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Welcome to our new-look newsletter.
You've probably toyed with the idea of investing in areas other than property. In this issue we take a look at some of the safer, and riskier, alternative investments on offer. For those who rent their properties we have also done some tenant profiling while also highlighting the benefits of line of credit mortgages - a useful product for borrowers whose income ebbs and flows.
I'd appreciate your feedback on the new newsletter so please feel free to get in touch. Hope you enjoy!
Sincerely
Karina Wolfin
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| Line of credit mortgage - a nice fit for the yo-yo income |
If a graph of your annual income
looks like the teeth of Jaws,
you’re obviously in need of
flexibility… a line of credit
mortgage may just be the option
for you.
Line of credit mortgages are
generally interest-only loans with
no set term for the loan to be
repaid. This gives the borrower
the freedom to decide when they
will make payments on the
principal, a useful tool for those
with incomes that ebb and flow or
for property investors looking to
take advantage of investment
opportunities.
One of the main concerns for a
line of credit mortgage is that
the speed in which the loan is
repaid is dependent on the
borrower. Borrowers will therefore
need to exercise a level of discipline, and |
there is a very good reason why.
A line of credit allows you to
make the bulk of your day-to-day
purchases or payments with a
credit card. By using the credit
card - and the interest free
period it entails – you can then
channel the majority of your
wage into your loan until your
credit card payment is due. This
effectively reduces the balance of
your loan for part of the month,
therefore reducing the interest
payable. This is known as offset
savings. If you are disciplined,
you pay the credit card off each
month by using funds from the
line of credit. If you are not, you
can find yourself in a bind.
Line of credit mortgages typically
have a higher interest rate than a
standard loan so it’s important to
weigh up the benefits of offset
savings compared to a more
traditional principal and interest
mortgage. While offset savings
will contribute to helping you own
your own home faster, only
additional repayments will you
really help drive your mortgage
down at a quicker rate.
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Alternative investments: dynamic
or high-risk? |
Netting good investment returns
is not limited to real estate alone.
But beware, while non-traditional
investments can be fun to get
involved in, they still of course
involve risk.
There are pros and cons to all
investments. When diversifying
your portfolio keep in mind that
‘attachment’, ‘feelings’ or
‘emotions’ can be very dangerous
things… if you want to invest with
a better chance to generate a
return, you need to be cold and
practical. Here are four
alternative investments that are
constantly growing in popularity,
some of which yield better returns
than others.
Sports memorabilia
The rule ‘Caveat Emptor’ is very
relevant when investing in
sporting memorabilia, particularly
if merchandise is from overseas.
Verifying the authenticity of an
autograph, for example, is
basically impossible unless you’re
there to witness it yourself.
Therefore buy from a reputable
source and do your home work -
take in a few auctions before you
make your bid. Also steer clear of
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personal favourites unless they’re
universally popular or you may
struggle to find a buyer when it’s
time to sell!
Carparks
They may not be very glamorous
but there’s not too many
commercial investments that cost
less than $50,000 and don’t
require ongoing maintenance
costs. The Australian reports that
in 2005 Sydneysiders paid up
to $50,000 apiece for 220 car
spaces in the Crescent
Apartments building in Kings
Cross, yielding around 4.5 per
cent net per year in rental! But
before you take the plunge make
sure you can access funding as
some lenders tend to keep clear
of these kinds of investments.
Art and antiques
Most experts agree that you
should buy art and antiques
primarily because you like them
and only secondarily because
they may return a profit. On a
positive note, however, art and
antiques add to the character of
your home and can be enjoyed
while they appreciate in value.
There are price guides available
covering most antiques and
certain artworks which will provide
the basis for your research before
you buy. If you’re considering
parting with serious cash ensure
that you’re buying from a
reputable source.
And remember, antiques and art
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are not always a liquid investment
- it may take a long time to get
your money back.
Classic Cars
An unpredictable beast at best,
picking a winner in the classic car
market can make the ASX seem
like child’s play. A good example
of the fickleness of the classic car
market is the Austin-Healey
3000: you can now pick up a
good example of this timeless
gem for about $50,000; five
years ago they cost $80,000-
$90,000!
According to expert car buffs,
classic cars should be regarded
as an investment that’s for
enjoyment; the fact that it might
offer a good return further down
the track is a bonus. But if you
want to charge in with an eye to
the future the classic cars of
tomorrow include the Audi TT,
Benz AMG and the BMW M3.
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| Tenant profiling |
In a perfect world tenants always
pay their rent in advance, stay
year after year and never come
close to causing any wear and
tear. In reality, the perfect tenant
is all too difficult to come by.
If you’re looking for new tenants
or considering buying an
investment property, the following
profiles will help you determine
which type of tenant best fits your
needs.
University students
Whether it’s your memories of
the characters from the 1980’s
BBC comedy The Young Ones, or
flashbacks to your university glory
days, students have never rated
highly among landlords as dream
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tenants. As tenants without a
regular income, there’s a greater
chance that students will lapse on
rent payments. If you do have
reservations, try and get a feel
for their finances, including a
reference from their parents in
case they do the bunk.
Also cap the number of student
renters allowed in your property -
restricting the number of people
translates into less damage,
parties and clean up costs. On a
positive note, student rentals
tend to roll over from student to
student as one graduates and
another commences their
three-five year degree, meaning
a reduced need to continually
find new tenants to lease your
property.
Backpackers and international
students
Keep your guard up - backpackers
and international students
probably rate as the least
desirable type of tenant.
