaned the bathroom and damaged the carpets with cigarettes and spilt drinks, requiring complete carpet replacement and more time from the owner. Add to this the capital gains in the sale and the net profit realised by the owner amounted to $37 000. $37k, for three and a half years work. Thats not worth it. This property investor would have been better off simply applying for overtime at work, during those 3.5 years and not purchasing in the first place. What went wrong? Background checks on the tennants were not rigorous enough and the property was not retained for long enough. Another 3 years would have been necessary to realise worthwhile profit. One thing a successful property investor learns early is to get away from unprofitable scenarios.

Sydney has an exstensive shore line, consequently many properties are of the "waterfront" variety.

Exclusive Beach Front Property 1 Hour North Of Sydney

A lovely view overlooking the pacific ocean. Australia has the highest standards of building quality in the world. The price of property is high, however the standard of living is also comensurately valuable as well.

Success: Realistic STRATEGY
Real estate investing is an activity that pays well when done right by an experienced business person. One should be able to beat the return from a passive investment a "set and forget" investment such as shares; or one should not buy the property in question. To a large extent, the amount of return is determined by the property purchase price. Therefor buying below market value is a key element of your property investment strategy.

NSW vendor tax deters investors

By Amy Coopes
September

Sydney property investors are flocking interstate to escape the NSW Government's exit stamp duty.
Picture:Rob Homer

Sydney property investors are taking their money interstate, fleeing the adverse impact of the NSW Government's exit stamp duty, an Australian Property Institute survey has found.

The 2.25 per cent tax on the sale of investment properties, introduced in May's mini-budget, was influencing investors' decisions in property markets, the survey, which was released yesterday, revealed.

The 13th biannual API Property Directions survey found 79 per cent of buyers and 79 per cent of developers said the vendor tax was affecting their decisions, while 67 per cent said the tax was also having a negative impact on non-residential single-property decisions.

API president Greg Preston said the tax was being factored into pricing and purchase value decisions, trading options and alternative state acquisitions. "(The vendor tax) hasn't only impacted in NSW, it's also impacting on other states in terms of flow of investment interstate," Mr Preston said.

Investors were looking elsewhere for better capital growth prospects and returns, or choosing to pay less for property. This was good news for interstate markets, he said.

"All the other states see it as a distinct commercial advantage," he said. "They love the fact that NSW has introduced this tax because it's driving investment into their states."

Commercially, the tax was also being priced into trust funds and syndicates, he said, but in terms of non-residential portfolio property decisions, a preference for broad capital city investment prevailed.

Survey respondents forecast interest rates and inflation to rise in the immediate to short term, with 67.9 per cent predicting an interest rate hike and 60 per cent saying inflation would rise in the next six months.

Foreign investment predictions are rising in the short to long term, the survey found.

Other states love the fact that NSW has introduced this tax because it's driving investment into their states.
- Greg Preston, API president

Nationally, industrial property would boom in 2006, while moderate growth was predicted for unlisted property trusts over the next year, and industrial, retail and diversified trusts would trend towards trading at a premium to net tangible assets.

Mr Preston said only 37 per cent of respondents were now predicting that equity markets would outperform the non-residential property sector over the next year.

- AAP

Looking for a big home in the sky

PENTHOUSE: Guy Allenby | September 15, 2007

THERE'S a fundamental mistake people often make when they swap living in a house for a high-rise apartment, says Thomas Hamel, interior designer to Sydney's and Melbourne's well-shod: forgetting to factor in somewhere to hide.

"I always say that you do need to turn one of the back bedrooms into a family room or a TV room," Hamel says.

"What happens is that they are all used to living in big houses and they get to these apartments and they're not happy because there's nowhere to escape."

Hamel's clients have typically traded their residence in Melbourne's Toorak or Sydney's Bellevue Hill for a smaller, but still relatively capacious, apartment nearer the CBD.

They're people used to space and luxury, and are the driving force in the latest wave of the country's now decade-long apartment revolution. Queenslander Adam Stuart says: "The reality is, if you wanted to be secluded and live a hermit-like lifestyle, you wouldn't do what we've done. We've simplified everything."

Stuart, his wife Bettianne and their two children have exchanged a rambling 440sqm suburban family home with swimming pool and tennis court for a 190sqm, three-bedroom place on the 45th floor of Surfers Paradise's landmark Q1 building.

"We don't need the lounge room, rumpus room, formal lounge room and theatre," Stuart says.

"You don't need heaps of lounge suites to live."

The Stuart family of Surfers Paradise and Hamel's clients and their cohorts are part of the well-heeled market now making the shift into more compact homes in the sky.

