MRD PROPERTY INVESTING STRATEGIES


MRD PROPERTY INVESTING STRATEGIES

Published on September 11, 2015

MRD Property investing strategies

Given that the current maximum pension rates are $860.20 per fortnight or $22,365.20 per annum for singles and $648.40 per fortnight or $16,858.40 per annum (each) for partnered couples, it’s no wonder most people I speak with say they want to take action and build wealth for their future lifestyle and eventual retirement.

If that’s so, why is it that most people don’t?

Confusing, complicated, risky or ‘too much for them to think about right now’ are some of the more common reasons people have.

Partly for these reason (but mostly because of personal conviction) I have, since May 2002 when I launched MRD, communicated a very simple and easy to follow message.

In the context of recent stock market jitters fuelled by the Chinese stock market, I’d like to share my simple message with you and give some reasoning behind it.

Many ways to create wealth

There are many different ways for you to create wealth; e.g. build businesses, trade, sell, invent, invest and so on.

The strategy that MRD promotes and teaches is limited to investing. Stay with me as I explain our process of elimination.

Many investment options

Under the broad canopy of investing there are numerous avenues you could take; the most common are the stock market and of course direct property.

MRD’s strategy is limited to property; but our process of elimination goes much further.

Many property investment options

You can invest in rural, commercial, industrial or residential property. MRD limits its involvement to the residential property space (but not any residential property).

Taking this a step further, residential property could mean holiday let, executive short term let (such as where I am staying right now in Melbourne), retirement villages or even student accommodation. MRD stays clear of these types and operates in the permanently let residential property market.

Different types of permanently let residential investment property

So having narrowed the preferred vehicle for wealth creation to permanently let residential property, at MRD we like to ‘drill down’ even further - for good reasons which I’ll explain

Various strategies

When it comes to investing in permanently let, residential property you can trade or speculate, you can buy and renovate etc. MRD promotes a buy and hold strategy - again, for very good reasons - which I will cover off on below.

Location, location, location

The above filtering system is designed to see people stay statistically safe so as to consistently progress their journey over time.

The final two steps in this process are:

  1. Picking the right location; based on (1) fundamentals and (2) where a market is located in the current property cycle; (and those submarket ‘pockets’ within that market)
  2. Sticking to the median price. Don’t buy at either end of the extreme but stay statistically safe by investing in a price point that reflects the type of housing that most people in that location would either rent or buy.

Well intended busy people

I meet countless numbers of well intentioned people who planned to implement their ideal investment strategy but life got in the way. Watching television shows like The Block motivated them to buy and renovate an old house and sell it for a profit, but after five or 10 years they have lost time and made no progress.

I get it! We lead busy lives with too many demands on our time, but that’s exactly my point.

If you’re successfully renovating houses for profit, congratulations. But if you fit the profile of someone with a full life with commitments to careers and family with demands on your weekends etc.; lacking the headspace to do the necessary research and analysis ahead of making an investment decision, then the MRD Way may just be your answer.

Rest in the assurance that property is very forgiving

After all the research, the checks and the balances, the reality is that when it comes to investing, nothing is an exact science. We know that markets fluctuate in response to global events and those global events are often not predictable.

It is for this reason that we need to be very clear in our understanding and approach property investing with a medium to long term commitment.

However, the really good news is that, unlike other investments, property never goes to zero and even in the toughest of economic times people need to live somewhere.

If you own well researched residential property where people want to live, close to infrastructure, services and amenities you will keep yourself as an investor (in my opinion) about as statistically safe as it’s possible to be.

The above ‘elimination filter’ that MRD applies does not mean you are free of risk but it does go a long way to minimise your risk.

Tough times never last but tough people do

The expression ‘Tough times never last but tough people do’, made famous by Reverend Robert H Schuller during his ‘Hour of Power’ weekly television broadcast in the 1980’s, is so very apt for life.

A cat may always land on its feet but we humans fall flat on our backs at times. So when it comes to investing for your financial future and ultimately retirement, risk minimisation strategies to keep you statistically safe should be a high priority.

Nobody saw the GFC coming, nor the impact it would have on markets around the world. The rapid end to the mining boom also defied analysts’ expectations and took most people by surprise. Both of these events have impacted investors in significant ways.

Residential property investors are perhaps the most insulated because property never goes to zero. This is the most forgiving of all asset classes (and property types).

Don’t ‘throw in the towel’

The biggest battle is often in our minds where the tendency unfortunately is to throw in the towel and sell in a flat market rather than staying strong and riding out the tough times with the assurance that the tough times never last.

Market recoveries

Property markets recover, sometimes quickly and sometimes slowly. Some sectors of property markets will recover quicker than others. Individual property values also recover; which in part is why Australians have a love affair with bricks and mortar.

Stock markets recover too and, much like with property, different sectors recover at different paces and at different times.

The big difference between a property market recovery and a stock market recovery is that if, for example, a company which was part of the All Ordinaries Index went belly up and failed, it would simply fall out of the top 100 and be replaced by another. So some stock shares do go to zero.

Here’s a handful of examples where the value of company shares did go to zero without prospect of recovery:

  • OneTel
  • Ansett Airlines
  • FIA Insurance
  • Storm Financial
  • Westpoint

Your greatest liability

People’s biggest liability is not their mortgage and it’s not their children. These are big but it’s a person’s unfunded retirement that takes first prize.

So it’s not a matter of should you have a strategy to fund your retirement, you absolutely must (or accept a pension).

Currently the Maximum Pension Rates are:

For a single - $860.20 per fortnight $22,365.20 per annum

For a partnered couple - $648.40 per fortnight or $16,858.40 per annum (each)

Develop your strategy

So the (only) question for you right now is ‘what strategy will be best for you’?

Before investing (in anything), know your strategy. If you’d like my team of experts and me here at MRD to assist you with developing or updating your strategy to put you on track to funding your potential 30 years of retirement, telephone us on 1300 883 854 or contact us online and use the hashtag #retirementstrategy and we’ll give you a call.

Partnering with you for your investment success,

Nick Lockhart