Barrett Lending Solutions
March 2012 Website | Email | Forward to a Friend | Print | Unsubscribe


There's no shortage of news these days about interest rates, home loans and property prices, but sometimes the messages we hear can be confusing or misleading.

In this newsletter we look at some of the important issues our clients are coming to us with questions about. We start below with an article on 'Australia's housing price bubble' and why we shouldn't be worried about it. This is followed up on the inside pages with an article on dealing with 'what if' scenarios in investment property (page 2) and whether the time is right to fix your home loan (page 3).

Lastly we take a look at technology – what's in (thin, apps, touch and voice control) and what's out (email).

Enjoy this newsletter and feel free to pass it on to family and friends.

Glen, Rose & Sean

Glen, Rose & Sean

Barrett Lending Solutions
23 Caravel Ct
Cleveland QLD 4163

Tel: 1800 253 486
Mob: 0400 737 767
Fax: 07 3319 0931

Price Bubble Debunked
What if...
Book Review
Fix or not?
Technology Trends

Price Bubble Debunked

Despite talk of a housing price bubble, ANZ research shows there is little chance of a housing market crash this year. The bank forecasts prices to remain on hold or fall slightly, but not crash. 

In its recent property market assessment, ANZ argues that gains in house prices have been driven by lower interest rates and an increase in household income.

The ANZ 'Australian Housing Chartbook' reports: "A combination of lower interest rates, falling house prices and rising household incomes has improved Australian house purchase affordability over the past 12 months."

"Despite the continued concerns about significant Australian house price overvaluation from some commentators, housing market fundamentals remain supportive."

This is backed up by ANZ compiled data on international house prices, rental yields and house price-to-income ratio comparisons – showing Australian house prices have not deviated from international trends. 

HSBC Bank chief economist Paul Bloxham agrees that there is little to fear from a price bubble. In the recent HSBC global research report 'Australia in 2012', he states there are three main reasons why prices won't plummet: the majority of houses can service their debt; the undersupply of housing is growing at a greater rate than the decline in population growth; and there is strong demand for housing close to major urban centres.

"We remain unconcerned about the possibility of a large decline in housing prices this year," concludes Bloxham.

What if...

Considering investing in property, but worried about all the things that might go wrong? Here we look at how to deal with a number of common 'what if' scenarios.

What if I buy the wrong property?
Rental yield, capital growth, tenant quality and demand should be upmost in your mind when searching for properties, which means not allowing your emotions or personal preferences to influence your decision.
Think about what appeals to a tenant and what property types are in demand now and in the future. Researching your market is an important part of knowing what features tenants are looking for.

What if I have problems with my tenants?
Screening tenants before signing contracts is the single most important tip for protecting yourself against this scenario. If you choose to hire a property manager to screen tenants, make sure their process is thorough and detailed, like using industry databases that list bad tenants. Conduct as many background checks as privacy laws allow and always ask for the tenant’s references to include company names (not just mobile numbers) to ensure their legitimacy.
Remain vigilant after the tenant has moved in by conducting regular general property inspections and promptly dealing with any issues that arise. Landlord insurance can cover you against damage by the tenant or loss of rent.

What if I can’t get a tenant?
This is a common fear among first time investors but you only need look at the low vacancy rates for rental properties to realise you are unlikely to have trouble finding tenants. Of course nothing turns potential tenants off faster than a run-down, dirty house, so for the greatest tenant appeal ensure the property is in good condition and the rent is on par with other similar properties in the area.

What if now is not the right time to buy?
Many property investors will tell you that 'when' to buy is nowhere near as important as actually 'buying'. With a long term strategy in mind, so long as you take a reasonably cautious approach, a decent property is more than likely going to deliver growth in the long term. The longer you hold off, the more time you spend missing opportunities to enter the market and grow your wealth.

What if I get the wrong advice?
You wouldn't take advice from an unqualified doctor, so don't take property advice from smooth talking sales people. Do your research and triple-check all the fine print before you enter purchasing schemes like rent guarantees and off-the-plan purchases. Remember, if it sounds too good to be true, it probably is!

Book Review

A Short History of Nearly Everything

by Bill Bryson

This book is a quest to understand everything that has happened from the Big Bang to the rise of civilization - how we got from there, being nothing at all, to here, being us.

Bill Bryson's challenge is to take subjects that normally bore the pants off most of us, like geology, chemistry and particle physics, and see if there isn't some way to render them comprehensible to people who have never thought they could be interested in science. It's not so much about what we know, as how we know what we know. How do we know what is in the centre of the earth, or what a black hole is, or where the continents were 600 million years ago? How did anyone ever figure these things out?

