SSS – Jun/Jul 2018

G’day All,

2-minute read:

Interest Rates

The RBA July cash rate remains on-hold at 1.5%. Because Australian lenders source a lot of their funding from overseas and interest rates globally are now rising, we can expect lenders to now begin lifting rates as has already begun with the majors. Now may be a good time to discuss the merits of fixing over the next 2-3 years remembering that P&I is the new norm for investment lending.

Also don’t forget we can also assist you with your DHOAS home loan requirements through Australian Military Bank (AMB)!

Federal Budget

Main take-aways are no changes to negative gearing (ability to claim expenses related to your investment property against other income); however developers will no longer be able to claim deductions on vacant land. This does not affect future clients who build a new investment property under a two-part (house & land) contract with the clear intention to rent it out.

The other big mention is $75 billion in national infrastructure spending. Land owners in vicinity of these projects will reap the greatest increases in land values and therefore personal wealth.

Tax Time

It’s upon us once again. Make sure you’re claiming your full deprecation entitlements and don’t forget that travel to visit an IP is no longer deductible. If you’d like a quote to process your ADF and investment property tax return, please get in touch as the team based in Sydney has some very good packages available.

Market

As mentioned previously, we are slowly moving into the second phase of the real-estate cycle, but not before an anticipated slow-down in 2019-21. From there we will see a growth-shift towards the commodities producing economies of QLD, WA and NT. South Australia will also bode well with the submarine and future frigates projects being confirmed (approx. $85billion). Terry Ryder’s article sums up nicely the relationship between economy and land value and you will do well to spot this early and acquire where you responsibly can.

Strategy

The Defencewealth strategy of TWO-50-TEN™ is based on acquiring a $2 million portfolio at 80-90% LVR over a 6-8 year timeframe. Once acquired we work to reduce the LVR to 50% over the next 4-7 years using a combination of capital growth, offset accounts and principal repayments. Once at 50% LVR, you will have some serious financial options but it will take time (10-15 years) to achieve. The new property packages we recommend are considered investment-grade based on experience and results and are selected for their balance in anticipated cash flow, capital growth and risk.

Quote – The few who do are the envy of the many who only watch – Jim Rohn

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