RISK VERSUS RETURN

RISK VERSUS RETURN

The current Real Estate market (as well as the share market) will prove to be another shining example of why the rich keep getting richer and the poor keep getting poorer.

Throughout history it has been a truism that the riskier the venture, the higher the return.

Lessons can be drawn from history from the Spanish Conquistadors chasing gold and silver in South America to indentured workers promised land in America.

That is why the returns from depositing cash in the bank will always be less than other forms of investing. The other enemy of cash deposits is inflation (Do you understand the rule of 72?).

By far the majority of people fail to understand that doing what appears to be the safe thing and turning assets into cash when prices are down, increases greatly the risk that they will miss out when those assets rise again in value. (Remember cash ONLY depreciates through inflation, it can never be worth more than the face value deposited).

Again, historically, people have demonstrated time and again that they suffer from a herd mentality. The reason is fear.

I encourage you to separate yourself from the herd.

The first thing you need to understand is the difference between investing and speculating.

Just ask yourself if you believe that BHP Billiton or one of the big four Australian banks actually lost as much as 4% or more of their true value in a single day during the recent herd panic on the stock exchange.

Another reason to acquire real estate is that it doesn’t lose 4% of it’s value in a single day and has always increased in value. The reason is that it is a finite resource. In other words, “Get into Real Estate son, they’re not making any more of it”.

Want to discuss these ideas further? Call Ross on 959 22 222.

Ross Cutten

Director

Noble Real Estate

WHO IS ABRAHAM MASLOW AND WHY IS HIS BOOK IMPORTANT?

WHO IS ABRAHAM MASLOW AND WHY IS HIS BOOK IMPORTANT?

Number two in a series on planning your life goals

Abraham Maslow had a PhD in Psychology and from his research into human motivation he designed a five stage pyramid in which he outlined how human beings would always satisfy their needs.

It has become known as ‘Maslow’s Hierarchy of Needs’.

http://en.wikipedia.org/wiki/File:Maslow%27s_Hierarchy_of_Needs.svg

It is fundamental to human behaviour and is forms the basis of my belief that a roof over your head should be number three on your list of priorities right after food and clothing.

Despite the fashionable talk of renting rather than buying the fact remains that at the end of everyone’s working life they need to own their own residence if they are to live a comfortable retirement.

So target you owning your own home first.

Noel Whittaker, one of the most level headed investment advisers appearing in the newspapers today, says that there is no more tax efficient investment than paying off your own mortgage.

Why?  Because you are paying your mortgage in ‘after tax’ dollars.

If your tax rate is 30% and your mortgage is $1,400 per month you need to earn $2,000 per month to pay the mortgage i.e. $2,000 earnings less 30% tax or $600, leaves $1,400 to pay the mortgage.

So before you start chasing investment properties, stop and consider the ideas above.

You will not get that advice elsewhere.

Ross Cutten

Director

Noble Real Estate

ANOTHER WARNING FOR SELLERS

ANOTHER WARNING FOR SELLERS

If you are about to list your home for sale it pays to ask about any further fees which you may be liable for.

It would appear that some agents are not satisfied with just charging a commission but are looking to charge sellers for many varied sundries.

The latest we have heard of is a seller being told she would need to pay $66 to have an ‘Under Offer’ sticker placed on her for sale sign.

This is a first for us as we have never heard of that one before.

Far from charging to use an ‘Under Offer’ sticker we do not use them.

Call one of our reps to find out why if you are curious as it is not up to me to educate our competitors.

So “Seller Beware”, read all the paperwork or make sure you fully understand the whole cost of listing for sale.

Ross Cutten

Director

Noble Real Estate