Bill Bryson takes us with him on the ultimate eye- opening journey, and reveals the world in a way most of us have never seen it before.

Fix or not?

A drop in fixed rates by a number of banks and lenders has increased the number of borrowers who are fixing their home loans. 

If you decide to do the same, make sure you are fixing for all the right reasons not just the lure of a cheap rate. Be fully informed of the implications of locking into a fixed rate as you don't want to later regret your decision if variable rates drop.
Your financial situation and personal preferences should always be the guiding factors in whether to choose a fixed or variable home loan. Both loan types have their pros and cons so talk to us for the best advice about what product suits your budget and lifestyle.

The insurance of fixing
Choosing a fixed loan is similar to buying an insurance policy; it gives you certainty over a period of time. In the current climate of global economic upheaval, a fixed rate can be a good option if you are on a tight budget because it allows you to know exactly how much each repayment will be. 

On the downside, many fixed loans charge for extra repayments and early payout (break fees). Seek advice before you sign the contract on how the break fees are calculated in case you have to sell or refinance within the set term. The more rates fall, the higher the break cost because the re-financer has to compensate themselves for the loss of re-lending the money at a lower rate.

The ups and downs of variables
Variable loans have more features and greater flexibility than fixed loans but as the rate fluctuates according to various market conditions they can be risky if you’ve overcapitalised on your loan.

If your variable rate falls, you may be making lower repayments than if you had fixed your rate but if the variable rate rises, your monthly repayments increase. When choosing a variable it’s important to plan for the possibility of rate rises and be able to adjust your budget accordingly.

Other options
Split rate and capped loans are hybrids between fixed and variable loans. 

Split rate loans allow you to divide your loan between fixed and variable interest rates, which gives you a foot in both camps.
Capped loans are often offered as honeymoon or introductory loans and under this type of loan the interest rate is fixed for the capped period. During this period, the interest rate cannot go higher but it may go lower if the lender's standard variable interest rate falls below the capped rate.

Technology Trends

Just as the fax machine has been relegated to dinosaur status, so too will email be considered old hat. Analysts predict that 2012 will see technologies become more social, more connected and increasingly voice controlled.
Embracing the rapid movement in technology is not always easy but investing the time and effort to take on a new technology almost always pays dividends. Let’s look at what's in store for us over the coming year.

Voice Command
The success of Siri (a speech-recognition 'personal assistant' that's built into all Apple iPhone 4S smartphones) will prompt this type of technology to be used in other handsets, computer tablets (mobile computers), PCs and on websites.

Email on the Out
The popularity of social networks and messaging products marks the decline in email usage. Downloading services that allow the sharing of links has also proved quicker and more smart-phone-friendly than email. 

App on the Up
App stores will grow in the number of available options as more companies come forward to help free us from content overload. 

Windows 8 - Touch
Windows 8 Touch will bring ‘touch’ into the mainstream PC market, narrowing the gap between notebooks and tablets. Users of Windows 8 devices will be able to tap and swipe their way to touch-based applications via big, touchable panels. 

Social media
Social media will continue to grow and insert itself into even more aspects of daily life, particularly those that are geared to photo and video based interaction. Social networks will add more features and get even more competitive, with Google+ trying to dominate the market.

Mobile capabilities
There will be an increase in mobile phone capabilities in every aspect and a growing number of internet users will demand access to content through mobile devices. Phone hardware and software will become more sophisticated and phone video will continue to improve in quality.

Getting Thinner
Our TVS, PCs and tablets are thin – so too will our laptops become as thin as manufacturers can allow. The emphasis will be on laptops that look great, run quietly, and are easier to carry.

Did you know?

If you apply for a fixed rate loan, the advertised rate offered is current only for that day. By the time your home purchase happens, that rate may no longer be on offer unless you opt for a Rate Lock. Some lenders offer this service automatically, while others require you to pay a fee to put the rate lock in place.

About Us

Barrett Lending Solutions is a boutique mortgage broking business, specialising in finding solutions to assist client's needs in relation to their lending requirements. We provide assistance in setting up strategies, borrowing structures, and finding loan options - be it for residential, investment or commercial lending needs.Why not let us do it for you?

Our points of difference:

  • Accredited with over 50 lenders.
  • Our service is totally FREE. We are remunerated by the chosen lender, whoever that ends up being.
  • Over 5 years industry experience
  • Individual attention to each loan scenario
  • After loan settlement-ongoing care and support.

Barrett Lending Solutions Core Values: 

  • Integrity
  • Transparency
  • Accountability

Need an accountant?

Gregory Thomas Accountants offer:

  • Income tax returns
  • Financial reporting
  • Business setup
  • Small business advisory & support services
  • Cash flow statements & management accounting

Contact Gregory Thomas Accountants by calling 07 3821 5929.


