Tag Archives: purchasing

MFAA Social Media Speech

I just had the great privilege of speaking to 30 plus local brokers at the Regional MFAA seminar held here in Wagga Wagga.

The MFAA (Mortgage and Finance Association of Australia) have accredited brokers who pride themselves on being up to date with industry best practice and legislative compliance as well as providing outstanding service to their clients.

My presentation was on the local real estate market and the majority was about social media changes and the need to be a part of online and social media marketing as consumers change their purchasing habits and online presence becomes more and more important to running a profitable business.

It was a bright and energetic audience with great questions and an open mind to new ideas on consistency and reach of online marketing and social media strategies.

I highly recommend that if you are in the process of screening brokers for your purchasing needs, you check that they are a member of the MFAA first.

Property of the Week! Families, investors, buyers…look here!

Adam Drummond talks about a great family home in Glenfield Park – 4 bedrooms, ensuite, double garage, ducted heating and cooling for less than $360,000!!! Check it out! Remember, “You only live once, so make today count”.

MONDAY – Movie Review

TUESDAY – Trivia and Prize

WEDNESDAY – Top 5 Tips

THURSDAY – Property of the Week

FRIDAY – What’s on Wagga?

Property of the Week Thursday 24th Jan 2013 – Daily Check-In

Which property makes sense as an investment in this market? How do you calculate a gross return on investment?

Watch this 90 second daily check-in with Adam Drummond.

Remember, you only live once, so make today count!

Monday – Movie Review
Tuesday – Trivia and prize
Wednesday – Top 5 Tips
Thursday – Property of the week
Friday – What’s on in Wagga

17th January 2013 Adam Drummond Daily Check-In

Welcome to the Thursday Property of The Week on the 90 Second Daily Check-In. The quote of the week is relevant to the Australian Real Estate market and the property of the week is a cracker. Share with your friends.

Monday – Movie Review
Tuesday – Trivia and Prize
Wednesday – Top 5 Tips
Thursday – Property of the Week
Friday – What’s on in Wagga

How to Tell When the Market Will Change

It sounds impossible doesn’t it.  Everyone always says, “there’s no crystal ball, but when will the market change?”  And they’re right.  There is no crystal ball – but there are signs.

Take the 2009 NSW residential property balloon as an example.  When the inflated first home buyer grant was reduced back to normal levels, buyers were no longer competing for entry level homes.  This had a flow on effect throughout the market as sellers of entry level homes could no longer upgrade.

At the same time the full effects of the Global Financial Crisis were yet to hit Australian shores.

In fact, the “Build a Better Education” scheme and increased first home buyer scheme were deemed by the Government at the time to be our saviours during economic turmoil.  They believed the stimulus created jobs and construction activity, but forgot to have a plan in place for when it all came to an END.

And end it did.  All pretty much at the same time.

Now, crystal balls aside, the writing was on the wall.  Supply had increased and demand had decreased – sharply.  Investors were nervous about foreign debt, shaky job figures and a Reserve Bank that seemed content to wait it out.

But what were the market signs?

  • longer days on market
  • increased competition with supply

Within months, listing prices began to drop.  From there, the number of sales dropped.  And finally, selling prices dropped.  In some cases up to 10% from the purchase price to the sale price.

And here we are with some subtle signs of recovery in – Wagga Wagga at least.

  • Population growth for the last 12 months is higher than forecast
  • $640mil in private and public development and infrastructure is being invested into the local economy
  • Interest rates are still low
  • Employment is steady

and here is the big one;

  • Compared to June/July 2011 when there were 1,180 properties advertised in the local paper, 2012 June/July figures show 885 properties advertised (supply is lower)

Now whilst demand has not increased exponentially, less properties on the market means less to choose from which will increase competition.  This coupled with some local economic confidence will lead to a slight increase in buyer demand as will the increased population growth.

So there is no crystal ball, and absolute predictions are impossible…but you tell me – “is the writing on the wall”?

About Myself

Adam Drummond has been listing and selling Wagga property for over 10 years. Play Adam’s profile clip to find out how he approaches the buying and selling experience.
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Rent vs buy…who do you think will win?