Not that all luxury apartments are necessarily smaller.

For instance, sub-penthouse 6901 at the Soul apartment block -- an $850 million, 77-storey tower planned for Surfers Paradise -- is 595sqm.

The top-floor, four-level penthouse in the development was sold off-the-plan to a Queensland businessman late last year for $16.85 million.

This represents the apogee of the super deluxe market -- and the new owners will have no problems at all in finding a tranquil corner to retreat to.

Demand for the smaller, if equally-sumptuously appointed, $2 million-plus equivalents is also a very strong, with Melbourne apparently boasting the very best the country has to offer.

"They actually build better apartments (in Melbourne) I find," Sydney-based Hamel says.

"They've got more space, everything is not view-obsessed, and you get more for your money, that's for sure."

In 2001 the population density of Melbourne's CBD was 935 people per square kilometre.

By 2006 it had reached 4755/sqkm, according to PRD Nationwide Research.

Melbourne now boasts a vibrant and urbane inner heart, and the rich and the influential want to live in or next to it.

Apart from the thrusting, iconic presence of Eureka Tower, some of the best and the most sought-after of the latest breed of Melbourne apartment blocks are to be found along St Kilda Road and in the Docklands, notably Mirvac's Tower 5 and Yve Apartments, both designed by local architects Wood Marsh.

Another of Wood Marsh's luxury boutique apartment developments, Isis, meanwhile has also caught the eye of the rich and influential.

Jac Nasser, the former head of Ford Motor Co in the US bought the fourth floor penthouse in the $20 million six-apartment block in South Yarra and Kevan Gosper, a vice president on the International Olympic Committee, has also bought into the development.

In Sydney the most desirable apartments at the top end of the luxury market are view-driven skyscrapers to be found in the north of Sydney's CBD.

The Stamford Residences, for instance, now being built, will have 400sqm penthouses.

In Brisbane and Perth, it's the riverfront apartment blocks close to the CBD that have been and will continue to be the biggest, priciest and most desirable.

Even low-density Adelaide is joining the multi-million-dollar luxury apartment club.

The two penthouses on top of Place on Brougham, the $120 million revamp of the old Hotel Adelaide, went for $3.8 million each last year.

The fact is that cashed-up Australians have been watching the incoming tide of people swapping the suburbs for a high-density lifestyle in our rejuvenated inner cities - and they are now willing to pay top dollar for a piece of the action in an increasingly sophisticated market.

"Developers are now building large-scale apartments because people are coming from large-scale houses," Hamel says.

"They need the family room, they need the living room, they need the storage."

And they need a place to retreat.

RBA's Stevens Sees Tougher Australian Loan Conditions

By Victoria Batchelor

Sept. 18

(Bloomberg) -- Australian companies and consumers face tougher borrowing conditions over coming months amid lingering fallout from the global financial turmoil, said central bank Governor Glenn Stevens.

Reserve Bank of Australia policy makers will ``grapple with'' how they need to react given that the domestic economy is ``strong,'' though world economic growth may be weaker than the bank expected, Stevens said in a speech today in Sydney.

The collapse of the U.S. subprime-mortgage market has made commercial banks worldwide reluctant to lend, pushing up the cost of credit and causing stock and commodity markets to slide. Stevens' comments indicate he may refrain from raising Australia's benchmark interest rate again this year as policy makers assess whether the global rout damps economic growth.

``These sorts of comments suggest that the Reserve Bank intends to remain firmly ensconced on the sidelines until the dust settles,'' said Michael Blythe, chief economist at Commonwealth Bank of Australia in Sydney. ``Any near-term Reserve Bank rate action is unlikely.''

The Australian dollar dropped to 83.18 U.S. cents at 3:10 p.m. in Sydney compared with 83.93 late in Asian yesterday. The yield of the benchmark 10-year bond rose 2 basis points to 5.93 percent.

Stevens raised the benchmark overnight cash rate target to an 11-year high of 6.5 percent in August. It was the bank's first adjustment since November 2006, aimed at curb inflation in an economy that is growing at the fastest pace in three years.

Credit Markets

The central bank left the benchmark rate unchanged at its most recent meeting this month amid signs the U.S. subprime rout was spreading. Global credit markets seized up in August as concern about exposure to subprime losses made banks reluctant to lend to each other.

In Australia, the rate commercial banks charge each other for loans soared to an 11-year high last week even after the Reserve Bank left the key policy rate unchanged on Sept. 5.

``We may well observe a further tightening of financial conditions in the Australian economy in the months ahead,'' Stevens said today. ``Given the macroeconomic situation of the Australian economy thus far, some additional restraint would perhaps not be unwelcome.''