Investment structures

Most taxpayers will purchase their properties in their personal names without any thought of the implications. This is generally done to make use of the negative gearing opportunity. However there are many more issues which need to be considered, including asset protection, family relations, and long term tax planning. In any event a little tax planning at the outset may easily achieve your goal of immediate tax relief through negative gearing as well as the long term goal of asset protection and tax structuring. You should be asking your advisor about this at the very beginning of your investment journey.

When buying an investment property there are certain issues one needs to consider in the decision making process. We have provided the 10 fundamentals that are widely held to be vitally important:

1. Structure your investment to protect your asset;
2. Know the activity you are getting involved in;
3. Consider your partners carefully;
4. Consider how much money is involved and the risk;
5. Examine your financial projections carefully, use "what if" scenarios to project different outcomes;
6. Consider your financing and future capital needs;
7. Know your neighbours;
8. Determine in advance your distribution plan, if applicable;
9. Determine what each partner wants out of the investment;
10. Determine the duration of the investment and structure the investment accordingly.

If you would like more information on structuring your investment, please do not hesitate to contact Jewell Moore Chartered Accountants. 


Information from Sovereign Capital Management's Individually Managed Account

As of this writing, global markets are again in turmoil and for many investors this will be a cause of concern.

Are you:

  • Concerned about the volatility and uncertainty of the share market?
  • Concerned about rising interest rates and the economy?
  • Interested in enhancing your Self-Managed Super Fund?
  • Interested in paying off your loan/s sooner?
  • Interested in generating cash flow to purchase additional investment properties?
  • Interested in wealth creation strategies not dependent on rising stock and property prices?
  • Interested in reducing your risk AND increasing your return?

Sovereign Capital Management Pty Ltd (SCM) is an investment management firm that can help you with this and more. Our investment strategy has been thoroughly tested over 6 ½ years and produces stable, consistent returns of up to 27% per annum with high liquidity and very low volatility, with the safety of knowing your cash and assets remain in your own account at a major Australian bank.

SCM's market neutral strategy removes market risk, so we are 'not investing in the share market'. Instead, we make profits through intelligent stock selection due to our most preferred shares outperforming our least preferred shares and we profit from both rising and falling prices, achieving good returns without experiencing the roller-coaster performance that is often associated with investments 'in the share market'. Some of the many benefits of our Individually Managed Account (IMA) service are:

1. Higher Returns - consistent and stable returns (after fees and transaction costs) of up to 27% per annum, dependent on the leveraging option chosen by the investor.

2. Lower Risk - our strategy is capable of generating a higher long-term return than the share market with less than a third of the risk.

3. Proven Strategy - our quantitative equity market neutral investment strategy has been thoroughly tested over 6 ½ years, covering up, down and sideways market conditions.

4. Liquidity - no lock-up period and high liquidity, as we only invest in the top 200 shares in Australia - and investor funds are available at short notice.

5. Higher Risk- Adjusted Returns - higher returns with lower risk than can be achieved by investing in real estate or the share market.

6. Portfolio Enhancement - adding a SCM IMA to a portfolio of other assets such as real estate, shares and/or bonds will provide a substantial diversification benefit, in many cases increasing portfolio return and reducing portfolio risk, at the same time.

7. Control & Transparency - having an IMA means all cash and assets remain in the name of the investor and do not get pooled. We also provide you with details of every transaction.

8. Safety - investment funds remain in the investor's name at a major Australian bank where they are also guaranteed by the Australian government.

9. Cash Flow - the nature of our strategy makes it ideal for providing an income for retirement purposes, additional investment income, accelerated loan repayment or reducing the overall cash flow burden of an otherwise negatively geared portfolio.

10. No interest rate stress - the expected return of our strategy rises in line with interest rates.

As we only deal with wholesale clients, the minimum investment is $500,000 - but this can come from one or more sources, such as: the equity in your real estate, cash, managed funds, or shares.

Lastly, our strategy is allowable for Self Managed Super Funds (SMSF) and complies with SMSF rules.

For a no-obligation copy of our detailed Investor Summary, or to arrange a free consultation, please contact our Business Development Manager, Mr Glenn Rushton at: or phone (07) 3272 6000, or 0413 948 888.

AFSL 341926
ABN 46 116 555 732

Disclaimer: This newsletter is intended to provide general news and information only. Readers should rely on their own enquiries before making any decisions regarding their own interests. Please do not rely on any part of this newsletter as a substitute for specific legal or financial advice. All material is copyright 2012. You can unsubscribe by clicking the "Unsubscribe" link at the top of this newsletter.