Strapped for cash, it’s not at all
uncommon for small apartments to sneakily
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Soothe the Soul for Cheap
With life’s stresses becoming
more intense, finding effective
ways to relax is taking on more
importance. But relaxation should
not necessarily mean huge
expense! Here are four sure-fire
cheap techniques to help you
unwind.
Meditation - Neuroscientists have
found that meditation affects
brain activity by shifting waves in
the brain’s stress-prone areas to
the calmer left frontal cortex. This
shift reduces the negative effects
of stress, mild depression and
anxiety. One simple technique
you can use in the comfort of
your own home is to sit on the
floor, straighten your back, put
your hands on your lap one on
top of the other (palms facing
up), close your eyes and begin to
breathe deeply and slowly in and
out.
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Yoga - Yoga helps achieve an
emotional balance through
detachment. This in turn builds
calmness and a positive outlook,
which also benefits your physical
health. Yoga has gained
immense popularity over the past
ten years and yoga studios can
be found in even the smallest
country towns. Expect to pay $5+
per yoga session.
Music - An underrated way of
winding down, some laid-back chill
out music - like Sade - will soothe
your state of mind more than you
might realise. Such music has
been proven to slow down the
heartbeat and the rate at which
you breathe and think, therefore
prompting relaxation.
Massage - For those with
partners, massage is the
cheapest self-indulgence there is.
Massage stimulates the release
of endorphins, the body’s natural
‘feel good’ chemicals, to help
induce relaxation and a sense
of well-being.
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house a cast of
occupants. This accelerates wear
and tear; if it’s an apartment
building also expect the
neighbours to throw a few
complaints your way regarding
noise levels. The upside: they’re
traditionally a low-maintenance
bunch and are less likely to
demand five-star furnishings.
Young Professionals
Today’s young professionals
typically dislike the hassle of
moving house and will have been
through enough negative flatting
experiences to know a good
opening when they see one.
These types of renters will
probably value peripheral things
like the quality of furniture and
flashy white goods more so than
any other renting demographic.
So if you have some dusty old
sofas and 1980s furnishing best
to strip the place bare and rent it
as unfurnished.
Families
Families score highly on areas
such as reliability. They are also
more likely to stay put for a while
as children settle into schools and
build friendships with neighbours.
If you want to attract the family
demographic you’ll need to
prepare your property to attract
families. This means a properly
fenced garden and secure gates
so that children will be safe when
playing outside. Families can also
be accompanied by pets - not
high on the wish-list for landlords!
If you’re prepared to accept pets
factor regular carpet steam
cleaning into their rental
agreement.
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| Build right, build confident |
It’s an unfortunate fact that
building disasters do happen. But
for those contemplating building
or renovations, incorporating
some key measures into your
plans should ensure a much
better result.
Whether you’re simply adding
another bedroom or building
your dream home, you can take
comfort that there’s a trusted and
respected organisation to help.
Listing one of its core aims as
“making Australian building
standards and regulations more
acceptable to the industry and
responsive to end user’s needs,”
it makes sense to have the
Master Builders Australia as your
first port of call when searching
for a quality builder.
Through their website
www.masterbuilders.com.au you
can verify whether your
prospective builder is a registered
master builder. To secure
membership, builders must show
a genuine interest in the integrity of the
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industry and prove they
have the required skills and
expertise to meet quality
standards. You can search for a
builder in your local area via the
website.
Once you’ve confirmed credibility
through registration with Master
Builders Australia, your next, and
perhaps most important planning
step, is to shop around and ask
lots of questions.
There are a number of things that
need to be considered when
sourcing a builder; one key
suggestion is to make sure you
tell each builder that you are
getting other quotes - this will
keep them on their toes. Some
other important tips include:
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Need a builder?
• Check that they belong to a
relevant state-based Master
Builders Association
• Get more than just one quote
• Listen to your gut instincts
• Check your prospective
builder has experience doing
your type of project
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• Cheaper isn’t necessarily better,
so back up quotes by speaking
with previous clients or through
obtaining testimonials; any
builder worth their salt will feel
comfortable giving you access to
past clients.
• Listen to your gut instincts and
let them contribute to your final
decision: will your project be a
priority and will you feel
comfortable having the builder
around your home when you’re
not about?
• Some builders will also be
better at certain types of jobs
than others. Determine each
builder’s specialisation and match
that to your project.
By using these practical measures
in your planning, you’ll be taking
a big step forward to achieving
peace of mind once construction
gets underway.
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Entertainment on a budget
DVDs versus the cinema - With
outlets like Video Ezy offering
three DVDs (includes one new
release and two older titles) for
ten dollars, going to the cinema
at around $40 for a couple is
almost now unnecessary. Given
the rate at which movies on the
big screen make it into the video
stores, holding back a month or
two and having a quiet night in
can add a few more dollars into
your budget each month.
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Photo exhibitions - Many
exhibitions are either free, or
next to free, and well worth the
effort attending. Some
exhibitions are also attached to a
charity so any fee paid will
typically go to a worthwhile cause.
Visit www.photoreview.com.au for
exhibition listings.
Community theatre - The fun,
unpretentious raw energy of
community theatre is a must if
you haven’t been before. The
website www.bcl.com.au has an
extensive list of community
theatres with an up to date guide
of what’s on offer.
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Disclaimer. This newsletter does not necessarily reflect the opinion of the publisher. It is intended to provide general news and information only.
While every care has been taken to ensure the accuracy of the information it contains, neither the publishers, authors nor their employees,
can be held liable for any inaccuracies, errors or omission. Copyright is reserved throughout. No part of this publication can be reproduced or
reprinted without the express permission of the publisher. Readers are advised to contact their financial adviser, broker or accountant before
making any investment decisions and should not rely on this newsletter as a substitute for professional advice.
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