As the cost of living continues to rise and housing becomes less affordable, more and more people are wondering whether it will work out better to rent for the rest of their lives, or live the Aussie dream and own their own home. I’ve decided to create an example to illustrate who is best off after 30 years of either renting or paying off a mortgage.

Bert lives in a house worth $850,000. But, he’s renting it. Now if we apply a conservative estimate that rental properties yield 5.2% gross, Bert’s rent per week would be $850 or $44,200 per annum.

Next door to Bert lives Ernie. Ernie’s house is identical in every way and worth exactly the same amount of $850,000. We know this because that is what Ernie paid for it.

Now, here are the assumptions. Both Bert and Ernie will reside in their respective “pads” for 30 years. They both started paying either rent or mortgage on the same day. To compare apples with apples as much as humanly possible, I am being really conservative with increases in rental amounts per annum, the variable interest rate as an average, capital gains per year and finally the interest earned for cash deposits of savings. I’ll also explain what could happen at the end if all things were done a little smarter by each resident.

Okay, let’s get down to it. First to Bert. Bert’s rent will increase ever so slightly per annum. In fact to be ultra conservative let’s say only 1.2%p.a. He will also decide to invest any difference made from savings, into short-term cash investment accounts which yield on average over 30 years about 5%. In his 30 years, Bert will have paid approximately $1,584,795.64 in rent.

Now Ernie on the other hand will be paying on average over 30 years 7.81% in interest on a $850,000 purchase. If he pays consistently for 30 years he will have spent $1,354,890 on interest alone and when you add to that his principal repayments he would have spent a total of $2,204,890 over 30 years.

So who’s in front so far? Based on savings, Bert would have been able to invest about $620,094 into an interest bearing account, that if yielding 5% p.a. would equate to total savings of $651,861.

However, we have to remember that at the end of the 30 years, Ernie has an asset that has increased in market value over time, and he decides to sell on his last day of repayments. If his property increases (and again this is conservative compared to historical data) in value by an average of just 4.23% p.a. his property is worth $2,933,977.60 upon sale.

This means that Ernie has spent $2,204,890 but when you minus his principal of $850,000, he has a net result of $120,912 in the red over 30 years. In other words it has cost him $121,000 approximately to live in his primary place of residence for most of his life.

On the other hand, Bert has spent $1,584,795.64 and saved $651,861, so he has a net position of $932,934.63 in the red. It has cost him nearly a million dollars to end up with nothing after all that time, other than arguably, more cash to live a “nicer” lifestyle.

So where could each resident have been smarter, and therefore finish up in a better position? If I introduced any variables at all to the above calculations the results would have been like comparing apples with oranges. However Bert may have decided to put his extra savings into the stock market and increased his savings to around 12.2% as an average. If he had been really smart, and bought an investment property on a smaller scale, he would have made even more money, and had an asset at the end, however that would really have made some variables in our calculations (as Ernie could have used equity and done the same thing.) The same could have been said for Ernie though, who with some smarter moves, such as, deciding to pour more into his home loan and paying it off earlier, saving him a substantial amount in interest being paid, thus improving his net position. And let’s face it – most of us would try to pay off more than just the minimum amount per annum. We could also have had the capital gain be more in line with historical data of around 11.6% over a few decades, however most people will agree the next 30 years should be more conservative than the last 30 years, particularly with house values being arguably above long-term average values based on comparative household income vs household debt.

So which is better? To rent or to buy? At the end of the day it comes down to what is important to you. Would you prefer to live in the “now” and have surplus cash to live a “nicer” lifestyle? Or would you rather have an asset at the end of a long life of forced savings, pay nothing in capital gains tax, and live a “nicer” lifestyle leading up to retirement? The other thing is, of course, the ability to do to your house what you want and when you want. Of course the savings there, can also be passed onto Bert, as most renters will have the majority of repairs and maintenance costs paid for by their landlord. The owner occupier will have to spend every cent themselves if they want to improve their property or even at a minimum maintain it.

Have a play with the figures to relate more to the scenario, and see where you will be in 30 years depending on which path you choose. I still feel that owning your own little piece of Australia, will always be better than living in someone else’s property forever.

(All calculations are based on my own workings and I apologise if there are any errors or variables. All persons reading this blog rely on their own calculations and financial advice as I am a licensed Real Estate Agent and not registered or licensed to offer any financial advice.)