From the Desk of the CEO

Do we have the perfect storm brewing? After a disaster there is always a recovery and most try to pin point that moment of recovery. The problem is recovery can sneak up and pass you by just like a disaster sometimes can and you miss it. Those ready for change to a new environment are the ones who kick the goals early while others wait and watch. We have seen that with the stock market lately, yes it is down from a year ago but it is up on two months ago depending on when you bought.

Nothing ever stays the same unless you lock yourself away and don’t get involved in the game which many people do stay insulated. Not everyone in life wants the same as you so that is why who you associate with and take advice from influences your outcome. Now there is no sense taking advice if you don’t action it because time will date the advice and later be worthless most of the time. Some life advice is timeless like have good manners and respect others views but, the stuff that helps you make decisions in finance can change like the winds.

Take advantage of your current circumstances. Have you checked your mortgage rate? Many are happy with the 4% loans they have but you can get fixed rates now at 2.29% for three years. So on a $400,000 loan over three years you would save $20,520 in interest and if you maintain your old repayments you would reduce your loan by more. It is about looking around and doing a bit of homework.

Most people live around their affordability and this is an example of a couple of phone calls saving you thousands or tens of thousands, most would struggle to save that much money in the same period. Tomorrow is usually too late now is better, find out what you need to do now. None of this is brain busting, it is just a bit of homework.

A gentleman told me he wasn’t going to sell his house because it was worth less now than five years ago. Then his house was worth $450,000, today he says he would not accept $385,000 it was valued at. He thought that was horrible figure. The sad part is he really wanted to move five years ago to near Mandurah and was looking to do a straight swap including his stamp duty. The value of properties he actually looked at and liked at the time were around $375,000 and less. These properties have dropped more than his percentage wise of his home and are around the $300,000 mark but now he thinks gee the properties down there must be awful at that price. A real change of mindset is needed. Let’s look at past vs today.

Sells his home 5 years ago:                                                      Sell today:

$450,000.00                                                                              $385,000.00

Less agents fee 3%                 $13,500.00                               Less agent fee 3%                   $11,550.00

Less other costs                      $1,500.00                                 Less other costs                         $1,500.00

Nett                                           $435,000.00                               Nett                                        $371,950.00

Buys New Home                                                                          Buys New Home

$375,000.00                                                                                   $300,000.00

Stamp Duty                               $11,827.50                               Stamp Duty                                 $8,835.00

Other costs                                  $1,500.00                               Other costs                                  $1,500.00

Total buy cost                        $388,327.50                               Total buy cost                         $310,335.00

Surplus Cash                             $46,672.50                               Surplus Cash                             $61,615.00

The real result is he still ends up with a lifestyle he was looking for and bonus he has more cash in the bank. Now not everyone owns their home but the principal of the concept is still the same with a mortgage, you will end up with a smaller mortgage with lower repayments and then add that you may have a better interest rate as well. You need to look at the maths and end results not the gross figures of purely what you get upfront for your property. It is about what you are going to do with what you get once you sell. In this case he actually ended up better off but he thinks he is worse off so you’ve got to look beyond what you can see and ask the right people the right questions.

So now the question is what you can do to take advantage of today’s set of circumstances to work to your advantage. If you are a first homebuyer what a great way to get started with the grants available, no stamp duty and amazing interest rates. It is a great time to explore your options and as I mentioned earlier, are we on the edge of the perfect storm? More and more will start to realise the opportunity that is currently available to us now.

Does anyone remember the early nineties housing loan interest rates at 17% plus unemployment at around eleven percent? That’s right, it changed and people did very well. So what is the next opportunity with what’s available today?  Explore your options with your eyes open to opportunity.

Written by Milton Rendell, CEO – Real Estate Plus Group