Just how much ``restraint will occur as a result of a market tightening in credit conditions is not yet clear,'' he said.

Australia's three-month bank bill swap rate fell 2 basis points today to 6.94 percent. The rate reached 7.09 percent on Sept. 12, the highest since July 1996, according to data compiled by Bloomberg. Borrowers use the rate to determine yields on variable- rate loans.

Global Rates

Central banks in England, Europe and Canada all opted to keep benchmark policy rates unchanged this month as they monitor how the credit squeeze will affect economic growth.

``Going into this episode, the economy was traveling very strongly, with the outlook for growth and inflation being revised higher over recent months,'' Stevens said. ``The data since the August decision to lift the cash rate indicates an economy at least as strong as the board's assessment at that time, with few signs of momentum slowing.''

Australia's A$1 trillion ($832 billion) economy is in its 16th consecutive year of growth, stoked by a mining investment boom and a pickup in consumer spending.

The economy expanded 4.3 percent in the second quarter from a year earlier, more than twice as fast as the 1.9 percent annual growth in the U.S. in the same period and outpacing the U.K.'s rate of 3 percent.

U.S., Europe

``The second factor is that the outlook for the U.S. economy has been weakening and will presumably be affected to some extent by the credit-market events themselves,'' Stevens said. ``It is conceivable that some European economies could be affected as well, given the credit difficulties in those markets.''

The U.S. Federal Reserve is forecast to cut its benchmark rate from 5.25 percent today.

``Global growth, which has continued to surprise by its strength in recent years, could turn out to be a bit weaker than expected a few months ago,'' Stevens said. Still, Asia and Australia ``appear, to date, to be weathering the storm fairly well.''

Exports make up about 20 percent of Australia's economy with China and Japan the nation's largest overseas markets.

Twenty of 25 economists surveyed by Bloomberg News on Sept. 7 expect the central bank will leave rates unchanged this year.

``The Reserve Bank of Australia will stay on the sidelines,'' said Matthew Johnson, senior economist at ICAP Australia Ltd. in Sydney. ``The market is delivering all the tough love that's required at present. I suspect that 6.5 percent will be the peak for the central bank's rate.''

Pay $275, including desal tax

Andrew Clennell State Political Editor
September 18, 2007

AVERAGE household water bills will rise by more than $275 a year - or 33 per cent - under a plan presented by Sydney Water to the independent pricing tribunal.

Of the rise, $110 will be to fund the Government's desalination plant, which the head of Sydney Water admitted yesterday could run for 20 years without being needed.

For bigger users (the 12 per cent of households that use between 250 and 500 kilolitres a year), water charges would rise by more than $400 a year over four years (a 36 per cent increase).

The news is even worse for business and is likely to lead to price increases being passed on to consumers.

Sydney Water's managing director, Kerry Schott, admitted the proposed rises, to be staggered from 2008-09 to 2011-12, would cause "pain" but said they were necessary.

"I'm not denying it's a large increase. I think you have to put the development of this infrastructure - desalination, recycling - in a longer-term objective," Dr Schott said.

Sydney Water has laid part of the blame for the rises on the corporation having a poor financial position, because it has to borrow to fund infrastructure such as the desalination plant. It broke up the $275 increase into $100 to $110 for desalination, $80 to $85 for "renewals, growth and operating licence", $30 to $35 for recycling and demand management and $50 to $55 for financial feasibility.

"It is clear that Sydney Water is not financially sustainable over the long term if the current pricing regime continues," Sydney Water's submission to the independent pricing tribunal says.

Of the big-ticket item, the desalination plant, which is estimated to cost $1.76 billion to build and more than $1 billion to operate over the next 20 years, Dr Schott admitted the city might never need the water.

"Hypothetically, that's correct but it's extremely unlikely and I ask you to have a look at the prescribed data on rainfall."

Dr Schott said if the desalination plant was switched off entirely - which would only occur if dams were about to spill over - the cost of maintaining it would be $9 million a year.

If the pricing tribunal did not grant the rises, she said, some projects might need to be dumped. But the desalination plant - which can produce up to 14 per cent of the city's water supply - would still go ahead.

The NSW Business Chamber's chief executive, Kevin Macdonald, said: "These increases will feed themselves back into the price structures of everything from restaurants to swim lessons at the local swimming pool."

The Premier, Morris Iemma, said there was a greater cost in not securing the water supply. The Water Utilities Minister, Nathan Rees, said the plant was necessary to ensure water did not run out. "Infrastructure doesn't fall from the sky. We need to pay for it and we need to plan for the future."